- Record Fourth Quarter 2011 Revenue of $361.9 Million, Up 107% Year Over Year From $175.2 Million
- Full Year Revenues of $1.25 Billion, Up 134% Year Over Year From $535.1 Million
- Full Year Wholesale Revenues Up 876% Year Over Year to $493.7 Million
- 2011 Total Ending Subscribers of 10.4 Million, Up 140% Year Over Year from 4.3 Million
- Achieves Positive Quarterly Adjusted EBITDA For the First Time of $22.5 Million
- Average Smartphone 4G Usage Increased 88% Year Over Year in Fourth Quarter 2011
- President and CEO, Erik Prusch, Appointed to Board of Directors
BELLEVUE, Wash., Feb. 15, 2012 (GLOBE NEWSWIRE) — Clearwire Corporation (NASDAQ:CLWR, news, filings), a leading provider of 4G wireless broadband services in the U.S., today reported its financial and operating results for fourth quarter and full year 2011.
“Our steadfast efforts to drive strong top line growth and contain costs delivered a successful year both financially and operationally while securing our position as one of the fastest growing U.S. telecommunications companies in 2011,” said Erik Prusch, President and CEO of Clearwire. “During the year, we achieved key operational milestones, grew our funding resources, realized operating efficiencies and laid out a long-term vision that we expect will unlock the value of our deep spectrum portfolio through the most capacity-rich LTE deployment in the country.”
Total revenue for full year 2011 increased 134% year over year to $1.25 billion, primarily driven by wholesale revenue which increased 876% to $493.7 million in 2011 from $50.6 million in 2010. Fourth quarter 2011 revenue was $361.9 million, a 107% increase over fourth quarter 2010 revenue of $175.2 million. Wholesale revenue in fourth quarter 2011 was a record $164.1 million, a quarter over quarter increase of 20% from $137.2 million in third quarter 2011. Fourth quarter 2011 retail revenue and other revenue was $197.8 million, a year over year increase of 33% from $148.9 million in fourth quarter 2010. Wholesale average revenue per user (ARPU) was $6.34 in fourth quarter 2011, up from $6.20 in third quarter 2011. Fourth quarter 2011 retail ARPU was $46.69, up from $45.52 in fourth quarter 2010.
Clearwire ended fourth quarter 2011 with approximately 10.4 million total subscribers, up 140% from 4.3 million subscribers in fourth quarter 2010. The subscriber base consists of 1.3 million retail subscribers and 9.1 million wholesale subscribers. During fourth quarter 2011, Clearwire added 873,000 total net new subscribers, reflecting 904,000 net new wholesale subscribers and a net loss of 31,000 retail subscribers during the period. Clearwire’s wholesale subscribers consist primarily of Sprint 3G/4G smartphone customers.
Fourth quarter 2011 aggregate network usage by wholesale customers increased 22% compared to third quarter 2011, driven primarily by growth in aggregate smartphone usage, which increased 30% over the same period. Average 4G smartphone usage during the quarter increased 88% year over year in fourth quarter 2011. During full year 2011, total 4G network usage by wholesale and retail customers increased 165% as compared to full year 2010. Retail cost per gross addition (CPGA) was $259 in the fourth quarter 2011 compared to $420 in fourth quarter 2010. Retail churn was 3.9% in fourth quarter 2011, down from 4.2% in third quarter 2011.
Adjusted EBITDA in fourth quarter 2011 was $22.5 million, representing a $68.9 million improvement when compared to third quarter 2011 Adjusted EBITDA loss of $46.4 million.
Fourth quarter 2011 reported net loss from continuing operations attributable to Clearwire was $236.0 million, or $0.81 per basic share. Including the effects of discontinued operations, fourth quarter 2011 reported net loss attributable to Clearwire was $236.8 million, or $0.81 per basic share.
At the end of fourth quarter 2011, Clearwire operated networks in the U.S. covering areas where approximately 134 million people reside, including approximately 132 million people in markets where we provide 4G services.
2012 Outlook
For full year 2012 Clearwire expects total revenue of $1.15 billion to $1.25 billion and Adjusted EBITDA loss of approximately $250 million to $350 million. Capital expenditures in 2012 are expected to total approximately $450 million to $550 million, with most of the spend occurring in the second half of the year.
