Clearwire Reports Fourth Quarter and Full Year 2009 Results
Key 2009 Highlights
Key 2009 Highlights
* CLEAR 4G in 27 Markets Across the U.S. Covering 34 Million People, including: Chicago, Dallas, Las Vegas, Atlanta, Philadelphia, Seattle and Honolulu
* Total Fourth Quarter Subscribers of 688,000 including 642,000 Retail Subscribers and 46,000 Wholesale Subscribers from Comcast, Sprint, and Time Warner Cable
* Largest Net Add Quarter in Company’s History; Fourth Quarter 2009 Retail Subscriber Growth of 87,000 Outpaced First Three Quarters Combined
* Total Subscribers in 4G Markets More than Doubled Sequentially to 438,000 at End of Fourth Quarter
* 2009 Revenue Increases 19 percent to $274.5 Million compared with Pro Forma 2008
* Raised $4.3 Billion, including $1.6 Billion of Additional Financial Support from Strategic Investors, and Refinancing of Debt which Extended Maturity to Late 2015
Additional Highlights
* Serves as 4G “Network of Networks” Through Wholesale Launches of 4G Service by Comcast, Sprint, and Time Warner Cable
* Network Expansion Expected to Reach up to 120 Million POPs by End of 2010; Concentration of New Launches to Occur Later in the Year; New 4G Markets to Launch in 2010 Expected to include New York, Boston, Washington, D.C., Houston, the San Francisco Bay Area, Denver, Minneapolis and Kansas City
* More than 30 Embedded 4G Devices Now Available - including Netbook and Notebook Computers
KIRKLAND, Wash., Feb 24, 2010 — Clearwire Corporation (NASDAQ: CLWR) (along with its subsidiaries, “Clearwire” or the “Company”), a leading provider of wireless broadband services, today reported its consolidated financial and operating results for the fourth quarter and full year ended December 31, 2009.
“Over the past year, Clearwire established its leadership in 4G mobile broadband services by building the largest 4G network in North America, raising additional financing to fuel our growth, supporting the 4G wholesale service launches for three of the most prominent communications companies in the U.S., and delivering solid financial results in a challenging economic environment,” said Bill Morrow, CEO of Clearwire.
“Our all-IP network and unmatched spectrum holdings have truly enabled us to become the 4G ‘network of networks.’ We now provide the underlying capability to Comcast, Sprint, and Time Warner Cable to serve the growing demand for mobile broadband services, and we are well positioned to expand our wholesale business even further. When coupled with the success of our own CLEAR retail brand, record subscriber growth, and our extensive market build plans for this year, we are confident that we remain on a strong growth trajectory for 2010.”
Business Outlook
In 2010, the Company expects to cover up to 120 million people with its 4G network. Within this footprint, services will be offered under both the CLEAR brand name, and that of the Company’s strategic wholesale providers which will vary across individual markets. The launches are expected to include top 100 markets such as New York, Boston, Washington, D.C., Houston, the San Francisco Bay Area, Denver, Minneapolis, and Kansas City.
During this year, the Company anticipates 4G subscriber levels to triple. The Company also expects retail cost-per-gross add (CPGA) to remain consistent with 2009 levels due to a significant number of market launches. In addition, the Company expects retail average-revenue-per-user (ARPU) to remain flat. The Company currently expects to have full year 2010 net cash spend between $2.8 billion to $3.2 billion.
The Company’s current and future plans are subject to a number of conditions and uncertainties, including among others, its ability to manage ongoing market development activities, its performance in launched markets and access to additional funding.
Presentation of 2009 Fourth Quarter, Year End and Pro Forma 2008 Fourth Quarter and Year End Results
As previously disclosed, on November 28, 2008, Clearwire, Sprint Nextel Corporation, Comcast Corporation, Time Warner Cable, Inc., Bright House Networks, LLC, Google Inc., and Intel Capital completed the transactions contemplated by the Transaction Agreement and Plan of Merger (the “Transaction Agreement”), entered into by the parties on May 7, 2008. For accounting purposes, the transactions (the “Transactions”) are treated as a “reverse acquisition” with the WiMAX business contributed from Sprint (the “Sprint WiMAX Business”) deemed to be the accounting acquirer. As a result, the financial results of the legacy Clearwire Corporation (”Old Clearwire”) prior to the consummation of the Transactions are not included as part of the Company’s consolidated financial statements. The results for Clearwire for the three and twelve months ended December 31, 2009, are presented with the results of operations of the Sprint WiMAX Business for the three and twelve months ended December 31, 2008, on subsequent pages of this earnings release.
