Key Highlights
-- FCC Announced Approval of Clearwire/Sprint Transaction and
Clearwire Stockholder Vote Scheduled for November 20
-- Third Quarter Service Revenue Increases 47 percent over Q3
2007 to $60.8 million
-- Record High ARPU Exceeds $40 in Third Quarter
-- Initial Markets Post Record Market EBITDA Margin of 37 percent
in Third Quarter
-- Adjusted EBITDA Loss Narrows for Fourth Consecutive Quarter
-- Clearwire Successfully Trials First Mobile WiMAX Network
Overlay in Bellingham, WA Paving the Way for 2009 Planned
Upgrade of Existing Pre-WiMAX Markets
KIRKLAND, Wash.--(BUSINESS WIRE)--Nov. 10, 2008--Clearwire
Corporation ("Clearwire") (NASDAQ: CLWR), a leading provider of
wireless high-speed Internet service, today reported financial and
operating results for its third quarter ended September 30, 2008.
"Clearwire's solid third quarter results, which include a record
high consolidated ARPU of over $40, a new record Market EBITDA margin
in our Initial Markets and the fourth consecutive quarter of narrowing
consolidated adjusted EBITDA losses, demonstrate once again the
attractive economics associated with the market operations side of our
business," said Benjamin G. Wolff, chief executive officer of
Clearwire. "On the market development side of our business, through
thoughtful and judicious capital management and expense control, we
focused our resources on the strategic priorities of preparing our
upcoming mobile WiMAX markets for launch as well as successfully
completing a proof of concept network overlay deploying mobile WiMAX
technology in one of our existing markets during the quarter."
"We were very gratified when last week the FCC announced unanimous
approval of our pending transaction to combine Clearwire with Sprint's
WiMAX business," Wolff continued. "With unparalleled spectrum
resources, next generation technology that is commercialized today,
key distribution partners and substantial financing, we believe
Clearwire will be set to unleash a new way to Internet by offering a
true mobile broadband experience for our customers. We continue to
make progress toward closing the transaction before the end of the
year."
2008 Third Quarter and Year-to-Date Consolidated Results
Consolidated Average Revenue Per User (or ARPU) for the 2008 third
quarter was a Clearwire record $40.43, an increase of $3.02 above the
$37.41 level from the prior year third quarter. ARPU growth was driven
by increased sales of new services, including our Voice over Internet
Protocol (or VoIP), PC Card and other ancillary services, as well as a
reduced level of promotional programs compared to the prior year.
Consolidated Churn was 3.0 percent in the third quarter of 2008
compared to 2.3 percent for the third quarter of 2007 and, on a
sequential quarter basis, compared to 2.6 percent in the second
quarter of 2008. The increase in consolidated subscriber churn was
primarily driven by an increase in domestic churn to 2.8 percent for
the third quarter due to significantly reduced marketing efforts in
our pre-WiMAX markets and increased bad debt-related churn reflecting
a difficult consumer economic environment.
Consolidated Service Revenue increased by 47 percent to $60.8
million in the third quarter, versus $41.3 million for the same
quarter of 2007. The growth in Service Revenue was driven primarily by
Clearwire's larger subscriber base, which has increased to
approximately 469,000 at the end of the third quarter 2008, up from
348,000 at the end of the third quarter 2007. In anticipation of its
previously announced upgrade of existing markets to mobile WiMAX and
consistent with an ongoing primary focus on market level
profitability, Clearwire continued to moderate new subscriber growth
by significantly reducing sales and marketing efforts, resulting in
approximately 8,300 net new subscribers during the third quarter.
Gross Margin declined slightly to 27 percent of Revenue in the
third quarter from 29 percent in the same period in 2007 primarily due
to the significantly increased number of network cell sites that the
Company is leasing in advance of its planned mobile WiMAX market
rollout. Clearwire ended the third quarter with a total of
approximately 2,470 cell sites in service compared to approximately
2,150 as of September 30, 2007. In addition, at September 30, 2008
approximately 3,200 cell sites were leased and being prepared for
mobile WiMAX deployment as compared to approximately 1,500 cell sites
leased but not yet on air at the end of Q3 2007.
