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Axtel Announces Results for First Quarter 2016Axtel (News - Alert), S.A.B. de C.V. ("Axtel" or "the Company"), a Mexican information and communications technology company, announced today its unaudited first quarter results ended March 31, 2016(1). Axtel is a subsidiary of Alfa S.A.B. de C.V. ("ALFA"). Highlights:
Note: Figures shown throughout the document include Alestra S. de R.L. de C.V. and its subsidiaries ("Alestra") as of February 15, 2016. However, in order to explain variations, reference is also made to pro forma figures, as if the merger had occurred at the beginning of each period. Sources of Revenues Mass Market: Quarterly revenues decreased 10%: FTTH. FTTH revenues totaled Ps. 447 million in the first quarter of 2016, compared to Ps. 392 million for same period in 2015, representing a 14% increase in line with a 14% increase in customers. Voice revenues increased 6% due to a 16% increase in monthly rent revenues and 46% decline in fix-to-mobile revenues due to lower prices. Internet and video revenues increased 12% and 39% respectively, due to increases in internet and video subscribers. Wireless. Revenues amounted to Ps. 324 million in the first quarter of 2016, compared to Ps. 465 million in the same period in 2015, a 30% decrease explained by a 28% decline in customers. Voice revenues decreased 30% mainly explained by a 50% decline in fix-to-mobile revenues due to a decline in billed minutes. Internet revenues decreased 23% due to a decline in internet subscribers and ARPUs. Telecom: Quarterly revenues totaled Ps. 1,756 million, compared to Ps. 1,430 million in the same period in 2015, a 23% increase. On a pro forma basis, revenues reached Ps. 2,403 million, a decrease of 10% due to declines in voice and managed networks revenues. Voice revenues decreased 18% mostly due to a 93% decline in international traffic revenues explained by a 60% and 80% decrease in volume and prices respectively. Data and Internet revenues increased 12% due to a combination of new customers and an increase in share of wallet of existing customers. Managed Networks revenues decreased 18% mainly due to a decline in managed services explained by lower revenues from the government sector. IT: Revenues amounted to Ps. 313 million in the first quarter of 2016, compared to Ps. 130 million in the same period in 2015, a 140% increase. On a pro forma basis, revenues totaled Ps. 447 million, an increase of 51% due to strong performance of both, system integration and hosting revenues related to new projects from government and enterprise customers and sale of equipment to provide these services. Mass Market Operating Data Customers. As of March 31, 2016, customers totaled 494 thousand, a reduction of 86 thousand from the same date in 2015 due to the continued decline in Wireless customers. Total customers declined 20 thousand on a sequential basis. ARPU for FTTH and wireless customers is Ps. 800 and Ps.400, respectively. RGUs(9). As of March 31, 2016, RGUs (Revenue Generating Units) totaled 1,080 thousand. During the first quarter of 2016, there were 26 thousand net disconnections, compared to 45 thousand net disconnections in the first quarter of 2015 due to a lower number of wireless disconnections and stronger FTTH additions in 2016. Voice RGUs (lines in service). As of March 31, 2016, lines in service totaled 546 thousand, composed of 233 thousand for FTTH segment and 314 thousand for wireless segment. Lines in service in the first quarter of 2016 decreased 21 thousand, compared to a decrease of 29 thousand in the same period of 2015, due to continued decline in wireless customers. Internet RGUs (internet subscribers). Internet subscribers decreased 12% year-over-year totaling 418 thousand as of March 31, 2016. During the first quarter of 2016, broadband subscribers' net disconnections totaled 12 thousand compared to 21 thousand in the same period of 2015, due to continued disconnections of wireless subscribers and an increase in FTTH net additions this quarter. As of March 31, 2016, wireless broadband subscribers reached 214 thousand, compared to 297 thousand a year ago, while AXTEL X-tremo, or FTTH customers, totaled 204 thousand compared to 177 thousand a year ago. Broadband penetration has increased from 74% in March 2015 to 77% in March 2016. Video subscribers. As of March 31, 2016, video subscribers reached 116 thousand compared to 98 thousand a year ago, an 18% increase. Video penetration within the FTTH broadband subscriber base increased from 56% a year ago to 57% in March 2016. Cost of Revenues and Operating Expenses Cost of Revenues. For the three month period ended March 31, 2016, the cost of revenues represented Ps. 504 million, an increase of 4% or Ps. 21 million, compared to the same period of year 2015. On a pro forma basis, costs decreased 11% due to declines in Mass Market and Telecom costs compensating an increase in IT costs. Mass Market costs declined 13% due to declines in Wireless segment voice costs, which compensated an increase in FTTH segment video costs. Telecom costs declined 24% mainly due to a 37% decline in Managed Networks costs associated to a decline in revenues. IT segment increased 67% associated to increases in system integration and hosting revenues. Gross Profit. Gross profit