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Axtel Releases 2Q Earnings Report [Manufacturing Close - Up](Manufacturing Close - Up Via Acquire Media NewsEdge) Axtel reported its unaudited second quarter results ended June 30. In its release on July 28, the Company said that highlights include: -This quarter, Axtel's core businesses revenues increased 5 percent year-over-year, driven by a 7 percent increase in the enterprise and government segment and a 1 percent increase in the mass market segment. Within mass market, revenues from FTTH services increased 46 percent. In the first semester of 2014, core businesses represented 81 percent of Axtel's total revenues. -In June, Axtel obtained a consent from existing bondholders to amend the indenture governing the 2020 Secured Notes and enable the Company to incur in debt sharing the collateral of the 2020 Senior Secured Notes. Given the increased number of attractive investment opportunities from the enterprise and government segment, the Company continues evaluating the appropriate timing to issue debt to fund these opportunities. Revenues from operations Revenues from operations totaled Ps. 2,673 million in the second quarter of year 2014 from Ps. 2,380 million for the same period in 2013, an increase of Ps. 294 million or 12 percent. Revenues from operations totaled Ps. 11,262 million in the 12 month period ended June 30, compared to Ps. 9,668 million in the same period in 2013, an increase of Ps. 1,594 million, or 16 percent. Sources of Revenues Local services. Local service revenues totaled Ps. 736 million in the second quarter of 2014, compared to Ps. 826 million for same period in 2013, representing a decrease of Ps. 90 million, explained by Ps. 40 million, Ps. 17 million and Ps. 33 million decreases in monthly rents, measured service and cellular revenues, respectively. Average customers declined 5 percent, contributing to a decline in monthly rents of 6 percent. The 34 percent decrease in measured services is explained by decreases of 31 percent in billed-traffic volume and 5 percent in prices. The 23 percent decrease in cellular revenue is explained by an 10 percent decrease in prices and a 15 percent decline in cellular billed-traffic volume. Revenues coming from monthly rents represented 81 percent of local revenues during the three month period ended June 30. For the 12 month period ended June 30, local revenues totaled Ps. 3,031 million, compared to Ps. 3,443 million registered in the same period in 2013, a decrease of Ps. 412 million or 12 percent mostly explained by Ps. 248, Ps. 59 and Ps. 105 million declines in monthly rents, measured service and cellular revenues, respectively. Long distance services. Revenues amounted to Ps. 250 million in the second quarter of 2014, compared to Ps. 288 million for same period in 2013, a 13 percent decrease. Billed-traffic volume declined 1 percent and billed-traffic prices declined 13 percent. For the 12 month period ended June 30, long distance revenues totaled Ps. 1,079 million compared to Ps. 1,194 million registered in 2013, a Ps. 114 million, or 10 percent, decline. Internet and Video. Quarterly revenues totaled Ps. 330 million, compared to Ps. 251 million in the same period in 2013, a 31 percent or Ps. 79 million increase driven by the pay-tv service and the increase in mass market, or "on-demand" internet services revenues, which increased 15 percent year-over-year. During the 12 month period ended on June 30, internet and video services revenues totaled Ps. 1,207 million from Ps. 908 million registered in 2013, an increase of Ps. 299 million, or 33 percent. Data and Network. Data and network revenues amounted to Ps. 474 million in the second quarter of 2014, compared to Ps. 481 million in the same period in 2013, a 1 percent or Ps. 7 million decrease driven by a 2 percent decline in dedicated internet revenues. During the 12 month period ended on June 30, data and network services revenues totaled Ps. 1,832 million from Ps. 1,962 million registered in 2013, a decrease of Ps. 129 million, or 7 percent. Competitive pressures on prices and migration to value-added integrated services solutions explain the decline in revenues. Integrated Services and Equipment Sales. Quarterly revenues totaled Ps. 428 million in the second quarter of 2014, from Ps. 267 million in the same quarter of previous year, a 60 percent increase explained mostly by an increased amount of integrated solutions projects provided to corporate and government customers. For the 12 month period ended June 30, revenues totaled Ps. 2,575 million from Ps. 1,194 