The third quarter of 2008 marks the fourth consecutive quarter for
which Clearwire reported a narrowing Adjusted EBITDA loss. Third
quarter Adjusted EBITDA reflected a loss of $72.9 million, versus an
Adjusted EBITDA loss of $84.1 million for the same period in 2007. The
decreased loss compared to the year-ago quarter was due primarily to a
significant decrease in selling, general and administrative expenses
(SG&A) consistent with the Company's previously announced focus on
moderating sales and marketing spending and subscriber growth in order
to direct its resources toward development of new mobile WiMAX markets
and the accelerated upgrade of existing markets to mobile WiMAX
technology. The third quarter SG&A decrease was partially offset by
increased network costs, customer care costs, and higher cash spectrum
lease expense.
Clearwire reported a Net Loss of $166.6 million for the third
quarter ended September 30, 2008 compared to a Net Loss of $328.6
million for the same period in 2007. The 2007 period included a
non-cash charge of $159.2 million related to extinguishment of debt.
Please refer to note (6) under Definition of Terms and Reconciliation
of Non-GAAP Financial Measures later in the release for information
regarding Adjusted Net Loss and Adjusted Net Loss per share for the
three and nine month periods ended 2007 and 2008.
Capital Expenditures (or CapEx) for the third quarter were $63.0
million, which was significantly below the $114.6 million CapEx level
in the same period last year. CapEx decreased primarily due to higher
network capital expenditures in the prior year required to launch five
new Clearwire markets covering over 3 million POPs during third
quarter 2007.
Consolidated Service Revenue for the nine months ended September
30, 2008 was $170.9 million, an increase of 61 percent from $106.1
million in the same period last year. The rapid revenue growth was
fueled by subscriber growth of 35 percent and a $1.79 increase in ARPU
for the nine month year-to-date period in 2008 as compared to the same
period in 2007. Consolidated Gross Margin for the nine month period
was $46.2 million or 27 percent, compared to $36.7 million or 35
percent for the same period in 2007. The decrease in Gross Margin
percentage was primarily due to the increased number of network cell
sites that the Company is leasing in advance of its planned mobile
WiMAX market rollout. Adjusted EBITDA loss for the nine month 2008
period was $229.4 million compared to $205.9 million for the nine
months ended September 30, 2007, reflecting the increased number of
launched markets year-over-year as well as continued investments in
future growth.
The following table summarizes Clearwire's third quarter and nine
months ended September 30, 2008 consolidated results, versus the 2007
third quarter and nine month results.
Clearwire Corporation
Summary of Income Statement Data (unaudited)
In thousands, unless otherwise noted
Three Months Ended September 30
REVENUE 2008 2007 % Change
----------- ---------- --------
Service $ 60,839 $ 41,297 47%
--------------------------------
Total Revenue 60,839 41,297 47%
Cost of Service 44,399 29,268 52%
--------------------------------
Gross Margin 16,440 12,029 37%
Gross Margin % 27% 29%
Selling, General and Administrative 84,305 103,424 -18%
Transaction Related Expenses 4,932 - N/M
Research and Development 537 194 177%
Spectrum Lease Expense 32,194 28,278 14%
--------------------------------
EBITDA Loss (105,528) (119,867) -12%
Adjustment for Non-Cash Items and
Transaction Related Expenses 32,645 35,733 -9%
--------------------------------
Adjusted EBITDA Loss $ (72,883) $ (84,134) -13%
KEY OPERATING METRICS (k for '000's, MM for '000,000's)
Net Subscriber Additions 8k 49k
Total Subscribers 469k 348k
ARPU $ 40.43 $ 37.41
Churn 3.0% 2.3%
CPGA $ 360 $ 462
Capital Expenditures $63.0MM $114.6MM
Covered POPS 16.9MM 14.8MM
