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8-K - FORM 8-K - Clearwire Corp /DE | v59113e8vk.htm |
Exhibit 99.1
For Release May 4, 2011
1:00 p.m. Pacific
1:00 p.m. Pacific
Clearwire Reports Record First Quarter 2011 Results
| Record Quarterly Net Subscriber Additions of 1.8 Million; 1.6 Million Wholesale, 155,000 Retail | ||
| Pro Forma 1Q 2011 Revenue $258.1 Million, Up 142% From $106.7 Million, Year Over Year | ||
| 4G Network Reaches 126 Million People in Q1 2011, Up 207% From 41 Million Year Over Year |
KIRKLAND, Wash. May 4, 2011 Clearwire Corporation (NASDAQ: CLWR), a leading provider of
4G wireless broadband services in the U.S., today reported its financial and operating results for
the first quarter 2011.
During the quarter we made good progress toward our objective of achieving positive EBITDA in 2012
by executing new agreements with Sprint, delivering strong post-pay subscriber growth and
company-best wholesale revenue growth, as well as significantly lowering our operating costs, said
John Stanton, Clearwires Chairman and interim CEO.
Erik Prusch, Clearwires Chief Operating Officer added, Looking ahead, we expect to work closely
with Sprint and all of our other wholesale partners to expand our 4G leadership and capitalize on
our rich spectrum holdings that enable us to meet the exploding customer demand for mobile
broadband internet access. Since the beginning of the year, our network has experienced a 40%
increase in network usage due to expanded coverage, record subscriber growth and higher usage per
device. Only Clearwire has the capacity required to deliver a truly next generation wireless
broadband experience.
Clearwire ended the first quarter 2011 with approximately 6.15 million total subscribers, up 533%
from 971,000 subscribers in the first quarter 2010. The subscriber base consists of 1.29 million
retail subscribers and 4.86 million wholesale subscribers. During the first quarter 2011, Clearwire
added 1.8 million total net new subscribers, including 155,000 retail additions and 1.6 million
wholesale additions. Clearwires wholesale subscribers consist primarily of users of 3G/4G
multi-mode devices. For wholesale subscribers with minimal or no usage on Clearwires network,
including those outside of Clearwires service areas, Clearwire receives nominal revenue, subject
to certain exceptions.
First quarter 2011 actual revenue was $242.0 million. Consolidated pro forma revenue for the first
quarter 2011 was $258.1 million, a 142% increase over first quarter 2010 actual revenue of $106.7
million. Retail revenue and other revenue was $181.1 million in the first quarter 2011, retail
average revenue per user (ARPU) was a record $46.32, and pro forma wholesale revenue was $77.0
million, or $6.37 in pro forma wholesale ARPU in the first quarter 2011.
Consolidated pro forma revenue and pro forma wholesale revenue includes approximately $16.1 million
payable by Sprint to Clearwire for wholesale services provided in the first quarter of 2011 under
the amendment to the 4G MVNO Agreement with Sprint that was announced on April 18, 2011, or the 4G
Amendment. This additional wholesale revenue, which Clearwire expects to recognize in the second
quarter, is not included in the Companys GAAP first quarter results because the 4G Amendment was
signed after March 31, 2011. In evaluating Clearwires financial performance for the first quarter,
management believes that it is useful to present pro forma revenue and net loss attributable to
Clearwire Corporation.
1
Retail cost per gross addition (CPGA) improved to $301 in the first quarter 2011 from $439 in the
first quarter 2010 and $422 in the fourth quarter 2010. Retail churn was 3.3% in the first quarter
2011, up from 3.0% in the first quarter of 2010, but an improvement from 3.8% in the fourth quarter
2010. Wholesale churn was 1.3% in the first quarter 2011, an improvement from fourth quarter
wholesale churn of 1.4% and first quarter 2010 churn of 2.7%.
The first
quarter 2011 actual net loss attributable to Clearwire was ($227.0) million, or ($0.93)
per basic share, and the first quarter 2011 pro forma net loss attributable to Clearwire was
($223.0) million, or ($0.91) per basic share. Both include the impact of $202.2 million in
non-cash write-offs as discussed in the results of operations section below. At the end of the
first quarter 2011, Clearwire operated networks covering areas where approximately 131 million
people reside globally, including approximately 126 million people in 4G markets in the U.S. In
the first quarter 2011, the Company added an additional 14 million covered people to its domestic
4G service areas.
