MDU Communications International, Inc.
OTC Bulletin Board : MDTV

MDU Communications International, Inc.

August 12, 2009 09:01 ET

MDU Communications' Revenue, EBITDA and ARPU Remain Strong; Shift From HD Upgrades to Growth Initiatives During Third Fiscal Quarter '09

- Nine month revenue up 6% over prior year; nine month EBITDA up 362% over prior year - ARPU up 11% fiscal year to date due mainly to advanced services from new DIRECTV® HD platform - DIRECTV HD platform upgrade program complete with 367 properties containing 72,263 units upgraded - Company acquires assets of Rocket Broadband Networks - Focus now on acquisitions, new property deployments and direct sales in HD upgrade properties

TOTOWA, NEW JERSEY--(Marketwire - Aug. 12, 2009) - MDU Communications International, Inc. (OTCBB:MDTV), having spent the first nine months of fiscal 2009 upgrading its current properties to the new DIRECTV HD Platform, completing the divestiture of certain assets to CSC Holdings to improve its balance sheet, and cutting costs to insure financial stability during the economic downturn, reports another solid fiscal quarter upon which it can prepare itself for increased growth during its fiscal fourth quarter and beyond.

The Company's conservative financial approach during the recession continued to pay off during the third fiscal quarter of 2009. Revenue for the nine months was up 6% over the prior year period and EBITDA (as adjusted) for the nine months was up 362% over the prior year period, due mainly to the gain on sale of assets to CSC Holdings. Exclusive of this gain, the Company still realized $2,925,466 in EBITDA (as adjusted) for the nine month period ended June 30, 2009. The Company's average revenue per unit ("ARPU") was up 11% over fiscal 2008 to $32.89.

The Company's continued focus on improving its financial results directly resulted in increased revenues and EBITDA during the nine months ended June 30, 2009 and also resulted in lower, as a percent of revenue, operating expenses during the nine months - specifically direct costs, customer service, sales and marketing, and general and administrative expenses - when compared to the same period in the prior fiscal year. Collectively, these operating expenses declined by 8% as a percent of revenue during the nine month period ended June 30, 2009, as compared to the same period in the prior fiscal year. Due mainly to the gain on sale of subscribers, the Company posted earnings of $0.02 per share for the nine month period. Comparative numbers for the three months ended June 30, 2009 over the prior period trended slightly negative due to the deferral of revenue received for certain property upgrades and the reduction in revenue from the sale of subscribers between the periods, but still resulted in EBITDA (as adjusted) of $742,533.



Three Months Ended June 30, Nine Months Ended June 30,
-------------------------------- ---------------------------------
2009 % 2008 % 2009 % 2008 %
------------------------------------------------------------------
Revenue $5,784,778 100 $6,257,780 100 $18,239,725 100 $17,138,127 100
Operating
expenses (5,120,792) -88 (5,285,689) -84 (15,581,110) -85 (15,919,254 -93
Depreci-
ation (1,728,074) -30 (1,673,136) -27 (5,062,042) -28 (4,851,530) -28
Gain (loss)
on sale
of assets 10,634 0 - 0 5,049,473 28 - 0
------------------------------------------------------------------
Operating
income
(loss) (1,053,454) -18 (701,045) -11 2,646,046 15 (3,632,657) -21
Other
income
(expense) (443,332) -8 (562,432) -9 (1,428,614) -8 (1,581,431) -9
------------------------------------------------------------------
Net income
(loss) ($1,496,786) -26 ($1,263,477) -20 $ 1,217,432 7 ($5,214,088) -30
Net income
(loss)
per share ($0.03) ($0.02) $0.02 ($0.10)
EBITDA $ 742,533 13 $1,099,831 18 $ 7,964,305 44 $ 1,722,851 10


The Company's property upgrade program to the new DIRECTV HD Platform is now complete, having upgraded or commenced upgrades on 13,381 more units during the third quarter in 71 properties. Since the Company began its upgrade program, it has upgraded 367 DIRECTV properties containing 72,263 units. This large undertaking by the Company has resulted in a significant number of access agreement extensions and renewals, increased penetration rates, increased sale of advanced services and an increase in the Company's DIRECTV subscriber residual, all of which have positively impacted the Company's financial results and competitive status. Property upgrades to the new DIRECTV HD platform were and continue to be essential as subscribers and property owners demand state-of-the-art technology and want access to DIRECTV's unparalleled comprehensive offering of HD and International programming and services. DIRECTV currently offers over 130 HD national programming channels and has HD local programming in more than 91% of all U.S. markets. The continued launch and advertising campaign for the new DIRECTV HD programming and associated services will continue to provide incremental revenue and improved penetration rates within Company properties.