Cash, Cash Equivalents and
Investments $423MM $1,017MM
Nine Months Ended September 30
REVENUE 2008 2007 % Change
---------- ---------- --------
Service $ 170,930 $ 106,056 61%
------------------------------
Total Revenue 170,930 106,056 61%
Cost of Service 124,766 69,316 80%
------------------------------
Gross Margin 46,164 36,740 26%
Gross Margin % 27% 35%
Selling, General and Administrative 278,183 259,456 7%
Transaction Related Expenses 15,156 - N/M
Research and Development 1,567 1,217 29%
Spectrum Lease Expense 96,401 56,543 70%
------------------------------
EBITDA Loss (345,143) (280,476) 23%
Adjustment for Non-Cash Items and
Transaction Related Expenses 115,736 74,601 55%
------------------------------
Adjusted EBITDA Loss $(229,407) $(205,875) 11%
KEY OPERATING METRICS (k for '000's, MM for '000,000's)
Net Subscriber Additions 75k 141k
Total Subscribers 469k 348k
ARPU $ 38.92 $ 37.13
Churn 2.6% 2.0%
CPGA $ 387 $ 426
Capital Expenditures $178.4MM $279.2MM
Covered POPS 16.9MM 14.8MM
Cash, Cash Equivalents and
Investments $423MM $1,017MM
Note: For a definition and reconciliation of non-GAAP financial
measures, including Adjusted EBITDA, ARPU, Churn, CPGA, EBITDA and
Market EBITDA, please refer to the section titled "Definition of
Terms and Reconciliation of Non-GAAP Financial Measures" at the end
of this release.
Market-Level Progress
2008 Third Quarter and Year-to-Date Results
Clearwire's Initial Markets, all 25 of which commenced operations
prior to 2006, ended the third quarter of 2008 with approximately
226,000 subscribers. Service Revenue for the Initial Markets increased
by 21 percent to $27.4 million for the quarter, versus $22.7 million
in the third quarter of 2007. Service Revenue growth was driven by 10%
year-over-year growth in subscribers, as well as increased delivery of
new products and services.
Gross Margin for the group of Initial Markets increased to 77
percent for the 2008 third quarter, versus a Gross Margin of 74
percent for third quarter of 2007. The Initial Markets posted record
Market EBITDA of $10.1 million and a Market EBITDA margin of 37
percent in the third quarter of 2008, a strong increase from the
Market EBITDA margin of 10 percent for the group in the third quarter
2007. The Market EBITDA improvement resulted from Clearwire's
consistent focus on driving economies of scale and emphasis on
containing SG&A expenses in the Initial Markets.
For the nine month year-to-date period ended September 30, 2008,
Service Revenue in the Initial Markets increased 27 percent to $78.8
million from $62.0 million in the same nine month period in 2007. In
addition, Gross Margin in the Initial Markets for the nine months was
77 percent compared to 74 percent in the same period last year. The
additional market scale and focus on cost containment helped to
significantly increase the Market EBITDA margin for the Initial
Markets to 31 percent for the period, compared to 4 percent for the
first nine months of 2007.
"We remain tremendously attuned to consistently improving
execution and improving operational efficiencies in each of our
markets," added Wolff. "More than 70 percent of our 46 domestic
operating markets are now Market EBITDA positive, and all of our U.S.
markets as a group achieved a 13% Market EBITDA margin after turning
Market EBITDA positive just last quarter. Our Initial Markets posted a
record high Market EBITDA margin of 37 percent in the third quarter
just ended. We believe our dependably strong market-level
profitability demonstrates our business model is scalable and
replicable, as evidenced by current margin achievement well in advance
of the breadth of significantly enhanced services which will be
enabled by our mobile WiMAX network."
The following table summarizes Clearwire's third quarter and nine
months ended September 30, 2008 Initial Market results, versus the
2007 third quarter and nine month results.
