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Press Release -- August 1st, 2012
Source: nTelos
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NTELOS Holdings Corp. Reports Second Quarter 2012 Operating Results

–Net Quarterly Subscriber Additions of 3,500

–Postpay Quarterly Churn of 1.9%

Adjusted EBITDA of $34.0 Million

–Company Declares Quarterly Dividend of $0.42 Per Share

WAYNESBORO, Va.--(BUSINESS WIRE)-- NTELOS Holdings Corp. (the “Company,” NASDAQ: NTLS), a leading regional provider of nationwide wireless voice and data communications and home to the “best value in wireless,” announced today operating results for its second quarter ended June 30, 2012.

Second Quarter Highlights

  • Operating revenues for the second quarter 2012 increased 6.9% to $111.6 million, compared to $104.3 million for the same period in 2011;
  • Wholesale and Other revenues for the second quarter 2012 increased 21.7% to $41.9 million, compared to $34.5 million for the same period in 2011;
  • Net subscriber additions for the second quarter 2012 were 3,500, compared to a net loss of (4,700) for the same period in 2011; and
  • Blended subscriber churn for the second quarter 2012 improved to 2.6%, compared to 3.3% for the same period in 2011.

“We are encouraged by the continued strong momentum of our retail operations, which posted a sequential quarterly increase in revenues for the first time in two years. In fact, we achieved simultaneous positive pre- and postpay net additions for the first time in six quarters. This accomplishment is a result of continuing improvements in our distribution network as well as the recent addition of iPhone to our smartphone lineup,” noted James A. Hyde, CEO of NTELOS Holdings Corp. “At the same time, overall ARPU improved for the second straight quarter, with postpay ARPU growing for the first time in almost two years. These trends highlight the growing strength of the NTELOS value proposition; providing an equivalent customer experience in terms of quality of service and equipment choices, but at a better value than our competitors.”

Highlights from Operations

  • Operating revenues for the second quarter 2012 were $111.6 million, up 6.9% from the second quarter 2011. The increase in operating revenue was primarily due to an increase in wholesale revenue partially offset by a small decline in retail revenues;
  • Retail revenue, which include subscriber and equipment revenue, were $69.6 million for the second quarter 2012, compared to $69.9 million for the second quarter 2011;
  • Wholesale revenue under the Company’s Strategic Network Alliance with Sprint for the second quarter 2012 increased 23.7% to $40.4 million, compared to $32.7 million for the second quarter 2011;
  • Adjusted EBITDA was $34.0 million for the second quarter 2012, compared to $34.9 million for the second quarter 2011; and
  • Income from Continuing Operations, less Net Income Attributable to Noncontrolling Interests, was $5.6 million, or $0.26 per diluted share, for the second quarter 2012 compared to $5.9 million, or $0.28 per diluted share, in the same period in 2011.

Total Subscribers

  • Total subscribers were 424,800 as of June 30, 2012, compared from 421,300 as of March 31, 2012;
  • Total gross additions for the second quarter were 36,800, compared to 37,100 in the same period of 2011; and
  • Total net subscriber additions for the second quarter were 3,500, compared to a loss of (4,700) for the same period in 2011.

Postpay Subscribers

  • Postpay subscriber gross additions for the second quarter 2012 were 16,800, a 6% decrease from the second quarter 2011 and a 1% decrease from first quarter 2012;
  • Net postpay subscribers increased 700 for the second quarter 2012, up slightly compared to the second quarter 2011 and up significantly from a loss of (4,800) for the first quarter 2012; and
  • As of June 30, 2012, total postpay subscribers were 285,400.

Prepay Subscribers

  • Prepay subscriber gross additions for the second quarter 2012 were 20,000, compared to 19,200 for the second quarter 2011 and 28,900 for the first quarter 2012;
  • Net prepay subscriber additions were 2,800 for the second quarter 2012, compared to losses of (5,300) for the second quarter 2011 and additions of 11,600 for the first quarter 2012; and
  • As of June 30, 2012, total prepay subscribers were 139,400.

Mr. Hyde concluded, “For the remainder of 2012, we expect a continuation of the positive trends we experienced during the first half of the year. We anticipate that continued growth of our retail business, combined with our strong wholesale business, will result in positive returns for our shareholders.”