million registered in 2013, an increase of Ps. 1,380 million, or 116 percent. International traffic. In the second quarter of 2014, international traffic revenues totaled Ps. 372 million, an increase of Ps. 201 million or 118 percent versus the same quarter of previous year, explained by an increase in prices attributable to a change in the mix towards higher priced international mobile traffic vs. on-net and off-net traffic. In peso terms, the price increase was benefited by a 4 percent depreciation of the Mexican peso vis-a- vis the US dollar. For the 12 month period ended June 30, revenues from international traffic totaled Ps. 1,185 million from Ps. 582 million in the same period in 2013, an increase of 103 percent mainly explained by increase in prices. Other services. Quarterly revenues from other services totaled Ps. 84 million in the second quarter of 2014, from Ps. 96 million in the same quarter of previous year, a decrease of 12 percent. For the 12 month period ended June 30, revenues totaled Ps. 354 million from Ps. 385 million registered in 2013, a decrease of Ps. 31 million, or 8 percent. Revenues by segment (Excludes International Traffic) Mass Market. Revenues totaled Ps. 895 million in the second quarter of 2014, a 1 percent increase compared to the same quarter in 2013. This was mainly due to a 10 percent decline in both local and long distance revenues, compensated by a 35 percent increase in internet and video services. For the 12 month period ended June 30, revenues totaled Ps. 3,529 million, a decrease of 3 percent compared to the same period in 2013, mostly explained by 12 percent and 11 percent decreases in local and long distance revenues and partially offset by a 35 percent increase in internet and video services. Enterprise (including Government). Revenues for this segment amounted to Ps. 1,237 million in the three month period ended June 30, an increase of 7 percent versus the same period in 2013. This is mostly explained by a 60 percent increase in integrated services and equipment sales. For the 12 month period ended June 30, revenues increased 24 percent, from Ps. 4,731 million registered in the 12 month period ended June 30, 2013, to Ps. 5,876 million in 2014. This is due to increases in integrated services and internet and video services. Interconnection, Public Telephony and Carriers. Revenues for this segment remained unchanged at Ps. 170 million in the second quarter 2014, mainly due to a 32 percent decrease in local revenues, compensated by a 17 percent increase in private lines. For the 12 month period ended June 30, revenues reached Ps. 672 million, a decline of 7 percent compared to the same period in 2013, primarily explained by 30 percent, 5 percent and 6 percent decreases in local, long distance and data revenues, respectively. Consumption Local Calls. Local calls totaled 410 million calls in the second quarter of 2014, compared to 452 million calls for same period in 2013, representing a decrease of 9 percent. Billed local calls decreased 27 million or 31 percent, while local calls included in commercial offers decreased by 15 million or 4 percent. Residential and business customers contributed with 2 million and 25 million calls, respectively, to the decline in billed local calls. Part of the decline in volume is explained by the seasonality effect of Easter week affecting the second quarter in 2014 compared to the first quarter in 2013. Local calls included in commercial offers represented 85 percent of total calls in the second quarter of 2014, compared to 81 percent in the year-earlier quarter. For the 12 month period ended June 30, local calls totaled 1,679 million, compared to 1,822 million registered in the same period in 2013, a decrease of 143 million calls or 8 percent. Cellular. Minutes of use of calls completed to a cellular line amounted to 168 million in the three month period ended June 30, compared to 173 million in the same period in 2013, a decrease of 3 percent. Billed cellular minutes decreased 18 million or 15 percent, while minutes in modules included in a monthly rent increased 13 million minutes or 26 percent. Billed cellular minutes represented 62 percent of cellular minutes in the second quarter of 2014, compared to 71 percent in the year-earlier quarter. For the 12 month period ended June 30, cellular minutes reached 677 million, similar to the same period in 2013. Long distance. Outgoing long distance minutes amounted to 634 million for the three month period ended June 30, from 640 million in the same period in 2013, a 6 million decrease. This, resulting from an 11 percent