PSINet Reports 1998 Revenues of $260 Million Up 113 Percent
HERNDON, VA. (Feb. 23) BUSINESS WIRE -Feb. 23, 1999--
Annualized Revenue Increases to $376 Million Beating First Call Estimates by $0.05 with Recurring EPS of ($1.02)
Over 54,700 Business and 863,000 SOHO/Consumer Customers Completed 17 Acquisitions with Annualized Revenues of $135 Million
(NASDAQ:PSIX) - PSINet Inc. today reported record revenues for the fourth quarter and year ended December 31, 1998. Revenues for the
quarter were $93.9 million, an increase of 39% over the $67.6 million reported for the third quarter of 1998 and up 170% over the $34.8 million
reported for the fourth quarter of 1997. EBITDA for the fourth quarter of 1998 was a loss of $9.9 million, or 10.6% of revenue, an improvement as
compared with a loss of $10.6 million for the third quarter of 1998, or 15.7% of revenue, and a loss in the fourth quarter of 1997 of $6.5 million,
or 18.7% of revenue. The net loss available to common shareholders for the fourth quarter was $53.2 million or $1.02 basic and diluted loss per
share, before the effect of a $30.4 million ($0.59 per share) charge for acquired in-process research and development related to PSINet's
acquisition of Tokyo Internet. This compares favorably to First Call's consensus estimate of a $1.07 loss per share.
The net loss available to common shareholders for the quarter, including the charge for acquired in-process research and development, was
$83.6 million, or $1.61 basic and diluted loss per share, compared with $48.1 million, or $0.93 basic and diluted loss per share, for the third
quarter of 1998. The net loss available to common shareholders for the fourth quarter of 1997 was $14.7 million, or $0.36 basic and diluted loss
per share. MANAGEMENT'S COMMENTS ON THE FOURTH QUARTER
"This fourth quarter exemplifies the overall powerful performance of PSINet for 1998 on all fronts," said William L. Schrader, chairman and chief
executive officer. "Our revenue growth for the quarter and the year was outstanding, and benefited from strong organic growth as well as
significant additions to revenue through our successful acquisition program. During the quarter, we were able to demonstrate important
progress with new alliances with customers, channels and vendors; take strategic action in acquiring bandwidth connectivity worldwide; further
introduce and enhance our product sets; further develop our commitment to sound management and organization; and continue to demonstrate
our ability to access and deploy capital for shareholder value."
"Over the past year, as PSINet has expanded into 12 of the top 20 telecommunication markets worldwide, we increased our revenue by 113%,
approximately half from organic growth and half from the 17 acquisitions made in 1998. We also increased our customer base to over 54,700
business customers as well as over 863,000 small office/home office (SOHO) and consumer customers, and acquired 125,000 equivalent route
miles of OC-12 fiber-optic capacity worldwide," said Pete Wills, president and chief operating officer. "PSINet has grown significantly in
competitiveness and strength as the world's largest independent global facilities-based Internet communications provider."