Initial Markets Performance
Summary of Income Statement Data (unaudited)
In thousands, unless otherwise noted
Three Months Ended Nine Months Ended
September 30 September 30
CONDENSED INCOME
STATEMENT 2008 2007 % Change 2008 2007 % Change
------- ------- -------- ------- ------- --------
Total Revenue $27,396 $22,728 21% $78,824 $62,039 27%
Gross Margin $21,138 $16,855 25% $60,678 $45,998 32%
Gross Margin % 77% 74% 77% 74%
Market EBITDA $10,075 $ 2,217 354% $24,370 $ 2,723 795%
EBITDA % 37% 10% 31% 4%
KEY OPERATING METRICS (k for '000's, MM for '000,000's)
Total Subscribers 226k 206k 226k 206k
ARPU $ 39.68 $ 37.64 $ 38.39 $ 37.33
Churn 2.7% 2.2% 2.4% 1.9%
CPGA $ 293 $ 391 $ 324 $ 367
Covered POPS 4.6MM 4.3MM 4.6MM 4.3MM
Number of EBITDA
positive markets 25 20 25 20
Management Webcast
Clearwire's senior leadership team will discuss the company's 2008
third quarter performance during a conference call and simultaneous
webcast at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time) today. The
call is expected to last approximately 45 minutes. To access today's
conference call, please call 800-573-4752, or outside the United
States please call 617-224-4324. The conference call passcode is
54580242. The simultaneous webcast can be accessed via the Internet at
http://investors.clearwire.com. The conference call will be archived
and available for replay until midnight Eastern Time (9 p.m. Pacific
Time), on November 24, 2008. To access the replay, please call
888-286-8010, or outside the United States dial 617-801-6888. The
replay passcode is 25044718.
About Clearwire
Clearwire, founded in October 2003 by telecom pioneer Craig O.
McCaw, is a provider of simple, portable and reliable wireless
high-speed Internet service. Clearwire customers connect to the
Internet using licensed spectrum, thus eliminating the confines of
traditional cable or phone lines. Headquartered in Kirkland, Wash.,
the company launched its first market in August 2004 and now offers
service in 50 markets across the U.S, as well as in Europe. For more
information, visit www.clearwire.com.
Forward-Looking Statements
This release, and other written and oral statements made by
Clearwire from time to time, contains 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; development and network launch; strategic plans
and objectives; industry conditions; the strength of its balance
sheet; and liquidity and financing needs. 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 are an early-stage company with a history of operating
losses and we expect to continue to realize significant net
losses for the foreseeable future.
-- Our pending transactions with Sprint and several strategic
investors are subject to several closing conditions that, if
not satisfied, could result in the transactions not being
completed.
-- The transaction agreement with Sprint and the strategic
investors includes covenants that limit our ability to take
certain actions prior to the completion of the transactions
and that may cause our business and prospects to suffer if
such transactions are not completed.
-- The transactions with Sprint and the investors may present
significant challenges to our management that could divert
management's attention from day-to-day operations and have a
negative impact on our business.
-- We may fail to realize all of the anticipated benefits of the
transactions with Sprint and the strategic investors.
-- Our business plan will require us to raise substantial
additional financing both in the near term and over the next
five years or more.
-- We are committed to using commercially reasonable efforts to
deploy wireless broadband networks based solely on mobile
WiMAX technology once that technology meets certain specified
performance criteria, even if there are alternative
technologies available in the future that are technologically
superior or more cost effective.
-- Our business plan contemplates migration of our pre-WiMAX
network to a mobile WiMAX network, which may not be developed
to our satisfaction.
-- We currently depend on our commercial partners to develop and
deliver the equipment for our pre-WiMAX and mobile WiMAX
networks.
-- Many of our competitors 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.
-- Craig McCaw and Intel Capital collectively control a majority
of our combined voting power, and 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 headings "Risk Factors" and "Forward-Looking Statements" in our
Annual Report on Form 10-K filed on March 13, 2008 and our Quarterly
Report on Form 10-Q filed on August 8, 2008. Clearwire assumes no
obligation to update or supplement such forward-looking statements.
IMPORTANT ADDITIONAL INFORMATION HAS BEEN FILED WITH THE SEC
In connection with the proposed transactions with Sprint Nextel
Corporation, Intel Corporation, Google Inc., Comcast Corporation, Time
Warner Cable Inc., and Bright House Networks, LLC, Clearwire filed a
definitive proxy statement with the SEC on October 17, 2008.
