MDU Communications International, Inc.
OTC Bulletin Board : MDTV

MDU Communications International, Inc.

November 08, 2005 11:48 ET

MDU Communications Announces Preliminary Fourth Quarter and Fiscal 2005 Year End Results

TOTOWA, NEW JERSEY--(CCNMatthews - Nov. 8, 2005) - MDU Communications International, Inc. (OTCBB:MDTV) -

- Fiscal 2005 Revenue up 103% over Prior Year to $9.1M

- Overall Subscriber Base Increase of 50% over Prior Year to 37,124 Subscribers

- 101% Increase in DIRECTV® Subscribers over Prior Year

- Average Revenue Per Subscriber Increase to $27.42 from Prior Year $21.80

MDU Communications International, Inc. (OTCBB:MDTV), a leading end-to-end provider of DIRECTV® digital satellite television programming, high-speed Internet and other premium communication and information services to the residential multi-dwelling unit ("MDU") market, today reports its preliminary fourth quarter and year end results for the quarter and fiscal year ended September 30, 2005.

The Company reports preliminary revenue for the year ended September 30, 2005 of $9,110,192, an increase of 103% over the prior year, and $2,721,003 for the quarter ended September 30, 2005, an increase of 13% over the prior quarter ended June 30, 2005. Highlights of the Company's preliminary Income Statement are as follows:



--------------------------------------------------------------------
Three Months Ended September 30, Year Ended September 30,
--------------------------------------------------------------------
2005 2004 2005 2004
(prelim.) (prelim.)
--------------------------------------------------------------------
Revenue $2,721,003 $1,484,670 $ 9,110,192 $ 4,490,235
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Operating
Expenses ($4,260,590) ($2,980,171) ($14,724,475) ($10,725,947)
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Operating Loss ($1,539,587) ($1,495,501) ($ 5,614,283) ($ 6,235,712)
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Net Income/Loss ($1,451,213) ($2,289,868) ($ 4,658,642) ($ 8,941,135)
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Net Income/Loss
per Share ($ 0.03) ($ 0.06) ($ 0.10) ($ 0.24)
--------------------------------------------------------------------


"MDU Communications is continuing its trend of increasing long-term revenue streams and achieving higher revenues per subscriber from subscribers in properties covered by our long-term access agreements. Our gross revenue and average revenue per user/subscriber ("ARPU") at September 30, 2005 increased 103% and 26%, respectively, during the fiscal year with the ARPU specifically increasing from $21.80 to $27.42," said Sheldon Nelson, Chief Executive Officer of MDU Communications. "We are further pleased with our continued consistent subscriber growth. The Company added 3,618 billable subscribers during the quarter, an increase over the 3,354 net subscribers added in the third quarter, and converted 876 existing low average revenue private cable subscribers, having an ARPU of $16.77, to bulk DIRECTV service subscribers, having an ARPU of $33.75. DIRECTV has been providing equipment and marketing assistance to the Company's effort of converting properties from traditional private cable to DIRECTV programming. In addition, high margin subscribers to the Company's high-speed Internet service increased 93% during fiscal year 2005," commented Nelson. A breakdown of the Company's subscriber base and quarterly increases during fiscal year 2005 are set forth below:



--------------------------------------------------------------------
Sub- Sub- Sub- Sub- Sub-
scribers scribers scribers scribers scribers
as of as of as of as of as of
Sept. 30, Dec. 31, March 31, June 30, Sept. 30,
Service Type 2004 2004 2005 2005 2005
--------------------------------------------------------------------
Bulk DTH 2,563 3,229 3,418 3,963 5,470
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DTH Choice /
Exclusive 4,895 5,001 5,576 5,833 6,860
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Bulk PC 13,705 13,802 15,589 16,869 16,587
--------------------------------------------------------------------
PC Choice /
Exclusive 1,576 1,583 1,688 1,370 1,399
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DTH "BCA" Program - 351 984 2,175 2,941
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Bulk ISP 1,415 1,489 1,511 1,771 1,828
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ISP Choice /
Exclusive 584 642 1,386 1,525 2,044
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Total
Subscribers 24,738 26,097 30,152 33,506 37,124
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As of September 30, 2005, the Company had 9,815 "under contract" subscribers currently in work-in-progress ("WIP") that the Company expects will become "billable" subscribers in the next few quarters. The under contract subscribers are an important component of the Company's subscriber base evaluation in that they represent the number of subscribers in the Company's WIP properties simply awaiting (i) completion of a DIRECTV/Internet system installation, (ii) maturity of a subscriber phase-in or resident move-in schedule, or (iii) launch or completion of a marketing campaign. A preliminary breakdown of these "under contract" subscribers (already reduced to reflect appropriate property type and penetration rate) shows that 4,021 are from bulk properties, 1,827 are from exclusive properties and 3,967 are from choice properties.

As of September 30, 2005, the Company had 70 properties and 33,029 units in WIP, a 62% increase from September 30, 2004 when the Company had only 20,330 units in WIP. Of the current WIP, approximately 18,000 units are in new construction properties. The Company's breakdown of WIP units by type of service is as follows: (i) DIRECTV (bulk) 1,370; (ii) DIRECTV (choice/exclusive) 13,640; (iii) DIRECTV BCA Program (bulk/choice) 5,067; (iv) Private Cable (bulk) 1,146; (v) Private Cable (choice/exclusive) 725; (vi) Internet (bulk) 1,181; and, (vii) Internet (choice/exclusive) 9,900.

