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8-K - FORM 8-K - Clearwire Corp /DE | v58400e8vk.htm |
Exhibit 99.1
For Release February 17, 2011
1:00pm Pacific
1:00pm Pacific
Clearwire Reports Record Fourth Quarter and Full Year 2010 Growth
| 4G Network Now Reaches 119 Million People, Up 250% From Beginning of 2010 | ||
| Total Ending Subscribers of 4.4 Million, Up 540% From 688,000 Year Over Year | ||
| Full Year Revenue $557 Million, 4Q Revenue $181 Million, Up 126% Year Over Year | ||
| Consolidated 4Q Churn 2.1%, Improved From 3.6% Year Over Year | ||
| 2011 Outlook to Double Subscriber Base | ||
| Company Reiterates Support for Retail Distribution Model |
KIRKLAND, Wash., February 17, 2011 Clearwire (NASDAQ: CLWR), a leading provider of 4G
wireless broadband services in the U.S., today reported its financial and operating results for the
fourth quarter and full year 2010.
In 2010, we achieved our aggressive network expansion goals, grew our subscriber base at an
incredible rate and solidified our position as a leader in the 4G industry in both network reach
and customer growth, said Bill Morrow, Clearwires CEO. The Clearwire 4G mobile broadband
network now reaches 119 million people in the U.S. and covers 71 of the top U.S. markets. Our
network expansion represents one of the fastest in history, and unlike some wireless operators, our
4G network is highly scalable and backed by a wealth of spectrum. With recent projections
estimating global mobile data traffic will nearly double annually through 2015, we believe more
than ever that a deep spectrum position will be a requirement for long-term success in the high
tonnage, video-enabled 4G world.
Clearwire is also one of the fastest growing companies in the wireless industry. With fourth
quarter subscriber additions in excess of 1.5 million, we now serve over 4.4 million customers and
expect continued strong subscriber growth to more than double our total subscriber base in 2011.
Despite this strong growth, our current plans and funding dictate that we remain prudent with our
spending. This year, we plan to focus on improving the operating performance of our business by
aggressively growing our wholesale business and reducing expenses. We remain very committed to our
retail distribution model as well, and plan to prudently pace our retail growth in an effort to
maximize our financial resources. We currently believe that the actions we are taking will allow
our existing business to achieve positive EBITDA during 2012 and potentially become cash flow
positive thereafter without the need for additional funding. Significant network expansion in the
near term, however, remains contingent upon additional funding.
Clearwire ended the fourth quarter 2010 with approximately 4.4 million total subscribers,
consisting of 1.1 million retail subscribers and 3.3 million wholesale subscribers. During the
fourth quarter 2010, Clearwire added 1.5 million total net new subscribers, including 126,000
retail additions and 1.42 million wholesale additions. Approximately 27% of our wholesale
subscribers are users of multi-mode 3G/4G devices residing in areas where the Company has not yet
launched 4G service, but from whom it currently expects to receive nominal revenue.
1
Revenue for the fourth quarter was $180.7 million, a 126% increase over fourth quarter 2009 revenue
of $79.9 million. Consolidated average revenue per user (ARPU) was $16.07, composed of a record
retail ARPU of $45.10 and wholesale ARPU of $3.52 in the fourth quarter. Reported wholesale ARPU
was determined based only on the $26.2 million of wholesale
revenue the Company recognized in the fourth quarter due to the Companys previously disclosed pricing disputes with
Sprint. Over the past few weeks, Clearwire and Sprint have held a number of productive discussions
about the outstanding wholesale pricing issues. While nothing has yet been finalized, the Company
believes that an agreement with Sprint resolving those issues is imminent. Under the proposed
terms, the Company expects to receive substantial additional
wholesale revenue.
Consolidated cost per
gross subscriber addition (CPGA) was $60 in the fourth quarter, comprised of $422 CPGA from the
retail business and no CPGA in the wholesale business. Consolidated monthly subscriber churn was
2.1% in the fourth quarter, consisting of 3.8% in the retail business and 1.4% in the wholesale
business.
The fourth quarter 2010 net loss attributable to Clearwire was ($128.0) million, or ($0.53) per
basic share. The fourth quarter 2010 adjusted earnings before interest, taxes, depreciation and
amortization and non-cash expenses related to operating leases and stock-based compensation expense
(adjusted EBITDA) loss was ($497.4) million. The fourth quarter 2009 net loss attributable to
Clearwire was ($98.7) million, or ($0.55) per basic share. The fourth quarter 2009 adjusted EBITDA
loss was ($295.7) million. The full year 2010 net loss attributable to Clearwire was ($487.4)
million, or ($2.19) per basic share.
At the end of 2010, Clearwire operated networks covering areas where approximately 117 million
people reside globally, including approximately 112 million people in 4G markets in the U.S. We
ended 2010 with nearly 14,500 4G cell sites on air utilizing in excess of 50,000 10 MHz carriers.
