- Record 3Q 2011 Revenue of $332.2 Million, Up 134% From
$142.2 Million, Year Over Year
- Record Quarterly Net Wholesale Subscriber Additions of
1.9 Million Representing 29% Sequential Growth in Ending Wholesale
Subscribers
- 57% Sequential Improvement in 3Q 2011 Adjusted EBITDA
as compared to 2Q 2011 Pro Forma Adjusted EBITDA
- Smartphone Data Traffic Driving Network Demand with 43%
Quarter over Quarter Increase in Smartphone Network
Usage
- New CLEAR Retail Pricing Options Offer Flexibility,
Convenience and Unlimited Usage
Clearwire Corporation (Nasdaq:CLWR), a leading provider of 4G
wireless broadband services in the U.S., today reported its
financial and operating results for third quarter 2011.
"Our record third quarter results demonstrate that our efforts
to optimize performance are succeeding," said Erik Prusch,
President and CEO of Clearwire. "We believe the growth of our
subscriber base and improvements in our cost structure resulted in
significant Adjusted EBITDA improvement in the third quarter, and
support the merits of our business model. Additionally, the
continued growth in network usage by our subscribers highlights the
rapidly increasing demand for mobile broadband data that Clearwire
is best-positioned to deliver.
"Today Clearwire is the only operational 4G wholesale business
combining an all-IP network, substantial spectrum resources, and a
technology roadmap to serve the growing demand for mobile
broadband. We believe Clearwire's deep spectrum resources are
capable of meeting the urban demand that will likely strain the
lower-capacity LTE deployments planned by other wireless operators.
Our common global technology roadmap, aligned with members of the
Global TDD-LTE Initiative (GTI), including China Mobile, the
largest wireless carrier in the world, should position us to
benefit from the significant economies of scale of a converged LTE
ecosystem. We look forward to opportunities to work with our
current wholesale partners, and other wireless carriers, to serve
this growing market."
Clearwire ended third quarter 2011 with approximately 9.54
million total subscribers, up 240% from 2.81 million subscribers in
third quarter 2010. The subscriber base consists of 1.32 million
retail subscribers and 8.22 million wholesale subscribers. During
third quarter 2011, Clearwire added 1.89 million total net new
subscribers, comprised of 35 thousand retail and 1.86 million
wholesale net new subscribers. Clearwire's wholesale subscribers
consist primarily of Sprint 3G/4G smartphone customers.
Third quarter 2011 aggregate network usage by wholesale
customers increased 34% compared to second quarter 2011, driven
primarily by growth in aggregate smartphone usage, which increased
43% over the same period.
Third quarter 2011 revenue was $332.2 million, a 134% increase
over third quarter 2010 revenue of $142.2 million. Third quarter
2011 retail revenue and other revenue was $195.0 million, a year
over year increase of 55% from $125.6 million in third quarter
2010. Third quarter 2011 retail average revenue per user (ARPU) was
$47.05 up from $43.10 in third quarter 2010. Wholesale revenue in
third quarter 2011 was $137.2 million, a year over year increase of
730% from $16.5 million in third quarter 2010. Third quarter 2011
wholesale ARPU was $6.20, up from $4.46 in third quarter 2010.
Retail cost per gross addition (CPGA) was $288 in the third
quarter 2011 compared to $313 in second quarter 2011. Retail churn
was 4.2% in third quarter 2011, up from 3.9% in second quarter
2011. Wholesale churn was 1.5% in third quarter 2011, up from
second quarter 2011 wholesale churn of 1.3%.
Adjusted EBITDA in third quarter 2011 was a loss of $46.4
million, representing a sequential improvement of $62.1 million
when compared to second quarter 2011 pro forma Adjusted EBITDA loss
of $108.5 million. When compared to second quarter 2011 actual
Adjusted EBITDA loss of $79.6 million, third quarter 2011 Adjusted
EBITDA improved by $33.2 million.
Third quarter 2011 reported net loss from continuing operations
attributable to Clearwire was $83.5 million, or $0.34 per basic
share. Including the effects of discontinued operations, third
quarter 2011 reported net loss attributable to Clearwire was $84.8
million, or $0.35 per basic share.
At the end of third quarter 2011, Clearwire operated networks in
the U.S. covering areas where approximately 135 million people
reside, including approximately 133 million people in 4G markets in
the U.S.
2011 Outlook
Clearwire now expects to exceed its previous guidance of 10
million subscribers by the end of 2011, with most of the new
subscribers coming from its wholesale business. Before any impact
of an LTE deployment, the company now expects capital expenditures
in 2011 to be less than $300 million, approximately $100 million
lower than previous guidance.
