No big surprises in the earnings (negative or positive), let's see if they can make it through the CC without dropping any bombs.
Excite@Home Reports Second Quarter 2001 Results Broadband Access Revenues Grow 71% Year-Over-Year
Worldwide Broadband Subscribers Increase by 474,000
REDWOOD CITY, Calif., Jul 23, 2001 (BUSINESS WIRE) -- Excite@Home (Nasdaq: ATHM chart, msgs) today reported its financial and operating results for the second quarter of 2001.
Revenues for the second quarter totaled $138.6 million, a decrease of 7% compared to the second quarter of 2000. The decrease in revenues was driven by a decline in media and advertising revenues, which was partially offset by strong growth in residential broadband subscription revenues.
Demand for Excite@Home's residential broadband service remained strong, as net subscriber additions in the quarter totaled 474,000, an increase of 62% from the 292,000 added in the second quarter of 2000. Excite@Home's worldwide subscriber base grew to 3,674,000 at June 30, 2001, an increase of 115% from 1,708,000 at June 30, 2000.
Net operating loss was $65.1 million for the quarter, or $0.16 per share, compared to a net operating loss of $38.6 million, or $0.10 per share, in the second quarter of 2000. The increase in net operating loss was driven primarily by the decline in media revenues and higher net interest expense. Operating EBITDA was negative $12.3 million for the quarter, an improvement of 23% from negative $15.9 million in the second quarter of 2000. The company's consumer access, commercial and international segments, taken together, contributed positive operating EBITDA during the second quarter of 2001. The company expects these combined business segments to continue generating positive operating EBITDA in the third and fourth quarters of 2001, and expects its overall business to generate positive operating EBITDA by the fourth quarter of 2001 and for the second half of 2001 overall.
Net operating loss and operating EBITDA exclude non-operating costs and certain other items, including expenses for the amortization of goodwill and other intangible assets, cost and amortization of distribution agreements, equity share of losses of affiliated companies, write-down of investments and other assets, and restructuring charges associated with workforce reductions. These items totaled $281.1 million for the quarter. Of this amount, cash expenditures totaled less than $10 million, related primarily to severance payments for workforce reductions.
Net loss for the quarter, which includes all of the items specified above, was $346.3 million or $0.85 per share, compared to a loss of $668.3 million, or $1.69 per share, in the second quarter of 2000. The decrease in net loss compared to the year-ago period was driven primarily by reduced expenses for the amortization of goodwill and other intangible assets following write-downs of these assets in prior quarters.
Cash and marketable securities totaled $183.4 million at the end of the quarter, compared to $104.5 million as of March 31, 2001. Excite@Home successfully secured $185 million in the second quarter through the sale of convertible notes and through the restructuring of its optical fiber backbone agreement with AT&T. As announced in April, the company continues to pursue alternatives that would reduce its financial exposure to narrowband media operations, which continue to generate financial losses for the company. The company will need to raise additional funds before the end of 2001 to support its operations. Potential sources of additional funds may include sales of certain of the company's media operations and financing transactions. If the company is unsuccessful at raising sufficient funds or sufficiently reducing expenses, this could have a material adverse impact on its operations and liquidity.
Commenting on the quarter, Excite@Home chairman and CEO Patti Hart said, "Despite facing a number of tough challenges, we executed solidly this quarter, posting results in line with our targets and delivering ever-higher levels of network reliability and customer satisfaction. Demand for broadband services remains high, our access revenues continue to grow rapidly and we continue to work towards the break-even mark on operating EBITDA."
"We are working quickly to reshape our company in order to lead the next phase of the growth in broadband," Hart continued. "We are unique in our ability to deliver highly reliable broadband network services and applications, and we are focused on leveraging these capabilities to deliver a wider array of services to a broader set of customers."
BUSINESS SEGMENT SUMMARY
Consumer Access
Consumer access revenues consist of Excite@Home's share of subscription fees paid by residential broadband subscribers in North America. These revenues totaled $89.7 million in the second quarter, up 71% from the second quarter of 2000, driven by growth in Excite@Home's North American residential subscriber base. North American subscribers totaled 3,271,000 at June 30, 2001, an increase of 101% from a year ago.
Excite@Home's addressable market grew to 35.2 million upgraded cable homes passed in North America, an increase of 30% from a year ago. Sixty-six percent of Excite@Home's total homes under contract in North America are now serviceable. Service penetration in North America was 9.3% in the second quarter, up from 6.1% a year ago. Subscriber and addressable-market figures include certain areas served by Excite@Home affiliates that Excite@Home expects to convert to the @Home service.