Erik Prusch Appointed to Board of Directors
Clearwire’s President and Chief Executive Officer, Erik Prusch, has been appointed to the company’s Board of Directors. Prusch was nominated by Eagle River according to their rights under the Equityholders’ Agreement and approved by the existing board members on February 10, 2012.
Results of Continuing Operations
Cost of goods and services and network costs (COGS) for fourth quarter 2011 increased 4% to $294.0 million compared to $282.5 million for third quarter 2011. These amounts include non-cash charges for network equipment reserves and other write-downs of $6.4 million and $38.7 million in the fourth and third quarters of 2011, respectively, and other non-cash network charges of $115.4 million and $65.2 million in the fourth and third quarters of 2011, respectively. The increase in other non-cash network charges in the fourth quarter was primarily due to an increased cease-to-use liability for tower-related leases. Excluding non-cash expenses, COGS decreased 4% quarter over quarter primarily due to reductions in software and hardware maintenance costs.
Selling, general and administrative (SG&A) expense for the fourth quarter 2011 decreased 27% to $128.5 million compared to $176.5 million for the third quarter 2011. The decrease is primarily attributable to reduced marketing activity, lower commission expenses, and a decline in employee-related expenses resulting from workforce reductions.
Total non-cash write-downs of $129.4 million in fourth quarter 2011 includes $123.0 million of loss from abandonment of network and other assets primarily related to write-downs of uncompleted WiMAX network development projects that were abandoned in the quarter as a result of our plans to build and launch service on an LTE network.
Fourth quarter 2011 capital expenditures (capex) were $23 million, up from $17 million in third quarter 2011 primarily due to prior quarter favorable settlements on capex purchases which offset new capex in third quarter 2011. The company ended fourth quarter 2011 with cash and investments of approximately $1.11 billion invested primarily in U.S. Treasury securities, including $716 million total net proceeds from a public equity offering and Sprint equity contribution which were completed in December 2011. In January 2012, Clearwire completed an offering of $300 million First Priority Senior Secured Notes due 2016 and received cash payments from Sprint totaling $172 million, including $150 million related to a promissory note which will be repaid through a reduction in the amounts due to us by Sprint for WiMAX service in two installments in January 2013 and 2014. Due to the repayment terms, this promissory note will be reported as deferred revenue in our financial statements.
| CLEARWIRE CORPORATION | |||||
| SUMMARY OF FINANCIAL DATA FROM CONTINUING OPERATIONS | |||||
| (In thousands) | |||||
| (Unaudited) | |||||
| Three months ended | |||||
| Actual | Pro forma (1) | Actual | |||
| December 31, | September 30, | June 30, | June 30, | December 31, | |
| 2011 | 2011 | 2011 | 2011 | 2010 | |
| REVENUES: | |||||
| Retail revenues | $ 197,640 | $ 194,789 | $ 190,583 | $ 190,583 | $ 148,205 |
| Wholesale revenues | 164,082 | 137,162 | 102,624 | 131,522 | 26,223 |
| Other revenue | 148 | 226 | 506 | 506 | 722 |
| Total revenues | 361,870 | 332,177 | 293,713 | 322,611 | 175,150 |
| OPERATING EXPENSES: | |||||
| Cost of goods and services and network costs (exclusive of items shown separately below) | 293,999 | 282,459 | 433,363 | 433,363 | 271,652 |
| Selling, general and administrative expense | 128,502 | 176,469 | 178,232 | 178,232 | 223,898 |
| Depreciation and amortization | 169,962 | 165,560 | 169,640 | 169,640 | 175,161 |
| Spectrum lease expense | 79,556 | 77,696 | 76,620 | 76,620 | 72,389 |
| Loss from abandonment of network and other assets | 123,000 | 29,129 | 376,350 | 376,350 | 169,239 |
| Total operating expenses | 795,019 | 731,313 | 1,234,205 | 1,234,205 | 912,339 |