Discontinued Operations

The Company completed the separation of its wireless and wireline operations with the spin-off of Lumos Networks Corp. (NASDAQ:LMOS, news, filings) on October 31, 2011. The wireline results are reflected as Discontinued Operations for all periods presented. As such, the reported operating results reflect the wireless operations of NTELOS, including certain expenses related to the business separation.

Net Income

Net Income, after Net Income Attributable to Noncontrolling Interests, was $5.6 million, or $0.26 per diluted share, for the second quarter 2012, compared to Net Income, after Net Income Attributable to Noncontrolling Interests, of $12.8 million, or $0.61 per diluted share, in the second quarter 2011, which included $6.9 million related to discontinued operations.

Declaration of Dividend

On July 31, 2012, the Company’s Board of Directors declared a quarterly cash dividend on its common stock in the amount of $0.42 per share to be paid on October 11, 2012 to stockholders of record on September 13, 2012.

Business Outlook

For the year ended December 31, 2012, NTELOS expects Adjusted EBITDA between $132 million and $138 million.

For the full year 2012, the Company reaffirmed its CapEx guidance of between $65 and $75 million as well as reaffirmed previously communicated subscriber development guidance of net positive subscriber growth in both postpaid and prepaid subscribers for the full year 2012.

NTELOS expects to update its annual guidance in conjunction with quarterly earnings throughout the year.

Conference Call

The Company will host a conference call with investors and analysts to discuss its second quarter 2012 results this morning, August 1, 2012, at 10:00 a.m. ET. To participate, please dial 1-877-317-6789, 1-866-605-3852 in Canada and +1 412-317-6789 for international, approximately 10 minutes before the scheduled start of the call. The conference call will also be accessible live on the Investor Relations section of the NTELOS website at http://ir.ntelos.com.

An archive of the conference call will be available online at http://ir.ntelos.com beginning approximately two hours after the call and continuing until August 16, 2012. A replay will also be available via telephone by dialing 1-877-344-7529, 1-412-317-0088 internationally and entering access code 10016571 beginning approximately two hours after the call and continuing until August 9, 2012.

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 derivatives, net income attributable to noncontrolling interests, other expenses/income, equity-based compensation charges, acquisition related charges, net income from discontinued operations and costs related to the separation of the wireless and wireline operations.

ARPU, or average monthly revenue per user, is computed by dividing service revenues per period by the average number of subscribers during that period. Please see the footnotes in the exhibits for a complete definition of this measure.

Adjusted EBITDA is a key metric used by investors to determine if the Company is generating sufficient cash flows to continue to generate shareholder value, provide liquidity for future growth and continue to fund dividends. ARPU provides management useful information concerning the appeal of NTELOS rate plans and service offerings and the Company’s performance in attracting and retaining high value customers.

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 accounting principles generally accepted in the United States of America (“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), operating through NTELOS Inc., its wholly owned subsidiary and its subsidiaries as “nTelos Wireless,” is headquartered in Waynesboro, VA, and provides high-speed, dependable nationwide voice and data coverage for over 420,000 retail subscribers based in Virginia, West Virginia and parts of Maryland, North Carolina, Pennsylvania, Ohio and Kentucky. NTELOS’s licensed territories have a total population of approximately 8.1 million residents, of which its wireless network covers approximately 6.0 million residents. NTELOS is also the exclusive wholesale provider of network services to Sprint in the western Virginia and West Virginia portions of its territories for all Sprint CDMA wireless customers. Additional information about NTELOS is available at www.ntelos.com or www.facebook.com/nteloswireless and www.twitter.com/ntelos_wireless.

SPECIAL NOTE FROM THE COMPANY REGARDING FORWARD-LOOKING STATEMENTS

Any statements contained in this press release or made on the above-referenced conference call 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: our ability to attract and retain retail subscribers to our services; the dependence on our affiliation and the potential outcome of any disputes with Sprint; a potential increase in roaming rates and wireless handset subsidy costs; rapid development and intense competition in the telecommunications industry; the potential to experience a high rate of customer turnover; the potential for Sprint and others to build networks in our markets; cash and capital requirements; operating and financial restrictions imposed by our senior credit facility; adverse economic conditions; federal and state regulatory fees, requirements and developments; loss of ability to use our current cell sites; our ability to realize the benefits anticipated following the spinoff of our wireline business; our continued reliance on indirect channels of retail distribution; our reliance on certain suppliers and vendors; 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 Form 10-K.

