NTELOS Net Income of $12.8 million, or $0.31 per share
Positive Wireless Postpay Net Subscriber Additions
Company Declares Quarterly Dividend
- Operating revenues of $132.3 million
- Adjusted EBITDA (a non-GAAP measure) of $55.8 million, representing a 42% margin
- Wireless adjusted EBITDA for second quarter 2010 of $38.4 million, up 1% from first quarter 2010
- Wireless adjusted EBITDA margin of 39%, up from 37% last quarter
- Wireless monthly postpay subscriber churn improved 48 basis points from previous quarter to 1.83%
- Wireless postpay data ARPU of $13.23 for second quarter 2010, up 34% from second quarter 2009
- Wireline adjusted EBITDA for second quarter 2010 of $18.8 million, representing a margin of 58%
“We are pleased with the current momentum in our business,” said James A. Hyde, CEO of NTELOS Holdings Corp. “Wireline continues to perform solidly and should greatly benefit from the recently announced FiberNet acquisition. Additionally, wireless postpay churn is down significantly from the previous quarter and is again under 2%. Wireless total subscriber churn improved nicely for the fourth consecutive quarter and our postpay data ARPU continued to grow, exceeding $13 for the quarter.”
Recent Developments
Declaration of Dividend: On August 3, 2010, the Board of Directors of NTELOS Holdings Corp. declared a quarterly cash dividend on its common stock in the amount of $0.28 per share to be paid on October 14, 2010 to stockholders of record on September 14, 2010.
Agreement to Acquire FiberNet: The Company announced on July 20, 2010 that it entered into a purchase agreement with One Communications Corp. to acquire its FiberNet business for cash consideration of approximately $170 million. The acquisition includes a fiber optic network of approximately 3,500 route miles and approximately 100,000 customer access lines. FiberNet service revenues and adjusted EBITDA for 2009 were approximately $76 million and $25 million, respectively. Capital expenditures for 2009 were approximately $13 million. NTELOS intends to fund the purchase through a combination of a permitted incremental term loan under the existing senior credit facility and cash on hand. The acquisition is subject to, among other conditions, receiving approval from the FCC and the relevant state public service commissions and anti-trust review under the Hart-Scott-Rodino Act. Pending all approvals, the acquisition is expected to close in the fourth quarter of 2010. The purchase agreement is subject to termination if the acquisition is not completed before December 31, 2010.
Closing of Loan Facility: On August 2, 2010 the Company closed on a permitted $125 million incremental term loan under the existing senior credit facility. NTELOS intends to use the proceeds as the primary source of funding for the FiberNet acquisition. Pricing on the new facility was set at LIBOR plus 3.75% with a LIBOR minimum of 2%, and sold at $99.75 per $100 of principal amount, or .25% OID.
Business Segment Highlights
Wireless
- Wireless operating revenues for the second quarter 2010 were $99.6 million, down 4% from first quarter 2010. This was due primarily to a $2.7 million reduction in equipment revenues related to lower gross additions and a higher mix of postpay additions. Subscriber revenues were $66.2 million in second quarter 2010 compared to $67.7 million in the previous quarter. Adjusted EBITDA for Wireless was $38.4 million for the second quarter 2010, up 1% from first quarter 2010. Wireless adjusted EBITDA margins were 39% for second quarter 2010, up from 37% in first quarter. Revenues from the Sprint wholesale agreement were $27.1 million for second quarter 2010, supported by the $9.0 million per month minimum and reflecting the travel data rate reset effective July 1, 2009. The calculated revenues underlying the minimum increased $0.6 million from first quarter 2010 to $24.5 million.
- Retail wireless subscribers were 439,348 at June 30, 2010. Postpay subscriber net additions were positive for the first time in a year with 303,059 postpay subscribers at quarter-end. Wireless gross subscriber additions for second quarter 2010 were 33,477. Total and postpay churn rates were improved for the second quarter 2010, marking the fourth consecutive quarter of improvement with total monthly subscriber churn of 2.97% and postpay monthly subscriber churn of 1.83%. Prepay subscribers at June 30, 2010 were 136,289 reflecting a loss for second quarter consistent with seasonal trends following a high-growth first quarter, but a gain of 4,506 for the first six months of 2010.
- Postpay ARPU was $56.35 for the second quarter of 2010 with postpay data ARPU continuing solid growth, increasing $3.35, or 34%, from $9.88 in second quarter 2009 to $13.23 in second quarter 2010. Sequentially, postpay data ARPU is up 12%, or $1.39, compared to first quarter 2010.
