EXHIBIT 99.1
RSL Communications Reports Third Quarter Financial Results
Cash Usage Reduced
Exploring Strategic Options
Hamilton, Bermuda and New York--November 9, 2000--RSL Communications, Ltd.
(Nasdaq:RSLC), a premier provider of data, Internet, and voice services focused
on small and medium enterprises in Europe and the United States, announced
revenues of $382.8 million and normalized EBITDA(1) of negative $44.6 million
for the third quarter 2000. Excluding foreign currency impacts, revenues would
have been approximately $393.1 million, slightly above revenues in the second
quarter of 2000. The Company has enhanced controls on its cash resources and has
reduced its cash burn rate in the third quarter primarily through the reduction
of non-critical capital expenditures and working capital management.
Paul Domorski, President and Chief Executive Officer of RSL COM said, "The
quarter was a challenging one, and although our results are consistent with the
expectations we communicated publicly several weeks ago, they are disappointing.
It is critical that we make bold and decisive changes to RSL COM's current
operational profile. Since I arrived at RSL COM, I have been relentlessly
focused on doing just that.
"We have devised a new strategy going forward that has three elements. The
first is to restructure our current business and place us on a path to
profitability. This will involve exiting certain countries, selling some
customer bases or shutting down operations that have no realistic expectations
of achieving reasonable financial returns. The second element is to leverage our
existing assets and competitive advantages, including the licenses, customer
bases, distribution channels and local presence we have in key markets. The
third element is to reposition the company to be a provider of network
applications and solutions to SME customers. This will include products and
services in the data and Internet space, including, for example, LANs, VPNs, and
custom applications.
"We have nearly completed our internal operational reviews and we are now
moving into the next phase of evaluating the implications and costs of the
various alternatives. Once we have completed this process, we will announce any
operations that will be shut down, restructured or sold. At that time we will
also provide guidance for the fourth quarter 2000, which will include a one time
restructuring charge.
"With its European and U.S. presence and its 1.3 million customer base, I
have a clear vision of a future RSL COM as a focused, customer-service oriented
enterprise on a path towards profitability."
RSL COM also announced it has hired the investment banking firm of
Wasserstein Perella & Co., Inc. to assist the company in exploring strategic
alternatives.
Third Quarter 2000 Results
Consolidated revenues for the third quarter 2000 were $382.8 million,
compared to $390.5 million for the second quarter 2000 and $368.8 million for
the third quarter 1999. Excluding foreign currency impacts, revenues would have
been approximately $393.1 million, slightly above revenues in the second quarter
of 2000. Revenues from operations in Europe, RSL COM's largest market segment,
were $222.4 million in the third quarter 2000, a 2.0% decline versus the second
quarter of 2000 and an increase of 19.0% over the third quarter of 1999. After
giving effect to foreign exchange fluctuations, third quarter 2000 revenues in
Europe increased slightly over the second quarter 2000 and 34.7% over the third
quarter of 1999. Revenues from operations in the U.S. were $87.6 million in the
third quarter of 2000, approximately flat versus the second quarter of 2000 and
27.4% below the third quarter of 1999. The U.S. revenue decline is consistent
with the Company's 1999 decision to de-emphasize certain marginally profitable
wholesale and prepaid card products. Revenues from Asia/Pacific and Latin
America operations were $56.3 million in the third quarter 2000, a 2.4% decline
versus second quarter 2000, and an increase of 17.6% compared to the third
quarter 1999.
<PAGE>
Cost of services in the third quarter 2000 was $282.3 million, an increase
of 3.4% from $272.9 million in the second quarter 2000 and an increase of 10.2%
from $256.1 million in the third quarter 1999. The consolidated gross margin
percentage(2) was 26.3% in the third quarter 2000, compared to 30.1% in the
second quarter 2000 and 30.6% in the third quarter 1999. European operations
reported a gross margin of 28.0% in the third quarter 2000, versus 33.4% in the
second quarter 2000, and 37.8% in the third quarter of last year. U.S. gross
margin percentage was 16.8% in the third quarter 2000, versus 21.0% in the
second quarter this year, and 19.2% in the third quarter of last year. The
declines in gross margins are due largely to seasonality and competitive
pressures in certain markets.
Consolidated selling, general and administrative expenses were $154.3
million in the third quarter 2000, compared to $138.5 million in the second
quarter 2000 and $112.6 million in the third quarter 1999. SG&A expenses as a
percent of revenue was 40.3% in the third quarter of 2000 compared to 35.5% in
the second quarter of 2000 and 30.5% in the third quarter of 1999. Consolidated
selling, general and administrative expenses increased $15.8 million versus the
second quarter of 2000 due to business expansion efforts, primarily in Spain,
severance costs in headquarter locations, and customer acquisition costs in
certain markets.