| OPERATING LOSS | (433,149) | (399,136) | (940,492) | (911,594) | (737,189) |
| LESS NON-CASH ITEMS: | |||||
| Non-cash expenses | 156,308 | 119,321 | 71,388 | 71,388 | 71,946 |
| Non-cash write-downs | 129,358 | 67,810 | 590,948 | 590,948 | 224,499 |
| Depreciation and amortization | 169,962 | 165,560 | 169,640 | 169,640 | 175,161 |
| Total non-cash items | 455,628 | 352,691 | 831,976 | 831,976 | 471,606 |
| Adjusted EBITDA | $ 22,479 | $ (46,445) | $ (108,516) | $ (79,618) | $ (265,583) |
| Adjusted EBITDA margin | 6% | -14% | -37% | -25% | -152% |
| KEY OPERATING METRICS (k for ‘000’s, MM for ‘000,000’s) | |||||
| Total net subscriber additions | 873k | 1,893k | 1,543k | 1,543k | 1,540k |
| Wholesale | 904k | 1,858k | 1,504k | 1,504k | 1,417k |
| Retail | (31)k | 35k | 39k | 39k | 123k |
| Total subscribers | 10,414k | 9,541k | 7,648k | 7,648k | 4,345k |
| Wholesale(2) | 9,122k | 8,219k | 6,360k | 6,360k | 3,246k |
| Retail | 1,292k | 1,322k | 1,288k | 1,288k | 1,099k |
| ARPU | |||||
| Wholesale | $6.34 | $6.20 | $6.18 | $7.92 | $3.52 |
| Retail | $46.69 | $47.05 | $47.59 | $47.59 | $45.52 |
| Churn | |||||
| Wholesale | 2.9% | 1.5% | 1.3% | 1.3% | 1.4% |
| Retail | 3.9% | 4.2% | 3.9% | 3.9% | 3.8% |
| Retail CPGA | $259 | $288 | $313 | $313 | $420 |
| Capital expenditures | $23MM | $17MM | $56MM | $56MM | $589MM |
| Domestic 4G covered POPS | 132MM | 133MM | 132MM | 132MM | 112MM |
| Cash, cash equivalents and investments | $1,108MM | $711MM | $848MM | $848MM | $1,748MM |
| (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. | |||||
| CLEARWIRE CORPORATION | ||
| SUMMARY OF FINANCIAL DATA FROM CONTINUING OPERATIONS | ||
| (In thousands) | ||
| (Unaudited) | ||
| Year ended | ||
| December 31, | December 31, | |
| 2011 | 2010 | |
| REVENUES: | ||
| Retail revenues | $ 758,254 | $ 480,761 |
| Wholesale revenues | 493,661 | 50,593 |
| Other revenues | 1,551 | 3,749 |
| Total revenues | 1,253,466 | 535,103 |
| OPERATING EXPENSES: | ||
| Cost of goods and services and network costs (exclusive of items shown separately below) | 1,249,966 | 912,776 |
| Selling, general and administrative expense | 698,067 | 870,980 |
| Depreciation and amortization | 687,636 | 454,003 |
| Spectrum lease expense | 308,693 | 279,993 |
| Loss from abandonment of network and other assets | 700,341 | 180,001 |
| Total operating expenses | 3,644,703 | 2,697,753 |
| OPERATING LOSS | (2,391,237) | (2,162,650) |
| LESS NON-CASH ITEMS: | ||
| Non-cash expenses | 423,260 | 305,869 |
| Non-cash write-downs | 966,441 | 345,727 |
| Depreciation and amortization | 687,636 | 454,003 |
| Total non-cash items | 2,077,337 | 1,105,599 |
| Adjusted EBITDA | $ (313,900) | $ (1,057,051) |
| Adjusted EBITDA margin | -25% | -198% |
| KEY OPERATING METRICS (k for ‘000’s, MM for ‘000,000’s) | ||
| Total net subscriber additions | 6,069k | 3,769k |
| Wholesale | 5,876k | 3,200k |
| Retail | 193k | 569k |
| Total subscribers | 10,414k | 4,345k |
| Wholesale(1) | 9,122k | 3,246k |
| Retail | 1,292k | 1,099k |
| ARPU | ||
| Wholesale | $6.44 | $4.10 |
| Retail | $47.04 | $43.65 |
| Churn | ||
| Wholesale | 1.9% | 1.5% |
| Retail | 3.8% | 3.4% |
| Retail CPGA | $292 | $452 |
| Capital expenditures | $226MM | $2,655MM |
| Domestic 4G covered POPS | 132MM | 112MM |
| Cash, cash equivalents and investments | $1,108MM | $1,748MM |
| (1) Includes non-launched markets. | ||
Management Webcast
Clearwire executives will host a conference call and simultaneous webcast to discuss the company’s fourth quarter and full year 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 athttp://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, at least five minutes prior to the start time. A replay of the call will be available beginning at approximately 7:30 p.m. Eastern Time on February 15, through Wednesday, February 22, by calling 1-855-859-2056, or from outside the United States by dialing 1-404-537-3406. The passcode for the replay is 46495945.