New CLEAR Pricing
This week, Clearwire launched a family of new, user-friendly
service plans for our new customers in order to simplify our CLEAR
retail product offerings and focus on our core 4G network. All of
the new CLEAR 4G internet plans now feature no long-term contracts
and unlimited* Internet usage following successful retail trials in
certain markets this summer. In addition, there are no credit
checks, consumers and businesses choose from the same plans, and in
most cases, the CLEAR service comes with a 15-day Risk-Free
Satisfaction Guarantee.
The new flexible service plans allow customers to get CLEAR for
2 hours, one day, one week or on a monthly recurring basis. Monthly
service prices start at $50 (plus tax) for a 4G Mobile or 4G Home
plan. Device prices for new customers start at $39.99 and device
leases will no longer be available.
Results of Continuing Operations
Cost of goods and services and network costs (COGS) for third
quarter 2011 decreased 35% to $282.5 million compared to $433.4
million for second quarter 2011. These amounts include non-cash
charges for network equipment reserves and other write-downs of
$214.6 million and $38.7 million in the second and third quarters
of 2011, respectively, and non-cash network related rents of $38.4
million and $65.2 million in the second and third quarters of 2011,
respectively. The sequential increase in non-cash network related
rents in third quarter 2011 was primarily due to a higher provision
for unused tower-related leases and other network agreements.
Excluding non-cash expenses, COGS decreased 1.3% sequentially
reflecting a full quarter's benefit of outsourcing
efficiencies.
Selling, general and administrative (SG&A) expense for the
third quarter 2011 decreased 1% to $176.5 million compared to
$178.2 million for the second quarter 2011. The decrease is
primarily attributable to lower general and administrative expenses
resulting from workforce reductions and outsourcing arrangements,
partially offset by higher non-cash stock compensation expense.
Third quarter 2011 capital expenditures (capex) declined to $17
million from $56 million in second quarter 2011 primarily due to
favorable settlements on prior capex purchases. The company ended
the third quarter 2011 with cash and investments of approximately
$711 million invested primarily in U.S. Treasury securities. In
October 2011 Clearwire received cash payments totaling $110.1
million for the third installment of the pre-payment and
take-or-pay commitment for 2011 in accordance with the Sprint
wholesale agreements.
|
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|
|
|
|
|
|
|
|
|
|
Clearwire
Corporation |
Summary of Financial
Data From Continuing Operations |
(In
thousands) |
(Unaudited) |
|
|
|
|
|
|
|
|
Three months
ended |
|
Actual |
Pro forma
(1) |
Actual |
|
September 30, |
June 30, |
March 31, |
June 30, |
March 31, |
September 30, |
|
2011 |
2011 |
2011 |
2011 |
2011 |
2010 |
|
|
|
|
|
|
|
REVENUES |
|
|
|
|
|
|
Retail revenues |
$ 194,789 |
$ 190,583 |
$ 175,242 |
$ 190,583 |
$ 175,242 |
$ 125,002 |
Wholesale revenues |
137,162 |
102,624 |
76,974 |
131,522 |
60,895 |
16,525 |
Other revenue |
226 |
506 |
671 |
506 |
671 |
635 |
Total revenues |
332,177 |
293,713 |
252,887 |
322,611 |
236,808 |
142,162 |
OPERATING EXPENSES: |
|
|
|
|
|
|
Cost of goods and services and
network costs (exclusive of items shown separately below) |
282,459 |
433,363 |
240,145 |
433,363 |
240,145 |
222,035 |
Selling, general and
administrative expense |
176,469 |
178,232 |
214,864 |
178,232 |
214,864 |
236,178 |
Depreciation and
amortization |
165,560 |
169,640 |
182,474 |
169,640 |
182,474 |
121,289 |
Spectrum lease expense |
77,696 |
76,620 |
74,821 |
76,620 |
74,821 |
72,761 |
Loss from abandonment of
network and other assets |
29,129 |
376,350 |
171,862 |
376,350 |
171,862 |
9,391 |
Total operating
expenses |
731,313 |
1,234,205 |
884,166 |
1,234,205 |
884,166 |
661,654 |
OPERATING LOSS |
(399,136) |
(940,492) |
(631,279) |
(911,594) |
(647,358) |
(519,492) |
|
|
|
|
|
|
|
LESS NON-CASH ITEMS |
|
|
|
|
|
|
Non-cash expenses |
119,321 |
71,388 |
76,243 |
71,388 |
76,243 |
84,716 |
Non-cash write-downs |
67,810 |
590,948 |
178,325 |
590,948 |
178,325 |
29,397 |
Depreciation and
amortization |
165,560 |
169,640 |
182,474 |
169,640 |
182,474 |
121,289 |
Total non-cash items |
352,691 |
831,976 |
437,042 |
831,976 |
437,042 |
235,402 |
Adjusted EBITDA |
$ (46,445) |
$ (108,516) |
$ (194,237) |
$ (79,618) |
$(210,316) |
$ (284,090) |
Adjusted EBITDA margin |
-14% |
-37% |
-77% |
-25% |
-89% |
-200% |
|
|
|
|
|
|
|
KEY OPERATING METRICS (k for
'000's, MM for '000,000's) |
|
|
|
|
|
Total net subscriber
additions |
1,893k |
1,543k |
1,761k |
1,543k |
1,761k |
1,226k |
Wholesale |
1,858k |
1,504k |
1,610k |
1,504k |
1,610k |
1,077k |
Retail |
35k |
39k |
151k |
39k |
151k |
149k |
Total subscribers |
9,541k |
7,648k |
6,105k |
7,648k |
6,105k |
2,805k |
Wholesale(2) |
8,219k |
6,360k |
