* Total revenue of $362.2 million, an increase of 30% compared to
$278.2 million in Q2 2004 RESTON, Va., Aug. 9
/PRNewswire-FirstCall/ -- XO Communications, Inc. (OTC:XOCM.OB)
(BULLETIN BOARD: XOCM.OB) today reported its second quarter 2005
financial and operational results. Revenue for the second quarter
ended June 30, 2005 was $362.2 million compared with $361.5 million
reported in the first quarter of 2005 and $278.2 million reported
in the second quarter of 2004. Consolidated net loss for the second
quarter of 2005 was $29.5 million, compared with a consolidated net
loss of $42.9 million in the first quarter of 2005 and a
consolidated net loss of $43.8 million in the second quarter of
2004. Consolidated adjusted EBITDA(1) for the second quarter of
2005 was $36.4 million compared with consolidated adjusted EBITDA
of $21.9 million in the first quarter of 2005 and a $4.8 million
consolidated adjusted EBITDA loss in the second quarter of 2004.
The increase in consolidated adjusted EBITDA primarily resulted
from the achievement of synergies from the integration of the
acquired assets of Allegiance Telecom, a $3.9 million adjustment to
the estimate of liabilities assumed from Allegiance Telecom and a
$10.5 million favorable non-cash settlement with another carrier.
"Our second quarter results show that we continue to make strong
progress against our financial and operational goals," said Carl
Grivner, chief executive officer of XO Communications. "We continue
to show financial progress with improved margins, positive adjusted
EBITDA for the fourth consecutive quarter, and positive cash flow
generated in the second quarter. We are also extremely pleased with
customer reception to our recently launched XOptions Flex VoIP
services bundle. In just three months after launching the service,
we have signed more than 1,000 new customer orders." Revenue from
voice services -- consisting of local, long distance and other
voice services -- was $188.5 million in the second quarter of 2005
compared with $141.7 million for the second quarter of 2004.
Revenue from data services -- consisting of Internet access,
network access and web hosting -- was $107.8 million in the second
quarter of 2005 compared with $95.6 million for the second quarter
of 2004. Revenue from integrated services -- consisting of
integrated data and voice services -- was $65.9 million in the
second quarter of 2005 compared with $40.9 million for the same
period in the prior year. Gross margin(2) for the second quarter of
2005 was $224.1 million compared to $213.6 million in the first
quarter of 2005 and $159.4 million in the second quarter of 2004.
As a percentage of revenue, gross margin increased to 62 percent in
the second quarter of 2005 compared to 59 percent in the first
quarter of 2005 and 57 percent in the second quarter of 2004. Gross
margin improvement for the second quarter of 2005 includes a $10.5
million favorable settlement with another carrier and a $3.9
million adjustment to the estimate of liabilities assumed from
Allegiance Telecom. Selling, operating and general (SOG) expenses
for the second quarter of 2005 were $187.8 million compared to
$164.1 million in the second quarter of 2004. As a percentage of
revenue, SOG expenses for the second quarter of 2005 were 52
percent compared to 53 percent for the first quarter of 2005 and 59
percent in the second quarter of 2004. The improvements in SOG
expenses 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. During the second quarter of 2005, operating
activities provided net cash of $32.2 million, investing activities
used net cash of $18.0 million and financing activities used net
cash of $0.7 million, resulting in net cash flow of $13.5 million.
Cash, cash equivalents and marketable securities increased by $12.3
million to $279.6 million in the second quarter of 2005 compared to
$267.3 million at the end of the first quarter of 2005. Recent
Announcements At the end of July 2005 XO announced that it had
signed its 1,000th XOptions Flex customer just three months after
launching the service nationwide in 45 metropolitan markets.
