MDU Communications International, Inc.
OTC Bulletin Board : MDTV

MDU Communications International, Inc.

November 23, 2010 14:36 ET

MDU Communications Announces Preliminary Fiscal 2010 Year End Results; Subscriber and Recurring Revenue Growth Jump 14% and 17%

TOTOWA, NEW JERSEY--(Marketwire - Nov. 23, 2010) - MDU Communications International, Inc. (OTCBB:MDTV) -

  • Preliminary fiscal year end 2010 revenue of $25.9M up 5% over fiscal 2009; recurring revenue up 17%
  • Subscriber base at fiscal year end 2010 increases to 74,712, a 14% increase over fiscal 2009
  • Preliminary fiscal year end 2010 EBITDA (as adjusted) of $1.8M; Preliminary cash from operations of $491,000
  • Cost reductions, the DIRECTV® CapEx program and the accelerated acquisition of ATTVS DIRECTV properties to boost first fiscal quarter 2011 results

MDU Communications International, Inc. today reports preliminary results for its fiscal year ended September 30, 2010. Preliminary total revenue for the fiscal year ended September 30, 2010 was $25,933,135, a 5% increase over the prior fiscal year's revenue of $24,753,128. However, preliminary "recurring revenue" for the year ended September 30, 2010 (total revenue less the one-time HD upgrade subsidy received) increased by 17% over the prior fiscal year. 

Preliminary EBITDA (as adjusted) for the fiscal year ended September 30, 2010 was $1,795,008, which included $708,650 in one-time HD upgrade subsidy revenue. EBITDA (as adjusted) for the prior fiscal year ended September 30, 2009 was $8,457,062, which included (i) a $5,038,839 gain resulting from the sale of assets to CSC Holdings, and (ii) $3,166,990 of one-time HD upgrade subsidy received. Net of the impact of the asset sale and one-time HD upgrade subsidies (which have no appreciable associated expense) received during the respective fiscal years, the Company's EBITDA (as adjusted) increased more than four-fold during fiscal 2010.

The Company's preliminary average revenue per unit ("ARPU"), net of the one-time HD upgrade subsidy in each respective year, was $28.13 at September 30, 2010, a slight increase over $27.56 for the year ended September 30, 2009. Inclusive of the one-time HD upgrade subsidies, ARPU was $29.82 at September 30, 2010, as compared to ARPU of $33.08 for the prior fiscal year, with such decrease due mainly to the $2,458,340 additional one-time HD upgrade subsidy received in fiscal 2009. ARPU is calculated by dividing average monthly revenues for the period (total revenues during the period divided by the number of months in the period) by average subscribers for the period. The average subscribers for the period is calculated by adding the number of subscribers as of the beginning of the period and for each quarter end in the current year or period and dividing by the sum of the number of quarters in the period plus one. The Company believes that its recurring revenue and ARPU will be positively impacted by (i) an increasing DIRECTV ARPU (the average revenue generated by a DIRECTV subscriber was up 4.3% in DIRECTV's third fiscal quarter to $88.98 (as disclosed in DIRECTV's public filings), (ii) an increasing ARPU generated from the sale of incremental high-speed Internet services to the Company's subscribers, (iii) a general increase in recurring revenue realized from the upgrade of properties to the new DIRECTV HD platform and the associated advanced services, and (iv) an increase in the total number of DIRECTV Choice and Exclusive subscribers that produce a higher ARPU relative to certain other types of subscribers. DIRECTV currently offers over 160 national HD programming channels - the most full-time HD channels of any provider. The continued launch and advertising campaign for the new DIRECTV HD programming and associated services will continue to provide visibility, incremental revenue and improved penetration rates within Company properties.

The Company reports 74,712 subscribers at September 30, 2010, compared to 65,262 subscribers at September 30, 2009, an overall 14% increase, but a 22% increase in higher margin DIRECTV subscribers. As compared to the previous fiscal quarter ended June 30, 2010, the Company experienced a slight overall subscriber decrease due to the non-renewal of approximately 1,700 low-revenue and low-margin bulk private cable (mostly mobile home) subscribers that were not feasible to convert to DIRECTV or deploy high-speed Internet services. However, the Company launched five new DIRECTV bulk properties during the quarter serving over 400 new DIRECTV subscribers. Additionally, as of September 30, 2010, the Company had 27 properties and 7,226 units in work-in-process which will contribute to organic growth in the upcoming quarters.