“Our second quarter postpay results are encouraging and show our initiatives gaining traction,” said Hyde. “Prepay in second quarter showed typical seasonality, exaggerated some by the great success we had in prepay last quarter. We’ve made significant progress rebuilding our indirect channel with 240 locations now with master agents and new exclusive agents. We remain optimistic about future subscriber growth and are very pleased with the continued strength of wireless EBITDA and margins.”
Wireline
- Wireline operating revenues for the second quarter 2010 were $32.6 million, up 5% from second quarter 2009. Adjusted EBITDA for Wireline was $18.8 million for the second quarter 2010, up 8% from the same quarter last year.
- RLEC: RLEC revenues for the second quarter of 2010 were $13.4 million, down 7% from second quarter 2009 as an increase in tandem switched access revenues from other carriers only partially offset a decline in access lines. RLEC adjusted EBITDA was $10.0 million for second quarter 2010, compared to $10.0 million in first quarter 2010 and $10.7 million in second quarter 2009, with an improved margin of 75%.
- Competitive Wireline: Revenues from wireline strategic products increased approximately $3.0 million, or 22%, to $16.8 million in second quarter 2010 from second quarter 2009. This improvement is primarily due to increases related to the Allegheny fiber acquisition, as well as customer growth and continued growth in data connectivity and bandwidth demand. Broadband growth in the RLEC footprint continued with a 9% year-over-year customer gain, increasing customer penetration from 49.9% at June 30, 2009 to 56.5% at June 30, 2010. Adjusted EBITDA for Competitive Wireline was $8.8 million for the second quarter 2010, an increase of 30% over second quarter 2009, reflecting revenue growth and a margin increase which improved from 41% in second quarter 2009 to 46% for second quarter 2010.
“Our high-bandwidth data products are the main growth drivers in wireline and continue to offset the impacts of legacy products and access line losses,” stated Hyde. “We are pleased with the revenue impact of the Allegheny acquisition and the significant improvement in margins. With our recently announced FiberNet acquisition, which is expected to close in fourth quarter, we look forward to accelerated growth in our wireline operations.”
Business Outlook
The Company will provide 2010 financial guidance updates on the Second Quarter 2010 Earnings Conference Call scheduled for August 6, 2010 at 10:00 A.M. ET.
Statements are based on management’s current expectations. These statements are forward-looking and actual results may differ materially. Please see “Special Note from the Company Regarding Forward-Looking Statements.”
Non-GAAP Measures
Adjusted EBITDA is defined as net income attributable to NTELOS Holdings Corp. before interest, income taxes, depreciation and amortization, accretion of asset retirement obligations, gain/loss on interest rate swap agreement, net income attributable to noncontrolling interests, other expenses/income, equity based compensation charges and charges from voluntary early retirement and workforce reduction plans.
ARPU, or average monthly revenues per subscriber/unit with service, is computed by dividing service revenues per period by the weighted average number of subscribers with service during that period. Please see the footnotes in the exhibits for a complete definition of this measure.
Adjusted EBITDA and ARPU are non-GAAP financial performance measures. They should not be considered in isolation or as an alternative to measures determined in accordance with GAAP. Please refer to the exhibits and materials posted on the Company’s website for a reconciliation of these non-GAAP financial performance measures to the most comparable measures reported in accordance with GAAP and for a discussion of the presentation, comparability and use of such financial performance measures.
About NTELOS
NTELOS Holdings Corp. (NASDAQ: NTLS – News) is an integrated communications provider with headquarters in Waynesboro, VA. NTELOS provides products and services to customers in Virginia, West Virginia, Pennsylvania, Kentucky, Ohio, Tennessee, Maryland and North Carolina, including wireless phone service, local and long distance telephone services, high capacity transport, data and voice services for Internet access and wide area networking and IPTV-based video services. Detailed information about NTELOS is available at www.ntelos.com.
