Consolidated Highlights
Covered POPs Increase 70% During 2007
Net Subscribers Grow 91% Over Prior Year
Fourth Quarter Service Revenues Increase 91% Over Same Quarter
Last Year
Market-Level Progress
Initial Markets Subscribers Grow 42% Over Same Quarter Last Year
Fourth-Quarter Initial Markets Revenues Increase 52% Over Same
Quarter Last Year
24 Markets Achieve Market EBITDA Positive Results in the Fourth
Quarter
KIRKLAND, Wash.--(BUSINESS WIRE)--March 4, 2008--Clearwire
Corporation ("Clearwire") (Nasdaq:CLWR), a leading provider of
wireless high-speed Internet service, today reported financial and
operating results for the fourth quarter and year ended December 31,
2007.
Benjamin G. Wolff, chief executive officer of Clearwire, said,
"2007 was a banner year for our company as we made significant
progress in both our new market development and our existing market
operations. On the new market development side of our company,
progress was marked by nearly doubling the size of our network
footprint, launching 14 new markets, successfully completing initial
trials of the mobile WiMAX technology that we expect to deploy in the
second half of this year and increasing our spectrum portfolio by more
than 3 billion MHz/POPs.
"With respect to the market operations side of our business, key
milestones included a year-end subscriber base of nearly 400,000,
which reflects an annual growth rate of approximately 91%, more than
doubling our service revenues and, most importantly, increasing the
number of our operating markets that were cash flow positive on a
Market EBITDA basis from four in the fourth quarter of 2006 to 24 at
the end of fourth quarter 2007.
"During the year, we increased our product portfolio to include
VoIP and PC cards, continuing to demonstrate that our fast, simple,
portable and reliable wireless broadband service has mass market
appeal. Penetration in some of our most successful markets now exceeds
20% of the homes covered by our network in these markets, despite
vigorous competition," Wolff said.
"As we move ahead in 2008, we look forward to building on the
success of our residential broadband and voice services through the
planned deployment of mobile WiMAX networks, which for the first time
will enable customers to enjoy all that the Internet has to offer when
they are both at home and away, with a simple and seamless 'True
Broadband' experience from a single, unified wireless network,"
commented Wolff.
2007 Fourth Quarter Consolidated Results
Average Revenue Per User (or ARPU) for the 2007 fourth quarter was
just over $36, which was slightly below the year-ago quarter,
primarily due to an increase in holiday season sales promotions and
slightly higher international bad debt expense. Consolidated churn was
2.4% in the 2007 fourth quarter, while domestic churn was 2.1% in the
same period.
Consolidated service revenues were $45.4 million in the quarter,
versus $23.7 million for the same quarter of 2006, or a growth rate of
91%. The growth in service revenues was driven primarily by
Clearwire's rapid subscriber growth. Clearwire added 47,000
subscribers and launched two new markets in Charlotte, N.C., and
Rochester, N.Y., in the fourth quarter.
Adjusted EBITDA reflected a loss of $83.1 million, versus an
Adjusted EBITDA loss of $62.0 million for the same period in the prior
year. The increased loss compared to the year-ago quarter was due
primarily to increased sales, general and administrative (or SG&A)
costs from targeted marketing efforts to create brand awareness around
launches in the new markets, as well as additional Cost per Gross
Addition (or CPGA) incurred to acquire new customers. Increased
expenses were also attributable to an increase in headcount in support
of Clearwire's growth initiatives and other corporate initiatives
related to operations support systems, billing support systems, mobile
WiMAX deployment and portal services.
Capital Expenditures (or CAPEX) for the fourth quarter were $82.7
million, which exceeded the CAPEX level of $62.7 million in the same
period last year. The increased CAPEX in the fourth quarter was due to
the Rochester and Charlotte market launches and expenditures
associated with future market deployments.