About Clearwire
Clearwire Corporation (NASDAQ:CLWR), through its operating subsidiaries, is a leading provider of 4G wireless broadband services. The company holds the deepest portfolio of wireless spectrum available for data services in the U.S. and provides coverage in areas of where more than 130 million people live. Clearwire serves retail customers through its own CLEAR® brand as well as through wholesale relationships with some of the leading companies in the communications, technology and retail industries. Strategic investors include Intel Capital, Comcast, Sprint, Google, Time Warner Cable, and Bright House Networks. The company plans to add to its current 4G offering by launching a next-generation 4G LTE Advanced-ready network to address the capacity needs of the market while also working closely with the Global TDD-LTE Initiative and China Mobile to advance the development of the TDD-LTE ecosystem. Clearwire is headquartered in Bellevue, Wash. Additional information is available athttp://www.clearwire.com.
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 may require additional capital to fund our current business. Also, we will need substantial additional capital over the 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 the expected timing and costs of deploying LTE on our wireless broadband network.
- 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 additional wholesale partners for significant 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.
- 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.
- We plan to deploy LTE on our wireless broadband network, alongside mobile WiMAX and we will incur significant costs to deploy such technology. 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, and will be dependent on commercial partners to deliver equipment and devices for our planned LTE network as well.
- 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.
| CLEARWIRE CORPORATION AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| (In thousands, except par value) | ||
| (Unaudited) | ||
| December 31, | December 31, | |
| 2011 | 2010 | |
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 891,929 | $ 1,230,242 |
| Short-term investments | 215,655 | 502,316 |
| Restricted cash | 1,000 | 1,000 |
| Accounts receivable, net of allowance of $5,542 and $3,792 | 83,660 | 24,653 |
| Inventory | 23,832 | 17,432 |
| Prepaids and other assets | 71,083 | 82,580 |
| Total current assets | 1,287,159 | 1,858,223 |
| Property, plant and equipment, net | 3,014,277 | 4,447,374 |
| Restricted cash | 7,619 | 29,355 |
| Spectrum licenses, net | 4,298,254 | 4,348,882 |
| Other intangible assets, net | 40,850 | 60,884 |
| Other assets | 157,797 | 199,003 |
| Assets of discontinued operations | 36,696 | 96,765 |
| Total assets | $ 8,842,652 | $ 11,040,486 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||
| Current liabilities: | ||
| Accounts payable and accrued expenses | $ 157,172 | $ 448,789 |
| Other current liabilities | 122,756 | 226,997 |
| Total current liabilities | 279,928 | 675,786 |
| Long-term debt, net | 4,019,605 | 4,017,019 |
| Deferred tax liabilities, net | 152,182 | 838 |
| Other long-term liabilities | 719,703 | 444,774 |
| Liabilities of discontinued operations | 25,196 | 32,071 |
| Total liabilities | 5,196,614 | 5,170,488 |
| Commitments and contingencies | ||
| Stockholders’ equity: | ||
| Class A common stock, par value $0.0001, 2,000,000 and 1,500,000 shares authorized; 452,215 and 243,544 shares outstanding | 45 | 24 |
| Class B common stock, par value $0.0001, 1,400,000 and 1,000,000 shares authorized; 839,703 and 743,481 shares outstanding | 83 | 74 |
| Additional paid-in capital | 2,714,634 | 2,221,110 |
| Accumulated other comprehensive income | 2,793 | 2,495 |
| Accumulated deficit | (1,617,826) | (900,493) |
| Total Clearwire Corporation stockholders’ equity | 1,099,729 | 1,323,210 |