The Company's backlog remained fairly constant from last quarter at 142,095 units; however, this is a 21% increase over the 117,000 units in backlog as of September 30, 2004. The Company's approximate breakdown of backlog units by type of service is as follows: (i) "BCA" DIRECTV (bulk) 17%; (ii) DIRECTV or Private Cable (bulk) 23%; (iii) Broadband (bulk) 3%; (iv) DIRECTV or Private Cable (exclusive) 2%; (v) Broadband (exclusive) 1%; (vi) DIRECTV or Private Cable (choice) 39%; and (vii) Broadband (choice) 15%.

The Company's preliminary operating expenses (including direct costs, sales/marketing, customer service, general/administrative, depreciation) increased during the year and quarter ended September 30, 2005 to $14,724,475 and $4,260,590, respectively, an increase of 37% and 43% over the year and quarter ended September 30, 2004. The Company preliminarily reports a significant reduction in net loss for the year and quarter ended September 30, 2005 of $4,658,642 and $1,451,213, respectively, compared to a net loss of $8,941,135 and $2,289,868, respectively, from the year and quarter ended September 30, 2004.

The Company preliminarily realized positive cash flow from operations during the quarter ended September 30, 2005 of $285,488; however, it experienced negative EBITDA of $537,066 for the same quarter (excluding non-cash charges associated with options and warrants) (See Non-GAAP Financial Reconciliation Schedule, below). The Company's cash utilization in the fourth quarter was preliminarily and approximately $2.5M, a decrease of 26% as compared to the cash utilization during the quarter ended June 30, 2005 of $3.4M (prior to cash realized from a non-core asset sale). The cash utilization decreased despite the Company adding more subscribers this period than last, which is evidence that increased revenues and activation fees are having a positive impact on cash needs. The Company reports a strong balance sheet as of September 30, 2005 with preliminarily $9,355,745 in cash and cash equivalents and total assets preliminarily valued at $29,212,904.

The Company is placing greater focus on its subscriber mix and is securing the highest revenue generating subscribers to long-term bulk and exclusive video and broadband access agreements. This emphasis has resulted in a 113% increase in bulk DIRECTV billable subscriber growth and 93% increase in broadband billable subscriber growth over the past fiscal year. During the fourth quarter alone, the Company added 3,300 DIRECTV type subscribers, an increase of 66% over the previous quarter when the Company added 1,993 DIRECTV type subscribers. Access agreements for DIRECTV type services with bundled broadband produce long-term guaranteed revenue streams that represent high margin and low risk/churn subscribers. The Company is also placing a priority on converting significant portions of its backlog into bulk or exclusive DIRECTV and broadband subscribers.

During the quarter, the Company shifted its organizational structure from one of centralized management to decentralized operating regions lead by experienced general managers. This is positively impacting the Company's growth and customer service levels and provides a more scalable corporate structure.

Regarding upcoming initiatives, the Company expects to launch a Voice over Internet Protocol (VoIP) beta trial during the latter part of the first fiscal quarter of 2006, with the goal of beginning to bundle this service with the Company's DIRECTV and broadband services in select markets in fiscal 2006 for a true "triple play." The Company is also developing new strategic relationships designed to significantly enhance the Company's rate of subscriber growth in certain markets. Additionally, the Company is exploring a number of acquisition opportunities that fit within its expansion plans for fiscal 2006.

The Company expects to file its annual report on Form 10-KSB for the year ended September 30, 2005 with the Securities and Exchange Commission on or before December 23, 2005.

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



Year Ended Three Months Ended
September 30, September 30,
--------------------------------------------------
2005 2004 2005 2004
(prelim.) (prelim.)
------------ ------------ ------------ -----------

EBITDA $ (887,066) $ (693,319) $ (537,066) $ (465,643)
Interest
Expense (8,032) (2,755,115) (2,614) (821,855)
Depreciation and
Amortization (3,047,590) (1,620,164) (918,611) (548,197)
Effects of
shares and
warrants issued
for professional
services (270,200) (313,040) - (237,840)
Effect of
cancellation
of shares and
warrants issued
for professional
services 426,041 - - -
Effect of Variable
Accounting for
Option Plans (271,885) (2,801,682) 152,114 (42,802)
Amortization of
Unearned
Compensation (599,910) (757,815) (145,036) (259,135)
------------ ------------ ------------ -----------
Net Income
(Loss) $(4,658,642) $(8,941,135) $(1,451,213) $(2,289,868)
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------


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 and preliminary financial information, subscriber 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 information due to the audit conducted by the Company's independent auditors, efforts on behalf of the Company to finalize and deploy certain programs, bringing to fruition strategic alliances, fluctuations in operating results and operating plans, deployment of new 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-KSB for year ended September 30, 2004, filed on or about December 24, 2004.

The Company's filings, including current financial reports, can be accessed through the EDGAR database at www.sec.gov.

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