Exhibits:

  • Condensed Consolidated Balance Sheets (unaudited)
  • Condensed Consolidated Statements of Operations (unaudited)
  • Reconciliation of Net Income Attributable to NTELOS Holdings Corp. to Adjusted EBITDA
  • Key Metrics
  • ARPU Reconciliation
NTELOS Holdings Corp.
Condensed Consolidated Balance Sheets (unaudited)
June 30, 2012 December 31, 2011
(In thousands)
ASSETS
Current Assets
Cash $ 56,210 $ 59,950
Restricted cash - 199
Accounts receivable, net 44,307 36,292
Inventories and supplies 12,742 7,570
Other receivables 2,448 2,587
Prepaid expenses and other 13,210 11,858
128,917 118,456
Securities and Investments 1,486 1,403
Property, Plant and Equipment, net 292,366 288,368
Other Assets
Goodwill 63,700 63,700
Customer relationships, net 7,846 9,447
Trademarks, net 3,655 3,889
Radio spectrum licenses in service 115,866 115,866
Radio spectrum licenses not in service 16,456 16,452
Deferred charges and other assets 9,228 10,409
216,751 219,763
Total Assets $ 639,520 $ 627,990
LIABILITIES AND EQUITY
Current Liabilities
Current portion of long-term debt $ 5,139 $ 4,412
Accounts payable 18,974 18,118
Dividends payable 8,916 8,902
Advance billings and customer deposits 10,549 10,003
Accrued expenses 12,455 9,068
Deferred revenue 628 720
Accrued taxes 4,064 4,528
60,725 55,751
Long-Term Liabilities
Long-term debt 452,130 453,997
Other long-term liabilities 75,929 67,108
528,059 521,105
Equity 50,736 51,134
Total Liabilities and Equity $ 639,520 $ 627,990
NTELOS Holdings Corp.
Condensed Consolidated Statements of Operations (unaudited) Three Months Ended: Six Months Ended:
(In thousands, except per share amounts) June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011
Operating Revenues $ 111,585 $ 104,348 $ 222,125 $ 209,229
Operating Expenses
Cost of sales and services (exclusive of items shown separately below) 41,793 34,908 80,993 69,832
Customer operations 29,808 29,960 59,391 59,278
Corporate operations 8,159 7,059 16,009 15,006
Depreciation and amortization 15,101 15,008 30,008 29,396
Accretion of asset retirement obligations 151 162 300 327
95,012 87,097 186,701 173,839
Operating Income 16,573 17,251 35,424 35,390
Other Income (Expense)
Interest expense (5,433 ) (5,464 ) (10,861 ) (12,409 )
Loss on interest rate derivatives - (103 ) (5 ) (251 )
Other (expense) income, net (44 ) (75 ) (101 ) (1,623 )
Income from Continuing Operations before Income Taxes 11,096 11,609 24,457 21,107
Income Taxes 4,609 5,311 9,989 9,322
Income from Continuing Operations 6,487 6,298 14,468 11,785
Discontinued Operations, net - 6,901 - 12,613
Net Income 6,487 13,199 14,468 24,398
Net Income Attributable to Noncontrolling Interests (881 ) (431 ) (1,010 ) (841 )
Net Income Attributable to NTELOS Holdings Corp. $ 5,606 $ 12,768 $ 13,458 $ 23,557
Basic and Diluted Earnings per Share Attributable to NTELOS Holdings Corp.: 1
Earnings per share - basic
Continuing operations $ 0.27 $ 0.28 $ 0.64 $ 0.53
Discontinued operations - 0.33 - 0.61
Total $ 0.27 $ 0.61 $ 0.64 $ 1.14
Earnings per share - diluted
Continuing operations $ 0.26 $ 0.28 $ 0.63 $ 0.52
Discontinued operations - 0.33 - 0.60
Total $ 0.26 $ 0.61 $ 0.63 $ 1.12
Weighted average shares outstanding - basic 20,887 20,778 20,868 20,751
Weighted average shares outstanding - diluted 21,334 21,066 21,291 21,032
Cash Dividends Declared per Share - Common Stock $ 0.42 $ 0.56 $ 0.84 $ 1.12
1 All share and per share amounts presented in this press release and on the Company's Form 10-Q have been adjusted for the impact of the reverse stock split which occurred after market close on October 31, 2011 in connection with the separation of the Company's wireless and wireline operations.
NTELOS Holdings Corp.
Reconciliation of Net Income Attributable to NTELOS Holdings Corp. to Adjusted EBITDA
(In thousands)
Three Months Ended: Six Months Ended:
June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011
Net income Attributable to NTELOS Holdings Corp. $ 5,606 $ 12,768 $ 13,458 $ 23,557
Net income attributable to
noncontrolling interests 881 431 1,010 841
Net Income $ 6,487 $ 13,199 $ 14,468 $ 24,398
Discontinued operations, net - 6,901 - 12,613
Income from continuing operations $ 6,487 $ 6,298 $ 14,468 $ 11,785
Interest expense 5,433 5,464 10,861 12,409
Loss on interest rate derivatives - 103 5 251
Income taxes 4,609 5,311 9,989 9,322
Other expense (income), net 44 75 101 1,623
Operating income $ 16,573 $ 17,251 $ 35,424 $ 35,390
Depreciation and amortization 15,101 15,008 30,008 29,396
Accretion of asset retirement obligations 151 162 300 327
Equity-based compensation 1,536 1,577 3,205 3,236
Business separation charges 1 635 912 921 2,014
Adjusted EBITDA $ 33,996 $ 34,910 $ 69,858 $ 70,363
   
