MDU Communications International, Inc.
OTC Bulletin Board : MDTV

MDU Communications International, Inc.

November 18, 2011 09:30 ET

MDU Communications Announces Preliminary Fiscal 2011 Year End Results; Significant and Continued Growth in EBITDA, Revenue and Subscriber Base

TOTOWA, NEW JERSEY--(Marketwire - Nov. 18, 2011) - MDU Communications International, Inc. (OTCBB:MDTV) -

  • Preliminary fiscal year end '11 revenue of $27.9M; a 10.5% increase over fiscal year end '10 revenue, net of one-time HD upgrade revenue.
  • Preliminary fiscal year end '11 EBITDA (as adjusted) of $3.7M; a 246% increase over fiscal year end '10 EBITDA (as adjusted), net of one-time HD upgrade revenue.
  • Serving 78,725 subscribers in 804 multi-family properties comprising 174,000 residences as of September 30, 2011.
  • 20% year-over-year growth in high long-term value digital bulk subscriber base.
  • 29% year-over-year growth in high ARPU digital exclusive/choice subscriber base.

MDU Communications International, Inc., one of the nation's largest operators and providers of DIRECTV and broadband services specifically designed for the multi-family marketplace, today reports preliminary results for its fiscal year ended September 30, 2011.

Preliminary total recurring revenue for the fiscal year ended September 30, 2011 was $27,880,132, a 10.5% increase over fiscal 2010 revenue of $25,935,135, net of one-time HD upgrade revenue of $708,650. Preliminary EBITDA (as adjusted) for the fiscal year ended September 30, 2011 was $3,758,862, or approximately 13.5% of revenue. EBITDA (as adjusted) for the prior fiscal year ended September 30, 2010 was $1,795,008, however, this included $708,650 in one-time HD upgrade subsidy revenue. Net of the one-time HD upgrade subsidy revenue received in fiscal 2010, EBITDA (as adjusted) increased 246% during fiscal 2011.

The Company successfully executed a plan in fiscal 2011 to expand its property service portfolio, generate new subscriber growth within properties, increase operating efficiency and improve EBITDA (as adjusted). In particular, the Company (i) concluded the transition of the remaining ATTVS properties to its service platform, (ii) significantly increased its portfolio of digital Bulk DTH ("Direct to Home") properties and subscribers, which provide guaranteed long-term revenue streams, (iii) increased its portfolio of digital DTH Choice and Exclusive properties and subscribers, which generate high ARPU and high gross profit margins, (iv) rolled out new premium priced broadband services and tiers to several of its high-speed Internet properties, (v) reduced direct costs for broadband circuits while concurrently increasing significantly the bandwidth and connectivity speeds available to residents, (vi) continued to promote and enroll subscribers in its unique worry-free "Customer Protection Plan" service which requires the annual prepayment or monthly auto-payment of a recurring monthly fee, and (vii) expanded its presence into the South Central and West Coast markets.

On a preliminary basis, the Company realized a gross profit margin of 54.4% (or $15.7M) during the year ended September 30, 2011, an increase of 1.1% when compared to the gross profit margin of 53.3% (or $12.8M) during the year ended September 30, 2010. A continued emphasis on reducing expenses, despite serving a larger subscriber base, resulted in preliminarily lower, as a percent of revenue, sales expenses (2.7%), customer service expenses (1%), and general and administrative expenses (.8%), for the year ended September 30, 2011, compared to fiscal 2010. Collectively, preliminary operating expenses, net of depreciation, were 43.7% of total revenue (or $12.2M) in fiscal 2011, as compared to 48.2% (or $12.5M) during fiscal 2010. Collectively, these operating expenses also decreased, preliminarily, in dollar terms for the year ended September 30, 2011, compared to the year ended September 30, 2010. The fact that the Company's expenses were lower in dollars and as a percent of revenue, while serving an increased subscriber base, is evidence of the incremental financial benefit realized from subscriber growth and scale.

The Company reports preliminary operating income before depreciation of approximately 11% of total revenue (or $3.04M) in fiscal 2011, a significant increase when compared to operating income of 5.3% of total revenue (or $1.37M) in fiscal 2010. Preliminary depreciation expense of $7M remained relatively constant in dollar terms year-over-year, however, declined as a percentage of revenue from 27.6% in fiscal 2011 to 26.4% in fiscal 2010. The Company incurred approximately $3M in interest expense in fiscal 2011, as compared to $2.5M in fiscal 2010. On a preliminary basis, the Company reduced its loss per common share from $1.56 in fiscal 2010 to $1.35 in fiscal 2011.