STOCKHOLDERS OF CLEARWIRE ARE URGED TO READ THE DEFINITIVE PROXY
STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE
THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER AND
RELATED TRANSACTIONS. The definitive proxy statement/prospectus was
mailed to the stockholders of Clearwire beginning on October 21, 2008.
Investors and security holders are able to obtain free copies of the
proxy statement and other documents filed with the SEC by Clearwire
through the web site maintained by the SEC at www.sec.gov. Free copies
of the definitive proxy statement and Clearwire's other filings with
the SEC also may be obtained from Clearwire, by directing a request to
Investor Relations at 425-216-4735. In addition, investors and
security holders may access copies of the documents filed with the SEC
by Clearwire on Clearwire's website at www.clearwire.com.
Clearwire, Sprint and their respective directors and executive
officers, may be deemed to be participants in the solicitation of
proxies from Clearwire's stockholders with respect to the transactions
contemplated by the definitive agreement between Sprint, the Investors
and Clearwire. Information regarding Clearwire's directors and
executive officers is contained in Clearwire's Annual Report on Form
10-K for the year ended December 31, 2007 and its definitive proxy
statement filed with the SEC on April 29, 2008 for its 2008 Annual
Meeting of Stockholders, which are filed with the SEC. Information
concerning Sprint's directors and executive officers is set forth in
the proxy statement dated March 27, 2008 for Sprint's 2008 annual
meeting of shareholders as filed with the SEC on Schedule 14A. You can
obtain free copies of these documents from Clearwire and Sprint,
respectively, using the contact information set forth above.
Additional information regarding interests of such participants is
included in the proxy statement filed with the SEC and available free
of charge as indicated above.
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
---------- ---------- ---------- ----------
REVENUES $ 60,839 $ 41,297 $ 170,930 $ 106,056
OPERATING EXPENSES:
Cost of goods and
services (exclusive of
a portion of
depreciation and
amortization shown
below) 44,399 29,268 124,766 69,316
Selling, general and
administrative expense 84,305 103,424 278,183 259,456
Transaction related
expenses 4,932 - 15,156 -
Research and development 537 194 1,567 1,217
Depreciation and
amortization 28,604 22,659 85,590 58,558
Spectrum lease expense 32,194 28,278 96,401 56,543
---------- ---------- ---------- ----------
Total operating
expenses 194,971 183,823 601,663 445,090
---------- ---------- ---------- ----------
OPERATING LOSS (134,132) (142,526) (430,733) (339,034)
OTHER INCOME (EXPENSE):
Interest income 3,468 16,596 15,766 52,006
Interest expense (24,726) (28,813) (79,031) (76,542)
Foreign currency gains
(losses), net (517) 292 174 224
Loss on extinguishment
of debt - (159,193) - (159,193)
Other-than-temporary
impairment loss and
realized loss on
investments, net (9,353) (14,208) (42,120) (14,208)
Other income (expense),
net (517) 453 (1,726) 2,197
---------- ---------- ---------- ----------
Total other expense,
net (31,645) (184,873) (106,937) (195,516)
---------- ---------- ---------- ----------
LOSS BEFORE INCOME TAXES,
MINORITY INTEREST AND
LOSSES FROM EQUITY
INVESTEES (165,777) (327,399) (537,670) (534,550)
Income tax provision (1,781) (1,198) (5,365) (3,927)
---------- ---------- ---------- ----------
LOSS BEFORE MINORITY
INTEREST AND LOSSES FROM
EQUITY INVESTEES (167,558) (328,597) (543,035) (538,477)
Minority interest in net
loss of consolidated
subsidiaries 1,061 994 3,406 2,961
Losses from equity
investees (78) (1,034) (2,389) (3,841)
---------- ---------- ---------- ----------
NET LOSS $(166,575) $(328,637) $(542,018) $(539,357)
========== ========== ========== ==========
Net loss per common share,
basic and diluted $ (1.01) $ (2.01) $ (3.30) $ (3.44)
========== ========== ========== ==========
Weighted average common
shares outstanding, basic
and diluted 164,232 163,586 164,145 156,940
========== ========== ========== ==========
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
September 30, December 31,
2008 2007
(unaudited)
------------- ------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 242,910 $ 876,752
Short-term investments 124,959 67,012
Restricted cash 1,205 1,077
Accounts receivable, net of allowance of