| Non-controlling interests | 2,546,309 | 4,546,788 |
| Total stockholders’ equity | 3,646,038 | 5,869,998 |
| Total liabilities and stockholders’ equity | $ 8,842,652 | $ 11,040,486 |
| CLEARWIRE CORPORATION AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| (In thousands, except per share data) | ||
| (Unaudited) | ||
| Three Months Ended | ||
| December 31, | ||
| 2011 | 2010 | |
| Revenues | $ 361,870 | $ 175,150 |
| Operating expenses: | ||
| Cost of goods and services and network costs (exclusive of items shown separately below) | 293,999 | 271,652 |
| Selling, general and administrative expense | 128,502 | 223,898 |
| Depreciation and amortization | 169,962 | 175,161 |
| Spectrum lease expense | 79,556 | 72,389 |
| Loss from abandonment of network and other assets | 123,000 | 169,239 |
| Total operating expenses | 795,019 | 912,339 |
| Operating loss | (433,149) | (737,189) |
| Other income (expense): | ||
| Interest income | 272 | 870 |
| Interest expense | (128,859) | (67,999) |
| Gain on derivative instruments | (2,919) | 63,255 |
| Other income (expense), net | (285) | 2,714 |
| Total other expense, net | (131,791) | (1,160) |
| Loss from continuing operations before income taxes | (564,940) | (738,349) |
| Income tax provision | (78,406) | (221) |
| Net loss from continuing operations | (643,346) | (738,570) |
| Less: non-controlling interests in net loss from continuing operations of consolidated subsidiaries | 407,348 | 613,766 |
| Net loss from continuing operations attributable to Clearwire Corporation | (235,998) | (124,804) |
| Net loss from discontinued operations attributable to Clearwire Corporation | (851) | (3,208) |
| Net loss attributable to Clearwire Corporation | $ (236,849) | $ (128,012) |
| Net loss from continuing operations attributable to Clearwire Corporation per Class A common share: | ||
| Basic | $ (0.81) | $ (0.51) |
| Diluted | $ (0.81) | $ (0.79) |
| Net loss attributable to Clearwire Corporation per Class A common share: | ||
| Basic | $ (0.81) | $ (0.53) |
| Diluted | $ (0.81) | $ (0.81) |
| Weighted average Class A common shares outstanding: | ||
| Basic | 291,634 | 243,544 |
| Diluted | 291,634 | 1,011,395 |
| CLEARWIRE CORPORATION AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
| (In thousands, except per share data) | ||
| (Unaudited) | ||
| Year Ended | ||
| December 31, | ||
| 2011 | 2010 | |
| Revenues | $ 1,253,466 | $ 535,103 |
| Operating expenses: | ||
| Cost of goods and services and network costs (exclusive of items shown separately below) | 1,249,966 | 912,776 |
| Selling, general and administrative expense | 698,067 | 870,980 |
| Depreciation and amortization | 687,636 | 454,003 |
| Spectrum lease expense | 308,693 | 279,993 |
| Loss from abandonment of network and other assets | 700,341 | 180,001 |
| Total operating expenses | 3,644,703 | 2,697,753 |
| Operating loss | (2,391,237) | (2,162,650) |
| Other income (expense): | ||
| Interest income | 2,335 | 4,950 |
| Interest expense | (505,992) | (152,868) |
| Gain on derivative instruments | 145,308 | 63,255 |
| Other income (expense), net | 681 | (2,671) |
| Total other expense, net | (357,668) | (87,334) |
| Loss from continuing operations before income taxes | (2,748,905) | (2,249,984) |
| Income tax provision | (106,828) | (1,218) |
| Net loss from continuing operations | (2,855,733) | (2,251,202) |
| Less: non-controlling interests in net loss from continuing operations of consolidated subsidiaries | 2,158,831 | 1,775,840 |
| Net loss from continuing operations attributable to Clearwire Corporation | (696,902) | (475,362) |
| Net loss from discontinued operations attributable to Clearwire Corporation | (20,431) | (12,075) |
| Net loss attributable to Clearwire Corporation | $ (717,333) | $ (487,437) |
| Net loss from continuing operations attributable to Clearwire Corporation per Class A common share: | ||
| Basic | $ (2.70) | $ (2.14) |