In order to facilitate the most useful comparative analysis between periods, the following table summarizes Clearwire’s fourth quarter and year to date ended December 31, 2009, consolidated results versus the Pro Forma Financial Data for the comparable three and twelve month periods ended December 31, 2008. The Pro Forma Financial Data has been derived from the unaudited pro forma condensed combined statements of operations of Clearwire for the three and twelve months ended December 31, 2008. The unaudited pro forma condensed combined statements of operations of Clearwire give effect to the Transactions as if they were consummated on January 1, 2008, and are based upon the financial results for both Old Clearwire and the Sprint WiMAX Business for the relevant periods. A full presentation of the unaudited pro forma condensed combined statements of operations for the three and twelve months ended December 31, 2008, and accompanying notes, are provided on subsequent pages of this release. The unaudited pro forma condensed combined statements of operations are presented for illustrative purposes only and are not necessarily indicative of the results of operations that would have been obtained had the Transactions actually been consummated on January 1, 2008, nor are they intended to be a projection of future results of operations. The unaudited pro forma condensed combined statements of operations do not give effect to the offering of the senior secured notes and the additional equity investments that occurred in November 2009, or the rights offering commenced in December 2009, or the application of the net proceeds from these transactions.
Clearwire Corporation
Summary of Pro Forma Financial Data
(In thousands, except per share data)
(Unaudited)
Three months ended December 31, Twelve months ended December 31,
Actual Pro Forma Actual Pro Forma
2009 2008 2009 2008
REVENUES $ 79,915 $ 59,716 34 % $ 274,458 $ 230,646 19 %
OPERATING EXPENSES:
Cost of goods and services and network costs (exclusive of items shown separately below) 169,768 77,408 119 % 422,116 285,759 48 %
Selling, general and administrative expense 201,074 109,733 83 % 568,063 484,421 17 %
Depreciation and amortization 60,513 41,670 45 % 208,263 128,602 62 %
Spectrum lease expense 66,224 76,092 -13 % 259,359 250,184 4 %
Total operating expenses 497,579 304,903 63 % 1,457,801 1,148,966 27 %
OPERATING LOSS (417,664 ) (245,187 ) -70 % (1,183,343 ) (918,320 ) -29 %
LESS NON CASH ITEMS
Non Cash Expenses 61,408 52,481 17 % 194,363 188,038 3 %
Depreciation and amortization 60,513 41,670 45 % 208,263 128,602 62 %
Total non cash 121,921 94,151 29 % 402,626 316,640 27 %
ADJUSTED EBITDA (295,743 ) (151,036 ) -96 % (780,717 ) (601,680 ) -30 %
Adjusted EBITDA Margin -370 % -253 % -284 % -261 %
KEY OPERATING METRICS (k for ‘000’s, MM for ‘000,000’s)
Retail Net Subscriber Additions 87k 5k 168k 80k
Total Subscribers 688k 475k 688k 475k
Retail 642k 475k 642k 475k
Wholesale 46k 46k
Total Subscribers in 4G markets(1) 438k 438k
Retail ARPU $ 39.86 $ 39.70 $ 39.65 $ 39.12
Retail Churn 3.6 % 2.8 % 3.1 % 2.7 %
Retail CPGA $ 624 $ 468 $ 565 $ 456
Capital Expenditures $ 767MM $ 83MM $ 1,540MM $ 738MM
Covered POPS 44.7MM 18.2MM 44.7MM 18.2MM
Cash, Cash Equivalents and Short-term Investments $ 3,805MM $ 3,108MM $ 3,805MM $ 3,108MM
(1) Includes 46k wholesale subscribers
Note: For a definition and reconciliation of non-GAAP financial measures, including Adjusted EBITDA, Retail ARPU, Retail Churn, and Retail CPGA, please refer to the section titled, “Definition of Terms and Reconciliation of Non-GAAP Financial Measures to Unaudited Condensed Consolidated Statements of Operations” at the end of this release.
2009 Fourth Quarter and Year End Consolidated Results
Consolidated revenue increased by 34 percent to $79.9 million in the fourth quarter 2009, versus pro forma revenue of $59.7 million for the same quarter of 2008. The growth in revenue was driven primarily by Clearwire’s larger subscriber base, including the addition of ten new markets year-over-year.