SPECIAL NOTE FROM THE COMPANY REGARDING FORWARD-LOOKING STATEMENTS
Any statements contained in this presentation that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. The words “anticipates,” “believes,” “expects,” “intends,” “plans,” “estimates,” “targets,” “projects,” “should,” “may,” “will” and similar words and expressions are intended to identify forward-looking statements. Such forward-looking statements reflect, among other things, our current expectations, plans and strategies, and anticipated financial results, all of which are subject to known and unknown risks, uncertainties and factors that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements. Many of these risks are beyond our ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made. We do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise. Important factors with respect to any such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, include, but are not limited to: rapid development and intense competition in the telecommunications industry; adverse economic conditions; operating and financial restrictions imposed by our senior credit facility; our cash and capital requirements; declining prices for our services; the potential to experience a high rate of customer turnover; our dependence on our affiliation with Sprint Nextel (“Sprint”); a potential increase in our roaming rates and wireless handset subsidy costs; the potential for Sprint to build networks in our markets; federal and state regulatory fees, requirements and developments; loss of our cell sites; the rates of penetration in the wireless telecommunications industry; our reliance on certain suppliers and vendors; the successful completion of the pending acquisition of the FiberNet business, and the effect thereof on our business; our ability to successfully integrate the operations of the FiberNet business upon its acquisition; the failure to realize synergies and cost savings from the pending acquisition of the FiberNet business or delay in realization thereof; and other unforeseen difficulties that may occur. These risks and uncertainties are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements and risk factors included in our SEC filings, including our Annual Reports filed on Forms 10-K.
Exhibits:
- Condensed Consolidated Balance Sheets
- Condensed Consolidated Statements of Operations
- Reconciliation of Net Income Attributable to NTELOS Holdings Corp. to Operating Income
- Reconciliation of Operating Income to Adjusted EBITDA
Additional exhibits include:
- Summary of Operating Results
- Customer Summary
- Wireless Customer Detail
- Wireless Key Performance Indicators (KPI)
- Wireless ARPU Reconciliation
These exhibits are available in the Company’s 8-K filing with the SEC or on the Company’s Investor Relations website.
| NTELOS Holdings Corp. | ||||||||
| Condensed Consolidated Balance Sheets | ||||||||
| June 30, 2010 | December 31, 2009 | |||||||
| (in thousands) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 59,826 | $ | 51,097 | ||||
| Accounts receivable, net | 46,785 | 45,767 | ||||||
| Inventories and supplies | 5,015 | 10,870 | ||||||
| Other receivables | 949 | 1,705 | ||||||
| Income tax receivable | 68 | 4,368 | ||||||
| Prepaid expenses and other | 12,352 | 10,196 | ||||||
| 124,995 | 124,003 | |||||||
| Securities and investments | 1,110 | 1,023 | ||||||
| Property, plant and equipment, net | 511,472 | 500,975 | ||||||
| Other Assets | ||||||||
| Goodwill | 113,041 | 113,041 | ||||||
| Franchise rights | 32,000 | 32,000 | ||||||
| Other intangibles, net | 58,504 | 64,360 | ||||||
| Radio spectrum licenses in service | 115,449 | 115,449 | ||||||
| Radio spectrum licenses not in service | 16,855 | 16,850 | ||||||
| Deferred charges and other assets | 11,556 | 12,845 | ||||||
| 347,405 | 354,545 | |||||||
| Total Assets | $ | 984,982 | $ | 980,546 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current Liabilities | ||||||||
| Current portion of long-term debt | $ | 6,924 | $ | 6,876 | ||||
| Accounts payable | 31,019 | 30,756 | ||||||