4,856k |
6,360k |
4,856k |
1,829k |
Retail |
1,322k |
1,288k |
1,249k |
1,288k |
1,249k |
976k |
ARPU |
|
|
|
|
|
|
Wholesale |
$6.20 |
$6.18 |
$6.37 |
$7.92 |
$5.04 |
$4.46 |
Retail |
$47.05 |
$47.59 |
$46.80 |
$47.59 |
$46.80 |
$43.10 |
Churn |
|
|
|
|
|
|
Wholesale |
1.5% |
1.3% |
1.3% |
1.3% |
1.3% |
1.3% |
Retail |
4.2% |
3.9% |
3.3% |
3.9% |
3.3% |
3.4% |
Retail CPGA |
$288 |
$313 |
$295 |
$313 |
$295 |
$504 |
Capital expenditures |
$17MM |
$56MM |
$130MM |
$56MM |
$130MM |
$760MM |
Domestic 4G covered
POPS |
132.7MM |
132.4MM |
125.6MM |
132.4MM |
125.6MM |
82.3MM |
Cash, cash equivalents and
investments |
$711MM |
$848MM |
$1,245MM |
$848MM |
$1,245MM |
$1,390MM |
|
|
|
|
|
|
|
(1) Pro Forma revenue includes
the impact of approximately $16.1 million of wholesale revenue
related to Q1 2011 that was recorded in Q2 2011 |
and approximately $12.8
million of wholesale revenue recorded in Q2 2011 to settle disputes
related to prior usage. |
(2) Includes non-launched
markets. |
Management Webcast
Clearwire executives will host a conference call and
simultaneous webcast to discuss the company's third quarter 2011
financial results at 4:30 p.m. Eastern Time today. A live broadcast
of the conference call will be available online on the company's
investor relations website located at
http://investors.clearwire.com.
Interested parties can access the conference call by dialing 1-
877-392-9886, or from outside the United States by dialing
1-707-287-9329, 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 November 2, through Wednesday, November 9, by
calling 1-855-859-2056, or from outside the United States by
dialing 1-404-537-3406. The passcode for the replay is
19135355.
About Clearwire
Clearwire Corporation (Nasdaq:CLWR), through its operating
subsidiaries, is a leading provider of mobile broadband services.
Clearwire's 4G network currently provides coverage in areas of the
U.S. where more than 130 million people live. Clearwire's 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 companies such as Sprint, Comcast,
Time Warner Cable, Locus Telecommunications, Cbeyond, Mitel,
NetZero and Best Buy. Strategic investors include Intel Capital,
Comcast, Sprint, Google, Time Warner Cable, and Bright House
Networks. Clearwire is headquartered in Bellevue, Wash. Additional
information is available at http://www.clearwire.com.
The Clearwire Corporation logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=8493
Forward-Looking Statements
This release, and other written and oral statements made by
Clearwire from time to time, contain forward-looking statements
which are based on management's 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, management's
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
Clearwire's 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 or if we incur
unforeseen expenses in the near term, we will require additional
capital to fund our current business. Also, we will need
substantial additional capital over the intermediate and long-term.
Such additional capital may not be available on acceptable terms or
at all. If we fail to obtain additional capital, our business
prospects, financial condition and results of operations will
likely be materially and adversely affected, and we will be forced
to consider all available alternatives.
- Our current plans and projections 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.
- Our business has 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 new agreements with Sprint and additional
wholesale partners for new wholesale commitments, our business
prospects, results of operations and financial condition could be
adversely affected, or we could be forced to consider all available
alternatives. For instance, Sprint has recently made a series of
announcements that will likely adversely affect our wholesale
business over the long term, including announcing: plans to deploy
its own nationwide 4G LTE network, that it is only committed to
selling mobile WiMAX devices through 2012, that it has commenced
sales of Apple's iPhone, and that it is limiting mobile WiMAX usage
on non-smartphone devices.
- 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.
- With Sprint's recent announcements about its plans to switch to
LTE, and that it is committed to selling mobile WiMAX devices only
through 2012, we believe we will need to deploy LTE on our wireless
broadband network, alongside mobile WiMAX, to be able to continue
to operate in the long term. We will incur significant costs to
deploy such technology, and will need to raise substantial
additional capital to cover such costs. Additionally, LTE
technology, or other alternative technologies that we may consider,
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 add a
new technology to our current network and to operate dual
technology networks without disruptions to customer service, as
well as our ability to generate new wholesale customers for the new
network.