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. XO also launched XOptions Flex
in two new markets, Minneapolis/St. Paul and San Antonio, during
the second quarter of 2005. XO announced that it carried more than
1.6 billion minutes of VoIP across the XO IP network during the
second quarter of 2005. VoIP traffic grew by 15 percent during the
quarter due to an increased usage of XO's commercial and wholesale
VoIP solutions, demonstrating the demand for delivering voice
services over an all IP environment. XO also announced an expansion
of its network in the Orlando metropolitan area. This expansion
doubled XO's coverage area in the Orlando market and neighboring
areas, allowing the company to serve more businesses with voice,
data and advanced IP-based services. During the second quarter, XO
also announced a partnership with Avaya to collaborate in offering
a suite of communications solutions that combine applications,
hardware, and services for small and medium-sized businesses. Avaya
and XO will offer managed solutions that simplify the
communications services packages small businesses use through
seamless, integrated offerings of converged systems and network
services. 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 http://www.xo.com/. THE STATEMENTS CONTAINED IN
THIS RELEASE THAT ARE NOT HISTORICAL FACTS ARE "FORWARD-LOOKING
STATEMENTS" (AS SUCH TERM IS DEFINED IN THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995). THESE STATEMENTS INCLUDE THOSE
DESCRIBING XO'S EXPECTED FUTURE BUSINESS AND NETWORK OPERATIONS AND
RESULTS OF OPERATIONS, XO'S ABILITY TO CONTINUE TO ACHIEVE
PROJECTED SYNERGIES AND REVENUE FROM THE ACQUISITION OF
ALLEGIANCE'S ASSETS, XO'S ABILITY TO INCREASE SALES, XO'S ABILITY
TO CONTINUE TO IMPLEMENT EFFECTIVE COST CONTAINMENT MEASURES, AND
XO'S ABILITY TO MITIGATE THE EFFECTS OF REGULATIONS RECENTLY
ADOPTED BY THE FEDERAL COMMUNICATIONS COMMISSION. SUCH STATEMENTS
ARE BASED ON CURRENT EXPECTATIONS BUT ARE SUBJECT TO A NUMBER OF
BOTH KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS, PERFORMANCE, AND/OR ACHIEVEMENTS OF XO TO DIFFER
MATERIALLY FROM ANY FUTURE RESULTS, PERFORMANCE, AND/OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING
STATEMENTS. MANAGEMENT CAUTIONS THE READER THAT THESE
FORWARD-LOOKING STATEMENTS ARE ONLY PREDICTIONS AND ARE SUBJECT TO
RISKS AND UNCERTAINTIES AND ACTUAL RESULTS MAY DIFFER MATERIALLY
FROM THOSE INDICATED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT
OF A NUMBER OF FACTORS. THESE FACTORS INCLUDE, WITHOUT LIMITATION,
THOSE RISKS AND UNCERTAINTIES DESCRIBED FROM TIME TO TIME IN THE
REPORTS FILED BY XO COMMUNICATIONS, INC. WITH THE SECURITIES AND
EXCHANGE COMMISSION, INCLUDING ITS ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 2004 AND ITS QUARTERLY REPORTS ON FORM
10-Q. XO UNDERTAKES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING
STATEMENTS. XO, XOptions, XOIP, XOptions Flex, National Local
Exchange Carrier, Allegiance, and all related marks are either
registered trademarks or trademarks of XO Communications, Inc. in
the United States and/or other countries. XO COMMUNICATIONS, INC.
Condensed Consolidated Statements of Operations (Dollars in
thousands, except for share and per share data) Three Months Ended
Six Months Ended June 30, June 30, June 30, June 30, 2005 2004 2005
2004 (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenue $
362,164 $ 278,183 $ 723,669 $ 539,128 Costs and expenses: Cost of
service (exclusive of depreciation and amortization) 138,024
118,822 285,947 228,783 Selling, operating, and general 187,772
164,149 379,466 332,702 Depreciation and amortization 61,097 30,065
119,461 55,762 Loss from operations $ (24,729) $ (34,853) $
(61,205) $ (78,119) Interest income 1,919 841 3,820 2,546
Investment gain (loss), net 1,891 (3,962) 1,612 (4,291) Interest
expense, net (8,588) (5,846) (16,592) (12,450) Net loss $ (29,507)
$ (43,820) $ (72,365) $ (92,314) Preferred stock accretion (3,145)
- (6,242) - Net loss applicable to common shares $ (32,652) $
(43,820) $ (78,607) $ (92,314) Net loss per common share, basic and
diluted $ (0.18) $ (0.31) $ (0.43) $ (0.67) Weighted average