With resources and capital being freed from the expansive DIRECTV HD Platform upgrade program, the Company began planning for increased organic and acquisition growth. During the quarter ended June 30, 2009, the Company added 3,050 new subscribers, however, seasonal disconnects typical of this time period in previous years, reduced the net number by 870, to a net increase of 2,180 subscribers. Therefore, the Company reports a total of 61,938 billable subscribers for the quarter ended June 30, 2009, a 9% reduction from the total billable subscribers reported one year ago, due to the previous sale of subscribers to CSC Holdings. The Company is embarking on a three-fold approach to growth, (i) acquisition of system operators severely constrained by the credit crisis, (ii) organic growth through new property right of entry opportunities, and (iii) increased penetration rates from the significant Company investment in its currently deployed properties for the DIRECTV HD Platform upgrades. With that strategy in mind, on June 30, 2009, the Company executed an agreement to acquire 3,938 subscribers and related assets from New York based Rocket Broadband Networks, Inc. These subscribers are located in 31 multi-family properties, which represent over 9,100 total units passed by wire. Concurrent with the signing of the agreement, the Company closed on the initial purchase of 2,512 subscribers located in 18 properties. On July 30, 2009, the Company completed a second round closing of 7 more properties. The Company expects to close the remainder of the properties by the end of August upon obtaining certain consents. Regarding new property opportunities, the Company has recently hired two new sales directors and two new sales account executives, all of whom have significant sales experience in the industry. As for growth in currently upgraded and deployed properties, the Company has assembled regional teams of direct sales representatives to assist its own employees in creating additional demand in the newly upgraded DIRECTV HD Platform properties. The Company has increased its direct mail offerings, with the assistance of DIRECTV, and is launching its new eNewsletter targeting multi-family property owners, managers and developers. In furtherance of its acquisition strategy, the Company is engaged in acquisition related discussions with approximately six other operators and expects, but makes no representation, that it will close one or more of these transactions prior to year end.

The breakdown of subscriber growth by type and kind in the third quarter is set forth below and includes the successful conversion of certain low-margin private cable subscribers to bulk DIRECTV services during the quarter. As mentioned above, the Company expects to continue to increase its rate of subscriber growth in its fourth fiscal quarter:



Subscr- Subscr- Subscr- Subscr- Subscr-
ibers ibers ibers ibers ibers
as of as of as of as of as of
June Sept. Dec. Mar. June
30, 30, 31, 31, 30,
Service Type 2008 2008 2008 2009 2009
----------------------------- ------- ------- ------- ------- -------
Bulk DTH - DIRECTV 15,249 15,382 12,478 12,925 13,058
DTH - DIRECTV Choice/Exclusive 11,547 10,790 11,037 11,802 11,920
Bulk Private Cable 20,179 17,194 14,586 13,609 13,986
Private Cable Choice/Exclusive 2,270 1,952 2,446 2,548 3,400
Bulk BCA - DIRECTV 8,687 10,337 9,505 9,549 9,925
Bulk ISP 6,394 5,911 5,215 5,215 5,315
ISP Choice or Exclusive 3,784 3,956 3,952 4,083 4,302
Voice 32 30 23 27 32
------- ------- ------- ------- -------
Total Subscribers 68,142 65,552 59,242 59,758 61,938
------- ------- ------- ------- -------
------- ------- ------- ------- -------


As of June 30, 2009, the Company also had 12 properties and 2,940 units in work-in-process for which the Company expects a minimum of 1,140 of these units (under contract subscribers) to become billable subscribers in the next few quarters.

The Company continues to maintain that it is significantly undervalued by the financial markets. As a result, the Company has, pursuant to its share repurchase plan, repurchased to date 174,423 shares of common stock at a total cost of $68,324 and an average cost per share of $0.39. Volume and "market-making" regulations have significantly reduced the number of shares that the Company has been able to repurchase. The specific timing and amount of any repurchases vary based on market conditions and other factors.