| Diluted | $ (2.99) | $ (2.41) |
| Net loss attributable to Clearwire Corporation per Class A common share: | ||
| Basic | $ (2.78) | $ (2.19) |
| Diluted | $ (3.07) | $ (2.46) |
| Weighted average Class A common shares outstanding: | ||
| Basic | 257,967 | 222,527 |
| Diluted | 965,099 | 970,765 |
| CLEARWIRE CORPORATION AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands) | ||
| (Unaudited) | ||
| Year Ended | ||
| December 31, | ||
| 2011 | 2010 | |
| Cash flows from operating activities: | ||
| Net loss from continuing operations | $ (2,855,733) | $ (2,251,202) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||
| Deferred income taxes | 105,308 | — |
| Non-cash gain on derivative instruments | (145,308) | (63,255) |
| Accretion of discount on debt | 40,216 | 6,113 |
| Depreciation and amortization | 687,636 | 454,003 |
| Amortization of spectrum leases | 53,674 | 57,433 |
| Non-cash rent expense | 342,962 | 200,901 |
| Loss on property, plant and equipment | 966,441 | 345,727 |
| Other operating activities | 27,745 | 49,506 |
| Changes in assets and liabilities: | ||
| Inventory | 15,697 | (11,697) |
| Accounts receivable | (54,212) | (20,550) |
| Prepaids and other assets | 22,447 | (73,767) |
| Prepaid spectrum licenses | (4,360) | (3,294) |
| Accounts payable and other liabilities | (135,683) | 144,680 |
| Net cash used in operating activities of continuing operations | (933,170) | (1,165,402) |
| Net cash provided (used in) by operating activities of discontinued operations | 2,381 | (3,311) |
| Net cash used in operating activities | (930,789) | (1,168,713) |
| Cash flows from investing activities: | ||
| Capital expenditures | (405,655) | (2,646,365) |
| Purchases of available-for-sale investments | (957,883) | (2,098,705) |
| Disposition of available-for-sale investments | 1,255,176 | 3,776,805 |
| Other investing | 20,229 | (44,119) |
| Net cash used in investing activities of continuing operations | (88,133) | (1,012,384) |
| Net cash used in investing activities of discontinued operations | (3,886) | (834) |
| Net cash used in investing activities | (92,019) | (1,013,218) |
| Cash flows from financing activities: | ||
| Principal payments on long-term debt | (29,957) | (876) |
| Proceeds from issuance of long-term debt | 1,413,319 | |
| Debt financing fees | (1,159) | (53,285) |
| Equity investment by strategic investors | 331,400 | 54,828 |
| Proceeds from issuance of common stock | 387,279 | 304,015 |
| Net cash provided by financing activities of continuing operations | 687,563 | 1,718,001 |
| Net cash provided by financing activities of discontinued operations | — | — |
| Net cash provided by financing activities | 687,563 | 1,718,001 |
| Effect of foreign currency exchange rates on cash and cash equivalents | (4,573) | (525) |
| Net decrease in cash and cash equivalents | (339,818) | (464,455) |
| Cash and cash equivalents: | ||
| Beginning of period | 1,233,562 | 1,698,017 |
| End of period | 893,744 | 1,233,562 |
| Less: cash and cash equivalents of discontinued operations at end of period | 1,815 | 3,320 |
| Cash and cash equivalents of continuing operations at end of period | $ 891,929 | $ 1,230,242 |
| Supplemental cash flow disclosures: | ||
| Cash paid for interest including capitalized interest paid | $ 474,849 | $ 336,314 |
| Non-cash investing activities: | ||
| Fixed asset purchases in accounts payable and accrued expenses | $ 14,144 | $ 120,025 |
| Fixed asset purchases financed by long-term debt | $ 11,514 | $ 133,288 |
| Non-cash financing activities: | ||
| Vendor financing obligations | $ (3,332) | $ (60,251) |
| Capital lease obligations | $ (8,182) | $ (73,037) |
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, 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 | |||
| December 31, | September 30, | June 30, | June 30, | December 31, | |
| 2011 | 2011 | 2011 | 2011 | 2010 | |
| (in thousands) | |||||