decrease in traffic from residential customers. Billed long distance minutes during the second quarter of 2014 declined 1 percent compared to the same period in 2013. Domestic long distance minutes represented 96 percent of total traffic during the quarter. For the 12 month period ended June 30, outgoing long distance minutes amounted 2,520 million, compared to 2,511 million registered in 2013, a slight increase explained by increased traffic from business customers which compensated the decline in traffic from residential customers. Operating Data Revenue Generating Units and Customers. As of June 30, RGUs totaled 1,525,000. During the second quarter of 2014, there were 7,000 net-additions, compared to no additions in the second quarter of 2013, attributable mostly to an improvement in the WiMAX customer base. As of June 30, customers totaled 628,000, a decline of 25,000 from the same date in 2013. Total customers declined 7,000 on a sequential basis. Voice RGUs (lines in service). As of June 30, lines in service totaled 928,000. During the second quarter of 2014 and second quarter 2013, gross additional lines totaled 53,000 and 52,000 respectively. Disconnections in the second quarter of 2014 totaled 49,000 compared to 70,000 in the year-earlier quarter. Lines in service in the second quarter of 2014 decreased 5,000, compared to a decrease of 18,000 in the same period of 2013. As of June 30, residential lines represented 60 percent of total lines in service. Broadband RGUs (broadband subscribers). Broadband subscribers increased 8 percent year-over-year totaling 517,000 as of June 30. During the second quarter of 2014, broadband subscribers' net- additions totaled 3,000 compared to 1,000 net-additions in the same period of 2013. As of June 30, WiMAX broadband subs reached 353,000, compared to 360,000 a year ago, while Axtel X-tremo, or FTTH customers, totaled 164,000 compared to 121,000 a year ago. Broadband penetration reached 56 percent at the end of the second quarter of 2014, compared to 51 percent a year ago. Video subscribers. Axtel launched its pay-television service, Axtel TV, on January 30Jan., 2013, and as of June 30, video subscribers reached 80,000 compared to 31,000 a year ago. Cost of Revenues and Operating Expenses Cost of Revenues. For the three month period ended June 30, the cost of revenues represented Ps. 792 million, an increase of 30 percent or Ps. 183 million, compared with the same period of year 2013, mainly explained by a 114 percent increase in international traffic costs. For the 12 month period ended June 30, cost of revenues reached Ps. 3,733 million, an increase of Ps. 1,160 million in comparison with year 2013, mainly due to increases in international traffic and integrated services costs. Gross Profit. Gross profit is defined as revenues minus cost of revenues. For the second quarter of 2014, the gross profit accounted for Ps. 1,881 million, an increase of 6 percent or Ps. 111 million compared with the same period in year 2013. The gross profit margin decreased from 74.4 percent to 70.4 percent year-over-year. For the 12 month period ended June 30, our gross profit totaled Ps. 7,529 million, compared to Ps. 7,095 million recorded in year 2013, an increase of Ps. 434 million or 6 percent. Operating expenses. In the second quarter of year 2014, operating expenses totaled Ps. 1,143 million, Ps. 73 million or 7 percent higher than the Ps. 1,070 million recorded in the same period in year 2013, explained mainly by increases of Ps. 48 million in personnel and Ps. 18 million in enterprise customers and network maintenance. For the 12 month period ended June 30, operating expenses totaled Ps. 4,563 million, coming from Ps. 4,445 million in the same period in 2013, a 3 percent increase. Personnel represented 40 percent of total operating expenses in the 12 month period ended June 30. Adjusted EBITDA, D&A and Operating Income Adjusted EBITDA. The Adjusted EBITDA totaled Ps. 739 million for the three month period ended June 30, compared to Ps. 701 million for the same period in 2013. As a percentage of total revenues, Adjusted EBITDA margin represented 27.6 percent in the second quarter of 2014, 38 bps higher than the margin recorded in the year- earlier quarter. For the 12 month period ended June 30, Adjusted EBITDA amounted to Ps. 2,966 million, compared to Ps. 2,650 million in year 2013, a 12 percent increase. Depreciation and Amortization. Depreciation and amortization totaled Ps. 831 million in the three month period ending on June 30, compared to Ps. 799 million for the same period in year 2013. Depreciation