As of mid-February 2011, Clearwires 4G networks in the U.S. reached 119 million
people.
Clearwire continues to seek additional funding to continue its network development by looking at a
number of funding and other strategic alternatives, including potential strategic transactions,
additional debt or equity financings and/or asset sales. In the second half of 2010, Clearwire
initiated a process to seek bids for the potential sale of certain excess spectrum. During the
process, the Company received offers to purchase varying amounts of spectrum from multiple parties,
some of whom also expressed interest in exploring other strategic transactions with the Company.
Currently, Clearwire is evaluating the offers received for its spectrum and is holding discussions
with the interested parties. As a result, Clearwire has not yet made a determination as to whether
to proceed with any sale and the Company now expects to delay a conclusion until second quarter
2011.
2011 Outlook
Clearwire expects to end 2011 with more than 8.8 million subscribers, with most of those
subscribers coming from its wholesale business. Consolidated CPGA is estimated to fall to below $50
in 2011. The Company also expects to receive significantly higher wholesale ARPU in 2011. Without
additional funding, the Company currently expects to cover approximately 130 million people with
its 4G networks by the end of 2011, with new coverage focused primarily on rural areas where a
build-out is required to protect its spectrum. Capital expenditures in 2011 are estimated to be
less than $400 million.
Under its current plans, the Company now expects to reach positive EBITDA during 2012. However,
this is based on a number of assumptions, including final resolution of the wholesale pricing
disputes with Sprint and achieving the expected expense reductions.
2
Results of Operations
Cost of goods and services and network costs for the fourth quarter 2010 increased 63% to $275.6
million compared to $169.5 million for the fourth quarter 2009, primarily due to an increase in
tower lease and backhaul expenses resulting from the launches of new 4G markets. During the three
months ended December 31, 2010, the Company incurred approximately $55.2 million of expense related
to excess and obsolete CPE, and write-offs of network base station equipment.
Selling, General and Administrative (SG&A) expense for the fourth quarter 2010 increased 19% to
$233.2 million compared to $196.3 million for the fourth quarter 2009. The increase is primarily
due to higher sales and marketing and customer care expenses in support of the launch of new
markets, as well as additional resources, headcount and shared services that Clearwire utilized as
it launched its 4G markets during the fourth quarter of 2010.
Loss from abandonment and impairment of network and other assets for the fourth quarter consists of
approximately $168.8 million in write-offs related to abandonment of projects that no longer fit
within managements strategic network plans. The abandoned projects were originally undertaken in
connection with our network build-out that were not incorporated into our networks at launch and no
longer fit within our future build plans.
Deceleration of network build activities led to a decrease in Capital Expenditures (CapEx) to $590
million in the fourth quarter 2010 from CapEx of $763 million for the third quarter 2010. CapEx was
$2.7 billion for 2010. Cash utilization was approximately $2.1 billion for 2010 including net
proceeds from financing activities of approximately $1.7 billion, primarily generated from the
proceeds from the Senior Secured Notes, the Second-Priority Secured Notes and the Exchangeable
Notes offerings completed in December 2010, as well as the Rights Offering completed in June 2010,
and the final closing of the 2009 equity financing in the first quarter of 2010. The Company ended
the fourth quarter 2010 with cash and investments of approximately $1.8 billion invested primarily
in U.S. Treasury securities.