2011 Outlook
Clearwire now expects to end 2011 with approximately 9.5 million subscribers, with most of those
subscribers coming from its wholesale business. This is an increase from the previous guidance of
8.8 million subscribers provided in February 2011. The Company continues to expect capital
expenditures in 2011 to be less than $400 million. This year Clearwire also expects to
aggressively implement additional cost efficiencies aimed at improving cash flow and achieving
positive EBITDA in 2012.
Results of Operations
Cost of goods and services and network costs for the first quarter 2011 increased 59% to $243.6
million compared to $153.4 million for the first quarter 2010, primarily due to an increase in
tower lease expense of $54.3 million and an increase in network costs of $14.0 million resulting
from Clearwires network expansion activities in 2010.
Selling, General and Administrative (SG&A) expense for the first quarter 2011 increased 4.5% to
$224.0 million compared to $214.4 million for the first quarter 2010. The increase is primarily due
to higher general and administrative expenses, including customer care, commissions and property
taxes incurred during the three months ended March 31, 2011, offset by lower marketing expenses as
the Company continues to focus sales efforts on lower cost channels.
Loss from abandonment and impairment of network and other assets for the first quarter 2011 totaled
$202.2 million as compared to $611,000 for the first quarter 2010. This charge consists of
approximately $31.1 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 Clearwires network build-out but were not incorporated into the Companys network
at launch and no longer fit within its future build plans. Additionally, in connection with
Clearwires savings initiatives, during the first quarter of 2011 the Company identified, evaluated
and terminated certain tower leases, or when early termination was not available under the terms of
the lease, Clearwire advised its landlords of the Companys intention not to renew. The costs for
projects classified as construction in progress related to leases for which Clearwire has initiated
such termination actions were written down, resulting in a charge of approximately $140.8 million
for the three months ended March 31, 2011. Additionally, network assets and spectrum in two of the
Companys international entities were determined to be impaired resulting in a charge of $30.3
million for the three months ended March 31, 2011.
2
Substantial completion of the first phase of the Companys network build activities led to a
decrease in Capital Expenditures (CapEx) to $132 million in the first quarter 2011 from CapEx of
$690 million for the first quarter 2010. The Company ended the first quarter 2011 with cash and
investments of approximately $1.2 billion invested primarily in U.S. Treasury securities. On April
27, 2011, Clearwire received a cash payment of $181.5 million comprised of the initial installments
of the pre-payment and the take-or-pay commitment for 2011 and the $28.2 million settlement amount
in accordance with the new Sprint wholesale agreements.
3
Clearwire Corporation
Summary of Financial Data
(In thousands)
(Unaudited)
Summary of Financial Data
(In thousands)
(Unaudited)
Three months ended | ||||||||||||||||
Pro forma (1) | Actual | |||||||||||||||
March 31, | March 31, | December 31, | ||||||||||||||
2011 | 2011 | 2010 | 2010 | |||||||||||||
REVENUES |
$ | 258,106 | $ | 242,027 | $ | 106,672 | $ | 180,669 | ||||||||
OPERATING EXPENSES: |
||||||||||||||||
Cost of goods and services and network
costs (exclusive of items shown
separately below) |
243,603 | 243,603 | 153,351 | 275,636 | ||||||||||||
Selling, general and administrative expense |
224,047 | 224,047 | 214,428 | 233,174 | ||||||||||||
Depreciation and amortization |
184,926 | 184,926 | 78,756 | 177,880 | ||||||||||||
Spectrum lease expense |
74,821 | 74,821 | 66,691 | 72,389 | ||||||||||||
Loss from abandonment and impairment of
network and other assets |
202,179 | 202,179 | 611 | 168,808 | ||||||||||||
Total operating expenses |
929,576 | 929,576 | 513,837 | 927,887 | ||||||||||||