1 Charges for legal and consulting services in connection with the separation of the Company's wireless and wireline operations.
NTELOS Holdings Corp.
Key Metrics Six Months Ended:
Quarter Ended: 6/30/2011 9/30/2011 12/31/2011 3/31/2012 6/30/2012 6/30/2012 6/30/2011
Subscribers
Beginning Subscribers 429,500 424,800 415,000 414,500 421,300 414,500 432,400
Prepay 127,900 122,800 120,000 122,100 135,300 122,100 125,600
Postpay 301,600 302,000 295,000 292,400 286,000 292,400 306,800
Gross Additions 37,100 36,500 41,600 45,900 36,800 82,700 80,000
Prepay 19,200 20,000 20,900 28,900 20,000 48,900 44,200
Postpay 17,900 16,500 20,700 17,000 16,800 33,800 35,800
Disconnections 41,800 46,300 42,100 39,100 33,300 72,400 87,600
Prepay 24,500 23,400 19,500 17,300 17,200 34,500 47,600
Postpay 17,300 22,900 22,600 21,800 16,100 37,900 40,000
Net Additions (Losses) (4,700 ) (9,800 ) (500 ) 6,800 3,500 10,300 (7,600 )
Prepay (5,300 ) (3,400 ) 1,400 11,600 2,800 14,400 (3,400 )
Postpay 600 (6,400 ) (1,900 ) (4,800 ) 700 (4,100 ) (4,200 )
Ending Subscribers 424,800 415,000 414,500 421,300 424,800 424,800 424,800
Prepay 122,800 120,000 122,100 135,300 139,400 139,400 122,800
Postpay 302,000 295,000 292,400 286,000 285,400 285,400 302,000
Churn, net 3.3 % 3.7 % 3.4 % 3.1 % 2.6 % 2.9 % 3.4 %
Prepay 6.5 % 6.5 % 5.4 % 4.5 % 4.2 % 4.3 % 6.3 %
Postpay 1.9 % 2.6 % 2.6 % 2.5 % 1.9 % 2.2 % 2.2 %
Other Items
ARPU $ 49.96 $ 49.77 $ 48.57 $ 49.08 $ 49.41 $ 49.25 $ 50.38
Prepay $ 33.30 $ 33.68 $ 33.01 $ 36.56 $ 34.89 $ 35.70 $ 34.15
Postpay $ 56.90 $ 56.26 $ 54.94 $ 54.63 $ 56.42 $ 55.52 $ 57.16
Data ARPU $ 15.46 $ 16.17 $ 17.36 $ 19.05 $ 19.65 $ 19.35 $ 14.99
Licensed Population (millions) 8.0 8.1 8.1 8.1 8.1 8.1 8.0
Covered Population (millions) 5.9 5.9 5.9 5.9 6.0 6.0 5.9
Total Cell Sites 1,326 1,337 1,353 1,365 1,378 1,378 1,326
Strategic Network Alliance Revenues (000's)
Total Voice $ 21,678 $ 22,825 $ 23,122 $ 23,533 $ 23,856 $ 47,389 $ 42,732
Total Data 10,983 12,579 14,780 16,347 16,536 32,883 20,972
Total $ 32,661 $ 35,404 $ 37,902 $ 39,880 $ 40,392 $ 80,272 $ 63,704
NTELOS Holdings Corp.
ARPU Reconciliation Three Months Ended: Six Months Ended:
Average Monthly Revenue per User (ARPU) 1 June 30, 2012 June 30, 2011 June 30, 2012 June 30, 2011
(In thousands, except for subscribers and ARPU)
Operating Revenues $ 111,585 $ 104,348 $ 222,125 $ 209,229
Less: Equipment revenue from sales to new customers (4,026 ) (1,826 ) (7,900 ) (3,930 )
Less: Equipment revenue from sales to existing customers (3,903 ) (4,533 ) (8,306 ) (9,292 )
Less: Wholesale, other and adjustments (41,061 ) (34,147 ) (81,897 ) (66,436 )
Gross subscriber revenue 62,595 63,842 124,022 129,571