3
Clearwire Corporation
Summary of Financial Data
(In thousands)
(Unaudited)
Summary of Financial Data
(In thousands)
(Unaudited)
Three months ended | ||||||||||||||||
December 31, | September 30, | June 30, | ||||||||||||||
2010 | 2009 | 2010 | 2010 | |||||||||||||
REVENUES |
$ | 180,669 | $ | 79,915 | $ | 146,964 | $ | 122,521 | ||||||||
OPERATING EXPENSES: |
||||||||||||||||
Cost of
goods and services and network costs (exclusive of items shown separately below) |
275,636 | 169,524 | 225,339 | 273,129 | ||||||||||||
Selling, general and administrative expense |
233,174 | 196,308 | 244,070 | 216,121 | ||||||||||||
Depreciation and amortization |
177,880 | 60,513 | 124,348 | 85,128 | ||||||||||||
Spectrum lease expense |
72,389 | 66,224 | 72,761 | 68,152 | ||||||||||||
Loss from
abandonment and impairment of network and other assets |
168,808 | 5,010 | 20,173 | 760 | ||||||||||||
Total operating expenses |
927,887 | 497,579 | 686,691 | 643,290 | ||||||||||||
OPERATING LOSS |
(747,218 | ) | (417,664 | ) | (539,727 | ) | (520,769 | ) | ||||||||
LESS NON CASH ITEMS |
||||||||||||||||
Non Cash Expenses |
71,946 | 61,408 | 84,716 | 72,396 | ||||||||||||
Depreciation and amortization |
177,880 | 60,513 | 124,348 | 85,128 | ||||||||||||
Total non cash |
249,826 | 121,921 | 209,064 | 157,524 | ||||||||||||
ADJUSTED EBITDA |
(497,392 | ) | (295,743 | ) | (330,663 | ) | (363,245 | ) | ||||||||
Adjusted EBITDA Margin |
-275 | % | -370 | % | -225 | % | -296 | % | ||||||||
KEY OPERATING METRICS (k for 000s, MM for 000,000s) |
||||||||||||||||
Total Net Subscriber Additions |
1,542 | k | 122 | k | 1,227 | k | 722 | k | ||||||||
Wholesale |
1,417 | k | 35 | k | 1,077 | k | 595 | k | ||||||||
Retail |
126 | k | 87 | k | 150 | k | 127 | k | ||||||||
Total Subscribers |
4,384 | k | 688 | k | 2,842 | k | 1,692 | k | ||||||||
Wholesale(1) |
3,246 | k | 46 | k | 1,829 | k | 752 | k | ||||||||
Retail(2) |
1,138 | k | 642 | k | 1,013 | k | 940 | k | ||||||||
Consolidated ARPU |
$ | 16.07 | $ | 39.52 | $ | 21.19 | $ | 32.06 | ||||||||
Wholesale |
$ | 3.52 | N/A | $ | 4.46 | $ | 4.87 | |||||||||
Retail |
$ | 45.10 | $ | 39.86 | $ | 42.74 | $ | 41.58 | ||||||||
Consolidated Churn |
2.1 | % | 3.6 | % | 2.3 | % | 3.2 | % | ||||||||
Wholesale |
1.4 | % | N/A | 1.3 | % | 3.0 | % | |||||||||
Retail |
3.8 | % | 3.6 | % | 3.5 | % | 3.2 | % | ||||||||
Consolidated CPGA |
$ | 60 | $ | 499 | $ | 92 | $ | 112 | ||||||||
Wholesale |
| | | | ||||||||||||
Retail |
$ | 422 | $ | 624 | $ | 505 | $ | 442 | ||||||||
Capital Expenditures |
$ | 590 | MM | $ | 767 | MM | $ | 763 | MM | $ | 622 | MM | ||||
Covered POPS |
117.1 | MM | 44.7 | MM | 70.5 | MM | 62.2 | MM | ||||||||
Cash, Cash Equivalents and Investments |
$ | 1,751 | MM | $ | 3,892 | MM | $ | 1,394 | MM | $ | 2,272 | MM |
(1) | Includes non-launched markets. | |
(2) | During the year, the retail subscriber base was reduced by 67k to adjust for subscribers who have cancelled service but have not yet returned equipment and for aged involuntary deactivations, and 12k to remove subscribers who reside in Ireland, which was sold in July 2010. |
Management Webcast
Clearwire executives will host a conference call and simultaneous webcast to discuss the Companys
fourth quarter and full year 2010 financial results at 4:30 p.m. Eastern Time today. A live
broadcast of the conference call will be available online on the Companys Investor Relations
website located at: http://investors.clearwire.com.
Interested parties can access the conference call by dialing 877.392.9886, or outside the United
States at 707.287.9329, at least five minutes prior to the start time. A replay of the call will be
available beginning at approximately 7:30 p.m. Eastern Time on February 17 until approximately
11:59 p.m. Eastern Time on March 3 by dialing 800.642.1687, or outside the United States by dialing
706.645.9291. The conference ID for the replay is 40334835.
About Clearwire
Clearwire Corporation (NASDAQ: CLWR), through its operating subsidiaries, is a leading provider of
wireless broadband services. Clearwires 4G network currently provides coverage in areas of the
U.S. where approximately 119 million people live. Clearwires open all-IP network, combined with
significant spectrum holdings, provides an unprecedented combination of speed and mobility to
deliver next generation broadband access. The company markets its 4G service through its own brand
called CLEAR® as well as through its wholesale relationships with Sprint, Comcast and
Time Warner Cable.
4
Strategic investors include Intel Capital, Comcast, Sprint, Google, Time Warner
Cable, and Bright House Networks. Clearwire is headquartered in Kirkland, Wash. Additional
information is available at www.clearwire.com.
Clearwire, CLEAR, and the CLEAR logo are trademarks or registered trademarks of Clearwire
Communications LLC in the United States and/or other countries. All other company or product names
are trademarks of their respective owners.