$994 and $787 5,202 3,677
Notes receivable, short-term - 2,134
Inventory 2,786 2,312
Prepaids and other assets 28,301 36,748
------------- ------------
Total current assets 405,363 989,712
Property, plant and equipment, net 650,339 572,329
Restricted cash 8,636 11,603
Long-term investments 55,278 88,632
Notes receivable, long-term 4,862 4,700
Prepaid spectrum license fees 516,773 457,741
Spectrum licenses and other intangible
assets, net 486,895 480,003
Goodwill 35,451 35,666
Investments in equity investees 12,135 14,602
Other assets 38,312 30,981
------------- ------------
TOTAL ASSETS $ 2,214,044 $ 2,685,969
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 99,708 $ 102,449
Deferred rent-current 697 24,805
Deferred revenue 11,818 10,010
Current portion of long-term debt 12,500 22,500
------------- ------------
Total current liabilities 124,723 159,764
Long-term debt 1,225,000 1,234,375
Deferred tax liabilities 47,338 43,107
Other long-term liabilities 148,226 71,385
------------- ------------
Total liabilities 1,545,287 1,508,631
MINORITY INTEREST 10,181 13,506
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.0001,
5,000,000 shares authorized; no shares
issued or outstanding
Common stock, par value $0.0001, and
additional paid-in capital,
350,000,000 shares authorized; Class
A, 135,806,518 and 135,567,269 shares
issued and outstanding 2,133,037 2,098,155
Class B, 28,596,685 shares issued and
outstanding 234,376 234,376
Accumulated other comprehensive income,
net 19,213 17,333
Accumulated deficit (1,728,050) (1,186,032)
------------- ------------
Total stockholders' equity 658,576 1,163,832
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,214,044 $ 2,685,969
============= ============
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS
(In thousands)
For the Nine Months Ended
September 30,
2008 2007
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(542,018) $ (539,357)
Adjustments to reconcile net loss to net
cash used in operating activities:
Provision for uncollectible accounts 5,244 3,631
Depreciation and amortization 85,590 58,558
Amortization of prepaid spectrum license
fees 29,695 16,962
Amortization of deferred financing costs
and accretion of debt discount 4,748 19,234
Share-based compensation 33,739 28,600
Other-than-temporary impairment loss and
realized loss on investments 42,120 14,208
Deferred income taxes 5,365 3,901
Non-cash interest on swaps 2,512 -
Minority interest (3,406) (2,961)
Losses from equity investees, net 1,796 3,841
Loss on extinguishment of debt - 159,193
Loss on other asset disposals 13,949 531
Impairment of equity investment 1,397 -
Gain on sale of equity investment - (2,213)
Changes in assets and liabilities, net:
Prepaid spectrum license fees (87,224) (183,776)
Inventory (951) (2,331)
Accounts receivable (6,829) (3,954)
Prepaids and other assets (3,984) (15,716)
Accounts payable 8,011 26,544
Accrued expenses and other liabilities 39,668 16,617
------------ ------------
Net cash used in operating activities (370,578) (398,488)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (178,367) (279,198)
Payments for acquisitions of spectrum
licenses and other (13,719) (212,353)
Purchases of available-for-sale
investments (323,225) (1,144,293)
Sales or maturities of available-for-sale
investments 266,532 1,478,252
Purchase of minority interest - (1,173)
Investments in equity investees (760) (5,293)
Receipt (issuance) of notes receivable,
related party 1,500 (2,000)
Restricted cash decrease (increase), net 2,839 (3,323)
Restricted investments - 85,670
Business acquisitions, net of cash
acquired - (7,067)
Proceeds from sale of business, net of
cash - 2,250
Proceeds from sale of equity investment
and other assets - 1,000
------------ ------------
Net cash used in investing activities (245,200) (87,528)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock for
IPO and other, net - 556,005
Proceeds from issuance of common stock for
option and warrant exercises 1,167 4,610
Proceeds from issuance of debt - 1,000,000
Financing fees - (66,954)
Principal payments on long-term debt (19,375) (745,696)
Contributions from minority interests - 15,000
------------ ------------
Net cash (used in) provided by financing
activities (18,208) 762,965
Effect of foreign currency exchange rates on
cash and cash equivalents 144 (696)
------------ ------------
Net (decrease) increase in cash and cash