| Operating loss | $ (433,149) | $ (399,136) | $ (940,492) | $ (911,594) | $ (737,189) |
| Non-cash expenses: | |||||
| Spectrum lease expense | 37,228 | 38,845 | 28,519 | 28,519 | 32,156 |
| Building and network related rents* | 113,612 | 70,584 | 37,965 | 37,965 | 32,625 |
| Stock compensation* | 5,468 | 9,892 | 4,904 | 4,904 | 7,165 |
| Non-cash expenses | 156,308 | 119,321 | 71,388 | 71,388 | 71,946 |
| Non-cash write-downs: | |||||
| Loss from abandonment of network and other assets | 123,000 | 29,129 | 376,350 | 376,350 | 169,239 |
| Network equipment reserves and other write-downs | 6,358 | 38,681 | 214,598 | 214,598 | 55,260 |
| Non-cash write-downs | 129,358 | 67,810 | 590,948 | 590,948 | 224,499 |
| Depreciation and amortization | 169,962 | 165,560 | 169,640 | 169,640 | 175,161 |
| Adjusted EBITDA | $ 22,479 | $ (46,445) | $ (108,516) | $ (79,618) | $ (265,583) |
| *Amounts included in COGS and SG&A. | |||||
| Year ended | ||
| (Unaudited) | ||
| December 31, | December 31, | |
| 2011 | 2010 | |
| (in thousands) | ||
| Operating loss | $ (2,391,237) | $ (2,162,650) |
| Non-cash expenses: | ||
| Spectrum lease expense | 139,340 | 100,251 |
| Building and network related rents* | 257,296 | 158,083 |
| Stock compensation* | 26,624 | 47,535 |
| Non-cash expenses | 423,260 | 305,869 |
| Non-cash write-downs: | ||
| Loss from abandonment of network and other assets | 700,341 | 180,001 |
| Network equipment reserves and other write-downs | 266,100 | 165,726 |
| Non-cash write-downs | 966,441 | 345,727 |
| Depreciation and amortization | 687,636 | 454,003 |
| Adjusted EBITDA | $ (313,900) | $ (1,057,051) |
| *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 Clearwire’s predecessor entity), 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 Clearwire’s predecessor entity), 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 | |||
| December 31, | September 30, | June 30, | June 30, | December 31, | |
| 2011 | 2011 | 2011 | 2011 | 2010 | |
| (in thousands) | |||||
| Total revenues | $ 361,870 | $ 332,177 | $ 293,713 | $ 322,611 | $ 175,150 |
| Acquired companies & other revenues | (14,564) | (10,850) | (9,509) | (9,509) | (7,350) |
| Total ARPU revenues | $ 347,306 | $ 321,327 | $ 284,204 | $ 313,102 | $ 167,800 |
| Wholesale ARPU revenues | $ 164,058 | $ 137,109 | $ 102,624 | $ 131,522 | $ 26,223 |
| Retail ARPU revenues | 183,248 | 184,218 | 181,580 | 181,580 | 141,577 |
| Total ARPU revenues | $ 347,306 | $ 321,327 | $ 284,204 | $ 313,102 | $ 167,800 |
| Three months ended | |||||
| (Unaudited) | |||||
| Actual | Pro forma | Actual | |||
| December 31, | September 30, | June 30, | June 30, | December 31, | |
| 2011 | 2011 | 2011 | 2011 | 2010 | |
| (in thousands) | |||||
| Wholesale ARPU revenues | $ 164,058 | $ 137,109 | $ 102,624 | $ 131,522 | $ 26,223 |
| Average wholesale customers | 8,630 | 7,371 | 5,533 | 5,533 | 2,485 |
| Months in period | 3 | 3 | 3 | 3 | 3 |
| Wholesale ARPU | $ 6.34 | $ 6.20 | $ 6.18 | $ 7.92 | $ 3.52 |
| Three months ended | |||||
| (Unaudited) | |||||
| Actual | Pro forma | Actual | |||
| December 31, | September 30, | June 30, | June 30, | December 31, | |
| 2011 | 2011 | 2011 | 2011 | 2010 | |
| (in thousands) | |||||
| Retail ARPU revenues | $ 183,248 | $ 184,218 | $ 181,580 | $ 181,580 | $ 141,577 |
| Average retail customers | 1,308 | 1,305 | 1,272 | 1,272 | 1,037 |
| Months in period | 3 | 3 | 3 | 3 | 3 |
| Retail ARPU | $ 46.69 | $ 47.05 | $ 47.59 | $ 47.59 | $ 45.52 |
| Year ended | ||
| (Unaudited) | ||
| December 31, | December 31, | |
| 2011 | 2010 | |
| (in thousands) | ||
| Total revenues | $ 1,253,466 | $ 535,103 |
| Acquired companies & other revenues | (45,753) | (29,828) |
| Total ARPU revenues | $ 1,207,713 | $ 505,275 |
| Wholesale ARPU revenues | $ 493,583 | $ 50,593 |
| Retail ARPU revenues | 714,130 | 454,682 |
| Total ARPU revenues | $ 1,207,713 | $ 505,275 |
| Year ended | ||
| (Unaudited) | ||