Forward-Looking Statements
This release, and other written and oral statements made by Clearwire from time to time, contains
forward-looking statements which are based on managements current expectations and beliefs, as
well as on a number of assumptions concerning future events made with information that is currently
available. Forward-looking statements may include, without limitation, managements expectations
regarding future financial and operating performance and financial condition; proposed
transactions; network development and market launch plans; strategic plans and objectives; industry
conditions; the strength of the balance sheet; and liquidity and financing needs. The words will,
would, may, should, estimate, project, forecast, intend, expect, believe,
target, designed, plan and similar expressions are intended to identify forward-looking
statements. Readers are cautioned not to put undue reliance on such forward- looking statements,
which are not a guarantee of performance and are subject to a number of uncertainties and other
factors, many of which are outside of Clearwires control, which could cause actual results to
differ materially and adversely from such statements. Some factors that could cause actual results
to differ are:
| We have a history of operating losses and we expect to continue to realize significant net losses for the foreseeable future. | |
| If our business fails to perform as we expect, we may require substantial additional capital, which may not be available on acceptable terms or at all. | |
| Our current plans, and our expectations about becoming EBITDA and cash flow positive, are based on a number of assumptions about our future performance, which may prove to be inaccurate, such as our ability to substantially expand our wholesale business and implement various cost savings initiatives. | |
| We regularly evaluate our plans, and we may elect to pursue new or alternative strategies which we believe would be beneficial to our business, including among other things, expanding our network coverage to new markets, augmenting our network coverage in existing markets, changing our sales and marketing strategy and or acquiring additional spectrum. Such modifications to our plans could significantly change our capital requirements. | |
| There are unresolved issues with Sprint relating to the application of existing wholesale pricing provisions under our commercial agreements. If we are unable to reach a resolution on these issues, or we end up receiving amounts that are less than expected, it could require us to revise our current business plans and projections and could also adversely affect our results of operations and financial condition. | |
| We have deployed a wireless broadband network based on mobile WiMAX technology, and would incur significant costs to deploy alternative technologies. Additionally, such alternative technologies may not perform as we expect on our network and deploying such technologies would result in additional risks to the company, including uncertainty regarding our ability to successfully transition from the current technology to the new technology without disruptions to customer service. | |
| We may experience difficulties in maintaining and upgrading our networks, which could adversely affect customer satisfaction, increase subscriber churn and costs incurred, and decrease our revenues. | |
| We currently depend on our commercial partners to develop and deliver the equipment for our legacy and mobile WiMAX networks. | |
| Many of our competitors are better established and have significantly greater resources, and may subsidize their competitive offerings with other products and services. | |
| Our substantial indebtedness and restrictive debt covenants could limit our financing options and liquidity position and may limit our ability to grow our business. | |
| Sprint Nextel Corporation owns a majority of our shares, resulting in Sprint holding a majority voting interest in the Company, and Sprint may have, or may develop in the future, interests that may diverge from other stockholders. | |
| Future sales of large blocks of our common stock may adversely impact our stock price. |
5
For a more detailed description of the factors that could cause such a difference, please refer to
Clearwires filings with the Securities and Exchange Commission, including the information under
the heading Risk Factors in our Annual Report on Form 10-K filed on February 24, 2010 and our
Quarterly Report on Form 10-Q filed on November 4, 2010. Clearwire assumes no obligation to update
or supplement such forward-looking statements.
