Time Warner Telecom Reports Strong Second Quarter 2007 Results

LITTLETON, Colo., Aug. 7 /PRNewswire-FirstCall/ -- Time Warner Telecom Inc. (Nasdaq: TWTC), a leading provider of managed voice and data networking solutions for business customers, today announced its second quarter 2007 financial results, including...


LITTLETON, Colo., Aug. 7 /PRNewswire-FirstCall/ -- Time Warner Telecom Inc. (Nasdaq: TWTC), a leading provider of managed voice and data networking solutions for business customers, today announced its second quarter 2007 financial results, including $268.0 million of revenue, $83.0 million in Modified EBITDA(1) ("M-EBITDA") and a net loss of $9.6 million.

"We continue to deliver strong organic enterprise revenue growth, drive sales momentum, and achieve solid margins while integrating a major expansion of our operations," said Larissa Herda , Time Warner Telecom's Chairman, CEO and President. "We have made substantial progress in all phases of our integration which includes organizational, network and systems changes that impact virtually all aspects of our business. We achieved this progress while accelerating the growth of our enterprise business. Integrating our operations and continuing to leverage our ability to serve the growing enterprise demand is where we are focused and why we are well positioned to capture greater market share."

Highlights for the Quarter

"Core(2)" operations exclude the results from acquired operations and related integration costs. "Acquired(3)" operations exclude integration costs. Both core and acquired exclude the impact of a reclassification of certain fees and taxes(4).

Revenue

Revenue for the quarter was $268.0 million, as compared to $191.3 million for the second quarter of 2006, an increase of $76.7 million, or 40%. The core operations reflected a 9% growth over the same period last year. Key changes in revenue included:

Monthly revenue churn was 1.1% for both the current quarter and the same period last year; however this reflects a decrease from the prior quarter which was 1.2%. The Company expects to experience ongoing revenue churn, including disconnects from carrier customers related to their merger activities and network grooming.

Growth in the core operations customer counts remained strong. Consolidated customer counts decreased due to a higher churn rate for the acquired operations' customer segment, as well as conversion of the acquired customer base to a common customer profile(12) during integration. The acquired customer churn had an impact of less than $1 million reduction in revenue for the quarter, while the change in the customer profile had no impact on revenue. The Company expects churn and reduction in customer counts from the acquired operations may continue as the Company completes its integration.

M-EBITDA and Margins

M-EBITDA grew $13.4 million to $83.0 million for the quarter, a 19% increase over the same period last year primarily reflecting strong core revenue growth and the impact of the acquired operations. M-EBITDA included $2.3 million of integration and branding costs in the quarter, and none in the same period last year. Operating costs increased primarily reflecting the impact of the acquisition and related higher network access costs which were partially offset by integration synergies, and the change in 2007 to present certain taxes and fees on a gross versus net basis. Selling, general and administrative costs ("SG&A") increased primarily reflecting the acquisition of the acquired operations as well as increased employee costs, including higher sales incentive costs associated with revenue growth. SG&A as a percent of revenue decreased to 28% for the current quarter from 29% for the same period last year, reflecting operating efficiencies.

M-EBITDA margin was 31% for the quarter as compared to 36% for the same quarter last year. Modified gross margin(11) was 57% for the current quarter compared to 64% for the same period last year. The difference in margins between periods primarily reflects higher access costs related to the acquired operations.

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