OPERATING LOSS |
(671,470 | ) | (687,549 | ) | (407,165 | ) | (747,218 | ) | ||||||||
LESS NON CASH ITEMS |
||||||||||||||||
Non Cash Expenses |
76,243 | 76,243 | 76,811 | 71,946 | ||||||||||||
Depreciation and amortization |
184,926 | 184,926 | 78,756 | 177,880 | ||||||||||||
Total non cash |
261,169 | 261,169 | 155,567 | 249,826 | ||||||||||||
ADJUSTED EBITDA |
(410,301 | ) | (426,380 | ) | (251,598 | ) | (497,392 | ) | ||||||||
Adjusted EBITDA Margin |
-159 | % | -176 | % | -236 | % | -275 | % | ||||||||
KEY OPERATING METRICS
(k for 000s, MM for 000,000s) |
||||||||||||||||
Total Net Subscriber Additions |
1,765k | 1,765k | 283k | 1,542k | ||||||||||||
Wholesale |
1,610k | 1,610k | 111k | 1,417k | ||||||||||||
Retail |
155k | 155k | 172k | 126k | ||||||||||||
Total Subscribers |
6,148k | 6,148k | 971k | 4,384k | ||||||||||||
Wholesale(2) |
4,856k | 4,856k | 157k | 3,246k | ||||||||||||
Retail |
1,292k | 1,292k | 814k | 1,138k | ||||||||||||
ARPU |
||||||||||||||||
Wholesale |
$ | 6.37 | $ | 5.04 | $ | 12.51 | $ | 3.52 | ||||||||
Retail |
$ | 46.32 | $ | 46.32 | $ | 42.77 | $ | 45.10 | ||||||||
Churn |
||||||||||||||||
Wholesale |
1.3 | % | 1.3 | % | 2.7 | % | 1.4 | % | ||||||||
Retail |
3.3 | % | 3.3 | % | 3.0 | % | 3.8 | % | ||||||||
CPGA |
||||||||||||||||
Retail |
$ | 301 | $ | 301 | $ | 439 | $ | 422 | ||||||||
Capital Expenditures |
$ | 132MM | $ | 132MM | $ | 690MM | $ | 590MM | ||||||||
Domestic 4G Covered POPS |
125.6MM | 125.6MM | 40.8MM | 112.0MM | ||||||||||||
Cash, Cash Equivalents and Investments |
$ | 1,247MM | $ | 1,247MM | $ | 3,054MM | $ | 1,751MM |
(1) | Pro Forma revenue includes the impact of approximately $16.1 million of wholesale revenue related to Q1 2011 that will be recorded in Q2 2011. | |
(2) | Includes non-launched markets. |
4
Management Webcast
Clearwire executives will host a conference call and simultaneous webcast to discuss the Companys
first quarter 2011 financial results at 4:15 p.m. Eastern Time today (1:15 p.m. Pacific Time). 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 1-877-392-9866, or outside the United
States 707-287-9329, five minutes prior to the start time. The passcode for the call is 68639415. A
replay of the call will be available beginning at approximately 7:30 p.m. Eastern Time on May 5,
until approximately 9:00 p.m. Eastern Time on Wednesday, May 19, by calling 1-800-642-1687, or
outside the United States by dialing 706-645-9291. The passcode for the replay is 61100734.
About Clearwire
Clearwire Corporation (NASDAQ:CLWR), through its operating subsidiaries, is a leading provider of
mobile broadband services. Clearwires 4G network is currently available in areas of the U.S.
where 130 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 service through its own brand called CLEAR® as well as
through its wholesale relationships with Sprint, Comcast, Time Warner Cable, Locus
Telecommunications, Cbeyond, Mitel and Best Buy. 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
http://www.clearwire.com.
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, to be able to continue to operate. |
| 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 expect that our business will become increasingly dependent on our wholesale partners, and Sprint in particular; if we do not receive the amount of revenues we expect from existing wholesale partners or if we are unable to enter into agreements with additional wholesale partners our business prospects, results of operations and financial condition could be adversely affected, or we could be required to revise our current business plans. |
| 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 |
5
or acquiring additional spectrum. Such modifications to our plans could significantly change our capital requirements. |
| We have deployed a wireless broadband network based on mobile WiMAX technology, may need to deploy other 4G technologies such as LTE to remain competitive, 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. |
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 22, 2011. Clearwire
assumes no obligation to update or supplement such forward-looking statements.