Less: prepay subscriber revenue (14,001 ) (12,268 ) (27,404 ) (25,224 )
Less: adjustments to prepay subscriber revenue (382 ) (242 ) (1,035 ) (636 )
Gross postpay subscriber revenue $ 48,212 $ 51,332 $ 95,583 $ 103,711
Prepay subscriber revenue 14,001 12,268 27,404 25,224
Plus: adjustments to prepay subscriber revenue 382 242 1,035 636
Gross prepay subscriber revenue $ 14,383 $ 12,510 $ 28,439 $ 25,860
Average number of subscribers 422,247 425,940 419,721 428,624
Total ARPU $ 49.41 $ 49.96 $ 49.25 $ 50.38
Average number of postpay subscribers 284,834 300,705 286,940 302,403
Postpay ARPU $ 56.42 $ 56.90 $ 55.52 $ 57.16
Average number of prepay subscribers 137,413 125,235 132,781 126,222
Prepay ARPU $ 34.89 $ 33.30 $ 35.70 $ 34.15
Gross subscriber revenue 62,595 63,842 124,022 129,571
Less: voice and other feature revenue (37,708 ) (44,092 ) (75,287 ) (91,015 )
Data revenue $ 24,887 $ 19,750 $ 48,735 $ 38,556
Average number of subscribers 422,247 425,940 419,721 428,624
Total Data ARPU $ 19.65 $ 15.46 $ 19.35 $ 14.99
Gross postpay subscriber revenue 48,212 51,332 95,583 103,711
Less: postpay voice and other feature revenue (31,490 ) (36,575 ) (62,922 ) (74,862 )
Postpay data revenue $ 16,722 $ 14,757 $ 32,661 $ 28,849
Gross prepay subscriber revenue 14,383 12,510 28,439 25,860
Less: prepay voice and other feature revenue (6,218 ) (7,517 ) (12,365 ) (16,153 )
Prepay data revenue $ 8,165 $ 4,993 $ 16,074 $ 9,707
Average number of postpay subscribers 284,834 300,705 286,940 302,403
Postpay data ARPU $ 19.57 $ 16.36 $ 18.97 $ 15.90
Average number of prepay subscribers 137,413 125,235 132,781 126,222
Prepay data ARPU $ 19.81 $ 13.29 $ 20.18 $ 12.82
   
1 Average monthly revenue per user (ARPU) is computed by dividing service revenues per period divided by the average number of subscribers during that period. ARPU as defined may not be similar to ARPU measures of other companies, is not a measurement under GAAP and should be considered in addition to, but not as a substitute for, the information contained in the Company’s unaudited condensed consolidated statements of operations. The Company closely monitors the effects of new rate plans and service offerings on ARPU in order to determine their effectiveness. ARPU provides management useful information concerning the appeal of NTELOS rate plans and service offerings and the Company’s performance in attracting and retaining high-value customers.

Investor Relations:
KCSA Strategic Communications
Jeffrey Goldberger, 212-896-1249
jgoldberger@kcsa.com
or
Rob Fink, 212-896-1206
rfink@kcsa.com

Source: NTELOS Holdings Corp.

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