2007 Full-Year Consolidated Results
Clearwire ended 2007 with approximately 16.3 million people
covered by its network in 50 domestic and international markets
compared with approximately 9.6 million people in 36 markets at the
end of 2006, representing an increase of approximately 70% in
Clearwire's market opportunity for the year.
Clearwire ended the year with approximately 394,000 subscribers,
reflecting an increase of approximately 188,000 subscribers during the
year, or a growth rate of 91%. This solid subscriber growth resulted
from increased penetration in Clearwire's established markets, as well
as an expansion in the number of markets covered by its network.
Service revenues for the year ended December 31, 2007, were $151.4
million, which reflected a 124% increase over 2006 service revenues of
$67.6 million. The revenue growth was driven by the 91% increase in
subscribers during 2007, as well as higher year-over-year ARPU
results. ARPU for 2007 was $36.81, an increase of 5% versus the 2006
full-year ARPU of $35.06 for 2006. Churn increased slightly in 2007 to
2.1% from 1.9% in 2006.
Clearwire reported an Adjusted EBITDA loss of $289.0 million for
the year, compared with an Adjusted EBITDA loss of $164.2 million in
2006. The expanded loss was driven by an increase in direct operating
costs related to the 14 new markets Clearwire launched in 2007 and an
increase in SG&A related to the new markets and other corporate
initiatives in support of Clearwire's growth, including customer
acquisition costs. CPGA was essentially flat at approximately $440 due
to the number and size of market launches throughout the year.
CAPEX was $361.9 million in 2007, versus $191.7 million in 2006,
reflecting the increased investment in network deployments and
customer premise equipment and, to a lesser extent, operations support
systems, billing support systems, and mobile WiMAX development
efforts.
In addition, at the beginning of 2008, Clearwire had more than
36.0 million POPs in various stages of design, development and
construction, which Clearwire believes provides it with flexibility to
modulate the pace of its market deployment in 2008 up or down based on
the availability of required capital.
The table below summarizes Clearwire's 2007 fourth quarter and
full-year reported consolidated results, versus the 2006 fourth
quarter and full-year consolidated results.
Clearwire Corporation
Summary of Income Statement Data (unaudited)
In thousands, unless otherwise noted
Three Months Ended December
31st
REVENUE 2007 2006 % Change
------------------------------
Service $ 45,384 $ 23,743 91%
Equipment - - -
------------------------------
Total Revenue 45,384 23,743 91%
Cost of Service 37,965 16,439 131%
Cost of Equipment - - -
------------------------------
Gross Margin 7,419 7,304 2%
Gross Margin % 16% 31%
Selling, General and Administrative 101,210 72,137 40%
Research and Development 180 420 (57%)
Spectrum Lease Expense 39,874 8,867 350%
Gain on Sale of NextNet - - -
------------------------------
EBITDA Loss (133,845) (74,120) 81%
Adjustment for Non-Cash Items 50,713 12,105 319%
------------------------------
Adjusted EBITDA Loss $ (83,132)$(62,015) 34%
KEY OPERATING METRICS (k for '000's, MM for '000,000's)
Net Subscriber Additions 47k 44k
Total Subscribers 394k 206k
ARPU $ 36.09 $ 36.39
Churn 2.4% 1.9%
CPGA $ 477 $ 515
Capital Expenditures $ 82.7MM $ 62.7MM
Covered POPS 16.3MM 9.6MM
Cash, Cash Equivalents and
Investments $ 1,032MM $1,102MM
Twelve Months Ended December
31st
REVENUE 2007 2006 % Change
------------------------------
Service $ 151,440 $ 67,598 124%
Equipment - 32,583 -
------------------------------
Total Revenue 151,440 100,181 51%
Cost of Service 107,281 50,438 113%
Cost of Equipment - 19,674 -
------------------------------
Gross Margin 44,159 30,069 47%
Gross Margin % 29% 30%
Selling, General and Administrative 360,666 214,669 68%
Research and Development 1,397 8,890 (84%)
Spectrum Lease Expense 96,417 23,516 310%
Gain on Sale of NextNet - (19,793) -
------------------------------
EBITDA Loss (414,321) (197,213) 110%
Adjustment for Non-Cash Items 125,314 32,991 280%
------------------------------
Adjusted EBITDA Loss $(289,007)$(164,222) 76%
KEY OPERATING METRICS (k for '000's, MM for '000,000's)
Net Subscriber Additions 188k 144k
Total Subscribers 394k 206k
ARPU $ 36.81 $ 35.06
Churn 2.1% 1.9%
CPGA $ 440 $ 441
Capital Expenditures $ 361.9MM $ 191.7MM
Covered POPS 16.3MM 9.6MM
Cash, Cash Equivalents and
Investments $ 1,032MM $ 1,102MM
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
Fourth Quarter Results
Clearwire believes that its market-level progress in 2007 reflects
its continued focus on driving markets rapidly toward profitability.