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
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)
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 183,678 | $ | 1,233,562 | ||||
Short-term investments |
1,019,610 | 502,316 | ||||||
Restricted cash |
2,289 | 1,050 | ||||||
Accounts receivable, net of allowance of $4,899 and $4,313 |
54,209 | 26,187 | ||||||
Notes receivable |
5,213 | 4,899 | ||||||
Inventory, net |
17,179 | 17,432 | ||||||
Prepaids and other assets |
88,825 | 80,155 | ||||||
Total current assets |
1,371,003 | 1,865,601 | ||||||
Property, plant and equipment, net |
4,230,971 | 4,464,534 | ||||||
Restricted cash |
15,961 | 30,524 | ||||||
Long-term investments |
43,706 | 15,251 | ||||||
Spectrum licenses, net |
4,386,750 | 4,417,492 | ||||||
Other intangible assets, net |
57,429 | 62,908 | ||||||
Investments in affiliates |
14,003 | 14,263 | ||||||
Other assets |
166,586 | 169,913 | ||||||
Total assets |
$ | 10,286,409 | $ | 11,040,486 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued expenses |
$ | 417,748 | $ | 455,890 | ||||
Other current liabilities |
305,409 | 230,963 | ||||||
Total current liabilities |
723,157 | 686,853 | ||||||
Long-term debt, net |
4,025,170 | 4,017,019 | ||||||
Deferred tax liabilities, net |
5,802 | 5,564 | ||||||
Other long-term liabilities |
479,975 | 461,052 | ||||||
Total liabilities |
5,234,104 | 5,170,488 | ||||||
Commitments and contingencies |
||||||||
Equity: |
||||||||
Clearwire Corporation stockholders equity: |
||||||||
Class A common stock, par value $0.0001, 1,500,000 shares
authorized; 245,627 and 243,544 shares issued and
outstanding, respectively |
24 | 24 | ||||||
Class B common stock, par value $0.0001, 1,000,000 shares
authorized; 743,481 shares issued and outstanding |
74 | 74 | ||||||
Additional paid-in capital |
2,232,088 | 2,221,110 | ||||||
Accumulated other comprehensive income |
4,592 | 2,495 | ||||||
Accumulated deficit |
(1,127,448 | ) | (900,493 | ) | ||||
Total Clearwire Corporation stockholders equity |
1,109,330 | 1,323,210 | ||||||
Non-controlling interests |
3,942,975 | 4,546,788 | ||||||
Total stockholders equity |
5,052,305 | 5,869,998 | ||||||
Total liabilities and stockholders equity |
$ | 10,286,409 | $ | 11,040,486 | ||||
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 | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Revenues |
$ | 242,027 | $ | 106,672 | ||||
Operating expenses: |
||||||||
Cost of goods and services and network costs
(exclusive of items shown separately below) |
243,603 | 153,351 | ||||||
Selling, general and administrative expense |
224,047 | 214,428 | ||||||
Depreciation and amortization |
184,926 | 78,756 | ||||||
Spectrum lease expense |
74,821 | 66,691 | ||||||
Loss from abandonment and impairment of network
and other assets |
202,179 | 611 | ||||||
Total operating expenses |
929,576 | 513,837 | ||||||
Operating loss |
(687,549 | ) | (407,165 | ) | ||||
Other income (expense): |
||||||||
Interest income |
842 | 1,250 | ||||||
Interest expense |
(119,960 | ) | (33,837 | ) | ||||
Gain (loss) on derivative instruments |
(26,781 | ) | | |||||
Other income (expense), net |
(75 | ) | 929 | |||||
Total other income (expense), net |
(145,974 | ) | (31,658 | ) | ||||
Loss before income taxes |
(833,523 | ) | (438,823 | ) | ||||
Income tax benefit (provision) |
(325 | ) | (578 | ) | ||||
Net loss |
(833,848 | ) | (439,401 | ) | ||||
Less: non-controlling interests in net loss of
consolidated subsidiaries |
606,893 | 345,309 | ||||||
Net loss attributable to Clearwire Corporation |
$ | (226,955 | ) | $ | (94,092 | ) | ||
Net loss attributable to Clearwire
Corporation per Class A Common Share: |
||||||||
Basic |
$ | (0.93 | ) | $ | (0.47 | ) | ||
Diluted (1) |
$ | (0.93 | ) | $ | (0.48 | ) | ||
Weighted average Class A
Common Shares outstanding: |
||||||||
Basic |
244,389 | 198,605 | ||||||
Diluted (1) |
244,389 | 935,925 | ||||||