Mr. Sheldon Nelson, President of MDU Communications, commented, "We have been fiscally prudent this past year in order to remain a strong competitor in the multi-family market. This prudence has paid off and we are now in a position to ramp up growth, with a significant percentage of this growth coming from acquiring other operators who did not fair so well in the economic downturn or whose access to capital is limited. We, as well as certain other medium to large operators, believe that scale is a very important factor to generate significant organic growth, increase profit margins and achieve ultimate success in this business, so it will be no surprise to see consolidation in the year(s) to come. MDU Communications plans to capitalize on and benefit from this opportunity."

The Company expects to file its quarterly report on Form 10-Q for the quarter ended June 30, 2009 with the Securities and Exchange Commission on or before August 14, 2009. The Company will be hosting a conference call on August 12, 2009 at 10:00 am EST. Call information is available on the Company's web site at www.mduc.com.

The following table reconciles the comparative EBITDA (as adjusted) of the Company to its consolidated net income (loss) as computed under accounting principles generally accepted in the United States of America:



For The Nine Months For The Three Months
Ended June 30, Ended June 30,
------------------------- -------------------------
2009 2008 2009 2008
------------ ----------- ------------ -----------
EBITDA $ 7,964,305 $ 1,722,851 $ 742,533 $ 1,099,831
Interest Expense (1,214,541) (1,331,673) (371,657) (475,788)
Deferred finance costs
and debt discount
amortization
(interest expense) (215,445) (251,154) (71,814) (86,496)
Provision for doubtful
accounts (89,212) (107,056) (3,324) (34,419)
Depreciation and
Amortization (5,062,042) (4,851,530) (1,728,074) (1,673,136)
Share-based
compensation
expense - employees (70,060) (264,522) (23,982) (53,696)
Compensation expense
for issuance of common
stock through employee
stock purchase plan (28,098) (17,085) - (2,649)
Compensation expense
for issuance of common
stock for employee
bonuses (1,530) (37,141) - -
Compensation expense
for issuance of common
stock for employee
wages (2,720) (4,560) - (4,560)
Compensation expense
accrued to be settled
through the issuance
of common stock (23,695) (6,296) (16,606) (6,296)
Compensation expense
through the issuance
of restricted common
stock for services
rendered (39,530) (60,522) (23,862) (20,572)
Share-based
compensation
expense - nonemployees - (5,400) - (5,400)
------------ ----------- ------------ -----------

Net Income (Loss) $ 1,217,432 $(5,214,088) $ (1,496,786) $(1,263,181)
------------ ----------- ------------ -----------
------------ ----------- ------------ -----------


MDU COMMUNICATIONS INTERNATIONAL, INC.
Condensed Consolidated Balance Sheets
June 30, 2009 (Unaudited) and September 30, 2008 (See Note 1)

June 30, September 30,
2009 2008
-------------- --------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 655,185 $ 60,634
Accounts and other receivables, net of an
allowance of $470,423 and $394,960 1,963,532 3,102,850
Prepaid expenses and deposits 468,790 541,612
-------------- --------------
TOTAL CURRENT ASSETS 3,087,507 3,705,096

Telecommunications equipment inventory 829,795 682,818
Property and equipment, net of accumulated
depreciation of $20,661,314 and
$17,283,584 21,337,565 21,738,007
Intangible assets, net of accumulated
amortization of $6,210,251 and $5,338,356 2,357,927 2,988,557
Deposits, net of current portion 64,594 63,037
Deferred financing costs, net of
accumulated amortization of $597,673
and $415,446 426,046 508,273
-------------- --------------
TOTAL ASSETS $ 28,103,434 $ 29,685,788
-------------- --------------
-------------- --------------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,524,759 $ 1,583,352
Other accrued liabilities 945,746 1,287,091
Current portion of deferred revenue 1,056,963 578,841
Note payable 9,322 50,290
Capital lease obligations 556 12,431
-------------- --------------
TOTAL CURRENT LIABILITIES 3,537,346 3,512,005