Total subscribers increased to approximately 688,000 at the end of the fourth quarter of 2009, up from approximately 475,000 on a pro forma basis at the end of the fourth quarter 2008. Total retail subscribers in the Company’s 27 4G markets (both new markets and legacy markets recently upgraded to 4G service) were approximately 392,000 at the end of December. On a consolidated basis Clearwire added approximately 87,000 net new retail subscribers during the fourth quarter of 2009, more than the first three quarters combined. This fourth quarter increase included the addition of approximately 90,000 net new retail subscribers in the Company’s 27 4G markets, which were partially offset by a modest net decline in subscribers in domestic and international legacy markets for the quarter.
Retail ARPU for the fourth quarter of 2009 was $39.86, an increase of $0.16 from the $39.70 pro forma retail ARPU level from the prior year fourth quarter and a sequential quarter increase of $0.15 compared to $39.71 reported in the third quarter of 2009. Retail ARPU increased due to an increase in bundled sales and mobile offerings, offset by an increase in promotional activity due to the large number of new customers.
Cost of goods and services and network costs for the fourth quarter ended December 31, 2009, increased 119 percent to $169.8 million compared to pro forma cost of goods and services and network costs of $77.4 million in the fourth quarter of the prior year period. This increase is due to increased tower rents as the Company expands its 4G network, combined with more equipment sales to customers and approximately $41 million related to write offs of customer premise equipment and network and base station equipment, and an increase in obsolescence and shrinkage allowance.
Selling, General and Administrative (SG&A) expense increased to $201.1 million in the fourth quarter 2009 compared to pro forma expense of $109.7 million for the fourth quarter 2008 as a result of significantly greater gross and net adds in 4G markets than the prior years. In addition, headcount growth impacted fourth quarter 2009 SG&A expense compared to the fourth quarter 2008. Ending headcount at December 31, 2009 was approximately 3,440 compared to 1,635 employees at December 31, 2008.
Adjusted EBITDA for the fourth quarter of 2009 reflected a loss of $295.7 million, versus a similar pro forma Adjusted EBITDA loss of $151.0 million for the same period in 2008.
Higher network expansion activities led to an increase in Capital Expenditures (or CapEx) to $767 million in the fourth quarter of 2009 from pro forma CapEx of $83 million in the same period in 2008. Approximately $200 million of the 2010 network build costs were accelerated and pulled into 2009 CapEx spend. Cash spent on operations and CapEx was $823 million for the fourth quarter of 2009, and $1.97 billion for the twelve months ended December 31, 2009. This was offset by a net increase of approximately $2.7 billion in net capital raising in Q4′09. Clearwire ended December 2009 with cash and short-term investments of approximately $3.8 billion invested primarily in U.S. Treasury securities.
Management Webcast
Clearwire executives will host a conference call and simultaneous webcast to discuss the Company’s 2009 fourth quarter and year end performance at 8:30 a.m. Eastern Time today (5:30 a.m. Pacific Time). A live broadcast of the conference call will be available online on the Company’s Investor Relations website located at: investors.clearwire.com.
Interested parties can access the conference call by dialing 1-800-901-5248, or outside the United States 617-786-4512, five minutes prior to the start time. The passcode for the call is 32677854. A replay of the call will be available beginning at approximately 11:30 a.m. Eastern Time on February 24, until approximately 9:00 p.m. Eastern Time on Wednesday, March 10, by calling 1-888-286-8010, or outside the United States by dialing 617-801-6888. The passcode for the replay is 21333381.
About Clearwire
Clearwire Communications LLC, an operating subsidiary of Clearwire Corporation (NASDAQ:CLWR), offers a robust suite of advanced high-speed Internet services to consumers and businesses. As part of a multi-year network build-out plan, Clearwire’s 4G service, called CLEARTM, will be available in major metropolitan areas across the U.S., and bring together an unprecedented combination of speed and mobility. Clearwire’s open all-IP network, combined with significant spectrum holdings, provides unmatched network capacity to deliver next generation broadband access. Strategic investors include Intel Capital, Comcast, Sprint, Google, Time Warner Cable, and Bright House Networks. Clearwire currently provides 4G service, utilizing mobile WiMAX technology, in 27 markets throughout the U.S. The Company also provides pre-WiMAX communications services in 30 markets across the U.S. and a combination of other high-speed Internet and 4G services in five markets in Europe. Headquartered in Kirkland, Wash., additional information about Clearwire is available at www.clearwire.com.
