Company Reports Net Income of $12.8 Million
High-Bandwidth Data Products Introduced Into Twenty-Three New Wireline Markets
Wireless Postpay Subscriber Net Additions Turn Positive
WAYNESBORO, Va.--(BUSINESS WIRE)-- NTELOS Holdings Corp. (NASDAQ:NTLS - News), a leading provider of wireless and wireline communications services (branded as NTELOS) in seven Mid-Atlantic states today announced operating results for its second quarter of 2011.
Operating highlights include:
- Wireless postpay gross additions for second quarter 2011 up 8% from second quarter 2010
- Smartphone and data card sales represented 74% of wireless postpay gross additions for the quarter
- Wireless Sprint wholesale revenues for second quarter 2011 were $32.7 million, a quarterly record
- Wireline Metro E and IP-based services expanded into 23 new market areas facilitated by FiberNet integration
- Consolidated adjusted EBITDA (a non-GAAP measure) for second quarter 2011 of $60.1 million
“Our postpay subscriber gross additions showed solid growth through second quarter and are up 8% from second quarter last year, reflecting continued successes in our distribution and promotional strategies,” said James A. Hyde, CEO of NTELOS Holdings Corp. “This sales strength combined with involuntary churn stability drove postpay net additions positive. Growth in data revenues continued with postpay data ARPU achieving a new high at $16.36 and Smartphone sales remained robust, representing 64% of postpay gross additions for second quarter.”
Separation Update: The Company has filed applications seeking approval of the pending wireline separation with all material regulatory agencies and recently received approvals from the West Virginia and Pennsylvania Public Service Commissions, in addition to other states, and the Virginia State Corporation Commission. Completion of the regulatory processes with the Private Letter Ruling from the IRS confirming that the separation will qualify for tax free treatment is expected by the end of August, 2011. The initial Form 10 filing with the SEC was made on May 16, 2011 and the first amendment was filed on July 13, 2011. Preliminary work to place a new senior credit facility for the wireline company has commenced.
Executive Update: On August 1, 2011, the Company announced the appointment of Michael B. Moneymaker, the Company’s current Executive Vice President, Chief Financial Officer, Treasurer and Secretary, as President and Chief Financial Officer of the Company’s wireline business, effective upon the separation of the wireline operations. Mr. Moneymaker would then serve on the wireline business’s board of directors. Also, the Board of Directors intends for Mr. Moneymaker to succeed James A. Hyde as the Chief Executive Officer of the wireline business following a transition period, and that Mr. Hyde would continue to serve on the wireline business’s board of directors. The Company further announced the appointment of Stebbins B. Chandor, Jr., as Executive Vice President of NTELOS. Mr. Chandor will succeed Mr. Moneymaker as the Company’s Executive Vice President, Chief Financial Officer, Treasurer and Secretary upon the effective date of the separation.
Declaration of Dividend: On August 2, 2011, 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 12, 2011 to stockholders of record on September 15, 2011.
FiberNet Integration: With personnel integration and initial billing system conversions completed last quarter, recent activities have focused upon expense efficiencies through network grooming initiatives and the virtual integration of customer care functions, all of which are on schedule. The estimated year-end run-rate for annualized expense synergies of $7 million to $9 million remains appropriate. Revenue losses from anticipated churn of legacy lower-margin voice products have stabilized and are diminishing.
Business Segment Highlights
- Wireless operating revenues for the second quarter 2011 were $104.3 million, up 5% from second quarter 2010 due to a $5.6 million increase in Sprint wholesale revenues. Subscriber revenues were $63.8 million compared to $66.4 million in second quarter 2010 due to a $3.1 million decline in prepay subscriber revenues. Reflecting these subscriber revenue losses, adjusted EBITDA for Wireless was $35.9 million for the second quarter 2011 compared to $38.4 million for second quarter 2010.
- Revenues from the Sprint wholesale agreement were $32.7 million for second quarter 2011, up 21% from second quarter 2010. Excluding support from the contracted minimums in the prior year, revenues from Sprint wholesale were up 33% in second quarter 2011, from $24.5 million of calculated revenue underlying the minimums for second quarter 2010.
- Sales of smartphones represented 64% of postpay gross additions for second quarter 2011, compared to 17% in second quarter 2010; sales of smartphones and data cards combined represented 74% of postpay gross additions. Additionally, more than 10,000 postpay devices were upgraded to smartphones during second quarter 2011. These costs are fully reflected in the quarter, while revenues will benefit future periods. At June 30, 2011, smartphone and data card penetration of the postpay subscriber base was 29% compared to 17% at June 30, 2010.
- Retail wireless subscribers were 424,796 at June 30, 2011. Second quarter 2011 total subscriber churn was 3.3%, a 27 basis-point improvement from the previous quarter. Wireless postpay subscribers were 302,025 at quarter end with postpay gross subscriber additions for second quarter 2011 of 17,920, up 8% from second quarter 2010. Postpay sales through Company managed stores recently relocated or retrofitted continued to show strong year over year sales gains and increased promotional efforts helped to drive improvements in gross additions. Porting results improved sequentially by approximately 1,850 units, or 71%, in second quarter 2011, compared to the previous quarter and the June porting total was net positive, the first positive month since July, 2007.