Clearwire's initial 25 U.S. markets, or Initial Markets, all of
which commenced operations prior to 2006, achieved 42% net subscriber
growth in the fourth quarter of 2007 versus the same quarter in the
prior year.
The Initial Markets service revenue was $23.7 million in the
fourth quarter of 2007, versus $15.5 million in the 2006 fourth
quarter, reflecting a growth rate of 52%. In addition, the gross
margin in the Initial Markets increased to 76% for the fourth quarter,
versus a gross margin of 72% for fourth quarter of 2006. Market EBITDA
for the Initial Markets was $2.6 million in the quarter, or 11% of
revenue, compared to a Market EBITDA loss of $3.2 million in the
year-ago quarter. The Market EBITDA improvement resulted from a
consistent focus on driving economies of scale and emphasis on
containing SG&A expense.
Full-Year 2007 Results
Clearwire ended the year with approximately 215,000 subscribers in
its Initial Markets, reflecting an increase of approximately 64,000
subscribers for the year, or a growth rate of 42%. The Initial Markets
service revenue for 2007 was $85.7 million, versus $45.7 million in
2006, yielding an 88% growth rate, which was driven primarily by the
large subscriber increases. Gross margin as a percent of revenues in
these markets expanded to 75%, versus 65% in 2006. This solid
improvement in gross margin was driven by increased network
efficiencies, as Clearwire continued to penetrate the Initial Markets
and leverage its network assets. The Initial Markets generated a
Market EBITDA margin of 6% for 2007, compared with a negative 56%
Market EBITDA margin in 2006.
By the end of the year, 20 additional markets turned Market EBITDA
positive, bringing the total number of Market EBITDA positive markets
to 24 out of our 46 domestic markets in the fourth quarter.
"We are highly focused on consistently improving execution in each
of our markets," added Wolff. "Over half of our domestic markets were
Market EBITDA positive, in the fourth quarter of 2007, even before any
of the additional revenue streams that will be made possible by mobile
WiMAX are implemented. We now have markets exceeding 30% Market EBITDA
margins, which we believe demonstrates a scalable, replicable business
model."
Initial Markets Performance
Summary of Income Statement Data (unaudited)
In thousands, unless otherwise noted
Three Months Ended Twelve Months Ended
December 31st December 31st
2007 2006 % Change 2007 2006 % Change
-------------------------- ---------------------------
Total
Revenue $23,662 $15,549 52% $85,701 $ 45,685 88%
Gross Margin $18,084 $11,221 61% $64,082 $ 29,762 115%
Gross Margin
% 76% 72% 75% 65%
Market
EBITDA $ 2,584 $(3,248) 180% $ 5,308 $(25,678) 121%
EBITDA % 11% (21%) 6% (56%)
KEY OPERATING METRICS (k for '000's, MM for '000,000's)
Total 215k 151k 215k 151k
Subscribers
ARPU $ 37.04 $ 36.79 $ 37.25 $ 35.36
Churn 2.3% 1.9% 2.0% 1.8%
CPGA $ 428 $ 431 $ 380 $ 411
Covered POPS 4.4MM 4.1MM 4.4MM 4.1MM
Number of
EBITDA
positive
markets 21 4 21 4
2008 Guidance Outlined
The table below sets forth Clearwire's consolidated 2008 full-year
guidance.