shares, basic and diluted 181,933,035 140,538,159 181,933,035
137,591,467 XO COMMUNICATIONS, INC. Condensed Consolidated Balance
Sheets (Dollars in thousands) As of As of June 30, March 31, 2005
2005 (Unaudited) (Unaudited) Cash, cash equivalents, and marketable
securities $ 279,598 $ 267,292 Accounts receivable, net 137,683
133,980 Other current assets 33,121 30,688 Property and equipment,
net 764,729 791,892 Broadband wireless licenses and other
intangibles, net 115,567 127,773 Other assets, net 44,917 46,375
Total assets $ 1,375,615 $ 1,398,000 Accounts payable and other
current liabilities $ 311,128 $ 307,510 Long-term debt and accrued
interest payable 382,646 374,195 Other long-term liabilities 67,502
71,272 Class A convertible preferred stock 210,596 207,451 Total
stockholders' equity 403,743 437,572 Total liabilities, convertible
preferred stock and stockholders' equity $ 1,375,615 $ 1,398,000
(1) Adjusted EBITDA is defined as net income or loss before
depreciation, amortization, interest expense, interest income,
investment gain (loss), impairment charges, restructuring charges,
and asset writedowns. Adjusted EBITDA is not intended to replace
operating income (loss), net income (loss), cash flow and other
measures of financial performance reported in accordance with
generally accepted accounting principles in the United States.
Rather, Adjusted EBITDA is an important measure used by management
to assess operating performance of the company. Adjusted EBITDA as
defined here may not be comparable to similarly titled measures
reported by other companies due to differences in accounting
policies. Additionally, Adjusted EBITDA as defined here does not
have the same meaning as EBITDA as defined in our secured credit
facility agreement, or as EBITDA as defined in our SEC filings. A
reconciliation of Adjusted EBITDA to net loss is included below: XO
COMMUNICATIONS, INC. Reconciliation of Net Loss to Adjusted EBITDA
(Dollars in thousands) Three Months Ended Six Months Ended June 30,
March 31, June 30, June 30, June 30, 2005 2005 2004 2005 2004
(Unaudited)(Unaudited)(Unaudited) (Unaudited)(Unaudited) Net loss
$(29,507) $(42,859) $(43,820) $(72,365) $(92,314) Depreciation and
amortization 61,097 58,365 30,065 119,461 55,762 Interest income
(1,919) (1,893) (841) (3,820) (2,546) Investment (gain) loss, net
(1,891) 271 3,962 (1,612) 4,291 Interest expense, 8,588 8,004 5,846
16,592 12,450 net Adjusted EBITDA $ 36,368 $ 21,888 $ (4,788) $
58,256 $(22,357) (2) Gross margin is defined as revenue less cost
of service, and excludes depreciation and amortization. Gross
margin is not intended to replace operating income (loss), net
income (loss), cash flow and other measures of financial
performance reported in accordance with generally accepted
accounting principles in the United States. Rather, gross margin is
an important measure used by management to assess operating
performance of the company. Additionally, we believe that gross
margin is a standard measure of operating performance that is
commonly reported and widely used by analysts, investors, and other
interested parties in the telecommunications industry. Gross margin
as defined here may not be comparable to similarly titled measures
reported by other companies due to differences in accounting
policies. A reconciliation of Gross Margin to net loss is included
below: XO COMMUNICATIONS, INC. Reconciliation of Net Loss to Gross
Margin (Dollars in thousands) Three Months Ended Six Months Ended
June 30, March 31, June 30, June 30, June 30, 2005 2005 2004 2005
2004 (Unaudited)(Unaudited)(Unaudited) (Unaudited)(Unaudited) Net
loss $(29,507) $(42,859) $(43,820) $(72,365) $(92,314) Selling,
operating and general 187,772 191,694 164,149 379,466 332,702
Depreciation and amortization 61,097 58,365 30,065 119,461 55,762
Interest income (1,919) (1,893) (841) (3,820) (2,546) Investment
(gain) loss, net (1,891) 271 3,962 (1,612) 4,291 Interest expense,
net 8,588 8,004 5,846 16,592 12,450 Gross margin $224,140 $213,582
$159,361 $437,722 $310,345 DATASOURCE: XO Communications CONTACT:
Chad Couser of XO Communications, +1-703-547-2746, or Web site:
http://www.xo.com/
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