XFONE, Inc. (NYSE Amex and TASE: XFN) (“Xfone” or “the
Company”) announces results for the three months ended March 31,
2011. As a consequence of the Company’s sale of its UK and Israeli
Divisions, the results from those subsidiaries are reflected as
discontinued operations for all periods presented.
Revenue
Revenue from the Company’s Fiber-To-The-Premise (FTTP) business
grew 33% to $2.9 million in the quarter ended March 31, 2011 as
compared to approximately $2.2 million in the first quarter of
2010. Sequentially, FTTP revenues increased 5% as compared to the
fourth quarter of 2010. FTTP revenues represented 20.7% of total
revenues for the first quarter of 2011 as compared to 15.2% of
total revenues for the first quarter of 2010.
Consolidated revenues for the quarter ended March 31, 2011 were
$14.3 million, a decrease of 2% compared to $14.6 million in the
quarter ended March 31, 2010. The revenue decline is related to
anticipated attrition in the residential customers and wholesale
business of Xfone’s legacy non-FTTP business and lower than
expected sales of peripheral equipment.
Customer Expansion
The Company’s total number of FTTP customers as of March 31,
2011 was 6,024 compared to 4,250 FTTP customers as of March 31,
2010.
Xfone is in the process of constructing its PRIDE Network in
northwestern Texas. This project is almost entirely financed by
$63.7 million in funds from the Federal Broadband Stimulus Program,
of which 44.2% is in the form of grants and 55.8% is in the form of
low cost loans.
Xfone was also selected to receive an additional $36.2 million
in Federal funding that will be used to further expand the PRIDE
Network to communities in southern Louisiana, of which 49% is in
the form of a grant and 51% is in the form of a low cost loan.
EBITDAS
EBITDAS (earnings before interest, taxes, depreciation,
amortization and stock-based compensation) for the first quarter of
2011 was $2 million, a slight increase sequentially from the fourth
quarter of 2010 and up 16.6% from the first quarter of 2010.
EBITDAS margin in the quarter ended March 31, 2011 was 14.1%
compared to EBITDAS margin of 11.8% for the quarter ended March 31,
2010.
Net Income
The Company had a net loss from continued operations of $633,614
or $0.03 loss per diluted share, assuming 21,119,488 shares
outstanding for the quarter ended March 31, 2011 compared to a net
loss from continued operations of $604,361 or $0.032 loss per
diluted share assuming 18,613,772 shares outstanding in the same
prior year period.
Net financing expense was $1.5 million in the three months ended
March 31, 2011 compared to $1.1 million in the three months ended
March 31, 2010. The increase in financing expenses is primarily
attributed to the effect of inflation in Israel.
Mr. Guy Nissenson, Xfone’s President and CEO, commented, “We are
very pleased with the continued strong growth we are seeing from
our fiber business, demonstrating steady increases in our customer
base with FTTP revenue now accounting for more than 20% of overall
revenues. Our consolidated revenues for the quarter were affected
by attrition in our legacy residential copper network, but to a
lesser extent than we have seen in the past because fiber revenues
continue to increase at a good pace. In addition to improved gross
margin and EBITDAS margins brought about by the continuing success
of our FTTP business, we also reduced operating expenses by closely
managing our cost structure.”
Average Revenue Per User (ARPU) for all of the Company’s fiber
markets is approximately $360 per month for business customers and
$91 per month for residential customers.
Click Here to View FTTP Trendline Charts
Levelland Market
Progress
Levelland is an important market for Xfone because management
believes that it provides a template for the larger, PRIDE network
roll-out that commenced in 2010. Total revenues in Levelland grew
9.4% sequentially to $696,000 for the first quarter of 2011.
Outlook for PRIDE
Network
As mentioned in previous company announcements, Xfone believes
that its PRIDE Network is an important vehicle for the Company’s
future growth. The PRIDE Network is a large triple play broadband
roll-out in Texas and Louisiana being funded by $99.9 million,
comprised of a combination of grants and low cost loans under the
Federal Stimulus Act. Xfone commenced building the network in 2010
and is making progress toward meeting its construction
timeline.
