NorthState Reports Third Quarter 2019 Results

HIGH POINT, N.C., Dec. 17, 2019 (GLOBE NEWSWIRE) -- NorthState, a fiber optic network, cloud and IT services provider, announced today its financial results for the third quarter ended September 30, 2019. 

Summary of Selected Financial Data

Quarter Ended September 30, 2019 versus Quarter Ended September 30, 2018

• Consolidated net operating revenue (NOR) for the 2019 quarter totaled $34.4 million, up 2% compared to NOR of $33.8 million for the 2018 quarter.
• Total strategic revenue^[1] for the 2019 quarter of $26.4 million, up 5% compared to total strategic revenue of $25.2 million for the 2018 quarter. Strategic revenue comprised 77% of NOR for the 2019 quarter, compared to 75% of NOR for the 2018 quarter.
• Net income for the 2019 quarter of $1.9 million, a decrease of 10%, compared to net income of $2.1 million for the 2018 quarter.²
• Earnings per share (EPS) for the 2019 quarter of $0.86 compared to EPS of $0.95 for the 2018 quarter.²
  

Nine Months Ended September 30, 2019 versus Nine Months Ended September 30, 2018

• Consolidated NOR of $101.3 million for the 2019 period, up 8% compared to NOR of $93.5 million for the 2018 period.
• Total strategic revenue¹ of $74.4 million for the 2019 period, up 9% compared to total strategic revenue of $68.3 million for the 2018 period, comprising 73% of NOR for each period.
• Net income of $8.4 million for the 2019 period compared to $5.5 million for the 2018 period, up 54%.²
• EPS of $3.73 for the 2019 period compared to EPS of $2.42 for the 2018 period.

Chief Executive Officer Royster Tucker III said, “Throughout 2019, we have been executing well on our plans to expand NorthState’s IT services & hardware and Internet & communications businesses. We have focused on putting technology to work to enhance businesses and lifestyles in the Piedmont Triad Region and our customers have been responding well to our offerings.

“Our third-quarter results demonstrate continued effectiveness in implementing our strategy. IT services and hardware revenues grew by 4.2% year over year, driven primarily by a 10.4% increase in telecom & IT equipment sales. Internet & communications revenues rose 0.4% quarter over quarter, reflecting an 8.2% increase in Internet & data revenue that was offset by declines in legacy voice services.² Video revenue also declined slightly quarter over quarter. For the first nine months of 2019, both net income and earnings per share grew significantly over last year’s period.”

Mr. Tucker concluded, “We have continued to take advantage of the market opportunities in our area and have gained momentum through our expanding sales efforts and increased fiber footprint. Our solid financial results for the first nine months of 2019 demonstrate the quality of our fiber assets and our growing IT services business.”

On December 9, 2019 NorthState announced a definitive agreement to merge with a subsidiary of MTN Infrastructure TopCo, Inc., which, together with its other subsidiaries, does business as “Segra.” Segra is one of the largest independent fiber bandwidth companies in the eastern U.S. It owns and operates an advanced fiber infrastructure network of more than 23,000 miles that connects more than 9,000 on-net locations and six data centers throughout nine Mid-Atlantic and Southeastern states. 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 third quarter of 2019, please see 3Q 2019 Earnings Report.

Additional Information about the Proposed Transaction
In connection with the proposed merger, NorthState will hold a special meeting to obtain shareholder approval and will mail a definitive proxy statement to its shareholders. The definitive proxy statement will contain important information about the proposed merger and related matters. In addition, investors and security holders may obtain free copies of the documents mailed to NorthState’s shareholders by contacting NorthState investor relations at investor.relations@nscom.com and by viewing the documents on or through NorthState’s website at www.northstate.net/investor-relations/. INVESTORS AND SECURITY HOLDERS OF NORTHSTATE ARE URGED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED TRANSACTION BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION.

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 (a) our momentum through our expanding sales efforts and increased fiber footprint and our growing IT services business and (b) the Segra 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 obtaining the requisite regulatory, governmental and shareholder 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 timing 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 in 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 letter Segra 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.

About NorthState
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.

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 page 2 of the Q3 2019 Earnings Report available through this link: 3Q 2019 Earnings Report.
²  Net income and EPS were negatively impacted by one-time adjustments in third quarter 2019 related to selection of the Connect America Fund (CAF) II funding mechanism in July 2019.  However, both net income and EPS are up significantly year-to-date.