Consolidated Clearwire 2008 Guidance
Item 12/31/08 Percentage Increase
Covered POPs Growth 20 - 22M 23% - 35%
Subscribers 510 - 530K 29% - 35%
Revenue $205 - $215M 36% - 42%
CAPEX $275M - $290M (20% - 24%)
Management Webcast
Clearwire's senior leadership team will discuss the company's 2007
and fourth quarter performance during a conference call and
simultaneous webcast at 11 a.m. Eastern Time (8 a.m. Pacific Time)
today. The call is expected to last approximately 60 minutes. To
access today's conference call, please call 888-680-0892, or outside
the United States please call 617-213-4858. The conference call
passcode is 78850119. 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 March 18, 2008. To access the replay, please
call 888-286-8010, or outside the United States please call
617-801-6888. The replay passcode is 38903556.
About Clearwire
Clearwire, founded in October 2003 by telecom pioneer Craig O.
McCaw, is a provider of simple, fast, 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 16 states 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;
development, network launch, and 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 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 current
network to a mobile WiMAX network, which is not yet
commercially available, and may never be developed to our
satisfaction or at all.
-- We currently depend on our commercial partners to develop and
deliver the equipment for our existing and planned 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
Quarterly Report on Form 10-Q filed on November 14, 2007. Clearwire
assumes no obligation to update or supplement such forward-looking
statements.
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(Unaudited)
December December
31, 31,
2007 2006
------------ -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 876,752 $ 438,030
Short-term investments 67,012 663,644
Restricted cash 1,077 10,727
Restricted investments - 69,401
Accounts receivable, net of allowance of $787
and $753 3,677 2,774
Notes receivable short-term, related party 2,134 4,409
Inventory 2,312 1,398
Prepaids and other assets 36,748 19,219
------------ -----------
Total current assets 989,712 1,209,602
Property, plant and equipment, net 572,329 302,798
Restricted cash 11,603 117
Restricted investments - 16,269
Long-term investments 88,632 -
Notes receivable long-term, related party 4,700 -
Prepaid spectrum license fees 457,741 241,151
Spectrum licenses and other intangible
assets, net 480,003 222,980
Goodwill 35,666 30,908
Investments in equity investees 14,602 14,983
Other assets 30,981 29,565
------------ -----------
TOTAL ASSETS $ 2,685,969 $2,068,373
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 102,447 $ 108,216
Deferred rent 24,805 6,986
Deferred revenue 10,010 5,599
Due to affiliate 2 532
Current portion of long-term debt 22,500 1,250
------------ -----------
Total current liabilities 159,764 122,583
Long-term debt, net of discount of $0 and
$110,007 1,234,375 644,438
Other long-term liabilities 114,492 42,385
------------ -----------
Total liabilities 1,508,631 809,406
MINORITY INTEREST 13,506 1,358
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, 135,567,269
and 109,325,236 shares issued and
outstanding 2,098,155 1,474,759
Class B, 28,596,685 shares issued and
outstanding 234,376 234,376
Common stock and warrants payable - 166
Deferred compensation - (116)
Accumulated other comprehensive income 17,333 6,990
Accumulated deficit (1,186,032) (458,566)
------------ -----------
Total stockholders' equity 1,163,832 1,257,609
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,685,969 $2,068,373
============ ===========
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Year Ended December 31,
2007 2006 2005
---------- ---------- ----------
REVENUES:
Service $ 151,440 $ 67,598 $ 8,451
Equipment and other - 32,583 25,003