(1) | For the three months ended March 31, 2011, Class B Common Stock was excluded from the computation of diluted loss per share as the potential exchange of Class B Common Stock together with Clearwire Communications LLC Class B Common Interests for Class A Common Stock would have been antidilutive due to the impact of the $26.8 million loss on derivatives which is fully allocated to the Class A Common Stock. |
8
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended | ||||||||
March 31 | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (833,848 | ) | $ | (439,401 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Deferred income taxes |
(63 | ) | 578 | |||||
Losses from equity investees, net |
251 | 333 | ||||||
Non-cash loss on derivative instruments |
26,781 | | ||||||
Accretion of discount on debt |
10,613 | 1,205 | ||||||
Depreciation and amortization |
184,926 | 78,756 | ||||||
Amortization of spectrum leases |
13,633 | 14,150 | ||||||
Non-cash rent expense |
56,250 | 42,961 | ||||||
Share-based compensation |
6,360 | 19,700 | ||||||
Loss on property, plant and equipment and impairment of other assets |
208,982 | 6,428 | ||||||
Changes in assets and liabilities: |
||||||||
Inventory |
1,127 | (7,072 | ) | |||||
Accounts receivable |
(27,935 | ) | (850 | ) | ||||
Prepaids and other assets |
(6,363 | ) | (29,184 | ) | ||||
Prepaid spectrum licenses |
(2,521 | ) | (23 | ) | ||||
Accounts payable and other liabilities |
114,853 | 81,050 | ||||||
Net cash used in operating activities |
(246,954 | ) | (231,369 | ) | ||||
Cash flows from investing activities: |
||||||||
Payments to acquire property, plant and equipment |
(272,965 | ) | (655,245 | ) | ||||
Payments for spectrum licenses and other intangible assets |
(632 | ) | (10,260 | ) | ||||
Purchases of available-for-sale investments |
(786,777 | ) | (1,237,229 | ) | ||||
Disposition of available-for-sale investments |
244,822 | 1,010,700 | ||||||
Other investing |
13,324 | (1,993 | ) | |||||
Net cash used in investing activities |
(802,228 | ) | (894,027 | ) | ||||
Cash flows from financing activities: |
||||||||
Principal payments on long-term debt |
(1,103 | ) | | |||||
Debt financing fees |
(1,148 | ) | (20,066 | ) | ||||
Equity investment by strategic investors |
| 64,156 | ||||||
Proceeds from issuance of common stock |
1,322 | 12,655 | ||||||
Net cash
(used in) provided by financing activities |
(929 | ) | 56,745 | |||||
Effect of foreign currency exchange rates on cash and cash equivalents |
227 | (297 | ) | |||||
Net decrease in cash and cash equivalents |
(1,049,884 | ) | (1,068,948 | ) | ||||
Cash and cash equivalents: |
||||||||
Beginning of period |
1,233,562 | 1,698,017 | ||||||
End of period |
$ | 183,678 | $ | 629,069 | ||||
Supplemental cash flow disclosures: |
||||||||
Cash paid for interest including capitalized interest |
$ | 986 | $ | | ||||
Non-cash investing activities: |
||||||||
Fixed asset purchases in accounts payable and accrued expenses |
$ | 82,353 | $ | 125,555 | ||||
Fixed asset purchases financed by long-term debt |
$ | 7,635 | $ | 3,358 | ||||
Non-cash financing activities: |
||||||||
Vendor financing obligations |
$ | (757 | ) | $ | | |||
Capital lease obligations |
$ | (6,878 | ) | $ | (3,358 | ) |
9
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 and Adjusted EBITDA, Excluding Non-cash Write-offs are non-GAAP financial
measures. 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. Adjusted EBITDA, Excluding Non-cash Write-offs is
defined as Adjusted EBITDA less: loss from abandonment and impairment of network and other assets;
charges for differences between recorded amounts and the results of physical counts; and charges
for excessive and obsolete network equipment and CPE inventory. A reconciliation of operating loss
to Adjusted EBITDA and Adjusted EBITDA, Excluding Non-cash Write-offs is as follows:
Three months ended | ||||||||||||||||
Pro forma | Actual | |||||||||||||||
March 31, | March 31, | December 31, | ||||||||||||||
2011 | 2011 | 2010 | 2010 | |||||||||||||
(in thousands) | (unaudited) | |||||||||||||||
Operating Loss |
$ | (671,470 | ) | $ | (687,549 | ) | $ | (407,165 | ) | $ | (747,218 | ) | ||||
Non-Cash Expenses |
||||||||||||||||
Spectrum Lease Expense |