- We currently depend on our commercial partners to develop and
deliver the equipment for our legacy and mobile WiMAX
networks.
- Many of our competitors for our retail business 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 owns just less than a majority of our common shares, is
our largest shareholder, and has the contractual ability to obtain
enough shares to hold the 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 Clearwire's 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 and subsequent Form 10-Q filings. Clearwire
assumes no obligation to update or supplement such forward-looking
statements.
*Please note, unlimited plans subject to CLEAR's Acceptable Use
Policy, posted at www.clear.com/legal.aup.
|
|
|
CLEARWIRE CORPORATION
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(In thousands, except
par value) |
(Unaudited) |
|
|
|
|
September 30, |
December 31, |
|
2011 |
2010 |
|
|
|
ASSETS |
|
|
Current assets: |
|
|
Cash and cash
equivalents |
$ 188,199 |
$ 1,230,242 |
Short-term investments |
509,609 |
502,316 |
Restricted cash |
1,000 |
1,000 |
Accounts receivable, net of
allowance of $11,715 and $3,792 |
98,117 |
24,653 |
Inventory, net |
8,710 |
17,432 |
Prepaids and other assets |
67,887 |
82,580 |
Total current assets |
873,522 |
1,858,223 |
Property, plant and equipment,
net |
3,306,387 |
4,447,374 |
Restricted cash |
5,881 |
29,355 |
Long-term investments |
13,567 |
15,251 |
Spectrum licenses, net |
4,311,917 |
4,348,882 |
Other intangible assets,
net |
45,853 |
60,884 |
Investments in equity
investees |
12,629 |
14,263 |
Other assets |
156,250 |
169,489 |
Assets of discontinued
operations |
38,599 |
96,765 |
Total assets |
$ 8,764,605 |
$ 11,040,486 |
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
Accounts payable and accrued
expenses |
$ 282,762 |
$ 448,789 |
Other current liabilities |
202,309 |
226,997 |
Total current liabilities |
485,071 |
675,786 |
Long-term debt, net |
4,019,326 |
4,017,019 |
Deferred tax liabilities,
net |
28,212 |
838 |
Other long-term
liabilities |
598,658 |
444,774 |
Liabilities of discontinued
operations |
26,968 |
32,071 |
Total liabilities |
5,158,235 |
5,170,488 |
Commitments and contingencies |
|
|
|
|
|
Stockholders' equity: |
|
|
Class A common stock, par value
$0.0001, 1,500,000 shares authorized; 249,705 and 243,544
shares outstanding |
25 |
24 |
Class B common stock, par value
$0.0001, 1,000,000 shares authorized; 666,068 and 743,481 shares
outstanding |
66 |
74 |
Additional paid-in capital |
2,250,661 |
2,221,110 |
Accumulated other comprehensive
income |
3,288 |
2,495 |
Accumulated deficit |
(1,380,977) |
(900,493) |
Total Clearwire Corporation
stockholders' equity |
873,063 |
1,323,210 |
Non-controlling interests |
2,733,307 |
4,546,788 |
Total stockholders' equity |
3,606,370 |
5,869,998 |
Total liabilities and stockholders'
equity |
$ 8,764,605 |
$ 11,040,486 |
|
|
|
|
|
|
CLEARWIRE CORPORATION
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(In thousands, except
per share data) |
(Unaudited) |
|
|
|
|
Three Months Ended
September 30, |
|
2011 |
2010 |
|
|
|
Revenues |
$ 332,177 |
$ 142,162 |
Operating expenses: |
|
|
Cost of goods and services and
network costs (exclusive of items shown separately below) |
282,459 |
222,035 |
Selling, general and
administrative expense |
176,469 |
236,178 |
Depreciation and
amortization |
165,560 |
121,289 |
Spectrum lease expense |
77,696 |
72,761 |
Loss from abandonment of
network and other assets |
29,129 |
9,391 |
Total operating
expenses |
731,313 |
661,654 |
Operating loss |
(399,136) |
(519,492) |
Other income (expense): |
|
|
Interest income |
534 |
1,325 |
Interest expense |
(128,596) |
(26,563) |
Gain on derivative
instruments |
59,729 |
-- |
Other income (expense),
net |
(1,261) |
(3,739) |
Total other income (expense),
net |
(69,594) |
(28,977) |
Loss from continuing operations before income
taxes |
(468,730) |
(548,469) |
Income tax provision |
(10,727) |
(206) |
Net loss from continuing
operations |
(479,457) |
(548,675) |
Less: non-controlling interests
in net loss from continuing operations of consolidated
subsidiaries |
395,955 |
413,174 |
Net loss from continuing operations
attributable to Clearwire Corporation |
(83,502) |
(135,501) |
Net loss from discontinued operations
attributable to Clearwire Corporation |
