EXHIBIT 99.1
Thursday August 3, 8:28 am Eastern Time
Press Release
SOURCE: RSL Communications, Ltd.
RSL Communications, Ltd. Reports Second Quarter Results
European Revenues Set Another Record Margin Improvement in Europe and US
Customer Base Increases 10% Sequentially to 1.3 Million
HAMILTON, Bermuda and NEW YORK, Aug. 3 /PRNewswire/ -- RSL Communications, Ltd.
(Nasdaq: RSLC - news), a premier provider of data, Internet, and voice services
focused on small and medium enterprises in Europe and the United States,
announced second quarter 2000 results with revenues of $390.5 million. Excluding
foreign currency impacts, revenues would have been approximately $406.4 million,
an 8.1% sequential increase from the first quarter of 2000. Revenues in Europe
were at a record level and now comprise 58.1% of the consolidated total. Our
customer base is at a record 1.3 million and 82% of consolidated revenues result
from sales to end-users. Gross margin percentage (1) exceeded 30% despite
competitive pressures. Net loss per share excluding the effect of the previously
announced non-cash charge was $1.96.
Itzhak Fisher, President and Chief Executive Officer of RSL COM said, "We are
extremely pleased to report robust revenue growth, strong margins, and excellent
customer growth in Europe despite ongoing competition in several markets. Our
core operations in Europe and the US are performing very well. Our recent
announcement to sell our Canadian operations brings us closer to our vision of a
more profitable company focused exclusively on Europe and the US. EBITDA in both
Europe and the US remain positive. And, the cash resources we currently have
available should fund our business plan well into 2001." Mr. Fisher added, "We
continue to add critical new data and Internet products to our portfolio in
Europe and the United States. In the UK, we concluded our acquisitions of the
Voyager and REDNET data companies, and we recently launched web hosting and
Application Service Provider centers in key regional locations. Our US
operations have recently added IP/VPN and an Application Service center to its
Internet and web-hosting services. Our Spanish subsidiary has opened a new
broadband Internet development center which will analyze, develop and apply
solutions for enhanced communications over the Internet. This year we introduced
data services in Mexico, the UK, Sweden, and Finland with the launch of global
frame relay. We can now offer data/Internet products to customers in the UK,
USA, Germany, Spain, Australia, Austria, Finland, Sweden, Switzerland, Denmark,
Canada, and Mexico. Clearly, we are making significant progress in expanding our
product offerings so that we can be the primary provider of bundled data and
Internet based products and services to our rapidly growing customer base."
Second Quarter 2000 Results
Consolidated revenues for the second quarter 2000 were $390.5 million, compared
to $375.9 million for the first quarter 2000 and $367.7 million for the second
quarter 1999. Revenues from operations in Europe, RSL COM's largest market
segment, were $226.8 million in the second quarter 2000, an increase of 2.1%
over the first quarter of 2000 and an increase of 27.2% over the second quarter
of 1999. After giving effect to foreign exchange fluctuations, second quarter
2000 revenues in Europe were up 7.4% over the first quarter 2000 and 39.5% over
the second quarter of 1999. Revenues from operations in the U.S. were $88.0
million in the second quarter 2000, compared to $89.4 million in the first
quarter 2000 and $133.5 million in the second quarter 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 while significantly
improving gross margin. Revenues from Asia/Pacific and Latin America operations
were $57.7 million in the second quarter 2000, up 9.9% compared to first quarter
2000, and up 32.3% compared to the second quarter 1999.
Cost of services in the second quarter 2000 was $272.9 million, an increase of
4.4% from $261.4 million in the first quarter 2000 and an increase of 5.6% from
$258.5 million in the second quarter 1999. The consolidated gross margin
percentage was 30.1% in the second quarter 2000, compared to 30.5% in the first
quarter 2000 and 29.7% in the second quarter 1999. European operations reported
a gross margin of 33.4% in the second quarter 2000, up from 32.5% in the first
quarter 2000. US gross margin percentage was 21.0% in the second quarter 2000 up
from 20.6% in the first quarter this year, and up from 17.3% in the second
quarter of last year.