is defined as revenues minus cost of revenues. For the first quarter of 2016, the gross profit accounted for Ps. 2,336 million, 21% higher than the same period in year 2015. On a pro forma basis, gross profit decreased 3% do to declines in Mass Market and Telecom revenues. The gross profit margin increased from 79.6% to 81.0% year-over-year, mainly due to an increase in Telecom margins explained by a decrease in international traffic revenue which has a low margin, among other factors. Operating expenses. In the first quarter of year 2016, operating expenses totaled Ps. 1,482 million, Ps. 332 million or 29% higher than the Ps. 1,150 million recorded in the same period in year 2015. On a pro forma basis, operating expenses increased 4% explained mainly by increases of 4% in personnel and 11% in maintenance expenses related to enterprise projects and also due to the peso devaluation. Personnel represented 46% of total operating expenses in the twelve month period ended March 31, 2016. Other income / (expense), EBITDA, Operating income (loss) Other income (expense). For the three month period ended March 31, 2016, net other expenses reached Ps. 495 million, compared to a net other income of Ps. 730 million in the same quarter of 2015, a decrease of Ps. 1,225 million. On a pro forma basis, net other expenses reached Ps. 497 million in 1Q16, compared to a net other income of Ps. 738 million in 1Q15. Other expenses in 1Q16 include expenses associated to the merger, mainly severance payments. Other income in 1Q15 is attributable to the settlement agreement with America Movil S.A.B. de C.V. to terminate several interconnection services disputes. EBITDA(7). For the first quarter of 2016, EBITDA reached Ps. 359 million, a 76% decline from the same period in year 2015. On a pro forma basis, EBITDA amounted to Ps. 635 million, a decline of 69% mainly explained by other income (expense). The adjusted EBITDA(6), excluding other income (expense), amounted to Ps. 1,132 million, a decline of 13%. Adjusted EBITDA margin decreased 294 basis points, from 34.2% in 2015 to 31.3% in 2016. Operating income (loss). In the first quarter of year 2016, operating loss totaled Ps. 439 million, compared to an operating income of Ps. 818 million, a decrease of Ps. 1,257 million. On a pro forma basis, operating loss reached Ps. 292 million, compared to an operating income of Ps. 1,110 million, a decline of Ps. 1,403 million, mainly due to the variation of other income (expense). Comprehensive Financing Result, Debt, Cash and Capital Investments Comprehensive Financing Result. On a pro forma basis, the comprehensive financing cost reached Ps. 1,504 million, compared to a cost of Ps. 709 million in 2015. Net interest expense for the first quarter 2016 increased Ps. 716 million mostly due to the redemption premium of the Senior Notes. During the first quarters of 2016 and 2015, the peso depreciated 7% against the U.S. dollar, generating FX losses of Ps. 465 million and Ps. 421, respectively. Concerning variations in the fair value of financial instruments, these are partly explained by a 3% decrease and a 44% increase in the price of AXTELCPO during the first quarter of 2016 and 2015, respectively, which affected the valuation of AXTEL's position held in its own stock through the financial (zero-strike call) instruments. Debt. At the end of the first quarter 2016, total debt increased Ps. 7,322 million in comparison with first quarter 2015, explained by (i) a Ps. 12,207 million increase related to the new Syndicated Credit Facility, (ii) a Ps. 10,731 million decrease related to the prepayment of the 2017, 2019 and 2020 Notes, (iii) an increase of Ps. 4,175 million increase related to Alestra's debt, (iv) a Ps. 89 million decrease in leases and other financial obligations, (v) a Ps. 182 million increase related to the Notes premium (discount) and other costs, (vi) a Ps. 208 million decrease related to accrued interests and (vii) a Ps. 1,787 million non-cash increase caused by the 13% depreciation of the Mexican peso. Cash. As of the end of the first quarter of 2016, the cash and equivalents balance totaled Ps. 696 million, compared to Ps. 3,255 million pro forma at the beginning of the quarter. Capital Investments. In the first quarter of 2016, capital investments totaled Ps. 1,443 million, or $79 million. On a pro forma basis, capital investments totaled $89 million, which include a non-recurring intangible capital investment related to the merger transaction. Financial Statements Information as of March 31, 2016 (including Alestra) compared with information as of March 31, 2015 Assets As of March 31, 2016, total assets summed Ps. 32,071 million compared to Ps. 22,492 million as of March 31, 2015, an increase of Ps. 9,579 million, or 43%. Cash and equivalents. As of March 31, 2016, we had cash and cash equivalents of Ps. 696 million compared to Ps. 3,223 million in the same date of year 2015, a 78% decline. Accounts Receivable. As of March 31, 2016, the accounts receivable were Ps. 6,816 million compared with Ps. 5,130 million in the same date of 2015, an increase of Ps. 1,685 million or 33%. Property, plant and equipment, net. As of March 31, 2016, the net of depreciation value of property, plant and equipment was Ps. 19,872 million compared with Ps. 13,242 million as of March 31, 2015, an