- Prepay gross subscriber additions were 19,193, up 14% from 16,825 in second quarter 2011. Effectively all of this quarterly increase occurred in June following the introduction of a $45 per month, all-inclusive rate plan which eliminated a competitive pricing disadvantage and through anticipated churn reductions potentially enhances lifetime revenues.
- Postpay ARPU was $56.90 for the second quarter of 2011, up 1% from an ARPU of $56.35 in the same quarter last year. Postpay data ARPU continued solid growth in the second quarter, increasing $3.13, or 24%, from $13.23 in second quarter 2010 to $16.36. Sequentially, postpay data ARPU was up 6%, or $0.91, compared to first quarter 2011.
“Continued strength of postpay gross additions, the growing percentage of smartphones and data cards in the base, now nearly 30%, and stability in involuntary churn are all positive indicators for wireless,” said Hyde. “For prepay, the immediate sales success of the new all-inclusive rate plan is most encouraging as is the longer-range potential. We remain confident in ongoing improvements in wireless subscriber and financial results.”
- Wireline operating revenues for the second quarter 2011 were $50.2 million compared to $32.6 million for second quarter 2010, reflecting contributions of FiberNet results. Adjusted EBITDA for Wireline was $25.2 million for the second quarter 2011, compared to $18.8 million in second quarter 2010, also reflective of FiberNet results.
- Competitive Wireline: Representing 74% of total wireline revenues, Competitive revenues for second quarter 2011 were $37.2 million, compared to $19.2 million in second quarter 2010. Proforma for the FiberNet acquisition and before intercompany wireless eliminations, Competitive revenues were $38.5 million and $76.9 million for the second quarter and the first six months of 2011, respectively, compared to $38.6 million and $77.3 million for the same periods last year, respectively. On a proforma basis, revenues from Enterprise Data Services and wholesale for second quarter 2011 increased $1.8 million, or 12%, over second quarter 2010 and increased $3.3 million, or 11%, for the first six months of 2011 compared to the first six months of 2010. During second quarter 2011, NTELOS wireline expanded Metro Ethernet and IP-based services into 23 new market areas in West Virginia, Pennsylvania and Maryland. Wholesale revenues continued gains as cell sites with fiber to the cell increased by 18 during the quarter.
Growth from data products was mitigated by revenue decreases in competitive voice, long distance and other legacy products, though the accelerated rate of this voice customer churn in first quarter subsided. On a proforma basis, revenues from legacy products were down $2.0 million, or 11% and $4.0 million, or 10%, for the second quarter and the first six months of 2011, respectively, compared to the same periods last year. Adjusted EBITDA for Competitive Wireline was $15.6 million for the second quarter 2011, compared to $8.8 million in second quarter 2010 and $14.3 million proforma second quarter 2010. For the first six months of 2011, proforma adjusted EBITDA was $29.9 million, an 8% increase over $27.8 million proforma for the first six months of 2010.
- RLEC: RLEC revenues for the second quarter of 2011 were $12.9 million and were down 4% from second quarter 2010 reflecting access revenue losses. It is expected that regulatory access rate resets will negatively impact RLEC revenues by approximately $1.3 million in the second half of 2011. RLEC adjusted EBITDA, with a margin of 75%, was $9.7 million for second quarter 2011, compared to $10.0 million in second quarter 2010.
“We continue to see a pick-up in orders for our enterprise data products and wireless carrier backhaul as we offer these services in FiberNet markets newly integrated into our network,” stated Hyde. “With these sales successes and diminishing losses from legacy lower-margin voice products, we are well positioned for significant data revenue growth in the Competitive segment later this year and in 2012.”
The Company will provide 2011 financial guidance updates on the Second Quarter 2011 Earnings Conference Call scheduled for August 5, 2011 at 10:00 A.M. ET.
Statements made will be 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.”
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 derivatives, net income attributable to noncontrolling interests, other expenses/income, equity based compensation charges, acquisition related charges, and costs related to the planned separation of the wireless and wireline companies.
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.
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, Maryland and North Carolina, including nationwide wireless voice and data services, local and long distance telephone, high capacity transport, networking and high-speed Broadband data services and IPTV-based video products. 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; our ability to successfully integrate the operations of the FiberNet business; the failure to realize synergies and cost savings from the acquisition of the FiberNet business or delay in realization thereof; 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; Failure to complete the business separation of the wireless and wireline operations in an orderly fashion as currently structured 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.