Consolidated selling, general and administrative expenses were $138.5 million in
the second quarter 2000, compared to $119.7 in the first quarter 2000 and $113.1
million in the second quarter 1999. SG&A expenses as a percent of revenue was
35.5% in the second quarter 2000 compared to 31.8% in the first quarter of 2000
and 30.7% in the second quarter of 1999. Consolidated selling, general and
administrative expenses increased $18.8 million versus first quarter primarily
related to the non-core operations of telegate, deltathree.com, Australia, and
Canada, the expenses related to a one-time corporate marketing campaign, as well
as the impact of our recent acquisitions in Spain. Excluding these non-core
operations and the expenses related to the corporate marketing campaign,
selling, general, and administrative expenses would have been 27.5% of sales in
the second quarter of 2000.
The company recorded non-cash compensation expense of $3.1 million in the second
quarter 2000 relating to stock incentive awards previously granted to employees,
primarily at deltathree.com.
Normalized EBITDA (2) for the second quarter 2000 was $8.2 million negative, a
decline from positive $1.5 million in the first quarter on a comparable basis.
The sequential normalized EBITDA decline was primarily due to the aforementioned
non-strategic operations, one-time corporate marketing expenses, and impact of
the Spanish acquisitions. EBITDA in the second quarter of 1999 on a comparable
basis was $2.7 million.
Net loss in the second quarter 2000 was $159.4 million, compared to a net loss
of $85.2 million in the first quarter of 2000 and a loss of $72.9 million in the
second quarter 1999. The increase in net loss is primarily due to the Company's
decision to sell its Canadian operations, which resulted in a non-cash charge of
$48.3 million in the second quarter, the accrual of a full quarter of interest
and dividend expense related to the debt and preferred stock offerings concluded
late February, and increased selling, general and administrative expenses. Net
loss excluding the non-cash charge related to this decision was $111.2 million.
Net loss per share was $2.81 for the second quarter 2000. Per share loss
excluding the impairment charge was $1.96.
Six Months Results
Consolidated revenues for the first six months of 2000 were $766.4 million,
compared to $708.0 million in the same period of 1999, up 8.3%. Revenues from
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operations in Europe were $448.9 million, or 58.6% of consolidated, for the
first six months of 2000, compared to $330.4 million, or 46.7% of consolidated,
for the same period in 1999. Revenues from operations in North America were
$202.3 million, or 26.4% of consolidated, in the first six months of 2000,
compared to $293.6 million, or 41.5% of consolidated, in the same period in
1999. Revenues from operations in Asia/Pacific and Latin America were $110.2
million, or 14.4% of consolidated, for the first six months of 2000, compared to
$82.9 million, or 11.7% of consolidated, for the same period last year. Revenues
from operations at deltathree.com represented the balance.
For the first six months of 2000, the normalized EBITDA loss was $6.7 million
compared to a $4.5 million loss in the same period in 1999. Net loss for the
first six months of 2000 was $244.7 million, compared to $129.8 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 their subsidiary,
deltathree.com, RSL COM also owns and operates a privately managed Internet
Protocol (IP) telephony network with 71 points of presence in 36 countries
around the world. RSL COM is headquartered in Hamilton, Bermuda with executive
offices in New York City. The web address is http://www.rslcom.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 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.
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RSL Communications Ltd.