34,748 | 34,748 | 24,591 | 32,156 | ||||||||||||
Tower & Building Rents |
35,135 | 35,135 | 32,520 | 32,625 | ||||||||||||
Stock Compensation |
6,360 | 6,360 | 19,700 | 7,165 | ||||||||||||
Non-Cash Items Expense |
76,243 | 76,243 | 76,811 | 71,946 | ||||||||||||
Depreciation and amortization |
184,926 | 184,926 | 78,756 | 177,880 | ||||||||||||
Adjusted EBITDA |
$ | (410,301 | ) | $ | (426,380 | ) | $ | (251,598 | ) | $ | (497,392 | ) | ||||
Non-Cash Write-offs: |
||||||||||||||||
Loss from abandonment and
impairment of network and other |
202,179 | 202,179 | 611 | 168,808 | ||||||||||||
Other write-offs |
6,555 | 6,555 | 5,829 | 55,155 | ||||||||||||
Non-Cash Write-offs |
208,734 | 208,734 | 6,440 | 223,963 | ||||||||||||
Adjusted EBITDA, Excluding Non-Cash Write-offs |
$ | (201,567 | ) | $ | (217,646 | ) | $ | (245,158 | ) | $ | (273,429 | ) | ||||
In a capital-intensive industry, management believes Adjusted EBITDA, as well as the
associated percentage margin calculation, and Adjusted EBITDA, Excluding Non-cash Write-offs to be
meaningful measures of the Companys operating performance. The Company provides these non-GAAP
measures as supplemental performance measures because management believes they facilitate
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, share-based compensation and other
non-cash write-offs. Because these non-GAAP measures facilitate internal comparisons of the
Companys historical operating
10
performance, management also uses these non-GAAP measures for
business planning purposes and in measuring the Companys performance relative to that of its
competitors. In addition, Clearwire believes that Adjusted EBITDA and Adjusted EBITDA, Excluding
Non-cash Write-offs 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 (Average Revenue Per User) is 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. Market ARPU is revenue, less the
revenue generated from the sale of devices and shipping revenue, at
the market level, divided by the average number of subscribers in
that market in the period divided by the number of months in the
period.
Three months ended | ||||||||||||||||
Pro forma | Actual | |||||||||||||||
March 31, | March 31, | December 31, | ||||||||||||||
2011 | 2011 | 2010 | 2010 | |||||||||||||
(in thousands) | (unaudited) | |||||||||||||||
Total Revenue |
$ | 258,106 | $ | 242,027 | $ | 106,672 | $ | 180,669 | ||||||||
Acquired Companies & Other Revenue |
(11,957 | ) | (11,957 | ) | (9,417 | ) | (9,015 | ) | ||||||||
Total ARPU Revenue |
246,149 | 230,070 | 97,255 | 171,654 | ||||||||||||
Wholesale ARPU Revenue |
76,974 | 60,895 | 3,349 | 26,223 | ||||||||||||
Retail ARPU Revenue |
169,175 | 169,175 | 93,906 | 145,431 | ||||||||||||
Total ARPU Revenue |
246,149 | 230,070 | 97,255 | 171,654 | ||||||||||||
Three months ended | ||||||||||||||||
Pro forma | Actual | |||||||||||||||
March 31, | March 31, | December 31, | ||||||||||||||
2011 | 2011 | 2010 | 2010 | |||||||||||||
(in thousands) | (unaudited) | |||||||||||||||
Wholesale ARPU Revenue |
76,974 | 60,895 | 3,349 | 26,223 | ||||||||||||
Average Wholesale Customers |
4,025 | 4,025 | 89 | 2,485 | ||||||||||||
Months in Period |
3 | 3 | 3 | 3 | ||||||||||||
Wholesale ARPU |
$ | 6.37 | $ | 5.04 | $ | 12.51 | $ | 3.52 | ||||||||
Three months ended | ||||||||||||||||
Pro forma | Actual | |||||||||||||||
March 31, | March 31, | December 31, | ||||||||||||||
2011 | 2011 | 2010 | 2010 | |||||||||||||
(in thousands) | (unaudited) | |||||||||||||||
Retail ARPU Revenue |
169,175 | 169,175 | 93,906 | 145,431 | ||||||||||||
Average Retail Customers |
1,217 | 1,217 | 732 | 1,075 | ||||||||||||
Months in Period |
3 | 3 | 3 | 3 | ||||||||||||
Retail ARPU |
$ | 46.32 | $ | 46.32 | $ | 42.77 | $ | 45.10 | ||||||||
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
12
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) Pro Forma Reconciliation
The unaudited pro forma condensed consolidated statement of operations that follows is presented
for informational purposes only and should not be taken as representative of the future
consolidated results of operations of the Company.