(1,289) |
(3,919) |
Net loss attributable to Clearwire
Corporation |
$ (84,791) |
$ (139,420) |
|
|
|
Net loss from continuing operations
attributable to Clearwire Corporation per Class A common
share: |
|
|
Basic |
$ (0.34) |
$ (0.56) |
Diluted |
$ (0.53) |
$ (0.56) |
|
|
|
Net loss attributable to Clearwire
Corporation per Class A common share: |
|
|
Basic |
$ (0.35) |
$ (0.58) |
Diluted |
$ (0.54) |
$ (0.58) |
|
|
|
Weighted average Class A common shares
outstanding: |
|
|
Basic |
248,796 |
242,332 |
Diluted |
914,864 |
985,813 |
|
|
|
|
|
|
CLEARWIRE CORPORATION
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(In thousands, except
per share data) |
(Unaudited) |
|
|
|
|
Nine Months Ended
September 30, |
|
2011 |
2010 |
|
|
|
Revenues |
$ 891,596 |
$ 359,953 |
Operating expenses: |
|
|
Cost of goods and services and
network costs (exclusive of items shown separately below) |
955,967 |
641,124 |
Selling, general and
administrative expense |
569,565 |
647,086 |
Depreciation and
amortization |
517,674 |
278,842 |
Spectrum lease expense |
229,137 |
207,604 |
Loss from abandonment of
network and other assets |
577,341 |
10,762 |
Total operating
expenses |
2,849,684 |
1,785,418 |
Operating loss |
(1,958,088) |
(1,425,465) |
Other income (expense): |
|
|
Interest income |
2,063 |
4,080 |
Interest expense |
(377,133) |
(84,869) |
Gain on derivative
instruments |
148,227 |
-- |
Other income (expense),
net |
966 |
(5,384) |
Total other income (expense),
net |
(225,877) |
(86,173) |
Loss from continuing operations before income
taxes |
(2,183,965) |
(1,511,638) |
Income tax provision |
(28,422) |
(997) |
Net loss from continuing
operations |
(2,212,387) |
(1,512,635) |
Less: non-controlling interests
in net loss from continuing operations of consolidated
subsidiaries |
1,751,483 |
1,162,074 |
Net loss from continuing operations
attributable to Clearwire Corporation |
(460,904) |
(350,561) |
Net loss from discontinued operations
attributable to Clearwire Corporation |
(19,580) |
(8,867) |
Net loss attributable to Clearwire
Corporation |
$ (480,484) |
$ (359,428) |
|
|
|
Net loss from continuing operations
attributable to Clearwire Corporation per Class A common
share: |
|
|
Basic |
$ (1.87) |
$ (1.63) |
Diluted |
$ (2.34) |
$ (1.63) |
|
|
|
Net loss attributable to Clearwire
Corporation per Class A common share: |
|
|
Basic |
$ (1.95) |
$ (1.67) |
Diluted |
$ (2.42) |
$ (1.67) |
|
|
|
Weighted average Class A common shares
outstanding: |
|
|
Basic |
246,621 |
215,515 |
Diluted |
955,507 |
215,515 |
|
|
|
CLEARWIRE CORPORATION
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(In
thousands) |
(Unaudited) |
|
|
|
|
Nine Months Ended
September 30, |
|
2011 |
2010 |
|
|
|
Cash flows from operating activities: |
|
|
Net loss from continuing operations |
$ (2,212,387) |
$ (1,512,635) |
Adjustments to reconcile net loss to net cash
used in operating activities: |
|
|
Deferred income taxes |
27,374 |
-- |
Losses from equity investees, net |
1,691 |
1,563 |
Non-cash gain on derivative instruments |
(148,227) |
-- |
Accretion of discount on debt |
30,390 |
2,954 |
Depreciation and amortization |
517,674 |
278,842 |
Amortization of spectrum leases |
40,699 |
43,644 |
Non-cash rent expense |
205,098 |
149,909 |
Share-based compensation |
21,156 |
40,370 |
Loss on property, plant and
equipment |
837,083 |
121,224 |
Changes in assets and
liabilities: |
|
|
Inventory |
8,608 |
(2,512) |
Accounts receivable |
(68,767) |
(16,444) |
Prepaids and other assets |
19,371 |
(88,910) |
Prepaid spectrum licenses |
(4,371) |
(2,775) |
Accounts payable and other
liabilities |
82,716 |
147,106 |
Net cash used in operating activities of
continuing operations |
(641,892) |
(837,664) |
Net cash (used in) provided by operating
activities of discontinued operations |
1,284 |
(3,177) |
Net cash used in operating activities |
(640,608) |
(840,841) |
Cash flows from investing activities: |
|
|
Payments to acquire property,
plant and equipment |
(387,099) |
(1,946,386) |
Payments for spectrum licenses
and other intangible assets |
(1,396) |
(11,050) |
Purchases of available-for-sale
investments |
(857,035) |
(1,873,966) |
Disposition of
available-for-sale investments |
847,222 |
2,752,050 |
Other investing |
23,474 |
(34,756) |
Net cash used in investing activities of
