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...


The Company utilizes a fully burdened modified gross margin, including network costs, and personnel costs for customer care, provisioning, network maintenance, technical field and network operations, excluding non-cash stock-based compensation expense.

Net Loss

The Company's net loss was $9.6 million, a loss of $.07 per share for the quarter compared to a net loss of $40.4 million, a loss of $.34 per share for the second quarter of 2006. The decrease in the net loss reflects strong M-EBITDA growth, debt extinguishment costs of $25.8 million for the second quarter of last year that did not recur, offset by an increase in depreciation expense related to both the acquired assets and new capital expenditures placed in service.

Sequential Results -Second Quarter 2007 compared to First Quarter 2007

Revenue

Revenue for the quarter was $268.0 million, as compared to $261.4 million for the first quarter of 2007, an increase of $6.6 million, or 3%. Revenue from core operations grew 3% over the prior quarter. Key changes in revenue included:

M-EBITDA and Margins

M-EBITDA was $83.0 million for the quarter, as compared to $76.3 million for the prior quarter, a 9% increase or $6.6 million. M-EBITDA margin was 31% for the quarter, as compared to 29% in the prior quarter. Modified gross margin was 57% for the quarter as compared to 55% in the prior quarter. The change in M-EBITDA and margins primarily reflects strong revenue growth, integration cost synergies, seasonal reduction in payroll taxes, and improved access costs due to volume discounts and network optimization.

Net Loss

The Company's net loss was $9.6 million, a loss of $.07 per share for the quarter compared to a net loss of $13.8 million, or a loss of $.10 per share for the prior quarter. The decrease in net loss per share reflects strong M-EBITDA growth partially offset by an increase in depreciation expense related to new capital expenditures placed in service.

Integration Milestones

The Company achieved substantial progress integrating its acquired operations through three major integration initiatives including organizational, systems and network activities.

"We are very pleased with our integration progress," said John Blount , Time Warner Telecom's Chief Operating Officer. "We have maintained the momentum of our core business while very efficiently moving through a large acquisition. Our employees did a great job in stepping up to this large integration effort, thereby avoiding a large portion of planned integration operating costs and at the same time accelerating the availability of our full product capabilities into the acquired markets. Our systems are integrated and now we continue the hard work of refining our workflow and processes in order to optimize the newly integrated operations. Completing the important process of network grooming will take time, but we expect it will result in us realizing our greatest cost synergies."

The Company continues to expect that integration cost synergies will be primarily realized in late 2007 and into 2008. For 2007, the Company continues to expect $35 to $45 million in integration expenditures, with the mix changing to reflect the Company's expectation of $5 to $7 million in operating costs, reflecting the efficiencies of the Company's integration activities, and $30 to $38 million in capital expenditures, reflecting increased capacity and acceleration of the rollout of new product capabilities.

Other

The Company has extended the right to use its existing Time Warner Telecom name through June of 2008. Prior to extending this licensing agreement the Company had began a branding initiative that resulted in approximately $1 million of expenses in the second quarter. The Company plans to continue certain activities throughout 2007 leading to a name change in 2008. Costs for the remainder of 2007 are expected to be less than $1 million.

M-EBITDA Margin Outlook