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Additionally, during the quarter ended December 31, 2008, the Company realized net income of $4,205,009 and positive EBITDA (as adjusted) of $6,418,080, as compared to positive EBITDA of $119,117 for the same period in the prior fiscal year. The strong financial growth in net income and EBITDA (as adjusted) was due primarily to the gain realized on the sale of certain assets during the quarter. Net of this gain, the Company realized positive EBITDA (as adjusted) of $1,379,241 in the first fiscal quarter.
The Company's continued focus on improving its financial results directly resulted in increased revenues and EBITDA, but also resulted in lower (as a percentage of revenue) operating expenses - specifically direct costs, customer service, sales and marketing, and general and administrative expenses, when compared to the same period in the prior fiscal year. Collectively, these operating expenses declined by 22% as a percentage of revenue during the quarter as compared to the same period in the prior fiscal year. Additionally, depreciation expense also declined by 5% as a percent of revenue during the first quarter as compared to the same period a year earlier.
Three Months Three Months Ended Ended Change Change December 31, 2008 December 31, 2007 ($) (%) ------------------------------------------------------- REVENUE $ 6,616,635 100% $ 5,268,439 100% $ 1,348,196 26% Direct costs 2,596,698 39% 2,429,204 46% 167,494 7% Sales expenses 278,060 4% 338,340 6% (60,280) -18% Customer service and operating expenses 1,556,873 24% 1,443,623 27% 113,250 8% General and administrative expenses 862,436 13% 1,196,447 23% (334,011) -28% Depreciation and amortization 1,626,635 25% 1,555,145 30% 71,490 5% (Gain) on sale of assets (5,038,839) -76% - - (5,038,839) - ----------- --- ----------- --- ----------- OPERATING INCOME (LOSS) 4,734,772 71% (1,694,320) -32% 6,429,092 379% Total other income (loss) (529,763) -8% (485,988) -9% 43,775 9% ----------- --- ----------- --- ----------- NET INCOME (LOSS) $ 4,205,009 63% $(2,180,308) -41% $ 6,385,317 293% ----------- --- ----------- --- ----------- ----------- --- ----------- --- -----------
For the past year, the Company has been implementing a comprehensive plan to upgrade its properties and current DIRECTV high definition ("HD") subscribers to the newly launched DIRECTV MFH-2 platform and expanded line-up of DIRECTV HD services. During the first fiscal quarter, the Company upgraded 21,303 units in 110 properties to the new DIRECTV HD platform and had 6,733 units in 25 properties that were work-in-progress at December 31, 2008. Since the Company began its upgrade program in fiscal '08, it has upgraded (or has upgrades in process at December 31, 2008) of 224 properties containing 45,762 units. The Company is currently implementing the final phase of its property upgrade program targeting an additional 25,500 units in approximately 180 properties to be completed during the second and third fiscal quarters of '09. DIRECTV is providing certain financial assistance with this upgrade program through July 2009.
These property upgrades to the new DIRECTV HD platform are essential as subscribers and property owners demand state-of-the-art technology and want access to DIRECTV's unparalleled comprehensive offering of HD programming and services. DIRECTV currently offers over 130 (moving to 150) HD national programming channels and has HD local programming in more than 94% of all U.S. markets. The continued launch and advertising campaign for this new DIRECTV HD programming and associated services will continue to provide incremental revenue and improved penetration rates within Company properties. Additionally, these upgrades are resulting in property access agreement extensions and renewals, increased penetration rates within these properties, increased sale of advanced services and an increase in the Company's DIRECTV subscriber residual, all of which positively impact the Company's financial results.