6
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value)
(Unaudited)
December 31, | ||||||||
2010 | 2009 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 1,233,562 | $ | 1,698,017 | ||||
Short-term investments |
502,316 | 2,106,661 | ||||||
Restricted cash |
1,050 | 1,166 | ||||||
Accounts receivable, net of allowance of $4,313 and $1,956 |
26,187 | 6,253 | ||||||
Notes receivable |
4,899 | 5,402 | ||||||
Inventory, net |
17,432 | 12,624 | ||||||
Prepaids and other assets |
80,155 | 46,466 | ||||||
Total current assets |
1,865,601 | 3,876,589 | ||||||
Property, plant and equipment, net |
4,464,534 | 2,596,520 | ||||||
Restricted cash |
30,524 | 5,620 | ||||||
Long-term investments |
15,251 | 87,687 | ||||||
Spectrum licenses, net |
4,417,492 | 4,495,134 | ||||||
Other intangible assets, net |
62,908 | 91,713 | ||||||
Investments in affiliates |
14,263 | 10,647 | ||||||
Other assets |
169,913 | 103,943 | ||||||
Total assets |
$ | 11,040,486 | $ | 11,267,853 | ||||
LIABILITIES AND EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued expenses |
$ | 455,890 | $ | 496,233 | ||||
Other current liabilities |
230,963 | 47,194 | ||||||
Total current liabilities |
686,853 | 543,427 | ||||||
Long-term debt, net |
4,017,019 | 2,714,731 | ||||||
Deferred tax liabilities, net |
5,564 | 6,353 | ||||||
Other long-term liabilities |
461,052 | 230,974 | ||||||
Total liabilities |
5,170,488 | 3,495,485 | ||||||
Commitments and contingencies |
||||||||
Equity: |
||||||||
Clearwire Corporation stockholders equity: |
||||||||
Class A common stock, par value $0.0001, 1,500,000
shares authorized; 243,544 and 196,767 shares
issued and outstanding, respectively |
24 | 20 | ||||||
Class B common stock, par value $0.0001, 1,000,000
shares authorized; 743,481 and 734,239 shares issued
and outstanding, respectively |
74 | 73 | ||||||
Additional paid-in capital |
2,221,110 | 2,000,061 | ||||||
Accumulated other comprehensive income |
2,495 | 3,745 | ||||||
Accumulated deficit |
(900,493 | ) | (413,056 | ) | ||||
Total Clearwire Corporation stockholders equity |
1,323,210 | 1,590,843 | ||||||
Non-controlling interests |
4,546,788 | 6,181,525 | ||||||
Total equity |
5,869,998 | 7,772,368 | ||||||
Total liabilities and equity |
$ | 11,040,486 | $ | 11,267,853 | ||||
7
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
Revenues |
$ | 180,669 | $ | 79,915 | ||||
Operating expenses: |
||||||||
Cost of goods and services and network costs
(exclusive of items shown separately below) |
275,636 | 169,524 | ||||||
Selling, general and administrative expense |
233,174 | 196,308 | ||||||
Depreciation and amortization |
177,880 | 60,513 | ||||||
Spectrum lease expense |
72,389 | 66,224 | ||||||
Loss from abandonment and impairment of network
and other assets |
168,808 | 5,010 | ||||||
Total operating expenses |
927,887 | 497,579 | ||||||
Operating loss |
(747,218 | ) | (417,664 | ) | ||||
Other income (expense): |
||||||||
Interest income |
880 | 1,399 | ||||||
Interest expense |
(67,999 | ) | (13,233 | ) | ||||
Gain (loss) on derivative instruments |
63,218 | (2,138 | ) | |||||
Other income (expense), net |
(1,691 | ) | 8,585 | |||||
Total other income (expense), net |
(5,592 | ) | (5,387 | ) | ||||
Loss before income taxes |
(752,810 | ) | (423,051 | ) | ||||
Income tax benefit (provision) |
864 | (870 | ) | |||||
Net loss |
(751,946 | ) | (423,921 | ) | ||||
Less: non-controlling interests in net loss of
consolidated subsidiaries |
623,937 | 325,195 | ||||||
Net loss attributable to Clearwire Corporation |
$ | (128,009 | ) | $ | (98,726 | ) | ||
Net loss attributable to Clearwire Corporation per
Class A Common Share: |
||||||||
Basic |
$ | (0.53 | ) | $ | (0.55 | ) | ||
Diluted |
$ | (0.81 | ) | $ | (0.55 | ) | ||
Weighted average Class A Common Shares outstanding: |
||||||||
Basic |
243,544 | 196,332 | ||||||
Diluted |
1,011,395 | 808,789 | ||||||
8
CLEARWIRE
CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Year Ended | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
Revenues |
$ | 556,826 | $ | 274,458 | ||||
Operating expenses: |
||||||||
Cost of goods and services and network costs
(exclusive of items shown separately below) |
927,455 | 428,348 | ||||||
Selling, general and administrative expense |
907,793 | 553,915 | ||||||
Depreciation and amortization |
466,112 | 208,263 | ||||||
Spectrum lease expense |
279,993 | 259,359 | ||||||
Loss from abandonment and impairment of network
and other assets |
190,352 | 7,916 | ||||||
Total operating expenses |
2,771,705 | 1,457,801 | ||||||
Operating loss |
(2,214,879 | ) | (1,183,343 | ) | ||||
Other income (expense): |
||||||||