The Levelland network was the Company’s first FTTP federally
funded project. The PRIDE Network is expected to be 18 times the
size of Levelland for business customers and 5 times its size in
terms of residential customers. Based on current Levelland ARPU,
PRIDE Network’s total market potential is approximately 7.5 times
the size of Levelland.
In order to provide a better understanding of the potential
growth and profitability profile of the PRIDE Network roll-out over
the next three years, the below table applies the Levelland
project’s current metrics to the PRIDE Network projects. The table
assumes Levelland’s fourth quarter 2010 billed and provisioned
customer penetration of approximately 40% and assumes no additional
sales growth beyond that. The figures in the table also assume
Levelland’s ARPU, straight line growth and are based on the current
build-out schedule of PRIDE Network. These should not be viewed as
projections, but as an analysis to help investors better understand
what will happen if PRIDE Network achieves the same success rate at
up to the same fourth quarter 2010 penetration rate as
Levelland.
Year
Potential RUS Funded Projects RUS Funded Projects
potential contribution to contribution to Revenues EBITDAS
Based On Levelland Metrics Assuming
Targeted 40-50% EBITDAS Margins 2011 $4.5M
$1.8M - $2.25M 2012 $16.0M $6.4M
- $8.0M 2013 $25.0M $10.0M - $12.5M
Xfone expects to complete the PRIDE network build-out by the end
of 2012, with the first major communities completed during the
second quarter of 2011.
It is important to note that the above table does not include
the financial contribution from Xfone’s legacy copper business as
well as Lubbock, TX FTTP revenues which, on a combined basis,
accounted for a majority of Xfone’s revenue and EBITDAS in fiscal
2010.
Mr. Nissenson continued, “Subsequent to the close of the
quarter, Xfone received definitive orders from two major wireless
providers for the use of a PRIDE Network fiber optic connection
from cell towers to core switching centers in select markets. Our
state-of-the-art fiber capacity enables these carriers to provide
faster broadband services to their mobile phone customers in areas
they could not previously service. We believe that the ability to
provide fiber optic back-haul services is an exciting opportunity
because it allows us to maximize margins by further utilizing our
network facilities in alternative ways that are not only good for
our Company but also for the rural communities we service.
“We are looking forward to bringing our first PRIDE Network
customers online in the next few weeks, and following the Levelland
model, we anticipate that the PRIDE Network will begin to generate
a meaningful revenue stream by the end of this year. We are excited
about the opportunities ahead for our Company and confident in our
execution capabilities to bring state of the art broadband to our
new markets,” Mr. Nissenson concluded.
Conference Call:
The Company will host a conference call today, May 17, 2011 at
10:00 a.m. Eastern Time to discuss its financial results. The
conference call may be accessed in the U.S. and Canada by dialing
toll-free 1-877-407-8035. International callers may access the call
by dialing 1-201-689-8035.
A replay of the teleconference will be available for 30 days
after the call and may be accessed domestically by dialing
1-877-660-6853 and international callers may dial 1-201-612-7415.
Callers must enter account number 286 and conference number
372716.
To access the live webcast, log onto the Xfone website at
http://www.xfone.com. The webcast can also be accessed at
http://www.InvestorCalendar.com. An online replay will be available
shortly after the call.
About XFONE, Inc.
Xfone is a provider of high speed broadband services,
including Internet access, digital cable TV programming and
local and long distance telephone service to residential and
business customers in northern Texas and southeastern Louisiana.
Xfone's Fiber-To-The-Premise (FTTP) network provides one of the
fastest internet connections available. The Company currently has
operations in Texas, Mississippi and Louisiana and also serves
customers in Arizona, Colorado, Kansas, New Mexico and Oklahoma.
For the company's website, please visit: www.xfone.com.
In addition to disclosing financial measures prepared in
accordance with Accounting Principles Generally Accepted in the US
(GAAP), this press release and the accompanying tables contain the
following non-GAAP financial measures: non-GAAP EBITDAS (non-GAAP
earnings before interest, taxes, depreciation, amortization and
stock-based compensation, other expenses and non-recurring loss).
The presentation of this financial information is not intended to
be considered in isolation or as a substitute for, or superior to,
the financial information prepared and presented in accordance with
GAAP.
