You realize you’re having a wacky quarter when it involves a resigning CEO , lawsuits , and rumors that one among your wholesale partners is courting your potential replacement. But are you able to still pop out on top? Clearwire answered this query during yesterday’s Q1 2011 earnings report back to investors, and the answer’s just as intriguing because the quarter itself. Though it posted a considerable revenue of $242 million, the corporate was also inflicted with a net lack of $227 million. Don’t be concerned, it gets crazier — Clearwire experienced record subscriber growth, seeing a rise of 533 percent year-over-year from Q1 2010. Seems like a contradiction, right? a couple of factors brought about the loss, similar to higher costs from network expansion and writing off the “abandonment of projects that now not fit within management’s strategic network plans.” A loss is a loss, but no less than the longer term looks brighter; Clearwire predicts it’s going to end the year with nearly 1,000,000 more subs than originally forecasted (9.5 million, up from 8.8). Saving one of the best news for last, CEO John Stanton announced his company isn’t any longer feeling the pressure to unload a number of its spectrum , primarily because of its recent $1 billion give attention to Sprint . The deal will add enough cash flow to sustain network operations for a higher year, so Clearwire just should make certain it uses one of the vital additional cash to purchase us all something pretty. The entire press release are available after the break.
Record Quarterly Net Subscriber Additions of one.8 Million; 1.6 Million Wholesale, 155,000 Retail
Pro Forma 1Q 2011 Revenue $258.1 Million, Up 142% From $106.7 Million, Year Over Year
4G Network Reaches 126 Million People in Q1 2011, Up 207% From 41 Million Year Over Year
KIRKLAND, Wash., May 4, 2011 (GLOBE NEWSWIRE) — Clearwire Corporation [1] (Nasdaq:CLWR), a number one provider of 4G wireless broadband services within the U.S., today reported its financial and operating results for the primary quarter 2011.
“In the course of the quarter we made good progress toward our objective of attaining positive EBITDA in 2012 by executing new agreements with Sprint, delivering strong post-pay subscriber growth and corporate-best wholesale revenue growth, in addition to significantly lowering our operating costs,” said John Stanton, Clearwire [2]‘s Chairman and interim CEO.
Erik Prusch, Clearwire [2]‘s Chief Operating Officer added, “Looking ahead, we think to work closely with Sprint and all of our other wholesale partners to expand our 4G leadership and capitalize on our rich spectrum holdings that enable us to satisfy the exploding customer demand for mobile broadband internet access. Because the beginning of the year, our network has experienced a 40% increase in network usage because of expanded coverage, record subscriber growth and better usage per device. Only Clearwire [2] has the capacity required to deliver a really next generation wireless broadband experience.”
Clearwire [2] ended the 1st quarter 2011 with approximately 6.15 million total subscribers, up 533% from 971,000 subscribers inside the first quarter 2010. The subscriber base contains 1.29 million retail subscribers and four.86 million wholesale subscribers. In the course of the first quarter 2011, Clearwire [2] added 1.8 million total net new subscribers, including 155,000 retail additions and 1.6 million wholesale additions. Clearwire [2]‘s wholesale subscribers consist primarily of users of 3G/4G multi-mode devices. For wholesale subscribers with minimal or no usage on Clearwire [2]‘s network, including those outside of Clearwire [2]‘s service areas, Clearwire [2] receives nominal revenue, subject to certain exceptions.
First quarter 2011 actual revenue was $242.0 million. Consolidated pro forma revenue for the primary quarter 2011 was $258.1 million, a 142% increase over first quarter 2010 actual revenue of $106.7 million. Retail revenue and other revenue was $181.1 million inside the first quarter 2011, retail average revenue per user (ARPU) was a record $46.32, and pro forma wholesale revenue was $77.0 million, or $6.37 in pro forma wholesale ARPU within the first quarter 2011.