equivalents (633,842) 276,253
CASH AND CASH EQUIVALENTS:
Beginning of period 876,752 438,030
------------ ------------
End of period $ 242,910 $ 714,283
============ ============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for income taxes $ - $ 24
Cash paid for interest 92,335 91,229
NON-CASH INVESTING AND FINANCING ACTIVITIES
Common stock and warrants issued for
spectrum licenses $ - $ 21,379
Common stock and warrants issued for
business acquisitions - 15
Fixed asset purchases in accounts payable 4,744 10,672
Non-cash dividends to related party - 1,465
Definition of Terms and Reconciliation of Non-GAAP Financial
Measures
The company utilizes certain 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). Certain of these financial measures are considered
non-GAAP financial measures within the meaning of Item 10 of
Regulation S-K promulgated by the SEC.
(1) EBITDA and Adjusted EBITDA are non-GAAP financial measures.
EBITDA is defined as consolidated operating loss less depreciation and
amortization. Adjusted EBITDA is defined as consolidated operating
loss less depreciation and amortization less transaction related
expenses less non-cash expenses including share-based compensation
expense, non-cash tower/office rent expense and non-cash spectrum
lease expense.
Three Months Ended Nine Months Ended
(in thousands) September 30 September 30
2008 2007 2008 2007
---------- ---------- ---------- ----------
Operating Loss $(134,132) $(142,526) $(430,733) $(339,034)
Depreciation and
Amortization 28,604 22,659 85,590 58,558
--------------------- ---------------------
EBITDA Loss (105,528) (119,867) (345,143) (280,476)
Non-Cash Items and
Transaction Related
Expenses
Transaction Related
Expenses 4,932 - 15,156 -
Share-Based
Compensation 9,995 10,398 33,739 28,600
Non-Cash Tower/Office
Rent Expense 8,254 5,559 18,505 11,245
Non-Cash Spectrum
Lease Expense 9,464 19,776 48,337 34,756
--------------------- ---------------------
Non-Cash Items and
Transaction Related
Expenses 32,645 35,733 115,736 74,601
Adjusted EBITDA $ (72,883) $ (84,134) $(229,407) $(205,875)
===================== =====================
In a capital-intensive industry, management believes Adjusted
EBITDA, as well as the associated percentage margin calculation, to be
meaningful measures of the company's operating performance. We use
Adjusted EBITDA 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 transaction related expenses and
non-cash items such as share-based compensation and non-cash expenses
related to long-term leases. Because Adjusted EBITDA facilitates
internal comparisons of our historical operating performance,
management also uses Adjusted EBITDA for business planning purposes
and in measuring our performance relative to that of our competitors.
In addition, we believe that Adjusted EBITDA and similar measures are
widely used by investors, financial analysts and credit rating
agencies as a measure of our financial performance over time and to
compare our financial performance with that of other companies in our
industry.
(2) ARPU is service revenue, less legacy businesses revenue
(businesses that were acquired through the acquisition of entities)
and CPE (Customer Premise Equipment) revenue divided by the average
number of subscribers in the period divided by the number of months in
the period.
Three Months Ended Nine Months Ended
(in thousands) September 30 September 30
2008 2007 2008 2007
----------- -------- --------- ---------
ARPU
Service Revenue $ 60,839 $41,297 $170,930 $106,056
Legacy Business Revenue (3,438) (4,433) (11,681) (11,370)
CPE Revenue (860) (687) (2,757) (1,757)
-------------------- -------------------
ARPU Revenue 56,541 36,177 156,492 92,929
Average Customers 466 322 447 278
Months in Period 3 3 9 9
ARPU $ 40.43 $ 37.41 $ 38.92 $ 37.13
==================== ===================
Management uses ARPU to identify average revenue per customer, to
track changes in average customer revenues over time, to help evaluate
how changes in our business, including changes in our 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 our customer revenue to
that of other wireless communications providers. We believe investors
use ARPU primarily as a tool to track changes in our average revenue
per customer and to compare our per customer service revenues to those
of other wireless communications providers. Other companies may
calculate this measure differently.