and amortization for the 12 month period ended June 30, reached Ps. 3,298 million, from Ps. 3,170 million in the same period in year 2013, an increase of Ps. 128 million. Operating Income (loss). In the three month period ended June 30, the Company recorded an operating loss of Ps. 99 million compared to an operating loss of Ps. 120 million registered in the same period in year 2013. For the 12 month period ended June 30, our operating loss reached Ps. 408 million when compared to the operating income of Ps. 2,367 million in the same period of year 2013, a decline of Ps. 2,775 million mainly explained by the gain related to the sale of the telecommunication towers in January 2013. CFR, Indebtedness, Cash, Investments and Derivative Instruments Comprehensive financial result. Net interest expense for the second quarter 2014 increased Ps. 24 million due to the higher level of debt in the second quarter 2014 and the increase on the interest rate related to the step-up scheme of the 2020 Secured Notes. During the second quarter 2014, the peso remained at similar levels against the U.S. dollar generating a minor FX gain. In the second quarter of 2013, an FX loss of Ps. 446 million was generated by a 6.3 percent peso depreciation. Concerning variations in the fair value of financial instruments, these are explained by an 8 percent and a 19 percent increase in the price of AxtelCPO during the second quarter of 2014 and 2013, which affected the valuation of Axtel's position held in its own stock through the zero-strike-calls instruments. The Ps. 632 million comprehensive financing loss for year ended in June 2014, compared to a Ps. 1,047 million comprehensive financing gain for year ended in June 2013, is mainly explained by the gain resulting from the debt exchange in the second quarter of 2013 and a 24 percent decrease in interest expenses in 2014. Debt. At the end of the second quarter 2014, total debt increased Ps. 445 million in comparison with second quarter 2013, explained by (i) a Ps. 377 million net increase related to the December 2013 notes exchange and the issuance of new 2020 notes, (ii) an increase of Ps. 271 million in leases and other financial obligations, (iii) a Ps. 17 million decrease related to the notes' discount, issuance and deferred financing costs, (iv) a Ps. 93 million decrease related to the implicit derivative instrument embedded in the Senior Secured Convertible Notes and (v) a Ps. 94 million non-cash decrease caused by the 1 percent appreciation of the Mexican peso. Cash. As of the end of the second quarter of 2014, the cash and equivalents balance totaled Ps. 795 million, compared to Ps. 750 million a year ago, and Ps. 828 million at the beginning of the quarter. As of the end of the quarter, 38 percent of the cash balance was maintained in dollars, the rest in pesos. Capital Investments. In the second quarter of 2014, capital investments totaled Ps. 697 million, or $54 million, compared to Ps. 410 million, or $33 million, in the year-earlier quarter. For the 12 month period ended June 30, capital investments totaled Ps. 2,711 million, or $208 million, compared to Ps. 1,776 million, or $139 million, for 2013. Other Investments. As of June 30, the Company maintained an economic position equivalent to 30.4 million AxtelCPOs in ZSC. At the end of the quarter, the Company's balance sheet recorded a liability of Ps. 105 million to reflect an implicit derivative instrument embedded in its Senior Secured Convertible Notes, per applicable accounting standards. Financial Statements Information as of June 30, compared with information as of June 30, 2013 Assets As of June 30, total assets summed Ps. 20,221 million compared to Ps. 18,924 million as of June 30, 2013, an increase of Ps. 1,298 million, or 7 percent. Cash and equivalents. As of June 30, we had cash and cash equivalents of Ps. 795 million compared to Ps. 750 million in the same date of year 2013, an increase of Ps. 45 million. Accounts Receivable. As of June 30, the accounts receivable were Ps. 3,715 million compared with Ps. 2,621 million in the same date of 2013, an increase of Ps. 1,093 million or 42 percent, mainly due to a revenue increase and a higher proportion of government segment revenues which has a lower receivables turnover. Property, plant and equipment, net. As of June 30, the net of depreciation value of property, plant and equipment was Ps. 13,060 million compared with Ps. 13,199 million as of June 30, 2013, a decrease of Ps. 139 million. The property, plant and equipment without adjusting for the accumulated depreciation, was Ps. 39,662 million and