Consolidated Statements of Operations
(In Thousands, except per share data)
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 % Change 2000 1999 %Change
Revenues $390,547 $367,700 6% $766,430 $707,981 8%
Operating costs
and expenses:
Cost of
services (272,850) (258,487) 6% (534,216) (508,878) 5%
Selling,
general and
administrative
expenses (138,489) (113,055) 22% (258,149) (210,897) 22%
Write-down for
impairment of
assets (48,267) -- N/A (48,267) -- N/A
Non-cash
compensation
expense (3,071) (2,926) 5% (6,126) (2,926) N/A
Depreciation and
amortization (51,910) (43,004) 21% (101,162) (80,083) 26%
Operating costs
and expenses (514,587) (417,472) 23% (947,920) (802,784) 18%
Loss from
operations (124,040) (49,772) N/A (181,490) (94,803) 91%
Interest
income 4,014 5,039 -20% 8,888 11,094 -20%
Interest
expense (40,267) (31,276) 29% (78,825) (60,274) 31%
Other (expense)
income - net (3,766) 65 N/A (4,159) 180 N/A
Foreign exchange
transaction
gain 3,625 4,340 -16% 8,674 14,028 -38%
Minority
interest 4,648 (609) N/A 7,980 822 N/A
Loss in equity
interest of
unconsolidated
subsidiaries (2,499) (152) N/A (4,426) (376) N/A
Income taxes (1,144) (490) N/A (1,314) (490) N/A
Net loss $(159,429) $ (72,855) N/A $ (244,672) $(129,819) 88%
Net loss per
share of common
stock $ (2.81) $ (1.36) N/A $ (4.37) $ (2.44) 79%
Weighted average
number of shares
of common
stock
outstanding 56,674 53,394 6% 56,026 53,163 5%
EBITDA (2) $(8,232) $2,724 N/A $ (6,694) $ (4,492) N/A
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RSL Communications Ltd.
Supplemental Data
Unaudited
Three Months Ended Six Months Ended
June 30, June 30,
Revenue: % %
(in thousands) 2000 1999 Change 2000 1999 Change
North America
- Fixed Wire/
Data $ 43,872 $ 57,436 -24% $ 90,931 $ 116,511 -22%
- Mobile 17 -- N/A 36 -- N/A
- Carrier/
Card 58,915 87,772 -33% 111,304 177,118 -37%
102,804 145,208 -29% 202,271 293,629 -31%
Europe
- Fixed Wire/
Data 92,791 75,939 22% 184,667 136,714 35%
- Mobile 90,673 72,461 25% 184,201 138,503 33%
- Carrier/
Card 43,337 29,903 45% 80,010 55,197 45%
226,801 178,303 27% 448,878 330,414 36%
Asia/Pacific
and Latin America
- Fixed Wire/
Data 24,865 21,969 13% 50,132 42,091 19%
- Mobile 30,681 18,912 62% 55,938 35,575 57%
- Carrier/Card 2,159 2,743 -21% 4,162 5,265 -21%
57,705 43,624 32% 110,232 82,931 33%
deltathree.com(3) 3,237 565 N/A 5,049 1,007 N/A
Consolidated
revenues per
minute(4) $ 0.12 $ 0.17 -29% $ 0.12 $ 0.18 -33%
Billable Voice Minutes (in thousands):
North
American 781,369 835,295 -6% 1,525,554 1,593,396 -4%
European
- fixed wire 795,387 454,381 75% 1,560,579 826,985 89%
- mobile 187,563 111,247 69% 378,975 215,457 76%
Asia and Other
- fixed wire 99,593 64,190 55% 188,018 121,583 55%
- mobile 52,163 30,082 73% 92,379 55,704 66%
deltathree.com 34,121 3,883 N/A 62,486 6,350 N/A
Customers as
of June 30,
2000 Business Residential Mobile Total
North American 83,076 41,094 -- 124,170
European 70,743 270,355 532,831 873,929
Asia and Other 9,838 145,233 143,561 298,632
163,657 456,682 676,392 1,296,731
Customers as
of March 31, 2000 (5)
Business Residential Mobile Total
North American 89,481 40,523 -- 130,004
European 45,056 245,126 492,778 782,960
Asia and Other 10,071 135,680 127,759 273,510
144,608 421,329 620,537 1,186,474
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Customers as
of December, 1999 (5)
Business Residential Mobile Total
North American 82,863 52,216 -- 135,079
European 42,599 206,200 460,614 709,413
Asia and Other 9,585 99,172 117,312 226,069
135,047 357,588 577,926 1,070,561
(1) Gross margin percentage is defined as revenues less cost of services
divided by revenues.
(2) 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 and to exclude the
EBITDA loss of deltathree.com, the Company's publicly held internet
telephony unit.
(3) Excludes services provided to other RSL COM operating companies of $4.6
million for the second quarter of 2000 and $1.5 million for the second
quarter 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.
(5) Amounts have been restated as a result of refinements in the measurement
process.
SOURCE: RSL Communications, Ltd.
