High Point, NC — February 25, 2020 — NorthState, a fiber optic network, cloud and IT services provider, announced today its financial results for the fourth quarter and year ended December 31, 2019.
Summary of Selected Financial Data
Quarter Ended December 31, 2019 versus Quarter Ended December 31, 2018
- Consolidated net operating revenue (NOR) of $34.6 million for the 2019 quarter, a decrease of 8.5% compared to NOR of $37.8 million for the 2018 quarter.
- Total strategic revenue1 of $25.3 million for the 2019 quarter, a decrease of 8.3% compared to total strategic revenue of $27.6 million for the 2018 quarter. Strategic revenue comprised 73% of NOR for the 2019 quarter and the 2018 quarter.
- Net income of $0.1 million for the 2019 quarter, a decrease of 96.4% compared to net income of $2.5 million for the 2018 quarter. Excluding transaction costs related to the proposed merger with Segra, net income was $2.8 million for the 2019 quarter, an increase of 11.9% compared to net income of $2.5 million for the 2018 quarter.
- Earnings per share (EPS) of $0.04 for the 2019 quarter compared to EPS of $1.09 for the 2018 quarter. Excluding transaction costs related to the proposed merger with Segra, EPS was $1.22 for the 2019 quarter compared to EPS of $1.09 for the 2018 quarter.
Year Ended December 31, 2019 versus Year Ended December 31, 2018
- Consolidated NOR of $135.9 million for the 2019 period, up 3.5% compared to NOR of $131.3 million for the 2018 period.
- Total strategic revenue1 of $99.7 million for the 2019 period, up 4% compared to total strategic revenue of $95.9 million for the 2018 period, comprising 73% of NOR for each period.
- Net income of $8.5 million for the 2019 period compared to net income of $7.9 million for the 2018 period, up 7.3%. Excluding transaction costs related to the proposed merger with Segra, net income was $11.2 million for the 2019 period, an increase of 40.8% compared to net income of $7.9 million for the 2018 period.
- EPS of $3.77 for the 2019 period compared to EPS of $3.51 for the 2018 period. Excluding transaction costs related to the proposed merger with Segra, EPS was $4.95 for the 2019 period compared to EPS of $3.51 for the 2018 period.
Chief Executive Officer Royster Tucker III said, “We are pleased with our financial performance for 2019. Our success was fueled by continued growth in both fiber and IT services. In our internet-driven world, we have continued to see demand for our fiber products and services. In addition, our IT solutions portfolio continued to help businesses securely transform themselves in this digital age.
“During 2019, business revenue grew by 3.0% driven by increases in both professional services and fiber-connected businesses. Business revenue declined in the fourth quarter due to lower equipment sales vs. the same period in 2018. For the year, residential revenue increased 4.4%, driven by continued growth of fiber-connected households.”
Mr. Tucker continued, “I am proud of our team’s efforts and their dedication to executing on our strategic objectives. We are also working to close our previously announced merger with a subsidiary of Segra. The transaction, which represents a strong value for shareholders, illustrates the value of our assets.”
On February 12, 2020, NorthState announced that holders of NorthState’s Class A common stock overwhelmingly approved the proposed merger of NorthState with a subsidiary of Segra at a special meeting of NorthState shareholders held earlier that day.
Segra is one of the largest independent fiber bandwidth companies in the eastern U.S. As previously announced, Segra will pay $80.00 in cash per share for both Class A and Class B of NorthState’s common stock, which, inclusive of indebtedness, represents an enterprise value of approximately $240 million.
The transaction is anticipated to close in the second or third quarter of 2020 and is subject to customary regulatory approvals and other closing conditions.
For further details on NorthState’s financial results for the fourth quarter and full year 2019, please see: Q4 2019 Earnings Report.
1 Strategic Revenue is all revenue excluding legacy voice revenue. Legacy voice revenue is comprised of non-IP voice, long distance, and network access revenue. Please see pages 2 and 3 of the Q4 2019 Earnings Report available through this link: Q4 2019 Earnings Report.
NorthState is a technology company focused on inspiring the Internet-driven lifestyle through high-touch experiences. Its fiber-delivered, ultrafast Internet and Internet-driven applications enable residential customers and businesses to efficiently and securely take advantage of the Internet. Through its Technology Solutions business unit, NorthState provides data center colocation, customized cloud and IT solutions, managed disaster recovery services, managed security and unified communications. For more information, visit northstate.net.
Special Note from NorthState Regarding Forward-Looking Statements
Any statements contained in this press release that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. Such forward-looking statements reflect, among other things, our current expectations about the transaction and its timing, all of which are subject to known and unknown risks, uncertainties and factors that may cause actual results to differ materially from those expressed or implied by these forward-looking statements. Many of these risks are beyond our ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made. We do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise. Important factors with respect to any such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, include: the business risks we face in our efforts to continue our growth, including the possible effects of the announcement of the pending Segra transaction; various risks associated with our efforts to achieve a successful closing of the Segra transaction including satisfying the conditions to the closing of the merger with Segra, by obtaining the requisite regulatory and governmental approvals and satisfying other closing conditions; the risk that required governmental and regulatory approvals may delay the transaction or result in the imposition of conditions that could cause the parties to abandon the transaction; the time required to consummate the proposed transaction; any disruption from the proposed transaction making it more difficult to maintain relationships with our customers, employees or suppliers; the diversion of management time on transaction-related issues; unexpected costs, liabilities or delays arising from the transaction; the outcome of any legal proceedings related to the transaction; the failure by Segra to obtain the necessary financing arrangement set forth in the debt commitment letters received in connection with the transaction; and other unforeseen difficulties that may occur. These risks and uncertainties are not intended to represent a complete list of all risks and uncertainties inherent in our business.
Harriet Fried, SVP