11/9/05
XO Communications Reports Financial Results for Third Quarter 2005
RESTON, VA - XO Communications, Inc. (OTCBB: XOCM.OB) today reported its third quarter 2005 financial and operational results.
Revenue for the third quarter ended September 30, 2005 was $358.7 million compared with $362.2 million in the second quarter of 2005 and $391.9 million reported in the third quarter of 2004. Consolidated net loss for the third quarter of 2005 was $30.6 million, compared with a consolidated net loss of $29.5 million in the second quarter of 2005 and a consolidated net loss of $41.8 million in the third quarter of 2004. Consolidated adjusted EBITDA1 for the third quarter of 2005 was $34.0 million compared with consolidated adjusted EBITDA of $36.4 million in the second quarter of 2005 and a $20.5 million consolidated adjusted EBITDA loss in the third quarter of 2004. Consolidated adjusted EBITDA for the third quarter of 2005 included favorable carrier settlements of $8.5 million, compared with $10.5 million for the second quarter of 2005 and $9.4 million for the third quarter of 2004.
“We continued to make progress against our financial goals by narrowing our net loss year over year, delivering positive EBITDA for the fifth consecutive quarter, and generating positive cash-flow for the second consecutive quarter,” said Carl Grivner, CEO of XO Communications. “Our new IP-based commercial and wholesale product offerings have been well-received by the market, demonstrated by the fact that we have signed nearly 2,000 new customers of XOptions Flex, our new VoIP services bundle for businesses, since its launch earlier this year.”
“The recently announced sale of XO’s wireline telecommunications business will mark a new chapter for XO,” added Grivner. “The transaction will create a new wireless business that will be debt free and have more than $300 million in cash. With its financial position and national spectrum coverage, the new wireless business will be uniquely positioned as one of the nation’s leading pure-play broadband wireless companies. The privately held XO national wireline business will have a restructured balance sheet and will be in a stronger position to move forward as the nation’s largest competitive provider of telecommunications services to businesses.”
Revenue from voice services – consisting of local, long distance and other voice services – was $182.0 million in the third quarter of 2005 compared with $188.5 million in the second quarter of 2005 and $214.7 million for the third quarter of 2004. Revenue from data services – consisting of Internet access, network access and web hosting – was $108.8 million in the third quarter of 2005 compared with $107.8 million in the second quarter of 2005 and $110.0 million for the third quarter of 2004. Revenue from integrated services – consisting of integrated data and voice services – was $67.9 million in the third quarter of 2005 compared with $65.9 million in the second quarter of 2005 and $67.2 million for the third quarter of 2004.
Gross margin2 for the third quarter of 2005 was $211.7 million compared to $224.1 million in the second quarter of 2005 and $229.9 million in the third quarter of 2004. Selling, operating and general (SOG) expenses for the third quarter of 2005 were $177.7 million compared to $187.8 million in the second quarter of 2005 and $209.4 million in the third quarter of 2004. As a percentage of revenue, SOG expenses for the third quarter of 2005 were 50 percent compared to 52 percent for the second quarter of 2005 and 53 percent in the third quarter of 2004. The improvements in SOG expenses year-over-year as a percentage of revenue were primarily due to greater efficiencies resulting from the integration of the acquired Allegiance Telecom operations and XO’s ongoing cost reduction initiatives.
Cash, cash equivalents and marketable securities increased by $0.6 million to $280.2 million in the third quarter of 2005 compared to $279.6 million at the end of the second quarter of 2005.
Detailed financials for the third quarter of 2005 are available at http://www.xo.com/about/investors/financials/3Q05.pdf
Quarter Highlights and Recent Announcements
Last week, XO announced an agreement that will create a leading provider of fixed broadband wireless services to businesses and service providers. In order to create and finance the fixed wireless business, XO will sell its national wireline telecommunications business for $700 million in cash to Elk Associates LLC, an entity owned by XO’s controlling stockholder, Carl Icahn. Following the sale, the Company will retain its fixed broadband wireless spectrum assets and be uniquely positioned to be a leading provider of fixed broadband wireless services nationally as one of the largest holders of fixed wireless licenses in the 28 GHz-31 GHz spectrum range covering more than 70 U.S. major metropolitan markets. The proceeds from the sale of the wireline business will be used to repay XO’s outstanding long-term debt, to offer to redeem, at the closing of the sale, XO’s outstanding preferred stock and to fund growth and development of the wireless business. Once the sale is completed, the wireless business will be debt-free and is currently expected to have in excess of $300 million in cash to fund its operations and for other corporate purposes. The transaction is anticipated to close in late 2005 or early 2006. The “XO Communications” brand name will be transferred to the private company and thereby will remain with the national wireline telecommunications business. XO anticipates operating its fixed wireless business under a new name.
On September 20, 2005, XO announced that it signed its 1,500th XOptions Flex customer just five months after launching the service nationwide. XOptions Flex is the industry’s first voice over IP (VoIP) services bundle for businesses that combines unlimited local and long distance calling, dedicated Internet access and web hosting services for a flat monthly price. XOptions Flex also received INTERNET TELEPHONY magazine’s Excellence Award for 2005, which singled out XOptions Flex for delivering solutions that improve VoIP and IP telephony.
XO announced that it is broadening its nationwide Wholesale Local Voice services platform to support competitive local exchange carriers (CLECs) that offer local and long distance services to residential customers in competition with the regional Bell operating companies (RBOCs). XO can now help CLECs focused on residential customers transition off of the RBOCs’ unbundled network element platform (UNE-P) and utilize central office and transport services from XO in order to continue to cost-effectively deliver telephone services to their customers.
XO announced that it carried more than 1.8 billion minutes of VoIP traffic across the XO IP network during the third quarter of 2005. VoIP traffic grew by 17 percent during the quarter due to an increased usage of XO’s commercial and wholesale VoIP solutions.
XO also announced a number of customer wins during the third quarter. These included Pandora Networks, the Sacramento Kings, SunRocket, and a $7 million, five-year contract to provide data and voice services to MinolConnect that will enable MinolConnect to provide local and long distance telephone and high-speed Internet services to 6,300 apartment units owned and operated by Olen Residential in the Las Vegas metropolitan area.
About XO Communications
XO Communications is a leading provider of national and local telecommunications services to businesses, large enterprises and telecommunications companies. XO offers a complete portfolio of services, including local and long distance voice, dedicated Internet access, private networking, data transport, and Web hosting services as well as bundled voice and Internet solutions. XO provides these services over an advanced, national facilities-based IP network and serves more than 70 metropolitan markets across the United States. For more information, visit www.xo.com.
For more information contact:
Chad Couser / XO Communications
703-547-2746
chad.couser@xo.com