| Dividends payable | 11,666 | 11,604 | ||||||
| Advance billings and customer deposits | 20,562 | 20,006 | ||||||
| Accrued compensation | 6,189 | 5,583 | ||||||
| Accrued operating taxes | 3,561 | 3,070 | ||||||
| Other accrued liabilities | 5,773 | 4,832 | ||||||
| 85,694 | 82,727 | |||||||
| Long-Term Liabilities | ||||||||
| Long-term debt | 619,532 | 622,032 | ||||||
| Other long-term liabilities | 97,273 | 99,678 | ||||||
| 716,805 | 721,710 | |||||||
| Equity | 182,483 | 176,109 | ||||||
| Total Liabilities and Equity | $ | 984,982 | $ | 980,546 | ||||
| NTELOS Holdings Corp. | ||||||||||||||||
| Condensed Consolidated Statements of Operations | Three months ended: | Six months ended: | ||||||||||||||
| (in thousands, except per share amounts) | June 30, 2010 | June 30, 2009 | June 30, 2010 | June 30, 2009 | ||||||||||||
| Operating Revenues | $ | 132,322 | $ | 140,001 | $ | 269,873 | $ | 280,665 | ||||||||
| Operating Expenses 1 | ||||||||||||||||
| Cost of sales and services (exclusive of items shown separately below) | 41,211 | 44,472 | 84,504 | 89,696 | ||||||||||||
| Customer operations | 28,500 | 28,770 | 59,469 | 58,184 | ||||||||||||
| Corporate operations 2 | 8,325 | 7,994 | 18,614 | 16,962 | ||||||||||||
| Depreciation and amortization | 22,065 | 23,091 | 43,593 | 46,249 | ||||||||||||
| Accretion of asset retirement obligations | 213 | 285 | 337 | 561 | ||||||||||||
| 100,314 | 104,612 | 206,517 | 211,652 | |||||||||||||
| Operating Income | 32,008 | 35,389 | 63,356 | 69,013 | ||||||||||||
| Other Income (Expenses) | ||||||||||||||||
| Interest expense | (10,024 | ) | (6,484 | ) | (20,114 | ) | (11,790 | ) | ||||||||
| Gain on interest rate swap agreement | – | 510 | – | 1,438 | ||||||||||||
| Other (expense) income | (36 | ) | (132 | ) | 31 | (57 | ) | |||||||||
| 21,948 | 29,283 | 43,273 | 58,604 | |||||||||||||
| Income Tax Expense | 8,567 | 11,706 | 17,162 | 23,393 | ||||||||||||
| Net Income | 13,381 | 17,577 | 26,111 | 35,211 | ||||||||||||
| Net Income Attributable to Noncontrolling Interests | (559 | ) | (241 | ) | (778 | ) | (473 | ) | ||||||||
| Net Income Attributable to NTELOS Holdings Corp. | $ | 12,822 | $ | 17,336 | $ | 25,333 | $ | 34,738 | ||||||||
| Basic and Diluted Earnings per Common Share Attributable to NTELOS Holdings Corp. Stockholders: | ||||||||||||||||
| Income per share – basic and diluted | $ | 0.31 | $ | 0.41 | $ | 0.61 | $ | 0.82 | ||||||||
| Weighted average shares outstanding – basic | 41,313 | 42,173 | 41,265 | 42,164 | ||||||||||||
| Weighted average shares outstanding – diluted | 41,686 | 42,448 | 41,614 | 42,389 | ||||||||||||
| Cash Dividends Declared per Share – Common Stock | $ | 0.28 | $ | 0.26 | $ | 0.56 | $ | 0.52 | ||||||||
| 1 | Includes equity based compensation charges related to all of the Company’s share-based awards and the Company’s 401(k) matching contributions (commencing June 1, 2009) of $1.5 million and $2.7 million for the three months and six months ended June 30, 2010, respectively, and $1.5 million and $2.6 million for the three months and six months ended June 30, 2009, respectively. | |
| 2 | First quarter 2010 included a $0.9 million charge related to severance benefits pursuant to an executive employment agreement. Please see Form 8-K filed with the SEC on March 12, 2010 for additional information. First quarter 2009 included a one-time cash payment of $1.0 million to James A. Hyde, NTELOS’ then newly hired president and COO. | |
| NTELOS Holdings Corp. | |||||||||||||||||||||
| Reconciliation of Net Income Attributable to NTELOS Holdings Corp. to Operating Income | |||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||
| Three months ended: | Six months ended: | ||||||||||||||||||||
| June 30, 2009 | June 30, 2010 | June 30, 2009 | June 30, 2010 | ||||||||||||||||||
| Net income attributable to NTELOS Holdings Corp. | $ | 17,336 | $ | 12,822 | $ | 34,738 | $ | 25,333 | |||||||||||||
| Net income attributable to noncontrolling interests | 241 | 559 | 473 | 778 | |||||||||||||||||
| Net Income | 17,577 | 13,381 | 35,211 | 26,111 | |||||||||||||||||