---------- ---------- ----------
Total revenues 151,440 100,181 33,454
OPERATING EXPENSES:
Cost of goods and services (exclusive
of a portion of depreciation and
amortization shown below):
Cost of service 107,281 50,438 13,086
Cost of equipment - 19,674 10,483
Selling, general and administrative
expense 360,666 214,669 106,211
Research and development 1,397 8,890 9,639
Depreciation and amortization 84,694 40,902 11,913
Spectrum lease expense 96,417 23,516 9,356
Gain on sale of NextNet - (19,793) -
---------- ---------- ----------
Total operating expenses 650,455 338,296 160,688
---------- ---------- ----------
OPERATING LOSS (499,015) (238,115) (127,234)
OTHER INCOME (EXPENSE):
Interest income 65,736 30,429 6,605
Interest expense (96,279) (72,280) (14,623)
Foreign currency gains, net 363 235 20
Loss on extinguishment of debt (159,193) - -
Other-than-temporary impairment loss
on investments (35,020) - -
Other income, net 1,801 2,150 300
---------- ---------- ----------
Total other expense, net (222,592) (39,466) (7,698)
---------- ---------- ----------
LOSS BEFORE INCOME TAXES, MINORITY
INTEREST AND LOSSES FROM EQUITY
INVESTEES (721,607) (277,581) (134,932)
Income tax provision (5,427) (2,981) (1,459)
---------- ---------- ----------
LOSS BEFORE MINORITY INTEREST AND
LOSSES FROM EQUITY INVESTEES (727,034) (280,562) (136,391)
Minority interest in net loss of
consolidated subsidiaries 4,244 1,503 387
Losses from equity investees (4,676) (5,144) (3,946)
---------- ---------- ----------
NET LOSS $(727,466) $(284,203) $(139,950)
========== ========== ==========
Net loss per common share, basic and
diluted $ (4.58) $ (2.93) $ (1.97)
========== ========== ==========
Weighted average common shares
outstanding, basic and diluted 158,737 97,085 71,075
========== ========== ==========
CLEARWIRE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASHFLOWS
(In thousands)
(Unaudited)
Year Ended December 31,
2007 2006 2005
------------ ------------ ----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (727,466) $ (284,203) $(139,950)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Provision for uncollectible
accounts 4,915 885 368
Depreciation and amortization 84,694 40,902 11,913
Amortization of prepaid
license fees 37,884 6,273 2,914
Amortization of deferred
financing costs and accretion
of debt discount 20,707 19,754 5,279
Deferred income taxes 5,412 2,960 1,459
Share-based compensation 42,771 14,246 2,542
Minority interest (4,244) (1,503) (387)
Losses from equity investees,
net 4,676 5,144 3,946
Loss on extinguishment of debt 159,193 -- --
Other-than-temporary
impairment loss on
investments 35,020 -- --
Loss (gain) on other asset
disposals 850 (1,915) 841
Gain on sale of equity
investment (2,213) -- --
Gain on sale of business, net
of cash -- (19,793) --
Changes in assets and liabilities,
net of effects from acquisitions:
Prepaid spectrum license fees (235,479) (64,638) (25,040)
Inventory (914) (1,913) 6,005
Accounts receivable (5,387) (686) (4,306)
Prepaids and other assets (17,841) (10,687) (4,445)
Accounts payable 11,198 389 14,027
Accrued expenses and other
liabilities 64,619 61,447 35,309
Due to affiliate (530) 184 (7,130)
------------ ------------ ----------
Net cash used in operating
activities (522,135) (233,154) (96,655)
------------ ------------ ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property, plant and
equipment (361,861) (191,747) (132,724)
Payments for acquisitions of
spectrum licenses and other (222,920) (67,665) (24,279)
Purchases of short-term
investments (1,294,484) (1,143,079) (368,160)
Sales or maturities of short-term
investments 1,760,246 575,845 350,429
Investments in equity investees (5,293) (2,161) (13,737)
Issuance of notes receivable,
related party (2,000) (4,105) --
Restricted cash (1,836) (1,830) (3,704)
Restricted investments 85,670 (30,324) (55,346)
Business acquisitions, net of