The company recorded non-cash compensation expense of $2.2 million in the
third quarter 2000 relating to stock incentive awards previously granted to
employees, primarily at deltathree.com. Normalized EBITDA for the third quarter
2000 was $44.6 million negative, a decline from negative $8.2 million in the
second quarter 2000 on a comparable basis. EBITDA in the third quarter of 1999
on a comparable basis was positive $2.7 million. The sequential normalized
EBITDA decline was due to the aforementioned increased selling, general and
administrative expenses as well as the decrease in gross margin.
Net loss in the third quarter 2000 was $146.7 million, compared to a net
loss of $159.4 million in the second quarter of 2000 and a loss of $118.9
million in the third quarter 1999. The sequential decrease in net loss is
primarily due to a $48.3 million non-cash charge in the second quarter due to
the Company's decision to sell its Canadian operations partially offset by
increased selling, general and administrative expenses in the third quarter as
well as the decline in gross margin. Net loss per share was $2.51 for the third
quarter 2000.
Nine Months Results
Consolidated revenues for the first nine months of 2000 were $1,149.3
million, compared to $1,076.8 million in the same period of 1999, up 6.7%.
Revenues from operations in Europe were $671.3 million, or 58.4% of
consolidated, for the first nine months of 2000, compared to $517.3 million, or
48.0% of consolidated, for the same period in 1999. Revenues from operations in
North America were $300.8 million, or 26.2% of consolidated, in the first nine
months of 2000, compared to $426.4 million, or 39.6% of consolidated, in the
same period in 1999. Revenues from operations in Asia/Pacific and Latin America
were $166.5 million, or 14.5% of consolidated, for the first nine months of
2000, compared to $130.8 million, or 12.1% of consolidated, for the same period
last year. Revenues from operations at deltathree.com represented the balance.
For the first nine months of 2000, the normalized EBITDA loss was negative
$51.3 million compared to a negative $1.8 million in the same period in 1999.
Net loss for the first nine months of 2000 was $391.4 million, compared to
$248.7 million in the same period in 1999.
RSL Communications, Ltd., is a facilities based communications company
that provides a broad range of data/Internet, voice and value-added product and
service solutions primarily to small and medium sized businesses and residential
customers in selected markets around the globe. Through its subsidiary,
deltathree.com, RSL COM also owns and operates a privately managed Internet
Protocol (IP) telephony network with 107 points of presence in over 40 countries
around the world. RSL COM is headquartered in Hamilton, Bermuda with executive
offices in New York City. The web address is http:/www.rsicom.com.
This press release contains forward-looking statements within the meaning
of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act
of 1995. These statements are based on management's current expectations or
beliefs and are subject to a number of risks and uncertainties that could cause
actual results to differ materially from those set forth in such statements.
Factors which may affect actual results include, but are not limited to, the
Company's capital requirements, general economic factors, the impact of rapid
industry changes, increased competition, pricing pressures, government
regulation, the integration of acquisitions and new operations, as well as other
risks referenced
<PAGE>
from time to time in the Company's filings with the Securities and Exchange
Commission. For a detailed discussion of these and other risk factors, please
refer to the Company's filings with the SEC, including the Company's Form 10-K
for the fiscal year ended December 31, 1999 and the Company's registration
statement on Form S-4 filed with the Securities and Exchange Commission in July
2000. All subsequent written and oral forward-looking statements attributable to
the Company or persons acting on its behalf are expressly qualified in their
entirety by these risk factors. The company does not undertake any obligation to
release publicly any revisions to such forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
CONTACT: Jim Magrone, Vice President, Investor Relations and Treasurer,
212-445-7443, or Kathleen Makrakis, Director of Investor Relations,
212-445-7463, both of RSL Communications.
<PAGE>
RSL Communications Ltd.
