Covad Communications Announces Third Quarter Results; Quarterly Revenue Increases 77% During the Quarter - Company Financial Information

Cambridge Telcom Report, Oct 25, 1999

Wednesday Covad Communications Group, Inc. (Nasdaq:COVD) announced third quarter 1999 results.

Revenues for the quarter ended Sept. 30, 1999 were $19.1 million, representing a 77% increase over quarter ended June 30, 1999 revenues of $10.8 million. The net loss for the third quarter 1999 increased to $54.1 million, from a loss of $41.9 million in the second quarter of 1999. EBITDA for the quarter ended Sept. 30, 1999 was negative $35.2 million versus negative $24.7 million for the quarter ended June 30, 1999.

Revenues for the nine months ended Sept. 30, 1999 were $35.6 million as compared to $2.6 million for the nine months ended Sept. 30, 1998. The net loss for the nine months ended Sept. 30, 1999 increased to $124.9 million, from a loss of $28.3 million for the nine months ended Sept. 30, 1998. EBITDA for the nine months ended Sept.30, 1999 was negative $77.4 million versus negative $17.0 million for the nine months ended Sept. 30, 1998.

"The demand for broadband access continues to be very strong as evidenced by Covad orders taken and lines installed during the third quarter," stated Robert E. Knowling, Jr., chairman, president and chief executive officer of Covad. "We continue to aggressively build our network, adding to the 25 million homes and businesses we can offer service to today."

During the third quarter, subscriber lines increased 86% to 31,000 lines, from 16,700 lines at June 30, 1999. Homes and businesses passed increased 62% during the quarter to 25 million from 15.4 million at June 30, 1999, giving Covad the largest national broadband access network. Service ready central offices increased during the third quarter by 65%, to 880 from 534 at June 30, 1999.

During the third quarter, Covad completed launching its services in the 51 metropolitan statistical areas (MSAs) that were planned to be operational by the end of 1999, and announced that it will expand into a total of 100 MSAs by the end of 2000. Upon completion of this announced expansion, Covad's network will pass over 40% of all homes and over 45% of all businesses in the United States by the end of year 2000.

Covad Communications is a leading broadband access and services provider of high-speed Internet and network access. It offers DSL services through Internet Service Providers to small and medium-sized businesses and home users. Covad services are currently available across the United States in 51 of the top Metropolitan Statistical Areas (MSAs). By the end of 2000, Covad's network is anticipated to cover a total of 100 MSAs which will reach 40 percent of all U.S. homes and 45 percent of all U.S. businesses. Covad Communications and its affiliates, doing business as Covad Communications Company, are wholly owned subsidiaries of Covad Communications Group, Inc. (Nasdaq:COVD). Corporate headquarters is located at 2330 Central Expressway, Santa Clara, CA 95050. Telephone: 1-888-GO-COVAD. Web site: www.covad.com.

                   COVAD COMMUNICATIONS GROUP, INC.
                         Financial Highlights
       (Dollars in thousands, except share and per share data)
                             (Unaudited)

                    Three Months Ended         Nine Months Ended
                        Sept. 30,                    Sept. 30,
                   1999            1998         1999          1998

Revenues          $19,141         $1,565      $35,570        $2,560
Operating
 Expenses:
  Network and
   product costs   16,694          1,355       32,219         2,316
  S,G&A expenses   37,697         10,681       80,786        17,231
  Amortization of
   deferred
   compensation     1,008          1,837        3,895         2,695
  Depreciation and
   amortization    10,593            738       23,911         1,348
     Total
      operating
      expenses     65,992         14,611      140,811        23,590
Income (loss)
from operations  (46,851)       (13,046)    (105,241)      (21,030)

Net Interest
 Income (expense)  (7,254)       (3,511)     (19,620)       (7,231)
Net Income (loss)$(54,105)     $(16,557)   $(124,861)     $(28,261)

Basic and diluted
 net income (loss)
 per common share  $(0.70)       $(1.84)      $(1.90)       $(3.51)

Weighted average
 shares used in
 computing net
 loss per share 77,082,969     9,017,415   66,368,810     8,062,386

Other Data:
EBITDA(1)        $(35,250)     $(10,471)    $(77,435)     $(16,987)

                                           As of
                                          Sept. 30,
                                     1999           1998
Selected Balance Sheet Data:
Cash and cash equivalents       $ 181,803       $ 97,076
Net property and equipment        187,376         34,003
Total assets                      543,790        144,622
Current liabilities                62,955         13,367
Long-term obligations             369,010        137,672
Total stockholders' equity        111,825         (6,417)

(1) EBITDA consists of earnings (losses) excluding interest, taxes, depreciation, amortization, non-cash stock based compensation and other non-operating income or expenses.