"PSINet's performance was excellent for the fourth quarter," said Edward D. Postal, senior vice president and chief financial officer,
"significantly improving on all key metrics including revenue, customer statistics, gross margin, and EBITDA. Our revenue growth of 113% for
the year and 39% sequentially in the fourth quarter exceeds all estimates. Our ability to access the capital markets with approximately $1.1
billion of high yield debt financing and credit line capacity has enabled us to grow rapidly and make investments in key markets around the
world. The integration of our 1998 acquisitions is progressing well throughout all of our operations, which includes the U.S., Canada, Europe
and Asia." He continued, "It is particularly satisfying to have met or exceeded Wall Street consensus estimates for all 8 quarters of 1997 and
1998." QUARTERLY HIGHLIGHTS AND RECENT DEVELOPMENTS - Purchased Tokyo Internet in Japan, which generates annualized
revenue of over $35 million and adds 6,500 business customers as
well as 10,000 new SOHO and consumer customers. The purchase of
Tokyo Internet results in PSINet becoming the number two Internet
provider to businesses in Japan - the second largest
telecommunications market in the world. - Also in Asia, purchased three companies in Hong Kong - AsiaNet,
SpiderNet and HugeNet. These acquisitions solidify PSINet's
position as the number two Internet provider to businesses in
Hong Kong. PSINet is also the number two Internet provider to
businesses in Korea. - In the Netherlands, purchased USN/IXE,
adding to PSINet's
European presence in Belgium, France, Germany, Italy, Switzerland
and the United Kingdom. - In January 1999, surpassed the $240
million valuation threshold
promised to IXC Communications Inc. (NASDAQ: IIXC) in connection
with PSINet's February 1998 purchase of transcontinental North
American fiber-optic Internet network capacity, completely
satisfying PSINet's obligation under this agreement. Continued to
deploy the IXC fiber-optic bandwidth, the delivery of which
currently stands at about 15% of IXC's total commitment. The
acquisition of this capacity reduces PSINet's unit cost of
bandwidth to one-tenth of bandwidth it replaces. - Acquired dark
fiber in the Silicon Valley region of Southern
California, and activated an OC-48 in New York City, an important
portion of PSINet's previously acquired dark fiber in the New
York to Washington, D.C. corridor. - In January 1999, acquired STM-1 fiber connections linking Japan,
China, Southeast Asia, India, the Middle East, Europe and the
U.K., and acquired STM-1 fiber connections linking existing
PSINet operations in London, Amsterdam, Brussels, Paris,
Dusseldorf, Berlin, Munich, Stuttgart, Frankfurt, Geneva, and
Zurich. In 2000, PSINet will add additional cities to the
European network, including Antwerp, Copenhagen, Lyon,
Marseilles, Strasbourg, Hannover, Hamburg, Cologne, Milan, Turin,
Luxembourg, Monaco, Madrid, Barcelona, Valencia, Stockholm,
Gothenburg, Rotterdam, and Vienna. These STM-1 acquisitions
reduce PSINet's unit cost of bandwidth to one-tenth of the
bandwidth being replaced. - Acquired dark fiber connecting the U.S. to Canada between
Seattle, Washington and Vancouver, British Columbia. The 20
strands of dark fiber will significantly increase network
capacity on PSINet's North American western corridor and link to
other PSINet fiber capacity currently being activated throughout
PSINet's global network. The acquisition of this dark fiber
reduces PSINet's unit cost of bandwidth to one one-hundredth of
the cost of bandwidth it replaces. - Raised approximately $350 million in 11 1/2% senior notes, $150
million of which were placed at a premium of 102, to be used for
the acquisition of additional telecommunications bandwidth and
related facilities, equipment, Internet data centers, and for
general corporate purposes. - Opened new global Internet hosting
centers for dedicated business
applications in the metropolitan Washington, D.C. area and
Toronto, Ontario. These are the first of several centers that
will be completed over the next few quarters, representing a
critical milestone in PSINet's strategy of providing a full range
of Web and business application hosting services on a global
scale. - In January 1999, forged a strategic commercial alliance
with the
NFL's Baltimore Ravens. This arrangement includes the development
of a global Internet-based network for the Ravens that will
significantly enhance outreach between fans and the team, as well
as establish a new business model for sports marketing. In
addition, PSINet acquired naming rights to the NFL Stadium at
Camden Yards in Baltimore, which has become PSINet Stadium, as
well as primary sponsorship of all team activities, including
extensive broadcast, print and event marketing opportunities. -
Entered into significant strategic alliances or partnerships -
Wang Global (NASDAQ: WANG) for the rollout of the PSIVoice
product, Inktomi Corporation (NASDAQ:INKT) to license Inktomi's
Traffic Server network cache, and Allaire Corporation to offer
Allaire's ColdFusion product. The company also announced reseller
agreements with NEXTLINK Communications Inc. (NASDAQ: NXLK) and
Cincinnati Bell Inc. (NYSE: CSN). ANNUAL RESULTS
Revenues for the year ended December 31, 1998 were $259.6 million, a 113% increase over revenues of $121.9 million for 1997. EBITDA for
the year ended December 31, 1998 was a loss of $42.1 million, or 16.2% of revenue, compared to a loss of $21.2 million, or 17.4% of revenue,
for the year ended December 31, 1997. The 1998 net loss available to common shareholders was $215.9 million, or $4.34 basic and diluted
loss per share, including the effect of $70.8 million ($1.42 per share) of charges for acquired in-process R&D. This compares to a net loss
available to common shareholders of $46.0 million for the year ended December 31, 1997. 1998 IN REVIEW - Purchased 17 companies for
approximately $260 million in cash,
generating $135 million in annualized revenue, accounting for
20,200 business customers and 208,800 SOHO/consumer customers at
the time of acquisition. These companies operate in 9 of the top
20 telecommunications markets in the world, bringing the number
of these markets served by PSINet to 12 as of year-end. - Successfully funded capital needs by placing $950 million of
senior notes at 10% and 11 1/2% in April, October and November,
completing a bank revolver in the amount of $110 million in
September, and placing approximately $110.4 million in lease
financing throughout the year. - Acquired STM-1 or greater
fiber-optic capacity completely
circumnavigating the globe, covering the U.S., Canada, the U.K.,
Europe, Middle East, India, Southeast Asia, Hong Kong, Japan and
Korea. - Introduced new products such as PSINet's voice-over IP suite of
services for PSINet's existing business customers, marking the
beginning of the phased roll out of the PSIVoice solutions.