Ps. 36,600 million as of June 30, and June 30, 2013, respectively. Liabilities Total liabilities were Ps. 13,117 million as of June 30, compared to Ps. 11,063 million as of June 30, 2013, an increase of Ps. 2,054 million or 19 percent. Accounts payable and accrued expenses. On June 30, the accounts payable and accrued expenses were Ps. 3,376 million compared with Ps. 1,823 million on June 30, 2013, an increase of Ps. 1,553 million or 85 percent due to an increase in capital expenditures during the quarter related to the advance in projects with the enterprise and government segments. Stockholders' Equity On June 30, the stockholders equity of the Company was Ps. 7,105 million compared with Ps. 7,861 million as of June 30, 2013, a decrease of Ps. 757 million, or 10 percent. The capital stock was Ps. 6,651 million as of June 30, compared to Ps. 6,626 as of June 30, 2013, a slight increase mainly due to the conversion of some of the Company's Senior Secured Convertible Notes due 2020. Liquidity and Capital Resources Historically we have relied primarily on vendor financing, the proceeds of the sale of securities, internal cash from operations and the proceeds from bank debt to fund our operations, capital expenditures and working capital requirements. Additionally, and subject to (i) market conditions, (ii) our liquidity position and (iii) contractual obligations, from time to time, we might acquire senior secured and unsecured notes in the open market or in privately negotiated transactions. Although we believe that we will be able to meet our debt service obligations and fund our operating requirements in the future with cash flow from operations, we may seek additional financing with commercial banks or in the capital markets from time to time depending on market conditions and our financial requirements. We will continue to focus on investments in property, systems and infrastructure and working capital management, including the collection of accounts receivable and management of accounts payable. Cash Flow Statement For the three month period ended June 30, compared with the three month period ended June 30, 2013 Net resources provided by operating activities were Ps. 809 million for the three month period ended on June 30, compared to Ps. 376 million recorded in the same period of year 2013. Net resources (used in) provided by investing activities were Ps. (697) million for the three month period ended on June 30, compared to Ps. (410) million recorded in the same period of year 2013. These flows primarily reflect investments in fixed assets of Ps. (697) million and Ps. (410) million, respectively. Net resources (used in) provided by financing activities were Ps. (146) million and Ps. (28) million for the three month periods ended on June 30, and 2013, respectively. For the 12 months ended June 30, compared with 12 months ended June 30, 2013 Net resources provided by operating activities were Ps. 3,151 million for the 12 month period ended on June 30, compared to Ps. 1,998 million recorded in the same period of 2013. Net resources (used in) provided by investing activities were Ps. (2,706) million for the 12 month period ended on June 30, compared to Ps. 1,370 million recorded in the same period of year 2013 due to the sale of the telecommunication towers in January 2013. These flows primarily reflect investments in fixed assets of Ps. (2,711) million and Ps. (1,776) million, respectively. Net resources (used in) provided by financing activities were Ps. (398) million and Ps. (3,343) million for the 12 month periods ended on June 30, and 2013, respectively. As of June 30, the ratios of net debt to Adjusted EBITDA and interest coverage of the company were 2.4x and 3.8x, respectively. As June 30, 2013 the ratios of net debt to Adjusted EBITDA and interest coverage, were 2.6x and 2.6x, respectively. Since the beginning of operations of the Company, Axtel has invested approximately Ps. 40 billion in infrastructure. The Company expects to do more investments in the future, according to the expansion of the network in other geographical areas of Mexico in order to gain market and to maintain its current infrastructure and network. Other -Consolidated income statement information for the three month periods ending on June 30, and 2013, and March 31; and 12 month period ending on June 30, and 2013, and -Balance sheet information as of June 30, and 2013; and March 31. Axtel is a Mexican telecommunications company. ((Comments on this story may be sent to [email protected])) (c) 2014 ProQuest Information and Learning Company; All Rights Reserved. |