| Interest expense | 6,484 | 10,024 | 11,790 | 20,114 | |||||||||||||||||
| Gain on interest rate swap agreement | (510 | ) | – | (1,438 | ) | – | |||||||||||||||
| Income taxes | 11,706 | 8,567 | 23,393 | 17,162 | |||||||||||||||||
| Other (income) expense | 132 | 36 | 57 | (31 | ) | ||||||||||||||||
| Operating income |
$
|
35,389 | $ | 32,008 | $ | 69,013 | $ | 63,356 | |||||||||||||
| Wireless | $ | 27,248 | $ | 23,503 | $ | 53,401 | $ | 47,142 | |||||||||||||
| RLEC | 6,992 | 6,357 | 14,207 | 12,807 | |||||||||||||||||
| Competitive Wireline | 3,640 | 4,748 | 7,264 | 9,476 | |||||||||||||||||
| Other | (2,491 | ) | (2,600 | ) | (5,859 | ) | (6,069 | ) | |||||||||||||
| Operating income | $ | 35,389 | $ | 32,008 | $ | 69,013 | $ | 63,356 | |||||||||||||
| NTELOS Holding Corp. | |||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of Operating Income to Adjusted EBITDA | |||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2009 | 2010 | |||||||||||||||||||||||||||||||||||||||||||
| Wireless | Competitive | Wireless | Competitive | ||||||||||||||||||||||||||||||||||||||||||
| PCS | RLEC | Wireline | Other | Total | PCS | RLEC | Wireline | Other | Total | ||||||||||||||||||||||||||||||||||||
| For The Three Months Ended June 30 | |||||||||||||||||||||||||||||||||||||||||||||
| Operating Income | $ | 27,248 | $ | 6,992 | $ | 3,640 | $ | (2,491 | ) | $ | 35,389 | $ | 23,503 | $ | 6,357 | $ | 4,748 | $ | (2,600 | ) | $ | 32,008 | |||||||||||||||||||||||
| Depreciation and amortization | 16,359 | 3,647 | 3,068 | 17 | 23,091 | 14,543 | 3,573 | 3,996 | (47 | ) | 22,065 | ||||||||||||||||||||||||||||||||||
| Sub-total: | 43,607 | 10,639 | 6,708 | (2,474 | ) | 58,480 | 38,046 | 9,930 | 8,744 | (2,647 | ) | 54,073 | |||||||||||||||||||||||||||||||||
| Accretion of asset retirement obligations | 265 | 4 | 15 | 1 | 285 | 194 | 6 | 13 | – | 213 | |||||||||||||||||||||||||||||||||||
| Non-cash compensation | 144 | 90 | 10 | 1,278 | 1,522 | 172 | 91 | 18 | 1,204 | 1,485 | |||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 44,016 | $ | 10,733 | $ | 6,733 | $ | (1,195 | ) | $ | 60,287 | $ | 38,412 | $ | 10,027 | $ | 8,775 | $ | (1,443 | ) | $ | 55,771 | |||||||||||||||||||||||
| Adjusted EBITDA Margin | 40.4 | % | 74.2 | % | 40.6 | % | NM | 43.1 | % | 38.6 | % | 74.7 | % | 45.8 | % | NM | 42.1 | % | |||||||||||||||||||||||||||
| For The Six Months Ended June 30 | |||||||||||||||||||||||||||||||||||||||||||||
| Operating Income | $ | 53,401 | $ | 14,207 | $ | 7,264 | $ | (5,859 | ) | $ | 69,013 | $ | 47,142 | $ | 12,807 | $ | 9,476 | $ | (6,069 | ) | $ | 63,356 | |||||||||||||||||||||||
| Depreciation and amortization | 32,642 | 7,313 | 6,219 | 75 | 46,249 | 28,633 | 7,061 | 7,859 | 40 | 43,593 | |||||||||||||||||||||||||||||||||||
| Sub-total: | 86,043 | 21,520 | 13,483 | (5,784 | ) | 115,262 | 75,775 | 19,868 | 17,335 | (6,029 | ) | 106,949 | |||||||||||||||||||||||||||||||||
| Accretion of asset retirement obligations | 522 | 9 | 29 | 1 | 561 | 382 | 11 | (56 | ) | – | 337 | ||||||||||||||||||||||||||||||||||
| Non-cash compensation | 242 | 153 | 15 | 2,155 | 2,565 | 357 | 183 | 36 | 2,133 | 2,709 | |||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 86,807 | $ | 21,682 | $ | 13,527 | $ | (3,628 | ) | $ | 118,388 | $ | 76,514 | $ | 20,062 | $ | 17,315 | $ | (3,896 | ) | $ | 109,995 | |||||||||||||||||||||||
| Adjusted EBITDA Margin | 39.8 | % | 74.4 | % | 40.7 | % | NM | 42.2 | % | 37.6 | % | 72.5 | % | 45.2 | % | NM | 40.8 | % | |||||||||||||||||||||||||||
Contact:
NTELOS Holdings Corp.
Wesley B. Wampler
Director, Investor Relations
540/949-3447
wamplerwes@ntelos.com
For Release: August 5, 2010
**Teleconference**
August 6, 2010, 10:00 A.M. (ET)
Domestic dial in number: 877-317-6789
International dial in number: 412-317-6789
Canada dial in number: 866-605-3852
Replay number: 877-344-7529
International replay number: 412-317-0088
Confirmation ID: 442980
Audio webcast: http://ir.ntelos.com/
Contact: Wesley B. Wampler
Director, Investor Relations
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