Interest income |
4,965 | 9,691 | ||||||
Interest expense |
(152,868 | ) | (69,468 | ) | ||||
Gain (loss) on derivative instruments |
63,255 | (6,976 | ) | |||||
Other income (expense), net |
(3,723 | ) | (3,038 | ) | ||||
Total other income (expense), net |
(88,371 | ) | (69,791 | ) | ||||
Loss before income taxes |
(2,303,250 | ) | (1,253,134 | ) | ||||
Income tax benefit (provision) |
156 | (712 | ) | |||||
Net loss |
(2,303,094 | ) | (1,253,846 | ) | ||||
Less: non-controlling interests in net loss of
consolidated subsidiaries |
1,815,657 | 928,264 | ||||||
Net loss attributable to Clearwire Corporation |
$ | (487,437 | ) | $ | (325,582 | ) | ||
Net loss attributable to Clearwire Corporation per
Class A Common Share: |
||||||||
Basic |
$ | (2.19 | ) | $ | (1.72 | ) | ||
Diluted |
$ | (2.46 | ) | $ | (1.74 | ) | ||
Weighted average Class A Common Shares outstanding: |
||||||||
Basic |
222,527 | 194,696 | ||||||
Diluted |
970,765 | 741,071 | ||||||
9
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Year Ended | ||||||||
December 31, | ||||||||
2010 | 2009 | |||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (2,303,094 | ) | $ | (1,253,846 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Deferred income taxes |
(1,192 | ) | 712 | |||||
Losses from equity investees, net |
1,971 | 1,202 | ||||||
Non-cash gain on derivative instruments |
(63,255 | ) | (6,939 | ) | ||||
Other-than-temporary impairment loss on investments |
| 10,015 | ||||||
Accretion of discount on debt |
6,113 | 66,375 | ||||||
Depreciation and amortization |
466,112 | 208,263 | ||||||
Amortization of spectrum leases |
57,433 | 57,898 | ||||||
Non-cash rent expense |
200,901 | 108,953 | ||||||
Share-based compensation |
47,535 | 27,512 | ||||||
Loss on property, plant and equipment |
349,512 | 60,874 | ||||||
Gain on extinguishment of debt |
| (8,252 | ) | |||||
Changes in assets and liabilities: |
||||||||
Inventory |
(4,808 | ) | (9,450 | ) | ||||
Accounts receivable |
(20,104 | ) | (2,381 | ) | ||||
Prepaids and other assets |
(74,600 | ) | (64,930 | ) | ||||
Prepaid spectrum licenses |
(3,294 | ) | (23,861 | ) | ||||
Accounts payable and other liabilities |
172,057 | 355,371 | ||||||
Net cash used in operating activities |
(1,168,713 | ) | (472,484 | ) | ||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(2,656,503 | ) | (1,450,238 | ) | ||||
Payments for spectrum licenses and other intangible assets |
(15,428 | ) | (46,816 | ) | ||||
Purchases of available-for-sale investments |
(2,098,705 | ) | (3,571,154 | ) | ||||
Disposition of available-for-sale investments |
3,776,805 | 3,280,455 | ||||||
Other investing |
(19,387 | ) | 4,754 | |||||
Net cash used in investing activities |
(1,013,218 | ) | (1,782,999 | ) | ||||
Cash flows from financing activities: |
||||||||
Principal payments on long-term debt |
(876 | ) | (1,171,775 | ) | ||||
Proceeds from issuance of long-term debt |
1,413,319 | 2,467,830 | ||||||
Debt financing fees |
(53,285 | ) | (44,217 | ) | ||||
Equity investment by strategic investors |
54,828 | 1,481,813 | ||||||
Proceeds from issuance of common stock |
304,015 | 12,196 | ||||||
Net cash provided by financing activities |
1,718,001 | 2,745,847 | ||||||
Effect of foreign currency exchange rates on cash and cash equivalents |
(525 | ) | 1,510 | |||||
Net decrease in cash and cash equivalents |
(464,455 | ) | 491,874 | |||||
Cash and cash equivalents: |
||||||||
Beginning of period |
1,698,017 | 1,206,143 | ||||||
End of period |
$ | 1,233,562 | $ | 1,698,017 | ||||
Supplemental cash flow disclosures: |
||||||||
Cash paid for interest including capitalized interest paid |
$ | 336,314 | $ | 119,277 | ||||
Swap interest paid, net |
$ | | $ | 13,915 | ||||
Non-cash investing activities: |
||||||||
Fixed asset purchases in accounts payable and accrued expenses |
$ | 120,025 | $ | 89,792 | ||||
Fixed asset purchases financed by long-term debt |
$ | 133,288 | $ | | ||||
Non-cash financing activities: |
||||||||
Vendor financing obligations |
$ | (60,251 | ) | $ | | |||
Capital lease obligations |
$ | (73,037 | ) | $ | |
10
Definition of Terms and Reconciliation of Non-GAAP Financial Measures to Unaudited Condensed
Consolidated Statements of Operations
The Company utilizes certain financial measures which are widely used in the telecommunications
industry and are not calculated based on accounting principles generally accepted in the United
States of America (GAAP). Certain of these financial measures are considered non-GAAP financial
measures within the meaning of Item 10 of Regulation S-K promulgated by the SEC. Other companies
may calculate these measures differently.