Consolidated pro forma revenue and pro forma wholesale revenue includes approximately $16.1 million payable by Sprint to Clearwire [2] for wholesale services provided within the first quarter of 2011 under the amendment to the 4G MVNO Agreement with Sprint that was announced on April 18, 2011, or the 4G Amendment. This extra wholesale revenue, which Clearwire [2] expects to acknowledge within the second quarter, seriously is not included within the Company’s GAAP first quarter results as the 4G Amendment was signed after March 31, 2011. In evaluating Clearwire [2]‘s financial performance for the primary quarter, management believes that it’s useful to provide pro forma revenue and net loss caused by Clearwire [2] Corporation.
Retail cost per gross addition (CPGA) improved to $301 inside the first quarter 2011 from $439 within the first quarter 2010 and $422 within the fourth quarter 2010. Retail churn was 3.3% within the first quarter 2011, up from 3.0% within the first quarter of 2010, but an improvement from 3.8% inside the fourth quarter 2010. Wholesale churn was 1.3% within the first quarter 2011, an improvement from fourth quarter wholesale churn of one.4% and primary quarter 2010 churn of two.7%.
The primary quarter 2011 actual net loss thanks to Clearwire [2] was ($227.0) million, or ($0.93) per basic share, and the primary quarter 2011 pro forma net loss caused by Clearwire [2] was ($223.0) million, or ($0.91) per basic share. Both include the impact of $202.2 million in non-cash write-offs as discussed within the result of operations section below. On the end of the primary quarter 2011, Clearwire [2] operated networks covering areas where approximately 131 million people reside globally, including approximately 126 million people in 4G markets within the U.S. Within the first quarter 2011, the corporate added another 14 million covered people to its domestic 4G service areas.
2011 Outlook
Clearwire [2] now expects to finish 2011 with approximately 9.5 million subscribers, with most of these subscribers coming from its wholesale business. It is a rise from the former guidance of 8.8 million subscribers provided in February 2011. The corporate continues to expect capital expenditures in 2011 to be lower than $400 million. This year Clearwire [2] also expects to aggressively implement additional cost efficiencies aimed toward improving cash flow and achieving positive EBITDA in 2012.
Result of Operations
Cost of products and services and network costs for the primary quarter 2011 increased 59% to $243.6 million when compared with $153.4 million for the 1st quarter 2010, primarily attributable to a rise in tower lease expense of $54.3 million and a rise in network costs of $14.0 million due to Clearwire [2]‘s network expansion activities in 2010.
Selling, General and Administrative (SG&A) expense for the primary quarter 2011 increased 4.5% to $224.0 million in comparison with $214.4 million for the primary quarter 2010. The rise is primarily attributable to higher general and administrative expenses, including customer care, commissions and property taxes incurred throughout the three months ended March 31, 2011, offset by lower marketing expenses because the Company continues to focus sales efforts on cheaper price channels.
Loss from abandonment and impairment of network and other assets for the primary quarter 2011 totaled $202.2 million compared to $611,000 for the primary quarter 2010. This charge contains approximately $31.1 million in write-offs concerning abandonment of projects that now not fit within management’s strategic network plans. The abandoned projects were originally undertaken in reference to Clearwire [2]‘s network build-out but weren’t incorporated into the Company’s network at launch and now not fit within its future build plans. Additionally, in reference to Clearwire [2]‘s savings initiatives, in the course of the first quarter of 2011 the corporate identified, evaluated and terminated certain tower leases, or when early termination was not available under the terms of the lease, Clearwire [2] advised its landlords of the Company’s intention to not renew. The fees for projects classified as construction in progress involving leases for which Clearwire [2] has initiated such termination actions were written down, leading to a charge of roughly $140.8 million for the 3 months ended March 31, 2011. Additionally, network assets and spectrum in two of the Company’s international entities were determined to be impaired leading to a charge of $30.3 million for the 3 months ended March 31, 2011.
Substantial completion of the primary phase of the Company’s network build activities caused a decrease in Capital Expenditures (CapEx) to $132 million within the first quarter 2011 from CapEx of $690 million for the primary quarter 2010. The corporate ended the primary quarter 2011 with cash and investments of roughly $1.2 billion invested primarily in U.S. Treasury securities. On April 27, 2011, Clearwire [2] received a cash payment of $181.5 million constituted of the initial installments of the pre-payment and take-or-pay commitment for 2011, and the $28.2 million settlement amount based on the recent Sprint wholesale agreements.
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