Winstar Communications Inc. (Nasdaq:WCII) was up 27 percent before Wednesday's opening bell. The company reported third quarter earnings that beat expectations, and announced more than $1 billion in additional financing.
Shares in the broadband services company closed up 2.63 to 22.38 Tuesday. Shares were up to 28.5 on the Island ECN.
Net loss for the quarter was $227.4 million, or $2.50 per share, 4 cents better than First Call's consensus expectations.
Winstar said expects losses to decline until it reaches EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) breakeven, sometime during the first half of 2001. Winstar narrowed its EBITDA loss for the quarter to $32.0 million, a $40.6 million improvement from the year-ago quarter, and a $12.8 million improvement from the prior quarter.
Total revenue was $195.1 million for the quarter ended September 30, a 63 percent increase over the year-ago quarter. Winstar's broadband services revenue for the quarter rose to $175.9 million, up 80 percent from the prior year and up 15 percent from the previous quarter.
Stronger than expected revenue was augmented by sharp improvement in gross margin, which rose to 47 percent in the third quarter. The company said it expects gross margins to keep improving.
Winstar also announced that it has signed agreements totaling $1.02 billion, and will use the new capital to fund its ongoing business plan, which includes the expansion of its broadband network, products and services.
Winstar entered into a $270 million private equity investment agreement with Microsoft (Nasdaq: MSFT), Compaq Computer Corp. (NYSE: CPQ), CSFB Private Equity and Welsh, Carson, Anderson & Stowe, VIII, L.P.
The investment is in the form of convertible preferred stock, which converts into common stock initially at $25 per share, a premium of 20 percent over Winstar's average share price for the last 30 days, plus five-year warrants to purchase 4.59 million shares at an initial exercise price of $25 per share. This is the second investment these companies have made in Winstar, bringing the total to $900 million.
The $750 million balance of these financing transactions, $500 million of which is available immediately, includes an increase in Winstar's senior bank credit facility and new vendor relationships with Cisco Systems, Inc. (Nasdaq: CSCO) and Compaq.
Winstar has entered into a Cisco Capital Financing Agreement with Cisco, which will give it additional capital and access to Cisco's technology as it completes its core network infrastructure and improves capabilities at the edge of its network. Compaq is also providing the company with lease equipment financing.
The company said that these transactions, along with its existing cash and the remaining amount available from the first $1 billion of its Lucent financing, will fully fund it into 2002, past the point of positive EBITDA.