(3) 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. 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 our gross customer additions and therefore not included
in the churn calculation.
Management uses churn to measure retention of our subscribers, to
measure changes in customer retention over time, and to help evaluate
how changes in our business affect customer retention. We believe
investors use churn primarily as a tool to track changes in our
customer retention. Other companies may calculate this measure
differently.
(4) CPGA (Cost per Gross Addition) is selling, general and
administrative costs less general and administrative costs and legacy
businesses costs, plus CPE and PC Card equipment subsidy, divided by
gross customer additions in the period.
Three Months Ended Nine Months Ended
(in thousands) September 30 September 30
2008 2007 2008 2007
--------- --------- ---------- ----------
CPGA
Selling, General and
Administrative $ 84,305 $103,424 $ 278,183 $ 259,456
G&A and Other (66,190) (70,830) (208,534) (178,182)
------------------- ---------------------
Total Selling Expense 18,115 32,594 69,649 81,274
Total Gross Adds 50 70 180 191
Total CPGA $ 360 $ 462 $ 387 $ 426
------------------- ---------------------
Management uses CPGA to measure the efficiency of our customer
acquisition efforts, to track changes in our average cost of acquiring
new subscribers over time, and to help evaluate how changes in our
sales and distribution strategies affect the cost-efficiency of our
customer acquisition efforts. We believe investors use CPGA primarily
as a tool to track changes in our average cost of acquiring new
subscribers. Other companies may calculate this measure differently.
(5) Market EBITDA is defined as the EBITDA (see definition (1)
EBITDA and Adjusted EBITDA) in the markets. This calculation does not
include an allocation of corporate general and administrative expenses
or spectrum lease expense.
(6) Adjusted Net Loss and Adjusted Net Loss per share are non-GAAP
financial measures and are defined as Net Loss and Net Loss Per Share
excluding Transaction related expenses, Loss on extinguishment of debt
and Other-than-temporary impairment loss and realized loss on
investments.
(in thousands, except per Three Months Ended Nine Months Ended
share data) September 30, September 30,
2008 2007 2008 2007
---------- ---------- ---------- ----------
NET LOSS $(166,575) $(328,637) $(542,018) $(539,357)
Transaction related
expenses 4,932 - 15,156 -
Loss on extinguishment
of debt - 159,193 - 159,193
Other-than-temporary
impairment loss and
realized loss on
investments 9,353 14,208 42,120 14,208
---------- ---------- ---------- ----------
ADJUSTED NET LOSS $(152,290) $(155,236) $(484,742) $(365,956)
========== ========== ========== ==========
Net loss per common share,
basic and diluted $ (1.01) $ (2.01) $ (3.30) $ (3.44)
Adjusted Net loss per
common share, basic and
diluted $ (0.93) $ (0.95) $ (2.95) $ (2.33)
========== ========== ========== ==========
Weighted average common
shares outstanding, basic
and diluted 164,232 163,586 164,145 156,940
---------- ---------- ---------- ----------
Adjusted Net Loss and Adjusted Net Loss per share are used by
management to facilitate comparisons of the company's operating
performance between and among periods. Since it removes Transaction
related expenses, Loss on extinguishment of debt and
Other-than-temporary impairment loss and realized loss on investments,
it also facilitates measuring our performance to that of our
competitors and comparisons to other companies.
CONTACT: Clearwire Corporation
Investor Relations
Mary Ekman, 425-216-7995
mary.ekman@clearwire.com
or
Media Relations
Susan Johnston, 425-216-7913
susan.johnston@clearwire.com
SOURCE: Clearwire Corporation