The Company's preliminary average revenue per unit ("ARPU") was $29.88 for the year ended September 30, 2011 and $28.13 (net of the one-time HD upgrade subsidy) for the year ended September 30, 2010, a 6.2% increase year-over-year. 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 increase in the total number of DIRECTV® Choice and Exclusive subscribers that produce a higher ARPU relative to certain other types of subscribers, (ii) an increasing ARPU generated from the sale of incremental broadband services to the Company's subscribers, (iii) a general increase in recurring revenue realized by the Company from the upgrade of properties to the new DIRECTV HD platform and the associated advanced services, and (iv) a shift in the Company's strategy for certain subscribers whereby it purchases video programming on a wholesale basis and resells the service, along with equipment and other services, to these subscribers on a retail basis. The continued launch and advertising campaign for new DIRECTV HD programming and associated services will continue to provide visibility and incremental revenue from within Company properties.

The Company reports 78,725 subscribers at September 30, 2011, compared to 74,712 subscribers at September 30, 2010, a 5.7% increase. The Company's subscribers by quantity and type are broken out as per the chart below:

Service Type Subscribers as of
Sept. 30, 2010
Subscribers as of
Dec. 31, 2010
Subscribers as of
Mar. 31, 2011
Subscribers as of
June 30, 2011
Subscribers as of
Sept. 30, 2011
Bulk DTH 16,143 16,489 16,943 20,328 20,272
Bulk BCA 10,339 10,418 10,621 10,403 9,880
DTH-Choice/Exclusive 17,477 21,323 21,246 22,577 22,541
Bulk Private Cable 16,112 15,166 13,174 13,125 13,125
Private Cable Choice/Excl. 3,010 4,081 3,665 2,669 2,351
Bulk ISP 6,121 5,508 5,887 5,887 5,576
ISP Choice or Exclusive 5,484 5,534 5,356 4,818 4,966
Voice 26 26 22 18 14
Total Subscribers 74,712 78,545 76,914 79,825 78,725

As of September 30, 2011, the Company also had 6,929 residences in 23 properties in its work in progress that it expects will continue to generate new subscriber additions in upcoming periods.

During the fiscal year, the Company focused its subscriber growth on the expansion of its digital Bulk DTH and its digital Choice/Exclusive DTH video service offerings. The digital Bulk DTH subscribers provide a guaranteed long-term revenue stream for the Company. The Company added 4,129 digital Bulk DTH subscribers, an increase of 20% during the fiscal year over the prior fiscal year. The digital Choice/Exclusive DTH subscribers provide the Company with a high ARPU and high margin as there is little to no direct costs associated with these types of customers. The Company added 5,064 digital Choice/Exclusive DTH subscribers during the fiscal year, an increase of 29% over the prior fiscal year. The Company continues to focus on renewing, signing and securing new long-term access agreements with primarily Class A and B multi-family properties located in the major metropolitan markets it services. These types of properties generally provide the Company with higher ARPU subscribers and are less likely to churn.

During fiscal 2011, on a preliminary basis, the Company invested $3.9M in the purchase of property plant, equipment, installations and intangible assets. There were three primary uses of capital investment in fiscal 2011, (i) approximately $1.3M was used to acquire property, plant, subscriber equipment and related access agreements, (ii) approximately $1M was invested in plant and equipment associated with new property deployments and one-time HD upgrades of recently acquired ATTVS properties and subscribers, and (iii) approximately $1.6M was used to fund subscriber equipment and installations from new subscriber growth and churn in properties.

During the fourth fiscal quarter, the Company entered into a Construction Contractor Agreement with DIRECTV to be an authorized contractor to provide DIRECTV with system design and construction services to support DIRECTV's multi-family Connected Properties™ program. The Company will utilize existing resources to fulfill project requirements. Additionally, the Company signed a DIRECTV MDU Referral and Right of Entry Acquisition Agreement whereby the Company is an authorized agent to negotiate "choice" right of entry agreements on behalf of DIRECTV for its multi-family Connected Properties™ program.

The Company continues negotiations with several companies that it deems significant strategic acquisition/merger prospects. To assist the Company in assessing its strategic plans, the Company has retained the investment advisory firm of Berkery, Noyes & Co.

The Company expects to file its annual report on Form 10-K for the year ended September 30, 2011 with the Securities and Exchange Commission on or before December 31, 2011. The Company will be hosting a conference call in the next few weeks to discuss the fiscal year end results and provide commentary on fiscal 2012 plans. Specific information will be provided at a later date and call information will be available on the Company's web site at

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 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, fluctuations in operating results and operating plans, deployment of new subscriber growth plans and conversion of existing subscribers, 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, 2010, filed on or about December 21, 2010.

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