(1) Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined as consolidated
operating loss less depreciation and amortization expenses, non-cash expenses related to operating
leases (towers, spectrum leases and buildings) and stock-based compensation expense. A
reconciliation of operating loss to Adjusted EBITDA is as follows:
Three months ended | ||||||||||||||||
December 31, | September 30, | June 30, | ||||||||||||||
2010 | 2009 | 2010 | 2010 | |||||||||||||
(in thousands) | (unaudited) | |||||||||||||||
Operating Loss |
$ | (747,218 | ) | $ | (417,664 | ) | $ | (539,727 | ) | $ | (520,769 | ) | ||||
Non-Cash Expenses |
||||||||||||||||
Spectrum Lease Expense |
32,156 | 27,780 | 24,300 | 19,204 | ||||||||||||
Tower & Building Rents |
32,625 | 30,323 | 50,640 | 42,298 | ||||||||||||
Stock Compensation |
7,165 | 3,305 | 9,776 | 10,894 | ||||||||||||
Non-Cash Items Expense |
71,946 | 61,408 | 84,716 | 72,396 | ||||||||||||
Depreciation and amortization |
177,880 | 60,513 | 124,348 | 85,128 | ||||||||||||
ADJUSTED EBITDA |
$ | (497,392 | ) | $ | (295,743 | ) | $ | (330,663 | ) | $ | (363,245 | ) | ||||
In a capital-intensive industry, management believes Adjusted EBITDA, as well as the associated
percentage margin calculation, to be meaningful measures of the Companys operating performance.
The Company provides Adjusted EBITDA as a supplemental performance measure because management
believes it facilitates comparisons of the Companys operating performance from period to period
and comparisons of the Companys operating performance to that of other companies by backing out
potential differences caused by non-cash expenses related to long-term leases, and share-based
compensation. Because Adjusted EBITDA facilitates internal comparisons of the Companys historical
operating performance, management also uses Adjusted EBITDA for business planning purposes and in
measuring the Companys performance relative to that of its competitors. In addition, Clearwire
believes that Adjusted EBITDA and similar measures are widely used by investors, financial analysts
and credit rating agencies as a measure of the Companys financial performance over time and to
compare the Companys financial performance with that of other companies in the industry.
11
(2) ARPU is revenue comprised of total revenue, less: acquired businesses revenue (revenue from
entities that were acquired by Old Clearwire), the revenue generated from the sales of devices, and
shipping revenue; divided by the average number of subscribers in the period divided by the number
of months in the period. Wholesale ARPU is wholesale revenue divided by the average number of
wholesale subscribers in the period divided by the number of months in the period. Retail ARPU is
retail revenue less: acquired businesses revenue (revenue from entities that were acquired by Old
Clearwire), the revenue generated from the sales of devices, and shipping revenue; divided by the
average number of retail subscribers in the period divided by the number of months in the period.
Three months ended | ||||||||||||||||
December 31, | September 30, | June 30, | ||||||||||||||
2010 | 2009 | 2010 | 2010 | |||||||||||||
(in thousands) | (unaudited) | |||||||||||||||
Consolidated ARPU |
||||||||||||||||
Total Revenue |
$ | 180,669 | $ | 79,915 | $ | 146,964 | $ | 122,521 | ||||||||
Acquired Companies & Other Revenue |
(9,015 | ) | (7,160 | ) | (7,421 | ) | (8,358 | ) | ||||||||
Consolidated ARPU Revenue |
171,654 | 72,755 | 139,543 | 114,163 | ||||||||||||
Wholesale ARPU Revenue |
26,223 | 2,190 | 16,525 | 4,496 | ||||||||||||
Retail ARPU Revenue |
145,431 | 70,565 | 123,018 | 109,667 | ||||||||||||
Consolidated ARPU Revenue |
171,654 | 72,755 | 139,543 | 114,163 | ||||||||||||
Average Customers |
3,560 | 614 | 2,195 | 1,187 | ||||||||||||
Months in Period |
3 | 3 | 3 | 3 | ||||||||||||
Consolidated ARPU |
$ | 16.07 | $ | 39.52 | $ | 21.19 | $ | 32.06 | ||||||||
Three months ended | ||||||||||||||||
December 31, | September 30, | June 30, | ||||||||||||||
2010 | 2009 | 2010 | 2010 | |||||||||||||
(in thousands) | (unaudited) | |||||||||||||||
Wholesale ARPU Revenue |
26,223 | N/A | 16,525 | 4,496 | ||||||||||||
Average Wholesale Customers |
2,485 | N/A | 1,236 | 308 | ||||||||||||
Months in Period |
3 | N/A | 3 | 3 | ||||||||||||
Wholesale ARPU |
$ | 3.52 | N/A | $ | 4.46 | $ | 4.87 | |||||||||
Three months ended | ||||||||||||||||
December 31, | September 30, | June 30, | ||||||||||||||
2010 | 2009 | 2010 | 2010 | |||||||||||||
(in thousands) | (unaudited) | |||||||||||||||
Retail ARPU Revenue |
145,431 | 70,565 | 123,018 | 109,667 | ||||||||||||
Average Retail Customers |
1,075 | 590 | 959 | 879 | ||||||||||||
Months in Period |
3 | 3 | 3 | 3 | ||||||||||||
Retail ARPU |
$ | 45.10 | $ | 39.86 | $ | 42.74 | $ | 41.58 | ||||||||
12
Management uses ARPU to identify average revenue per customer, to track changes in average
customer revenues over time, to help evaluate how changes in the business, including changes in the
Companys service offerings and fees, affect average revenue per customer, and to assist in
forecasting future service revenue. In addition, ARPU provides management with a useful measure to
compare the Companys customer revenue to that of other wireless communications providers. The
Company believes investors use ARPU primarily as a tool to track changes in the Companys average
revenue per customer and to compare Clearwires per customer service revenues to those of other
wireless communications providers.