PSINet Canada launched xDSL deployment in key Canadian markets.
Also in 1998, PSINet's Carrier and ISP Services unit began
offering a new content filtering service for its ISP customers
that enables them to offer consumers protection from pornography
and other objectionable content and web sites. Coupled with the
opening of the new global Internet hosting centers, PSINet
developed three new services designed to serve the growing market
demand for highly reliable, outsourced hosting services that
allow companies to scale from a basic online web presence to
mission-critical applications. - Expanded the availability of
PSINet InterSky - a business-grade
wireless Internet access service. Building on nearly one year of
successful deployment in test markets in the U.S., the service
will be available in selected metropolitan areas in the U.S. by
the end of 1999 utilizing PSINet inside sales experts as well as
channel and private-label partners. The initial roll out has been
completed or planned for ten Southeastern U.S. markets by the end
of the second quarter of 1999. Service is planned to be extended
to 50 markets in total by the end of the year 2000. - Promoted
Harold S. "Pete" Wills to president of PSINet and David
N. Kunkel to executive vice president and general counsel. Both
continue to serve on the company's board of directors. During the
year, the company also hired and promoted 25 senior corporate
officers to leadership positions throughout the world from such
leading telecommunication and technology companies as
MCIWorldCom, Sprint, Bell Atlantic AT&T, British Telecom and
Lucent Technologies. - PSINet forged strategic partnerships with industry-leading
equipment manufacturers such as Intel, Hewlett-Packard, Ascend,
Cisco, Lucent, Xedia, and WatchGuard; first-tier distributors
such as Ingram Micro, and Merisel; and retailers such as
CompUSA/Computer City and American Express. PSINet's channel
partner program has also grown to include more than 1,400
certified value-added resellers and systems integrators such as
Micros-to-Mainframes, Timebridge Technologies, Ray
Communications, Omicron Consulting and AAA Networks. OPERATING
RESULTS - PSINet provided service to 54,700 corporate customers at
December
31, 1998, an increase of 28,300 customers, or 107%, over the
26,400 customers at December 31, 1997 and an increase of 17% for
the fourth quarter. Of the 10,400 customers added in the fourth
quarter, 3,400 were added as a result of organic growth in our
core business, and 7,000 were added through customers of
companies acquired during the quarter. Accounts outside the U.S.
represented 59% of PSINet's customer base at the end of 1998. - Average annual new contract value for business accounts increased
to $6,000 for 1998 from $5,500 for 1997. For the fourth quarter,
the average new contract value was $6,300, reflecting the
increasing demand for value-added services and higher levels of
bandwidth. - The business account retention rate remained strong
with a full
year retention rate of 79% and a fourth quarter rate of 78%. - PSINet's Carrier and ISP business added 27 new customers this
quarter, bringing the total served to 168. These ISPs provide,
along with PSINet's SOHO and consumer customers around the world,
Internet services to over 863,000 customers using PSINet Internet
solutions. |