There are a number of limitations related to the use of non-GAAP
EBITDAS. First, these non-GAAP financial measures exclude
depreciation and amortization expenses that are recurring and
significant non-recurring expenses. First, Depreciation and
amortization have been, and will continue to be for the foreseeable
future, a significant recurring expense with an impact upon our
company notwithstanding the lack of immediate impact upon cash.
Second, there is no assurance the components of the costs that we
exclude in our calculation of non-GAAP operating loss do not differ
from the components that our peer companies exclude when they
report their results of operations. Third, there is no assurance we
will avoid further non-recurring costs associated with other
balance sheet items. Our management compensates for these
limitations by providing specific reconciliation of GAAP amounts to
these non-GAAP financial EBITDAS and evaluating these non-GAAP
financial measures together with their most directly comparable
financial measures calculated in accordance with GAAP. Readers
should note the chart at the end of this release which sets forth
how we calculate the non-GAAP EBITDAS.
This press release contains forward-looking statements. The
words or phrases "would be," "will allow," "intends to," "will
likely result," "are expected to," "will continue," "is
anticipated," "estimate," "project," or similar expressions are
intended to identify "forward-looking statements." XFONE's
financial and operational results reflected above should not be
construed by any means as representative of the current or future
value of its common stock. All information set forth in this news
release, except historical and factual information, represents
forward-looking statements. This includes all statements about the
Company's plans, beliefs, estimates and expectations. These
statements are based on current estimates and projections, which
involve certain risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking
statements. These risks and uncertainties include issues related
to: rapidly changing technology and evolving standards in the
industries in which the Company and its subsidiaries operate; the
ability to obtain sufficient funding to continue operations,
maintain adequate cash flow, profitably exploit new business,
license and sign new agreements; the unpredictable nature of
consumer preferences; and other factors set forth in the Company's
most recently filed annual report and registration statement.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis
only as of the date hereof. The Company undertakes no obligation to
publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. Readers should
carefully review the risks and uncertainties described in other
documents that the Company files from time to time with the U.S.
Securities and Exchange Commission.
Xfone, Inc. and Subsidiaries CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three months ended March 31, 2011
2010 Revenues Services on Fiber-To-The-Premise
network $ 2,945,400 $ 2,216,616 Leased local loop services and
other 11,311,818 12,340,822
Total
Revenues 14,257,218 14,557,438
Expenses
Cost of services (excluding depreciation and amortization shown
below) 7,011,475 7,168,347 Selling, general and administrative
5,317,448 6,059,622 Depreciation and amortization 1,169,282
1,016,088 Financing expenses, net 1,524,430 1,094,726 Other
expenses 146,732 145,245
Total Expenses
15,169,367 15,484,028 Loss from continued operations before
taxes and non-controlling interest (912,149 ) (926,590 )
Income tax benefit (expense) 278,535 322,229
Net loss from continued operations (633,614 ) (604,361 )
Loss from discontinued operations in the United Kingdom and Israel,
before taxes - (259,663 ) Income tax expense on discontinued
operations in the United Kingdom and Israel - (93,094
) Net loss (633,614 ) (957,118 ) Less: Net loss
attributed to non-controlling interest (related to discontinued
operations) - (97,139 )
Net loss attributed
to shareholders $ (633,614 ) $ (1,054,257 )
Basic and
diluted income (loss) per share: Loss from continued operations
$ (0.030 ) $ (0.032 ) Income (loss) from discontinued operations
- (0.024 ) Basic and diluted loss per share $ (0.030
) $ (0.056 ) Basic and diluted weighted average number of
shares outstanding: 21,119,488 18,613,772
Reconciliation of EBITDAS to Net income (loss) applicable to
common stockholders as it is presented on the Condensed
Consolidated Statements of Operations for Xfone, Inc.
Three Months Ended March 31, 2011
2010 Net income (loss) attributed to shareholders $
(633,614 ) $ (1,054,257 ) Depreciation and
amortization 1,169,282 1,016,088 Compensation in connection with
the issuance of warrants and options 82,996 395,415 Financing
expense (income), net 1,524,430 1,094,726 Other expenses 146,732
145,245 Net income attributed to non-controlling interest - 97,139
Income tax benefit (278,535 ) (322,229 ) Loss (income) from
discontinued operations, after taxes - 352,757
EBITDAS $ 2,011,291 $ 1,724,884
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