As previously announced, the Company entered into an agreement with CSC Holdings, Inc. on September 30, 2008 for the sale of certain assets. This multi-closing transaction has produced three separate closings to date, two of which closed during the quarter ended December 31, 2008. On November 5, 2008, 1,803 subscribers were transferred for proceeds of $2,705,500 (resulting in a gain to the Company of $2,382,502) and on December 17, 2008, 2,064 subscribers were transferred for proceeds of $3,096,000 (resulting in a gain to the Company of $2,656,337). In total, the Company has received over $8,330,000 in proceeds from this transaction, clearly establishing an important valuation for its subscribers. As of December 31, 2008, the Company has applied over $6 million of these proceeds to reduce its Credit Facility and expects another $2.3 million to be applied prior to the end of the second fiscal quarter. As of December 31, 2008, the Company had utilized $11,216,828 (net of proceeds held in escrow from the asset sale closings) of its Credit Facility, as compared to $16,641,586 on September 30, 2008.
The Company planned for, and expected, slower subscriber growth during the quarter due to (i) its significant commitment to upgrade its current properties to the new DIRECTV HD Platform, (ii) its focus to convert its current properties from low margin private cable services to higher ARPU DIRECTV services, (iii) a fiscal decision, dictated in part by these economic times, to conserve capital and improve financial returns from previous capital investment in its portfolio of properties, and (iv) the sale of a certain number of subscribers to CSC Holdings. During the quarter ended December 31, 2008, the Company experienced a net subscriber reduction of 6,310 subscribers, primarily the result of the sale of subscribers to CSC Holdings, the disconnection of Internet subscribers in properties sold to CSC Holdings and other planned disconnections and non-renewals. As of December 31, 2008, the Company reports 59,242 total billable subscribers. The Company expects to increase its rate of subscriber growth later in fiscal '09 as its HD platform upgrade program approaches completion. The Company's breakdown of total subscribers by type and kind is outlined in the following chart:
Subscribers Subscribers Subscribers Subscribers Subscribers as of as of as of as of as of Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Service Type 2007 2008 2008 2008 2008 -------------- ----------- ----------- ----------- ----------- ----------- Bulk DTH -DIRECTV 14,808 15,016 15,249 15,382 12,478 DTH -DIRECTV Choice/ Exclusive 10,650 11,269 11,547 10,790 11,037 Bulk Private Cable 20,564 20,084 20,179 17,194 14,586 Private Cable Choice or Exclusive 3,211 3,369 2,270 1,952 2,446 Bulk BCA -DIRECTV 7,921 8,527 8,687 10,337 9,505 Bulk ISP 5,863 6,173 6,394 5,911 5,215 ISP Choice or Exclusive 3,875 4,041 3,784 3,956 3,952 Voice 73 39 32 30 23 ----------- ----------- ----------- ----------- ----------- Total Subscribers 66,965 68,518 68,142 65,552 59,242 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
As of December 31, 2008, the Company also had 6,777 units in work-in-progress for which the Company expects a minimum of 1,382 of these units (under contract subscribers) to become billable subscribers in the next few quarters. Regarding its Voice over Internet ("VoIP") service, the Company previously announced it had deployed this service to certain of its properties in a 'soft' launch. Based on the successful operating results of the service, the Company has expanded the launch of the service to numerous additional properties where the Company offers bulk video and broadband services. To facilitate the bundling of its video, broadband and VoIP services, the Company is developing plans to 'bundle' its services onto a single billing platform.
Mr. Sheldon Nelson, President of MDU Communications, commented, "We are very well positioned to succeed in fiscal '09 and expect our results to continue to improve as we solidify our position as a leader in this market segment. We are well-capitalized, committed to fiscally responsible growth, and despite a poor economy, we expect our results to improve as more and more people turn to their television and the Internet as economical sources of information and entertainment."
The Company expects to file its quarterly report on Form 10-Q for the quarter ended December 31, 2008 with the Securities and Exchange Commission on or before February 12, 2009. The Company will be hosting a conference call on February 11, 2009 at 10:00 am EST. Call information is available on the Company's web site at www.mduc.com. About MDU: MDU Communications International, Inc. (OTCBB: MDTV | Quote | Chart | News | PowerRating) 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, 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, market forces, supplier negotiations, the closing of asset sales 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.
Contacts: MDU Communications International, Inc. Sheldon Nelson CEO (973) 237-9499 Email: investor@mduc.com Website: www.mduc.com
SOURCE: MDU Communications International, Inc.
mailto:investor@mduc.com http://www.mduc.com
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