continuing operations |
(374,834) |
(1,114,108) |
Net cash used in investing activities of
discontinued operations |
(3,030) |
(374) |
Net cash used in investing
activities |
(377,864) |
(1,114,482) |
Cash flows from financing activities: |
|
|
Principal payments on long-term
debt |
(23,633) |
(122) |
Debt financing fees |
(1,158) |
(21,918) |
Equity investment by strategic
investors |
-- |
54,839 |
Proceeds from issuance of
common stock |
3,619 |
303,630 |
Net cash (used in) provided by financing
activities of continuing operations |
(21,172) |
336,429 |
Net cash (used in) provided by financing
activities of discontinued operations |
-- |
-- |
Net cash (used in) provided by financing
activities |
(21,172) |
336,429 |
Effect of foreign currency
exchange rates on cash and cash equivalents |
(4,145) |
(880) |
Net decrease in cash and cash
equivalents |
(1,043,789) |
(1,619,774) |
Cash and cash equivalents: |
|
|
Beginning of period |
1,233,562 |
1,698,017 |
End of period |
189,773 |
78,243 |
Less: cash and cash equivalents
of discontinued operations at end of period |
1,574 |
3,914 |
Cash and cash equivalents of
continuing operations at end of period |
$ 188,199 |
$ 74,329 |
Supplemental cash flow disclosures: |
|
|
Cash paid for interest
including capitalized interest |
$ 237,132 |
$ 168,931 |
Non-cash investing activities: |
|
|
Fixed asset purchases in
accounts payable and accrued expenses |
$ 25,903 |
$ 206,452 |
Fixed asset purchases financed
by long-term debt |
$ 11,204 |
$ 91,312 |
Non-cash financing activities: |
|
|
Vendor financing
obligations |
$ (3,166) |
$ (45,392) |
Capital lease obligations |
$ (8,038) |
$ (45,920) |
Definitions of Terms and Reconciliations of Non-GAAP
Financial Measures to Unaudited Condensed Consolidated Statements
of Operations
The company utilizes certain non-GAAP 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). 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), stock-based compensation expense, loss from abandonment
of network and other assets, impairment charges, 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 is as follows:
|
|
|
|
|
|
|
|
Three months
ended |
|
(Unaudited) |
|
Actual |
Pro
forma |
Actual |
|
September 30, |
June 30, |
March 31, |
June 30, |
March 31, |
September 30, |
|
2011 |
2011 |
2011 |
2011 |
2011 |
2010 |
(in thousands) |
|
|
|
|
|
|
Operating loss |
$ (399,136) |
$ (940,492) |
$ (631,279) |
$ (911,594) |
$ (647,358) |
$ (519,492) |
|
|
|
|
|
|
|
Non-cash expenses: |
|
|
|
|
|
|
Spectrum lease expense |
38,845 |
28,519 |
34,748 |
28,519 |
34,748 |
24,300 |
Building and network related
rents* |
70,584 |
37,965 |
35,135 |
37,965 |
35,135 |
50,640 |
Stock compensation* |
9,892 |
4,904 |
6,360 |
4,904 |
6,360 |
9,776 |
Non-cash expenses |
119,321 |
71,388 |
76,243 |
71,388 |
76,243 |
84,716 |
|
|
|
|
|
|
|
Non-cash write-downs: |
|
|
|
|
|
|
Loss from abandonment of
network and other assets |
29,129 |
376,350 |
171,862 |
376,350 |
171,862 |
9,391 |
Network equipment reserves and
other write-downs |
38,681 |
214,598 |
6,463 |
214,598 |
6,463 |
20,006 |
Non-cash write-downs |
67,810 |
590,948 |
178,325 |
590,948 |
178,325 |
29,397 |
|
|
|
|
|
|
|
Depreciation and amortization |
165,560 |
169,640 |
182,474 |
169,640 |
182,474 |
121,289 |
|
|
|
|
|
|
|
Adjusted EBITDA |
$ (46,445) |
$ (108,516) |
$ (194,237) |
$ (79,618) |
$ (210,316) |
$ (284,090) |
|
|
|
|
|
|
|
*Amounts included in COGS and SG&A. |
|
|
|
|
|
|
In a capital-intensive industry, management believes Adjusted
EBITDA to be a meaningful measure of the company's operating
performance. The company provides this non-GAAP measure as a
supplemental performance measure because management believes it
facilitates comparisons of the company's operating performance from
period to period and comparisons of the company's 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 non-cash write-downs. Because
this non-GAAP measure facilitates internal comparisons of the
company's historical operating performance, management also uses
this non-GAAP measure for business planning purposes and in
measuring the company's 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 company's
financial performance over time and to compare the company's
financial performance with that of other companies in the
industry.
