NTELOS Holdings Corp. Reports Third Quarter 2012 Operating Results

NTELOS Holdings Corp. (the “Company,” NASDAQ: NTLS), a leading regional provider of nationwide wireless voice and data communications and home to the “best value in wireless,” announced today operating results for its third quarter ended September 30, 2012.

Third Quarter Highlights
  • Operating revenues for the third quarter 2012 increased 7% to $114.5 million, compared to $107.4 million for the same period in 2011;
  • Net subscriber additions for the third quarter 2012 were 5,500, compared to a net loss of (9,800) for the same period in 2011;
  • Blended subscriber churn for the third quarter 2012 improved to 2.9%, compared to 3.7% for the same period in 2011; and
  • Blended ARPU for the third quarter was $50.93, compared to $49.77 for the same period in 2011.

“During the third quarter, we continued to execute successfully against our combined retail / wholesale operating model. Within our retail business, we were extremely encouraged by the substantial increase in subscriber revenue, which had its largest sequential improvement in more than four years. We also experienced substantial growth in smartphone penetration during the quarter, ending the period with smartphone customers representing 50% of our subscriber base, up from 45% and 24% at the end of Q2 2012 and Q3 2011, respectively. These accomplishments were the result of a strong response to the value proposition within our network operating footprint, continued improvements in our distribution network as well as favorable handset additions to our smartphone lineup,” noted James A. Hyde, CEO of NTELOS Holdings Corp. “At the same time, wholesale revenue increased sequentially and year-over-year, driven by the continued growth in both voice and data usage on our network.”

Highlights from Operations
  • Operating revenues for the third quarter 2012 were $114.5 million, up 7% from the third quarter 2011. The increase in operating revenues reflected both an increase in wholesale revenue and an increase in retail revenues;
  • Retail revenues, which include subscriber and equipment revenue, were $71.1 million for the third quarter 2012, compared to $69.9 million for the third quarter 2011;
  • Wholesale and other revenue derived primarily from the Company’s Strategic Network Alliance with Sprint increased 16% to $43.3 million for the third quarter 2012, compared to $37.5 million for the third quarter 2011;
  • Adjusted EBITDA was $31.9 million for the third quarter 2012, compared to $38.7 million for the third quarter 2011; and
  • Income from continuing operations, less net income attributable to noncontrolling interests, was $4.6 million, or $0.22 per diluted share, for the third quarter 2012 compared to $6.5 million, or $0.31 per diluted share, for the same period in 2011.

Total Subscribers
  • Total subscribers were 430,300 as of September 30, 2012, compared to 415,000 as of September 30, 2011;
  • Total gross additions for the third quarter were 42,400, compared to 36,500 for the same period of 2011; and
  • Total net subscriber additions for the third quarter were 5,500, compared to a loss of (9,800) for the same period for 2011.

Postpay Subscribers
  • Postpay subscriber gross additions for the third quarter 2012 were 22,000, compared to 16,500 in the third quarter 2011 and 16,800 in the second quarter 2012;
  • Net postpay subscriber additions were 4,900 for the third quarter 2012, compared to a loss of (6,400) in the third quarter 2011 and up significantly from a gain of 700 in the second quarter 2012;
  • Postpay churn for the third quarter 2012 was 2.0%, compared to 2.6% in the third quarter 2011; and
  • As of September 30, 2012, total postpay subscribers were 288,900.

Prepay Subscribers
  • Prepay subscriber gross additions for the third quarter 2012 were 20,400, compared to 20,000 in both the third quarter 2011 and second quarter 2012;
  • Net prepay subscriber additions were 600 for the third quarter 2012, compared to a loss of (3,400) in the third quarter 2011 and additions of 2,800 in the second quarter 2012;
  • Prepay churn for the third quarter 2012 was 4.7%, compared to 6.5% in the third quarter 2011; and
  • As of September 30, 2012, total prepay subscribers were 141,400.

Mr. Hyde concluded, “We expect the favorable trends seen in the first nine months of 2012 to continue. The benefits of the improvements we have made to our handset lineup and the consistent focus on our value proposition and brand positioning are successfully impacting our retail business. These results complement the continued growth recognized in the wholesale business, which combined provide a catalyst for positive returns for our shareholders.”

Discontinued Operations

The Company completed the separation of its wireless and wireline operations with the spin-off of Lumos Networks Corp. (NASDAQ: LMOS) on October 31, 2011. The wireline results are reflected as Discontinued Operations for all periods presented. As such, the reported operating results reflect the wireless operations of the Company, including certain expenses related to the business separation.

Net Income

Net income, after net income attributable to noncontrolling interests, was $4.6 million, or $0.22 per diluted share, for the third quarter 2012, compared to net income, after net income attributable to noncontrolling interests, of $13.3 million, or $0.63 per diluted share, for the third quarter 2011, which included $6.8 million related to discontinued operations.

Declaration of Dividend

On November 2, 2012, the Company’s Board of Directors declared a quarterly cash dividend on its common stock in the amount of $0.42 per share to be paid on January 11, 2013 to stockholders of record on December 14, 2012.