The following unaudited pro forma condensed consolidated statements of operations for the three
months ended March 31, 2011 were prepared using the unaudited condensed consolidated statement of
operations of Clearwire for the three months ended March 31, 2011. The unaudited pro forma
condensed consolidated statement of operations should be read in conjunction with the separate
historical financial statements and accompanying notes thereto.
The
pricing provisions agreed to in the 4G Amendment and the other new
Sprint wholesale agreements are applicable from and after January 1, 2011. However, in accordance with
generally accepted accounting principles in the United States applicable to revenue recognition,
Clearwires first quarter results do not reflect the additional revenues due to the Company as a
result of the amendments contained in the Sprint Wholesale Amendments which were signed on April
18, 2011.
During the second quarter of fiscal 2011, Clearwire will recognize revenue of approximately $16.1
million attributable to services provided in the first quarter of 2011. Had the Sprint Wholesale
Amendments been in effect as of March 31, 2011, Clearwires pro forma revenues for the first
quarter of 2011 would have increased by $16.1 million, and the pro forma Net loss attributable to
Clearwire Corporation would have decreased by $4.0 million ($0.02 per share).
On April 27, 2011 Clearwire received a cash payment of $181.5 million comprised of the initial
installments of the take-or-pay commitment for 2011 and the pre-payment, and the $28.2 million
settlement amount in accordance with the Sprint Wholesale Amendments. In the second quarter of
2011, in addition to revenues earned during the second quarter, the Company expects to record the
$16.1 million of revenue attributable to services provided in the first quarter, and a portion of
the $28.2 million of cash received related to services provided in periods prior to December 31,
2010.
The following table provides reconciles as reported results to the pro forma results for the three
months ended March 31, 2011 (in thousands):
13
Three Months Ended March 31, 2011 | ||||||||||||
Pro forma | ||||||||||||
Amounts as reported | Adjustments(1) | amounts | ||||||||||
(unaudited) | ||||||||||||
Revenues: |
||||||||||||
Retail revenue |
$ | 180,362 | $ | | $ | 180,362 | ||||||
Wholesale revenue |
60,895 | 16,079 | 76,974 | |||||||||
Other revenue |
770 | 770 | ||||||||||
Total revenues |
242,027 | 16,079 | 258,106 | |||||||||
Total expenses |
(1,075,875 | ) | (1,075,875 | ) | ||||||||
Net loss |
(833,848 | ) | 16,079 | (817,769 | ) | |||||||
Non-controlling interests in net loss of consolidated subsidiaries |
606,893 | (12,087 | ) | 594,806 | ||||||||
Net loss attributable to Clearwire Corporation |
$ | (226,955 | ) | $ | 3,992 | $ | (222,963 | ) | ||||
Net loss
attributable to Clearwire Corporation per Class A common share: |
||||||||||||
Basic |
$ | (0.93 | ) | $ | (0.91 | ) | ||||||
Diluted |
$ | (0.93 | ) | $ | (0.91 | ) | ||||||
(1) | Represents the effect of recording Q1 revenues using the usage-based pricing in the 4G Amendment signed April 18. |
14
(4) 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 any of the churn
calculations. 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.
(5) CPGA (Cost per Gross Addition) is selling, general and administrative costs less general and
administrative costs and acquired businesses costs (costs from entities that were acquired by Old
Clearwire), 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 | ||||||||||||
March 31, | December 31, | |||||||||||
2011 | 2010 | 2010 | ||||||||||
(in thousands) | (unaudited) | |||||||||||
Retail CPGA |
||||||||||||
Selling, General and Administrative |
$ | 224,047 | $ | 214,428 | $ | 233,174 | ||||||
G&A and Other |
(140,928 | ) | (110,431 | ) | (127,788 | ) | ||||||
Total Selling Expense |
83,119 | 103,997 | 105,386 | |||||||||
Total Gross Adds |
276 | 237 | 250 | |||||||||
Total Retail CPGA |
$ | 301 | $ | 439 | $ | 422 | ||||||
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 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.
(6) Market EBITDA is the equivalent of Adjusted EBITDA (see definition (1) Adjusted EBITDA and
Adjusted EBITDA, excluding non-cash write-offs) at the market level. This calculation does not
include an allocation of corporate general and administrative expenses or spectrum lease expense.
15