(3) Churn, which measures customer turnover, is calculated as the number of subscribers that
terminate service in a given month divided by the average number of subscribers in that month using
the actual number of subscribers. Subscribers that discontinue service in the first 30 days of
service for any reason, or in the first 90 days of service under certain circumstances, are
deducted from the Companys gross customer additions and therefore not included in the churn
calculation. Wholesale churn is calculated as the number of wholesale subscribers that terminate
service in a given month divided by the average number of wholesale subscribers in that month using
the actual number of wholesale subscribers. Retail churn is calculated as the number of retail
subscribers that terminate service in a given month divided by the average number of retail
subscribers in that month using the actual number of retail subscribers. Management uses churn to
measure retention of the Companys subscribers, to measure changes in customer retention over time,
and to help evaluate how changes in the business affect customer retention. The Company believes
investors use churn primarily as a tool to track changes in the Companys customer retention. Other
companies may calculate this measure differently.
(4) CPGA (Cost per Gross Addition) is selling, general and administrative costs less general and
administrative costs and acquired businesses costs, plus devices equipment subsidy, divided by
gross customer additions in the period. Retail CPGA is selling, general and administrative costs
less general and administrative costs and acquired businesses costs, plus devices equipment
subsidy, divided by gross retail customer additions in the period.
Three months ended | ||||||||||||||||
December 31, | September 30, | June 30, | ||||||||||||||
2010 | 2009 | 2010 | 2010 | |||||||||||||
(in thousands) | (unaudited) | |||||||||||||||
Consolidated CPGA |
||||||||||||||||
Selling, General and Administrative |
$ | 233,174 | $ | 196,308 | $ | 244,070 | $ | 216,121 | ||||||||
G&A and Other |
(127,788 | ) | (102,716 | ) | (117,782 | ) | (122,284 | ) | ||||||||
Total Selling Expense |
105,386 | 93,592 | 126,288 | 93,837 | ||||||||||||
Total Gross Adds |
1,771 | 187 | 1,375 | 835 | ||||||||||||
Total Consolidated CPGA |
$ | 60 | $ | 499 | $ | 92 | $ | 112 | ||||||||
Three months ended | ||||||||||||||||
December 31, | September 30, | June 30, | ||||||||||||||
2010 | 2009 | 2010 | 2010 | |||||||||||||
(in thousands) | (unaudited) | |||||||||||||||
Retail CPGA |
||||||||||||||||
Selling, General and Administrative |
$ | 233,174 | $ | 196,308 | $ | 244,070 | $ | 216,121 | ||||||||
G&A and Other |
(127,788 | ) | (102,716 | ) | (117,782 | ) | (122,284 | ) | ||||||||
Total Selling Expense |
105,386 | 93,592 | 126,288 | 93,837 | ||||||||||||
Total Retail Gross Adds |
250 | 150 | 250 | 212 | ||||||||||||
Total Retail CPGA |
$ | 422 | $ | 624 | $ | 505 | $ | 442 | ||||||||
Management uses CPGA to measure the efficiency of the Companys customer acquisition efforts,
to track changes in Clearwires average cost of acquiring new subscribers over time, and to help
evaluate
13
how changes in the Companys sales and distribution strategies affect the cost-efficiency
of the Companys customer acquisition efforts. Clearwire believes investors use CPGA primarily as a
tool to track changes in the Companys average cost of acquiring new subscribers.
Clearwire Contacts
Investor Relations:
Paul Blalock, 425-636-5828
paul.blalock@clearwire.com
Paul Blalock, 425-636-5828
paul.blalock@clearwire.com
Media Relations:
Susan Johnston, 425-216-7913
susan.johnston@clearwire.com
Susan Johnston, 425-216-7913
susan.johnston@clearwire.com
JLM Partners for Clearwire
Mike DiGioia or Jeremy Pemble, 206-381-3600
mike@jlmpartners.com or jeremy@jlmpartners.com
Mike DiGioia or Jeremy Pemble, 206-381-3600
mike@jlmpartners.com or jeremy@jlmpartners.com
14