Deferred revenue, net of current portion 308,004 379,966
Credit line borrowing, net of debt
discount 13,582,629 16,641,586
-------------- --------------
TOTAL LIABILITIES 17,427,979 20,533,557
-------------- --------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
Preferred stock, par value $0.001;
5,000,000 shares authorized, none issued - -
Common stock, par value $0.001; 70,000,000
shares authorized, 53,256,465 and
52,005,464 shares issued and 53,109,354
and 52,005,464 outstanding 53,256 52,005
Additional paid-in capital 61,125,335 60,764,621
Accumulated deficit (50,446,963) (51,664,395)
Less: Treasury stock; 147,111 shares (56,173) -
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 10,675,455 9,152,231
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 28,103,434 $ 29,685,788
-------------- --------------
-------------- --------------

See notes to the unaudited condensed consolidated financial statements
contained in the Company's Report on Form 10-Q for the period ended
June 30, 2009


MDU COMMUNICATIONS INTERNATIONAL, INC.
Condensed Consolidated Statements of Operations
Nine and Three Months Ended June 30, 2009 and 2008
(Unaudited)

Nine Months Ended Three Months Ended
June 30, June 30,
------------------------- -------------------------
2009 2008 2009 2008
----------- ------------ ----------- ------------

REVENUE $18,239,725 $ 17,138,127 $ 5,784,778 $ 6,257,780
----------- ------------ ----------- ------------

OPERATING EXPENSES
Direct costs 7,470,045 7,468,119 2,425,766 2,542,022
Sales expenses 978,941 955,890 408,815 303,895
Customer service and
operating expenses 4,381,923 4,386,747 1,376,543 1,504,127
General and
administrative
expenses 2,750,201 3,108,498 909,668 935,645
Depreciation and
amortization 5,062,042 4,851,530 1,728,074 1,673,136
Gain on sale of
customers and plant
and equipment (5,049,473) - (10,634) -
----------- ------------ ----------- ------------
TOTALS 15,593,679 20,770,784 6,838,232 6,958,825
----------- ------------ ----------- ------------

OPERATING INCOME
(LOSS) 2,646,046 (3,632,657) (1,053,454) (701,045)

Other income
(expense)
Interest income 1,372 1,396 139 148
Interest expense (1,429,986) (1,582,827) (443,471) (562,284)
----------- ------------ ----------- ------------
NET INCOME (LOSS) $ 1,217,432 $ (5,214,088) $(1,496,786) $ (1,263,181)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
BASIC EARNINGS
(LOSS) PER COMMON
SHARE $ 0.02 $ (0.10) $ (0.03) $ (0.02)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
DILUTED EARNINGS
(LOSS) PER COMMON
SHARE $ 0.02 $ (0.10) $ (0.03) $ (0.02)
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING
Basic 52,665,721 51,769,295 53,076,098 51,920,237
Diluted 52,807,001 51,769,295 53,076,098 51,920,237

See accompanying notes to the unaudited condensed consolidated financial
statements contained in the Company's Report on Form 10-Q for the period
ended June 30, 2009


About MDU: MDU Communications International, Inc. (OTCBB:MDTV) is a leading provider of premium communication/information services, including digital satellite television and high-speed (broadband) Internet services, exclusively to the United States multi-dwelling unit (MDU) marketplace - estimated to include 26 million residences. Through its wholly owned subsidiary, MDU Communications (USA) Inc., MDU Communications delivers DIRECTV( digital satellite television services and high-speed (broadband) Internet systems and is committed to delivering the next generation of interactive communication services to MDU residents. For additional information, please see www.mduc.com or contact Investor Relations.

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements relating to financial information, property upgrades, strategic partner relationships, subscriber sales, acquisitions, subscriber and revenue growth and implementation of new programs and developments of the Company. Such statements involve risks and uncertainties which may cause results to differ materially from those set forth in these statements, including, but not limited to, changes in financial condition, efforts on behalf of the Company to finalize and deploy certain programs, bringing to fruition strategic alliances and upgrade programs, fluctuations in operating results and operating plans, deployment of new subscribers and conversion of existing subscribers, the closing of certain acquisitions, market forces, supplier negotiations and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission, including, but not limited to, the Company's 10-K for the year ended September 30, 2008, filed on or about December 23, 2008.

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