Telegroup Press Release - Telegroup, Inc. Announces First Quarter 1998 Results
Revenues and Minutes Reach Record Levels
Fairfield, IA (March 10, 1998) -- Telegroup Inc. (Nasdaq: TGRP - news), today reported results for the first quarter ended March 31, 1998.
For the quarter, total revenues increased 15.9% to $85.9 million, in line with previously announced expectations, compared with $74.1 million for the first quarter of 1997.
For the first quarter of 1998, billed minutes of use increased 46% to 255.9 million minutes, or 80.7 million minutes more than the 175.2 million minutes reported for the first quarter of 1997. The growth in usage occurred in each business segment, representing increased usage of the Company's retail and wholesale services, domestically and internationally.
Earnings before interest, taxes, depreciation and amortization (EBITDA) stood at $(7.5) million in the first quarter of 1998, compared to $1.0 million in the prior year's period. The Company incurred a net loss of $11.2 million, or $(.35) per diluted share, compared to a net loss of $0.3 million, or $(.01) per diluted share, in the first quarter of 1997. The weighted average number of common and common equivalent shares outstanding for the first quarter 1998 was 32.083 million, compared with 26.212 million for the first quarter in 1997.
"To increase retail growth and profitability, a number of important programs have been implemented," said Cliff Rees, Telegroup's Chief Executive Officer. "Steve Baumgartner, our recently appointed President and Chief Operating Officer, and Eric Stakland, Senior Vice President, International Marketing and Operations, are overseeing implementation of these new endeavors. These include: establishing interconnection agreements in key European markets throughout the remainder of 1998; increasing our direct sales force in the UK, the Netherlands, Australia, New Zealand, France and Germany; and the budgeted expenditure of $10 million on marketing and promotional campaigns in core markets during 1998. The preliminary results of our trial marketing campaign in the Netherlands have been excellent."
Gross profit for the first quarter of 1998 was $16.9 million, or 19.6% of revenues, compared to gross profit of $17.5 million, or 17.7% of revenues, reported for the fourth quarter 1997.
As a percentage of revenue, operating expenses, comprised of selling, general and administrative expenses, depreciation and amortization, and stock option-based compensation, increased from 27.5% in the first quarter of 1997, to 30.9% in the first quarter of 1998.
Mr. Douglas Neish, Telegroup's Chief Financial Officer, commented, "In line with our operating plan, SG&A expenses increased in absolute terms as we expanded our marketing and services. As a result of this investment and our other business initiatives, we expect to see strong growth during the second half of the year with break-even EBITDA by year-end 1998. We recently acquired fiber optic capacity on the Gemini cable. This will supplement the Cantat-3 cable and serve as another trans-Atlantic connection for our international gateway switches in the U.S. and the UK. Starting by the end of the second quarter, this new capacity, combined with our new NPC trans-Pacific circuits between the U.S. and Japan, should significantly reduce our transport costs, thus improving our margins."
Mr. Rees concluded, "We intend to increase our market share through internal growth in 1998 while continuing to evaluate acquisitions and consolidations. Simultaneously, we are working on the global introduction of a high-bandwidth, multi-service ATM network. This ATM network is a natural extension of our current network, allowing us to expand our market to larger businesses, to improve service quality through more redundancy, and to reduce transport costs on our voice traffic."
Telegroup is a leading emerging multinational carrier of long distance telecommunications services to over 200 countries. Telegroup offers services to small- and medium-sized businesses and residential customers. The company also provides value-added wholesale services to over 40 domestic and international telecommunications carriers. Telegroup is recognized as having one of the most comprehensive global sales, marketing, and customer service organizations of the emerging multinational carriers. The company operates a digital, facilities-based network, the Telegroup Intelligent Global Network (R) which consists of a central operating center, twenty-one switches, five enhanced service platforms, owned or leased capacity on ten digital fiber-optic cable links, and leased parallel data transmission capacity. Telegroup had revenues of $337 million in 1997.
This press release contains certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding Telegroup's future operating performance and network expansion. Telegroup's actual results might differ materially from those projected in forward-looking statements as a result of numerous factors including without limitation, the Company's success in developing its business plan and acquiring additional financing needed to meet this plan, market competition, unforeseen operating and technical problems, regulatory uncertainties, possible delays in the full implementation of liberalization initiatives by foreign governments, foreign currency fluctuations, and changes in the U.S. and foreign tax laws. Those and other risks are described in the Company's filings with the Securities and Exchange Commission.
Telegroup, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(In $000's, except per share data)
|
Three Months Ended
|
|
March 31, 1997
|
March 31, 1998
|
|
Retail revenue
|
56,909.4
|
57,018.6
|
| Carrier revenue |
17,186.4
|
28,846.0
|
Total revenues
|
74,095.8
|
85,864.6
|
| Cost of revenues |
53,282.9
|
69,002.4
|
| Gross profit |
20,812.9
|
16,862.2
|
| Commissions |
9,035.4
|
6,928.4
|
| SG&A |
10,505.0
|
17,439.1
|
| D&A |
806.5
|
2,181.8
|
Operating income
|
466.0
|
(9,687.1)
|
| Interest income |
184.4
|
1,123.8
|
| Interest expense |
(729.5)
|
(2,490.0)
|
| FX gain (loss) |
(367.6)
|
(152.0)
|
| Other |
31.0
|
52.9
|
| Loss before taxes |
(415.7)
|
(11,152.4)
|
| Tax benefit (expense) |
138.6
|
(87.9)
|
Net loss
|
(277.1)
|
(11,240.3)
|
| EBITDA |
1,021.6
|
(7,518.8)
|
Net loss per share
|
(0.01)
|
(0.35)
|
| Weighted average common and common equivalent shares outstanding (in thousands) |
26,212
|
32,083
|
Telegroup, Inc. and Subsidiaries
Unaudited Consolidated Balance Sheets
(Condensed, in $000's)
| Selected Balance Sheet Data |
December 31, 1997(a)
|
March 31, 1998
|
| Cash and cash equivalents |
74,213.9
|
73,094.6
|
| Securities available- for-sale |
21,103.0
|
11,894.5
|
| Accounts receivable (net) |
54,188.8
|
47,489.8
|
| Income tax recoverable |
2,693.7
|
2,516.4
|
| Other current assets |
1,576.5
|
1,193.7
|
| Property, plant and equipment |
27,913.0
|
31,890.5
|
| Intangible assets (net) |
8,475.5
|
13,776.7
|
| Other assets |
3,594.1
|
7,610.4
|
| Total Assets |
193,758.5
|
189,466.6
|
| Payables and accrued expenses |
60,605.9
|
60,013.4
|
| Current portion of capital lease |
158.7
|
150.3
|
| Current portion of long term debt |
93.8
|
176.8
|
| Other current liabilities |
964.8
|
1,162.8
|
| Capital lease (net of current portion) |
221.2
|
189.6
|
| Long term debt (net current portion) |
101,451.0
|
103,415.2
|
| Shareholder equity |
30,263.1
|
24,358.5
|
| Total Liabilities and Shareholder Equity |
193,758.5
|
189,466.6
|
(a)Selected balance sheet data for December 31, 1997 is derived from audited financials at that date.
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|