(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 weighted 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 weighted average number of retail subscribers in the period,
divided by the number of months in the period.
|
|
|
|
|
|
|
|
Three months
ended |
|
(Unaudited) |
|
Actual |
Pro
forma |
Actual |
|
September 30, |
June 30, |
March 31, |
June 30, |
March 31, |
September 30, |
|
2011 |
2011 |
2011 |
2011 |
2011 |
2010 |
(in thousands) |
|
|
|
|
|
|
Total revenue |
$ 332,177 |
$ 293,713 |
$ 252,887 |
$ 322,611 |
$ 236,808 |
$ 142,162 |
Acquired companies & other
revenue |
(10,850) |
(9,509) |
(10,830) |
(9,509) |
(10,830) |
(6,502) |
Total ARPU Revenue |
321,327 |
284,204 |
242,057 |
313,102 |
225,978 |
135,660 |
|
|
|
|
|
|
|
Wholesale ARPU revenue |
137,109 |
102,624 |
76,974 |
131,522 |
60,895 |
16,525 |
Retail ARPU revenue |
184,218 |
181,580 |
165,083 |
181,580 |
165,083 |
119,135 |
Total ARPU revenue |
321,327 |
284,204 |
242,057 |
313,102 |
225,978 |
135,660 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended |
|
(Unaudited) |
|
Actual |
Pro
forma |
Actual |
|
September 30, |
June 30, |
March 31, |
June 30, |
March 31, |
September 30, |
|
2011 |
2011 |
2011 |
2011 |
2011 |
2010 |
(in thousands) |
|
|
|
|
|
|
Wholesale ARPU revenue |
137,109 |
102,624 |
76,974 |
131,522 |
60,895 |
16,525 |
|
|
|
|
|
|
|
Average wholesale customers |
7,371 |
5,533 |
4,025 |
5,533 |
4,025 |
1,236 |
Months in period |
3 |
3 |
3 |
3 |
3 |
3 |
Wholesale ARPU |
$ 6.20 |
$ 6.18 |
$ 6.37 |
$ 7.92 |
$ 5.04 |
$ 4.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended |
|
(Unaudited) |
|
Actual |
Pro
forma |
Actual |
|
September 30, |
June 30, |
March 31, |
June 30, |
March 31, |
September 30, |
|
2011 |
2011 |
2011 |
2011 |
2011 |
2010 |
(in thousands) |
|
|
|
|
|
|
Retail ARPU revenue |
184,218 |
181,580 |
165,083 |
181,580 |
165,083 |
119,135 |
|
|
|
|
|
|
|
Average retail customers |
1,305 |
1,272 |
1,176 |
1,272 |
1,176 |
921 |
Months in period |
3 |
3 |
3 |
3 |
3 |
3 |
Retail ARPU |
$ 47.05 |
$ 47.59 |
$ 46.80 |
$ 47.59 |
$ 46.80 |
$ 43.10 |
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
company's 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 company's customer revenue to that of other wireless
communications providers. The company believes investors use ARPU
primarily as a tool to track changes in the company's average
revenue per customer and to compare Clearwire's per customer
service revenues to those of other wireless communications
providers.
(3) Pro Forma Reconciliation
The unaudited pro forma condensed consolidated statements of
operations that follow are presented for informational purposes
only and should not be taken as representative of the future
consolidated results of operations of the company. Management
believes the unaudited pro forma condensed consolidated statements
of operations are useful because they more accurately reflect the
revenue-generating activities during the relevant periods and
facilitate period to period comparisons of the company's operating
performance.
The following unaudited pro forma condensed consolidated
statements of operations for the three months ended March 31, 2011
and June 30, 2011 were prepared using the unaudited condensed
consolidated statement of operations of Clearwire for the three
months ended March 31, 2011 and June 30, 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 GAAP applicable to
revenue recognition, Clearwire's first quarter results did not
reflect 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 2011,
Clearwire recognized revenue of approximately $16.1 million
attributable to services provided in the first quarter of 2011.
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 agreed-upon pre-payment, as well as a
$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 recorded the
$16.1 million of revenue attributable to services provided in the
first quarter, and $12.8 million of the $28.2 million of cash
received related to services provided in periods prior to December
31, 2010.
Had the Sprint wholesale amendments been in effect as of March
31, 2011, and the portion of the settlement related to prior
periods been recorded in the attributable service periods,
Clearwire's pro forma revenues for the second quarter of 2011 would
have decreased by $28.9 million and the pro forma net loss from
continuing operations attributable to Clearwire Corporation would
have increased by $6.5 million or $0.03 per basic share.