| December 31, | December 31, | |
| 2011 | 2010 | |
| (in thousands) | ||
| Wholesale ARPU revenues | $ 493,583 | $ 50,593 |
| Average wholesale customers | 6,390 | 1,029 |
| Months in period | 12 | 12 |
| Wholesale ARPU | $ 6.44 | $ 4.10 |
| Year ended | ||
| (Unaudited) | ||
| December 31, | December 31, | |
| 2011 | 2010 | |
| (in thousands) | ||
| Retail ARPU revenues | $ 714,130 | $ 454,682 |
| Average retail customers | 1,265 | 868 |
| Months in period | 12 | 12 |
| Retail ARPU | $ 47.04 | $ 43.65 |
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 June 30, 2011 were prepared using the unaudited condensed consolidated statement of operations of Clearwire for the three months ended 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 signed on April 18, 2011 were applicable as of January 1, 2011. However, in accordance with GAAP applicable to revenue recognition, Clearwire’s first quarter 2011 results did not reflect additional revenues due to the company as a result of the amendments contained in the Sprint wholesale amendments being signed subsequent to the end of the period. As such, during second quarter 2011, Clearwire recognized revenue of approximately $16.1 million attributable to services provided in first quarter 2011. In addition, Clearwire received a $28.2 million settlement in second quarter 2011, of which $12.8 million 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 second quarter 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 June 30, 2011 (in thousands):
| Three Months Ended June 30, 2011 | |||
| (Unaudited) | |||
| Amounts as reported | Adjustments(1) | Pro forma amounts | |
| Revenues: | |||
| Retail revenue | $ 190,583 | $ — | $ 190,583 |
| Wholesale revenue | 131,522 | (28,898) | 102,624 |
| Other revenue | 506 | 506 | |
| Total revenues | 322,611 | (28,898) | 293,713 |
| Total expenses | (1,262,381) | (1,262,381) | |
| Net loss from continuing operations | (939,770) | (28,898) | (968,668) |
| Less: non-controlling interests in net loss from continuing operations of consolidated subsidiaries | 779,245 | 22,382 | 801,627 |
| Net loss from continuing operations attributable to Clearwire Corporation | (160,525) | (6,516) | (167,041) |
| Net loss from discontinued operations attributable to Clearwire Corporation | (8,213) | — | (8,213) |
| Net loss attributable to Clearwire Corporation | $ (168,738) | $ (6,516) | $ (175,254) |
| Net loss from continuing operations attributable to Clearwire Corporation per Class A Common Share: | |||
| Basic | $ (0.65) | $ (0.68) | |
| Diluted | $ (0.98) | $ (1.00) | |
| Net loss attributable to Clearwire Corporation per Class A Common Share: | |||
| Basic | $ (0.68) | $ (0.71) | |
| Diluted | $ (1.01) | $ (1.03) | |
| Wholesale ARPU | $ 7.92 | $ 6.18 | |
| (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 Clearwire’s predecessor entity) plus devices equipment subsidy, divided by gross retail customer additions in the period.
| Three months ended | ||||
| (Unaudited) | ||||
| December 31, | September 30, | June 30, | December 31, | |
| 2011 | 2011 | 2011 | 2010 | |
| (in thousands) | ||||
| Retail CPGA | ||||
| Selling, general and administrative | $ 128,502 | $ 176,469 | $ 178,232 | $ 223,894 |
| G&A and other | (96,469) | (118,923) | (120,033) | (122,210) |
| Total selling expense | 32,033 | 57,546 | 58,199 | 101,684 |
| Total gross adds | 124 | 200 | 186 | 242 |
| Total retail CPGA | $ 259 | $ 288 | $ 313 | $ 420 |
| Year ended | ||||
| (Unaudited) | ||||
| December 31, | December 31, | |||
| 2011 | 2010 | |||
| (in thousands) | ||||
| Retail CPGA | ||||
| Selling, general and administrative | $ 698,067 | $ 870,980 | ||
| G&A and other | (471,529) | (455,084) | ||
| Total selling expense | 226,538 | 415,896 | ||
| Total gross adds | 776 | 920 | ||
| Total retail CPGA | $ 292 | $ 452 | ||
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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