Overall customer satisfaction for Excite@Home's broadband service increased this quarter to the highest levels since 1998 (source:Excite@Home Quarterly Customer Satisfaction Survey). The increases were due to large improvements in overall reliability, e-mail, and consistency of speed. In this second quarter survey, 84% of respondents said they were very or somewhat satisfied with the service and 86% were very or somewhat satisfied with the downstream speed.
Commercial Services
Commercial services revenues are generated through the sale of @Work broadband services to small and medium-sized enterprises via cable, T1 connections, and the sale of very high-speed connectivity to content distribution networks and Internet content providers. Commercial services revenues totaled $14.3 million in the second quarter, an increase of 4% from the second quarter of 2000. Adjusted for reductions in revenue due to the discontinuation of certain operations, commercial revenues increased approximately 40% compared to the second quarter of 2000. This increase was driven by growth in @Work bandwidth under contract, which more than tripled year-over-year to more than nine gigabits, including @Work accounts for cable access as well as T1 and higher-speed connections. Total @Work accounts at quarter-end totaled 12,170, an increase of more than 61% over the year-ago figure.
Media/Advertising
Media revenues consist of fees for advertising and sponsorships on Excite@Home's media properties as well as online marketing services revenues generated by the company's MatchLogic subsidiary. Media revenues totaled $28.6 million in the second quarter, down 62% compared to the year-ago quarter. The decline was driven primarily by the industry-wide weakness in the online advertising market as well as Excite@Home's reduced emphasis on narrowband media and advertising services.
International Services
International revenues include fees paid to Excite@Home for services provided to broadband providers in Japan, Australia and the Netherlands, as well as revenues from Excite@Home's international portal properties. Second quarter international revenues were $6.1 million compared to $7.7 million in the second quarter of 2000 as a result of reduced media revenues in the company's European portal operations.
Excite@Home's international broadband subscribers numbered 403,000 at the end of June, up nearly five times from 82,000 a year ago. Subscriber growth continues to be led by @Home Japan, which now provides services to four cable operators in Japan serving approximately seven million cable homes.
Excite@Home announced during the quarter that it is discontinuing its wholly-owned international media operations, including operations in France, Germany and Spain, while continuing to participate in non-consolidated joint ventures operating Excite portals in Japan, Australia, Italy and the United Kingdom.
FINANCIAL DETAIL
Net interest expense for the quarter was $12.5 million compared with interest income of $0.9 million a year ago. Net interest expense includes the impact of other income and expense from portfolio sales and other items. The change was driven by higher interest expense from capital equipment leases, as well as lower gains from Excite@Home's investment portfolio.
Capital expenditures, directed primarily at expanding and increasing the reliability of Excite@Home's broadband network, totaled $48.5 million in the second quarter.
Conference Call to Discuss Earnings
Excite@Home will host a conference call to present its results at 1:30 PM Pacific Time on July 23. The call will be available to the public via an audio webcast at the company's investor relations website, www.excitehome.net/ir. A replay of the call will also be archived on the website.
ABOUT EXCITE@HOME
Excite@Home is the leader in broadband, offering consumers residential broadband services and businesses high-speed commercial services. Excite@Home has three joint ventures outside of North America to deliver high-speed Internet services and has localized versions of the Excite service in a number of international markets.
This press release contains forward-looking statements that involve risks and uncertainties. These include statements about the company's future financial outlook, cash position, revenue and operating losses, goals for the growth of its broadband subscriber base and footprint, and the statements made by Ms. Hart. Actual results may differ materially due to a number of factors, including developments regarding the company's relationships with its cable partners, the company's ability to raise additional funds, the company's ability to execute on expense reduction plans, the company's ability to find buyers for certain business units, adverse economic and industry conditions, weakening demand for advertising and marketing services and increased risk of turnover of executives and key employees. There can be no assurances that the company will successfully renegotiate its agreements with Cox and Comcast. These expectations are subject to risk and uncertainty, and are subject to modification. Reported results should not be considered as an indication of future performance. The matters discussed in this press release also involve risks and uncertainties described in Excite@Home's Form 10-Q for the quarter ended March 31, 2001 and other filings with the Securities and Exchange Commission. Excite@Home assumes no obligation to update the forward-looking information contained in this press release.
Note to Editors: Excite@Home and @Home are service marks or registered service marks of At Home Corporation in the United States and other countries. |