- 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
- Wireline Customers and Network Statistics
- 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, 2011||December 31, 2010|
|Restricted cash 1||9,210||9,210|
|Accounts receivable, net||62,479||56,308|
|Inventories and supplies||8,556||7,120|
|Income tax receivable||1,115||11,008|
|Prepaid expenses and other||15,413||12,217|
|Securities and investments||1,362||1,236|
|Property, plant and equipment, net||587,536||566,949|
|Other intangibles, net||73,140||83,237|
|Radio spectrum licenses in service||115,449||115,449|
|Radio spectrum licenses not in service||16,863||16,859|
|Deferred charges and other assets||14,404||15,612|
|LIABILITIES AND EQUITY|
|Current portion of long-term debt||$||8,661||$||8,567|
|Advance billings and customer deposits||23,462||23,304|
|Income tax payable||967||-|
|Accrued operating taxes||4,924||3,168|
|Other accrued liabilities||6,819||6,986|
|Other long-term liabilities||139,107||125,894|
|Total Liabilities and Equity||$||1,153,961||$||1,143,557|
|1||During 2010, the Company received Federal stimulus awards, providing 50% funding, to bring broadband services and infrastructure to Alleghany County, Virginia and to provide wireless broadband service and infrastructure to Hagerstown, Maryland. The Company was required to deposit 100% of its portion for both grants ($9.2 million) into pledged accounts in advance of any reimbursements, to be drawn down ratably following reimbursement approvals.|
|NTELOS Holdings Corp.|
|Condensed Consolidated Statements of Operations||Three months ended:||Six-months ended:|
|(in thousands, except per share amounts)||June 30, 2011||June 30, 2010||June 30, 2011||June 30, 2010|
|Operating Expenses 1|
|Cost of sales and services (exclusive of items shown separately below)||52,325||41,211||105,257||84,504|
|Corporate operations 2,3||9,881||8,325||21,014||18,614|
|Depreciation and amortization||26,006||22,065||51,396||43,593|
|Accretion of asset retirement obligations||190||213||383||337|
|Other Income (Expenses)|
|Loss on derivatives||(103||)||-||(251||)||-|
|Other (expense) income, net||(79||)||(36||)||(1,615||)||31|
|Income Tax Expense||9,487||8,567||17,063||17,162|
|Net Income Attributable to Noncontrolling Interests||(468||)||(559||)||(925||)||(778||)|
|Net Income Attributable to NTELOS Holdings Corp.||$||12,768||$||12,822||$||23,557||$||25,333|
|Basic and Diluted Earnings per Common Share Attributable to NTELOS Holdings Corp. Stockholders:|
|Income per share - basic||$||0.31||$||0.31||$||0.57||$||0.61|
|Income per share - diluted||$||0.30||$||0.31||$||0.56||$||0.61|
|Weighted average shares outstanding - basic||41,555||41,313||41,501||41,265|
|Weighted average shares outstanding - diluted||42,132||41,686||42,063||41,614|
|Cash Dividends Declared per Share - Common Stock||$||0.28||$||0.28||$||0.56||$||0.56|
|Note: First six months of 2011 includes the operating results of FiberNet, acquired on December 1, 2010.|
|1||Includes equity based compensation charges related to all of the Company’s share-based awards and the Company’s 401(k) matching contributions of $1.8 million and $1.5 million for the second quarters of 2011 and 2010, respectively; and $3.6 million and $2.7 million for the six months ended June 30 of 2011 and 2010, 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.|
|3||Second quarter 2011 includes $0.9 million of legal and consulting services costs in connection with plans to separate the wireless and wireline operations; for the six months ended June 30, 2011, these costs were $1.9 million.|
|NTELOS Holdings Corp.|
|Reconciliation of Net Income Attributable to NTELOS Holdings Corp. to Operating Income|
|Three months ended:||Six months ended:|
|June 30, 2010||June 30, 2011||June 30, 2010||June 30, 2011|
|Net income attributable to NTELOS Holdings Corp.||$||12,822||$||12,768||$||25,333||$||23,557|
|Net income attributable to noncontrolling interests||559||468||778||925|
|Loss on derivatives||-||103||-||251|
|Other expense (income)||36||79||(31||)||1,615|
|NTELOS Holding Corp.|
|Reconciliation of Operating Income to Adjusted EBITDA|
|(dollars in thousands)||2010||2011|
|For The Three Months Ended June 30|
|Depreciation and amortization||14,543||3,996||3,573||(47||)||22,065||14,294||7,486||3,500||726||26,006|
|Accretion of asset retirement obligations||194||13||6||-||213||162||21||6||1||190|
|Acquisition related charges 1||-||-||-||-||-||-||1||-||38||39|
Proposed business separation charges 2
|Adjusted EBITDA Margin||38.6||%||45.8||%||74.7||%||NM||42.1||%||34.5||%||41.8||%||74.8||%||NM||38.9||%|
|For The Six Months Ended June 30|
|Depreciation and amortization||28,633||7,859||7,061||40||43,593||28,591||14,921||7,058||826||51,396|
|Accretion of asset retirement obligations||382||(56||)||11||-||337||327||43||12||1||383|
Acquisition related charges 1
Proposed business separation charges 2
|Adjusted EBITDA Margin||37.6||%||45.2||%||72.5||%||NM||40.8||%||34.7||%||40.7||%||74.0||%||NM||38.8||%|
|1||Acquisition related charges represent legal and professional fees related to the acquisition of FiberNet that closed on December 1, 2010.|
|2||Charges for legal and consulting services costs in connection with plans to separate the wireless and wireline operations.|
NTELOS Holdings Corp. Wesley B. Wampler Director, Investor Relations 540-949-3447 firstname.lastname@example.org