Consolidated Statements of Operations
(In Thousands, except per share data)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
2000 1999 % Change 2000 1999 % Change
---- ---- -------- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 382,843 $ 368,831 4% $ 1,149,273 $ 1,076,812 7%
Operating costs and expenses:
Cost of services (282,264) (256,131) 10% (816,480) (765,009) 7%
Selling, general and
administrative expenses (154,254) (112,573) 37% (412,403) (323,470) 27%
Write-down for impairment of
assets -- -- N/A (48,267) -- N/A
Special charge -- (30,143) N/A -- (30,143) N/A
Non-cash compensation expense (2,204) (2,676) -18% (8,329) (5,602) 49%
Depreciation and amortization (53,496) (46,032) 16% (154,658) (126,115) 23%
---------- --------- ---------- ----------
Operating costs and expenses (492,218) (447,555) 10% (1,440,137) (1,250,339) 15%
========== ========= ========== ==========
Loss from operations (109,375) (78,724) 39% (290,864) (173,527) 68%
Interest income 2,288 5,408 -58% 11,176 16,502 -32%
Interest expense (45,007) (35,546) 27% (123,832) (95,820) 29%
Other (expense) income - net (3,221) 326 N/A (7,380) 506 N/A
Foreign exchange transaction
gain(loss) 7,205 (3,468) N/A 15,879 10,560 50%
Minority interest 5,338 (4,791) N/A 13,318 (3,969) N/A
Loss in equity interest of
unconsolidated subsidiaries (3,477) (1,184) N/A (7,903) (1,560) N/A
Income taxes (459) (918) -50% (1,773) (1,408) 26%
---------- --------- ---------- ----------
Net loss $ (146,708) $ (118,897) 23% $ (391,379) $ (248,716) 57%
========== ========= ========== ==========
Net loss per share of common
stock $ (2.51) $ (2.17) 15% $ (6.89) $ (4.63) 49%
Weighted average number of
shares of common stock
outstanding 58,440 54,702 7% 56,835 53,676 6%
Normalized EBITDA (1) $ (44,600) $ 2,717 N/A $ (51,294) $ (1,775) N/A
</TABLE>
<PAGE>
RSL Communications Ltd.
Supplemental Data
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------------- ----------------------------------------
% %
2000 1999 Change 2000 1999 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Revenue: (in thousands)
North America
- Fixed Wire / Data $ 38,762 $50,999 -24% $129,693 $ 167,510 -23%
- Mobile 15 -- N/A 51 -- N/A
- Carrier / Card 59,774 81,800 -27% 171,078 258,918 -34%
------------- ------------ ----------- ----------
98,551 132,799 -26% 300,822 426,428 -29%
------------- ------------ ----------- ----------
Europe
- Fixed Wire / Data 90,983 84,675 7% 275,650 221,391 25%
- Mobile 87,898 77,619 13% 272,099 216,122 26%
- Carrier / Card 43,544 24,664 77% 123,554 79,858 55%
------------- ------------ ----------- ----------
222,425 186,958 19% 671,303 517,371 30%
------------- ------------ ----------- ----------
Asia / Pacific and Latin America
- Fixed Wire / Data 23,630 23,871 -1% 73,762 65,964 12%
- Mobile 30,516 21,705 41% 86,454 57,336 51%
- Carrier / Card 2,155 2,288 -6% 6,317 7,496 -16%
------------- ------------ ----------- ----------
56,301 47,864 18% 166,533 130,796 27%
------------- ------------ ----------- ----------
deltathree.com (3) 5,566 1,348 N/A 10,615 2,355 N/A
------------- ------------ ----------- ----------
Consolidated revenues per minute (4) $ 0.11 $ 0.17 -35% $ 0.12 $ 0.18 -33%
Billable Voice Minutes (in thousands):
North American 786,942 778,603 1% 2,312,496 2,371,999 -3%
European
- fixed wire 796,928 568,199 40% 2,357,507 1,395,184 69%
- mobile 212,738 111,247 91% 591,712 326,704 81%
Asia and Other
- fixed wire 99,795 81,880 22% 287,813 203,463 41%
- mobile 58,935 30,082 96% 151,314 85,786 76%
deltathree.com 23,354 5,602 N/A 85,840 13,952 N/A
<CAPTION>
Customers as of September 30, 2000 Business Residential Mobile Total
-------- ----------- ------ -----
North American 76,136 45,330 -- 121,466
European 71,547 261,508 558,213 891,268
Asia and Other 9,514 155,281 158,102 322,897
------------- ------------ --------------- --------------
157,197 462,119 716,315 1,335,631
============= ============ =============== ==============
</TABLE>
<PAGE>
(1) EBITDA, as used herein, consists of loss from operations before depreciation
and amortization. EBITDA has also been normalized to exclude non-cash
compensation expense, the write-down for impairment of assets in Canada, Japan
and Hong Kong and their operating losses, the special charge in 1999 and to
exclude the EBITDA loss of deltathree.com, the Company's publicly held internet
telephony unit.
(2) Gross margin percentage is defined as revenues less cost of services divided
by revenues
(3) Excludes services provided to other RSL COM operating companies of $3
million for the third quarter of 2000, $1 million for the third quarter of 1999,
$12 million for the nine months of 2000, and $4 million for the nine months of
1999.
(4) Consolidated revenue per minute consists of consolidated revenues less
revenues derived from equipment sales, revenues generated from directory
assistance and mobile and data services, divided by total billable minutes
excluding minutes generated from the Company's mobile and data services.