The following table reconciles as reported results to the pro
forma results for the three months ended March 30, 2011 and June
30, 2011 (in thousands):
|
|
|
|
|
|
|
|
Three Months Ended June
30, 2011 |
Three Months Ended
March 31, 2011 |
|
(Unaudited) |
(Unaudited) |
|
Amounts as
reported |
Adjustments (1) |
Pro forma
amounts |
Amounts as
reported |
Adjustments (1) |
Pro forma
amounts |
Revenues: |
|
|
|
|
|
|
Retail revenue |
$ 190,583 |
$ -- |
$ 190,583 |
$ 175,242 |
$ -- |
$ 175,242 |
Wholesale revenue |
131,522 |
(28,898) |
102,624 |
60,895 |
16,079 |
76,974 |
Other revenue |
506 |
|
506 |
671 |
|
671 |
Total revenues |
322,611 |
(28,898) |
293,713 |
236,808 |
16,079 |
252,887 |
Total expenses |
(1,262,381) |
|
(1,262,381) |
(1,029,968) |
|
(1,029,968) |
Net loss from continuing
operations |
(939,770) |
(28,898) |
(968,668) |
(793,160) |
16,079 |
(777,081) |
Less: non-controlling interests
in net loss from continuing operations of consolidated
subsidiaries |
779,245 |
22,382 |
801,627 |
576,283 |
(12,087) |
564,196 |
Net loss from continuing
operations attributable to Clearwire Corporation |
(160,525) |
(6,516) |
(167,041) |
(216,877) |
3,992 |
(212,885) |
Net loss from discontinued
operations attributable to Clearwire Corporation |
(8,213) |
-- |
(8,213) |
(10,078) |
-- |
(10,078) |
Net loss attributable to
Clearwire Corporation |
$ (168,738) |
$ (6,516) |
$ (175,254) |
$ (226,955) |
$ 3,992 |
$ (222,963) |
|
|
|
|
|
|
|
Net loss from continuing
operations attributable to Clearwire Corporation per Class A Common
Share: |
|
|
|
|
|
|
Basic |
$ (0.65) |
|
$ (0.68) |
$ (0.89) |
|
$ (0.87) |
Diluted |
$ (0.98) |
|
$ (1.00) |
$ (0.89) |
|
$ (0.87) |
|
|
|
|
|
|
|
Net loss attributable to
Clearwire Corporation per Class A Common Share: |
|
|
|
|
|
|
Basic |
$ (0.68) |
|
$ (0.71) |
$ (0.93) |
|
$ (0.91) |
Diluted |
$ (1.01) |
|
$ (1.03) |
$ (0.93) |
|
$ (0.91) |
|
|
|
|
|
|
|
Wholesale ARPU |
$ 7.92 |
|
$ 6.18 |
$ 5.04 |
|
$ 6.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Pro Forma
revenue includes the impact of approximately $16.1 million of
wholesale revenue related to Q1 2011 that was recorded in Q2
2011 |
and
approximately $12.8 million of wholesale revenue recorded in Q2
2011 to settle disputes related to prior usage. |
(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 company's gross customer additions and therefore
not included in any of the churn calculations. Wholesale churn is
calculated as the wholesale subscriber deactivations during the
reporting period divided by the weighted average wholesale
subscriber base for the period divided by the number of months in
the period. Retail churn is calculated as the retail subscriber
deactivations during the reporting period divided by the weighted
average retail subscriber base for the period divided by the number
of months in the period. Management uses churn to measure retention
of the company's 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 company's
customer retention. Other companies may calculate this measure
differently.
5) Retail 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 retail customer additions in
the period.
|
|
|
|
|
|
Three months
ended |
|
(Unaudited) |
|
September 30, |
June 30, |
March 31, |
September 30, |
|
2011 |
2011 |
2011 |
2010 |
(in thousands) |
|
|
|
Retail CPGA |
|
|
|
Selling, general and
administrative |
176,469 |
$ 178,232 |
$ 214,864 |
236,178 |
G&A and other |
(118,923) |
(120,033) |
(136,105) |
(113,633) |
Total selling expense |
57,546 |
58,199 |
78,759 |
122,545 |
|
|
|
|
|
Total gross adds |
200 |
186 |
267 |
243 |
Total retail CPGA |
$ 288 |
$ 313 |
$ 295 |
$ 504 |
Management uses retail CPGA to measure the efficiency of the
company's customer acquisition efforts, to track changes in
Clearwire's average cost of acquiring new subscribers over time,
and to help evaluate how changes in the company's sales and
distribution strategies affect the cost-efficiency of the company's
customer acquisition efforts. Clearwire believes investors use
retail CPGA primarily as a tool to track changes in the company's
average cost of acquiring new subscribers.
(6) Market EBITDA is the equivalent of Adjusted
EBITDA (see definition (1) Adjusted EBITDA) at the market level.
This calculation does not include an allocation of corporate
general and administrative expenses or spectrum lease expense.
CONTACT: Investor Relations:
Alice Ryder, 425-636-5828
alice.ryder@clearwire.com
Media Relations:
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
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