* Increased revenues to $391.9 million reflecting a 40.2% improvement from third quarter of 2003
* Consolidated results include a full quarter of revenue from acquired Allegiance Telecom, Inc. assets
* Reported net loss of $43.6 million and $20.5 million in positive EBITDA
* Continued the successful integration of the network assets of Allegiance Telecom, Inc.
RESTON, VA – November 9, 2004 – XO Communications, Inc. (OTCBB: XOCM.OB) today reported financial results for the quarter ending September 30, 2004.
Total revenue for the third quarter of 2004 was $391.9 million – reflecting a full quarter of revenues from the acquired assets of Allegiance Telecom – compared with $278.2 million in the second quarter of 2004 and $279.4 million in the third quarter of 2003. Total revenues for the nine-month period ending September 30, 2004 was $931.0 million compared with $849.4 million for the corresponding period in 2003. Reported net loss for the quarter was $43.6 million, which includes $1.8 million of preferred stock accretion, or a loss per common share of $0.24. Consolidated EBITDA for the third quarter was positive $20.5 million compared to a $4.8 million EBITDA loss in the second quarter of 2004. Third quarter results include settlements of disputes with other carriers as well as certain one-time adjustments. In total, these settlements and adjustments increased the Company’s revenues by approximately $10 million and improved net loss and EBITDA by approximately $15 million.
“We are extremely pleased with the results from our ongoing operations as well as the benefits and efficiencies realized through the continued integration of Allegiance Telecom,” said Carl Grivner, XO Communications’ CEO. “The Company’s financial performance in the third quarter of 2004 continued to meet our expectations, highlighted by the achievement of positive EBITDA.”
Revenue from voice services – consisting of local, long distance and other voice services – was $214.7 million in the third quarter of 2004 compared with $140.4 million for the corresponding period in 2003. Revenue from data services – consisting of Internet access, network access and web hosting services – was $110.0 million in the third quarter of 2004 compared with $101.0 million in the corresponding period in 2003. Revenue from integrated services – consisting of integrated data and voice services – was $67.2 million in the third quarter of 2004 compared with $38.0 million in the corresponding period in 2003.
Gross margin for the third quarter of 2004 was $229.9 million compared to $159.4 million in the second quarter of 2004 and $172.5 million in the third quarter of 2003. On a percentage of revenues basis, cost of service for the third quarter of 2004 was 41.3%, compared to 42.7% in the second quarter of 2004 and 38.3% in the third quarter of 2003. The gross margin improvement in the third quarter of 2004 relative to the second quarter of 2004 was due to significant settlements during the third quarter of disputes with incumbent local exchange carriers.
Selling, operating and general (SOG) expenses were $209.4 million reflecting the inclusion of a full quarter of Allegiance Telecom results. SOG as a percentage of revenue for the third quarter was 53.4% compared to 59% reported in the second quarter of 2004 and 64.4% in the third quarter of 2003. The improvement in third quarter 2004 SOG as a percentage of revenue was primarily due to the Company’s ongoing cost reduction initiatives and greater efficiencies resulting from the integration of Allegiance Telecom’s operations.
Net loss for the third quarter of 2004 was $43.6 million compared to a net loss of $43.8 million in the second quarter of 2004, and a net loss of $40.8 million in the third quarter of 2003. The third quarter 2004 results include $1.8 million of accretion on the August 2004 preferred stock offering that provided net proceeds of $199.4 million. Capital expenditures for the third quarter of 2004 were $23.6 million compared to $23.7 million for the second quarter of 2004.
“We continue to review business opportunities including voice over IP and broadband wireless offerings as well as potential acquisitions. On the regulatory front, we remain committed to maintaining a competitive environment and look for the FCC to quickly reaffirm its public support for the retention of cost-based wholesale rates for unbundled DS-1 circuits,” added Mr. Grivner.
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.
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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 achieve projected synergies and revenue from the acquisition of allegiance’s assets in a timely manner or at all, XO’s ability to increase sales, and XO’s ability to continue to implement effective cost containment measures. 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, but are not limited to, 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, 2003 and its quarterly reports on Form 10-Q.
Media Contact:
Chad Couser
XO Communications
703-547-2746
chad.couser@xo.com
Investor Contact:
Augustine Okwu Jr. / Andrew Greenebaum
Integrated Corporate Relations, Inc.
203-682-8244 / 310-395-2215
aokwu@icrinc.com / agreenebaum@icrinc.com