increase of Ps. 6,630 million or 50%. The property, plant and equipment without adjusting for the accumulated depreciation, was Ps. 61,595 million and Ps. 41,843 million as of March 31, 2016 and March 31, 2015, respectively. Liabilities Total liabilities were Ps. 25,673 million as of March 31, 2016 compared to Ps. 16,574 million as of March 31, 2015, an increase of Ps. 9,099 million or 55% mainly driven by the inclusion of Alestra's debt and a non-cash increase in debt related to the 13% peso depreciation against the US dollar. Accounts payable & accrued expenses. On March 31, 2016, the accounts payable and accrued expenses were Ps. 3,006 million compared with Ps. 2,567 million on March 31, 2015, an increase of Ps. 439 million or 17%. Stockholders' Equity On March 31, 2016, the stockholders equity of the Company was Ps. 6,398 million compared with Ps. 5,918 million as of March 31, 2015, an increase of Ps. 480 million, or 8%. The capital stock was Ps. 10,365 million as of March 31, 2016 compared to Ps. 6,764 million as of March 31, 2015, this increase is due to the merger between Axtel and Alestra in February 15, 2016. 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. 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 March 31, 2016 (including Alestra since February 15, 2016) compared with the three month period ended March 31, 2015 Net resources used by operating activities were Ps. (32) million for the three month period ended on March 31, 2016 compared to resources provided by operating activities of Ps. 1,529 million recorded in the same period of year 2015. Net resources (used in) provided by investing activities were Ps. (1,026) million for the three month period ended on March 31, 2016 compared to Ps. (455) million recorded in the same period of year 2015. These flows primarily reflect investments in fixed assets of Ps. 1,443 million and Ps. 454 million, respectively. Net resources (used in) provided by financing activities were Ps. (914) million for the three month periods ended on March 31, 2016 and Ps. (584) million for 2015. As of March 31, 2016, the ratios of net debt to Adjusted EBITDA and interest coverage of the company were 3.3x and 2.7x, respectively. As of March 31, 2015 the ratios of net debt to Adjusted EBITDA and interest coverage, were 2.8x and 3.2x, respectively. Other important information 1) We are presenting financial information based on International Financial Reporting Standards (IFRS) in nominal pesos for the following periods:
2) 2015 and 1Q16 revenues (include Alestra as of February 15, 2016) under the new segmentation:
3) Pro forma 2015 and 1Q16 revenues (include Alestra as of the beginning of each period) under the new segmentation:
4) Costs of revenues include expenses related to the termination of our customers' cellular and long distance calls in other carriers' networks, as well as expenses related to billing, payment processing, operator services and our leasing of private circuit links. 5) Operating expenses include costs incurred in connection with general and administrative matters which incorporate compensation and benefits, the costs of leasing land and towers related to our operations and costs associated with sales and marketing and the maintenance of our network. 6) Adjusted EBITDA is calculated as operating income (loss) plus depreciation and amortization, plus impairment of assets and further adjusted for extraordinary or non-recurring income and expenses. 7) EBITDA is defined as operating income (loss) plus depreciation and amortization, plus impairment of assets. 8) Net Debt to EBITDA and Net Debt to Adjusted EBITDA: Ratio of net debt at the end of the period divided by the respective LTM EBITDA and Adjusted EBITDA. For 2016 ratio, pro forma LTM EBITDA and Adjusted EBITDA is used. 9) Revenue Generating Unit, or RGU, represents individual service subscriptions who generates recurring revenue for the Company. Total RGUs include the sum of all lines in service, broadband service and video subscriptions. 10) Total debt includes accrued interests as of the end of each period. Net debt is calculated as total debt minus cash and cash equivalents, which include non-current restricted cash. Analyst Coverage: The analysts mentioned below currently cover Axtel S.A.B. de C.V.
About AXTEL Axtel is a Mexican Information and Communication Technology Company that serves the enterprise, government, and residential markets with a robust portfolio of offers through its brands Alestra (Enterprise and government services) and Axtel (residential and small businesses). With a network infrastructure of over 39 thousand kilometers and more than 6 thousand square meters of data center, Axtel enables organizations to be more productive and bring people together to improve their quality of life. As of February 15, 2016, Axtel is a subsidiary of ALFA, which owns 51% of its equity. Axtel shares, represented by Ordinary Participation Certificates, or CPOs, trade on the Mexican Stock Market under the symbol "AXTELCPO" since 2005. Visit AXTEL's Investor Relations Center at axtelcorp.mx Enterprise and Government services website: alestra.mx Mass Market services website: axtel.mx View source version on businesswire.com: http://www.businesswire.com/news/home/20160414006592/en/ |
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