As of September 30, 2010, 4,863 subscribers in 67 properties with 20,666 wired units have been transferred to the Company under the December 2, 2009 agreement with AT&T Video Services, Inc. ("ATTVS"). The ATTVS agreement provides for the multi-closing transfer to the Company of its mostly DIRECTV multi-family video subscribers. The transitions have recently accelerated and the Company expects that an additional 4,325 subscribers in 59 properties with 16,100 wired units and will be included in the Company's subscriber base as of December 31, 2010, with one final closing prior to March 31, 2011. The Company continues to establish new property relationships, extend the term for (or enter into new) right-of-entry agreements and evaluate for upgrade the properties acquired from ATTVS. The Company has delayed any significant upgrade program for these acquired properties until transition of the remaining ATTVS properties could be accelerated and until the Company reaches an agreement to determine DIRECTV's capital assistance to upgrade these transitioned properties to the DIRECTV MFH-2 or MFH-3 HD platform.

The Company's continued focus on improving its financial results also resulted, preliminarily, in lower, as a percent of recurring revenue and net of one-time HD upgrade subsidies, operating expenses during the fiscal year ended September 30, 2010 - specifically direct costs, sales and marketing expenses, customer service and general and administrative expenses - when compared to the prior fiscal year ended September 30, 2009.

In the fourth fiscal quarter, and continuing into the current fiscal year, the Company has implemented a number of initiatives designed to dramatically improve its EBITDA (as adjusted) and reduce its reliance on debt financing. In particular, the Company has (i) accelerated the closing and transition of the remaining ATTVS properties, (ii) signed and launched the DIRECTV CapEx program, (iii) initiated price increases and introduced new pricing bundles for video and broadband services across multiple properties, (iv) developed and launched its new online web portal for subscribers to manage and pay their accounts online thereby eliminating the costs associated with mailings and collections, (v) developed and launched robust premium priced broadband services and tiers to several of its high-speed Internet properties, (vi) negotiated direct cost reductions for video and broadband services thereby improving gross margins derived from existing properties and subscribers, (vii) re-packaged its monthly video subscriber access fee into a "Customer Protection Plan" fee requiring annual pre-payment or monthly auto-payment (eliminating time and costs and reducing bad debt exposure), (viii) implemented a $0.99 monthly mailed statement fee to increase revenues from approximately 35,000 current subscribers, (ix) developed an independent contractor national rate card for subcontracted construction and installation services at a significant cost savings, and (x) instituted cost saving changes (and service level increases) to its call center structure and technology to provide more efficient and cost-effective call routing solutions. The impact of these initiatives will be seen starting in the Company's first fiscal quarter 2011.

In addition to improving financial results, the Company is continuing negotiations and due diligence with two companies that it deems significant strategic acquisition/merger prospects. Both companies have a significant presence in the multi-family space and collectively have in excess of 70,000 subscribers as well as strong broadband capabilities. To assist with strategic planning and the potential financing associated with any acquisition or merger, the Company has retained and sought the advice of New York investment bank Morgan Joseph & Co. Similarly, the Company continues to assess its core and non-core service areas and has identified certain assets in non-core markets that may be considered for sale. To that end, the Company is preliminarily engaged with several parties regarding interest for the sale of these assets at prices similar to what the Company has previously received. The Company makes no representations that these acquisition/merger or sale negotiations will result in any closed transactions. 

"The Company is currently in a position to generally maintain and fund current operations (and some growth) with recurring revenues, however, the vision for MDU Communications is not to be a steady state participant, but to be a significant and driving force in the multi-family communications market," commented Mr. Sheldon Nelson, President and Chief Executive Officer. "Shareholders of the Company deserve more, and in that regard we are exploring all options to dramatically accelerate growth, increase revenues, decrease costs, increase EBITDA (as adjusted) and improve cash flow so that we maximize the value of our business and subscribers," added Nelson.

The Company expects to file its annual report on Form 10-K for the year ended September 30, 2010 with the Securities and Exchange Commission on or before December 31, 2010. The Company will be hosting a conference call in the next few weeks to discuss the fiscal year end results. Specific information will be provided at a later date and call information will be available on the Company's web site at www.mduc.com.

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(R) 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, implementation of new programs and other 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 and close certain acquisitions or sales, fluctuations in operating results and operating plans, deployment of new subscriber growth plans and conversion of existing subscribers, market forces, supplier negotiations, implementation of cost-saving plans 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, 2009, filed on or about December 29, 2009.

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