cash acquired (7,066) (49,576) (27,779)
Proceeds from sale of business,
net of cash - 47,085 --
Proceeds from sale of equity
investment and other assets 3,250 -- --
------------ ------------ ----------
Net cash used in investing
activities (46,294) (867,557) (275,300)
------------ ------------ ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of common
stock for IPO and other, net 556,005 1,030,683 139,609
Proceeds from issuance of common
stock for option and warrant
exercises 4,849 -- --
Proceeds from issuance of debt 1,250,000 495,350 260,346
Financing fees (69,462) (21,820) (10,774)
Principal payments on long-term
debt (748,821) -- --
Contributions from minority
interests 15,000 -- --
------------ ------------ ----------
Net cash provided by financing
activities 1,007,571 1,504,213 389,181
------------ ------------ ----------
Effect of foreign currency
exchange rates on cash and cash
equivalents (420) 5,340 (636)
------------ ------------ ----------
Net increase in cash and cash
equivalents 438,722 408,842 16,590
CASH AND CASH EQUIVALENTS:
Beginning of period 438,030 29,188 12,598
------------ ------------ ----------
End of period $ 876,752 $ 438,030 $ 29,188
============ ============ ==========
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 non-cash expenses
including share-based compensation expense, non-cash tower rent
expense and non-cash spectrum lease expense.
(in thousands) Three Months Ended Twelve Months Ended
December 31st December 31st
2007 2006 2007 2006
------------------- --------------------
Operating Loss $(159,981)$(88,650) $(499,015)$(238,115)
Depreciation and
Amortization 26,136 14,530 84,694 40,902
------------------- --------------------
EBITDA Loss (133,845) (74,120) (414,321) (197,213)
Non-Cash Items
Share-Based Compensation 14,171 5,880 42,771 14,246
Non-Cash Tower/Office
Rent Expense 6,941 1,598 18,186 5,407
Non-Cash Spectrum Lease
Expense 29,601 4,627 64,357 13,338
------------------- --------------------
Non-Cash 50,713 12,105 125,314 32,991
Adjusted EBITDA $(83,132)$(62,015) $(289,007)$(164,222)
=================== ====================
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 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 (Average Revenue per User) is service revenue, less
legacy businesses revenue (businesses that were acquired through the
acquisition of spectrum 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.
(in thousands) Three Months Twelve Months
Ended December Ended December
31st 31st
2007 2006 2007 2006
---------------- ------------------
ARPU
Service Revenue $45,384 $23,743 $151,440 $ 67,598
Legacy Business Revenue (4,397) (3,472) (15,769) (11,773)
CPE Revenue (751) (356) (2,507) (723)
---------------- ------------------
ARPU Revenue 40,236 19,915 133,164 55,102
Average Customers 372 182 301 131
Months in Period 3 3 12 12
ARPU $ 36.09 $ 36.39 $ 36.81 $ 35.06
================ ==================
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 divided by
gross customer additions in the period.
(in thousands) Three Months Ended Twelve Months Ended
December 31st December 31st
2007 2006 2007 2006
------------------ --------------------
CPGA
Selling, General and
Administrative $101,210 $ 72,137 $ 360,666 $ 214,669
G&A and Other (66,061) (44,181) (244,243) (137,779)
------------------ --------------------
Total Selling Expense 35,149 27,956 116,423 76,890
Total Gross Adds 74 54 265 174
Total CPGA $ 477 $ 515 $ 440 $ 441
================== ====================
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 Initial Markets. This calculation
does not include an allocation of corporate general and administrative
expenses or spectrum lease expense.
CONTACT: Clearwire
Investor Relations
Hope Cochran, 425-216-7974
hope.cochran@clearwire.com
or
Media Relations
Susan Johnston, 425-216-7913
susan.johnston@clearwire.com
SOURCE: Clearwire Corporation
