Clearwire (CLWR) Q1 2012 Earnings Call April 26, 2012 4:15 pm ET Executives Alice Ryder - Erik E. Prusch - Chief Executive Officer, President and Director Hope F. Cochran - Chief Financial Officer John Saw - Chief Technology Officer and Senior Vice President Analysts Jennifer M. Fritzsche - Wells Fargo Securities, LLC, Research Division Walter Piecyk - BTIG, LLC, Research Division Jonathan Chaplin - Crédit Suisse AG, Research Division Philip Cusick - JP Morgan Chase & Co, Research Division Richard H. Prentiss - Raymond James & Associates, Inc., Research Division Simon Flannery - Morgan Stanley, Research Division Michael J. Funk - BofA Merrill Lynch, Research Division Anthony Klarman - Deutsche Bank AG, Research Division Presentation Operator
In addition, today's call may contain forward-looking statements reflecting management's beliefs and assumptions concerning future events and trends and/or expectations regarding the financial results. Forward-looking statements include, among other things, our future financial and operating performance and financial condition, including projections and targets for 2012 and subsequent period, subscriber growth, network deployment or development plans, strategic plans and objectives and future liquidity.These forward-looking statements are all based on currently available operating financial and competitive information and are subject to various risks and uncertainties. Listeners are cautioned not to put undue reliance on any forward-looking statements as they are not a guarantee of future performance. Please refer to our press release or our filings with the SEC for more information concerning risk factors that could cause actual results to differ materially from those in the forward-looking statements. The company assumes no obligation to update any of these statements. Finally, all mentions of EBITDA on this call reference adjusted EBITDA as defined in our press release where listeners may find definitions and reconciliations for all non-GAAP measures discussed today. I will now turn the call over to Erik Prusch. Erik E. Prusch Thank you, Alice. Good afternoon, everyone. I'm pleased to report today the great progress we have made in the first quarter. On our last call, I shared our plans to focus on 4 goals in 2012, which we believe are instrumental to Clearwire becoming a leading LTE provider in the United States. Those goals were: first, to increase the cash contribution from our resell operations by a double-digit percentage. Second [Audio Gap] great start in achieving our first objective of increasing the cash contribution from our retail operations by a double-digit percentage. During the quarter, we rolled out our new no-contract retail offering in Earnest and supported it with a targeted marketing campaign. We also launched 3 new CLEAR devices this quarter, a hotspot, a wireless modem and the first USB in the country to offer instant 4G connectivity without either [ph] software.
We're already seeing very positive product reviews. We've seen at PC Magazine and others, as well as positive impacts to our operating results from these marketing efforts. First quarter 2012 retail cash contribution more than doubled year-over-year primarily as a result of 16% growth in retail and other revenue. And 40% lower selling costs reflecting the low cost nature of our new retail offering.Our customers are now purchasing their devices at unsubsidized prices, and we are selling our services through lower cost channels so commissions are substantially lower. While we expect a higher retail churn rate in 2012 when compared to 2011 due to the no-contract nature of the revised offering, early results thus far are strong and we continue to expect the net effect of the modifications will be incremental to cash. As a result, we remain on track to generate double-digit growth in retail cash contribution and expect we will continue to reap the benefits of the investments we have made in our retail business over the past few years to transform this channel into a meaningful cash source for the company in 2012 and beyond. Turning now to our second goal of making significant progress in our LTE Advanced-ready network build. After collaborating closely with Sprint over the past few months, we have finalized the identification of the first 5,000 sites we intend to build as part of our larger LTE overlay of up to 8,000 sites and have officially kicked off the build. The initial process for equipment testing and site preparation are now underway. And we remain on track to have the first 5,000 sites on-air by the end of June 2013. These high-usage sites were carefully selected based on a detailed profitability and ROI analysis and our belief is they will not only enhance service for Sprint customers but also for the customers that Leap Wireless and other potential workers who would otherwise look to sell split in the central business districts and other high usage areas where we plan to make our LTE network available. Read the rest of this transcript for free on seekingalpha.com