Business Outlook

For the year ended December 31, 2012, the Company expects its full year 2012 Adjusted EBITDA to be between $132.0 million and $136.0 million. In addition, the Company expects its full year 2012 capital expenditures to be approximately $75.0 million. Lastly, the Company reaffirmed previously communicated subscriber development guidance of net positive subscriber growth in both postpaid and prepaid subscribers for the full year 2012.

Conference Call

The Company will host a conference call with investors and analysts to discuss its third quarter 2012 results this morning, November 8, 2012, at 10:00 a.m. ET. To participate, please dial 1-877-317-6789, 1-866-605-3852 in Canada and 1- 412-317-6789 for international, approximately 10 minutes before the scheduled start of the call. The conference call will also be accessible live on the Investor Relations section of the Company’s website at http://ir.ntelos.com.

An archive of the conference call will be available online at http://ir.ntelos.com beginning approximately two hours after the call and continuing until November 15, 2012. A replay will also be available via telephone by dialing 1-877-344-7529, 1-412-317-0088 internationally and entering access code 10020133 beginning approximately two hours after the call and continuing until November 15, 2012.

Non-GAAP Measures

Adjusted EBITDA is defined as net income attributable to NTELOS Holdings Corp. before interest, income taxes, depreciation and amortization, accretion of asset retirement obligations, gain/loss on derivatives, net income attributable to noncontrolling interests, other expenses/income, equity-based compensation charges, acquisition related charges, net income from discontinued operations and costs related to the separation of the wireless and wireline operations.

ARPU, or average monthly revenue per user, is computed by dividing service revenues per period by the average number of subscribers during that period. Please see the footnotes in the exhibits for a complete definition of this measure.

Adjusted EBITDA is a key metric used by investors to determine if the Company is generating sufficient cash flows to continue to produce shareholder value, provide liquidity for future growth and continue to fund dividends. ARPU provides management with useful information concerning the appeal of the Company’s rate plans and service offerings and the Company’s performance in attracting and retaining high value customers.

Adjusted EBITDA and ARPU are non-GAAP financial performance measures. They should not be considered in isolation or as an alternative to measures determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Please refer to the exhibits and materials posted on the Company’s website for a reconciliation of these non-GAAP financial performance measures to the most comparable measures reported in accordance with GAAP and for a discussion of the presentation, comparability and use of such financial performance measures.

About NTELOS

NTELOS Holdings Corp. (NASDAQ: NTLS), operating through its subsidiaries as “nTelos Wireless,” is headquartered in Waynesboro, VA, and provides high-speed, dependable nationwide voice and data coverage for over 430,000 retail subscribers based in Virginia, West Virginia and portions of Maryland, North Carolina, Pennsylvania, Ohio and Kentucky. The Company’s licensed territories have a total population of approximately 8.1 million residents, of which its wireless network covers approximately 6.0 million residents. The Company is also the exclusive wholesale provider of wireless digital PCS services to Sprint Nextel in the Company’s western Virginia and West Virginia service area for all Sprint CDMA wireless customers. Additional information about the Company is available at www.ntelos.com or www.facebook.com/nteloswireless and www.twitter.com/ntelos_wireless.

SPECIAL NOTE FROM THE COMPANY REGARDING FORWARD-LOOKING STATEMENTS

Any statements contained in this press release that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. The words “anticipates,” “believes,” “expects,” “intends,” “plans,” “estimates,” “targets,” “projects,” “should,” “may,” “will” and similar words and expressions are intended to identify forward-looking statements. Such forward-looking statements reflect, among other things, our current expectations, plans and strategies, and anticipated financial results, all of which are subject to known and unknown risks, uncertainties and factors that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements. Many of these risks are beyond our ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made. We do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise. There are important factors with respect to any such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements. We advise the reader to review in detail the cautionary statements and risk factors included in our SEC filings, including our most recent Annual Report filed on Form 10-K.

Exhibits:

  • Condensed Consolidated Balance Sheets (unaudited)
  • Condensed Consolidated Statements of Operations (unaudited)
  • Reconciliation of Net Income Attributable to NTELOS Holdings Corp. to Adjusted EBITDA
  • Key Metrics
  • ARPU Reconciliation
NTELOS Holdings Corp.        
Condensed Consolidated Balance Sheets (unaudited)    
 
(In thousands) September 30, 2012 December 31, 2011
 
ASSETS
Current Assets
Cash $ 64,604 $ 59,950
Restricted cash - 199
Accounts receivable, net 42,348 36,292
Inventories and supplies 10,352 7,570
Prepaid expenses and other current assets   13,662   14,445
  130,966   118,456
 
Securities and Investments 1,524 1,403
 
Property, Plant and Equipment, net 299,015 288,368
 
Intangible Assets
Goodwill 63,700 63,700
Radio spectrum licenses 132,326 132,318
Customer relationships and trademarks, net 10,749 13,336
 
Deferred Charges and Other Assets 8,910 10,409
   
Total Assets $ 647,190 $ 627,990
 
LIABILITIES AND EQUITY
Current Liabilities
Current portion of long-term debt $ 5,153 $ 4,412
Accounts payable 21,771 18,118
Dividends payable 8,923 8,902
Advance billings and customer deposits 11,104 10,003
Accrued expenses and other current liabilities   21,562   14,316
  68,513   55,751
 
Long-Term Debt 451,183 453,997
 
Other Long-Term Liabilities 79,485 67,108
 
Equity 48,009 51,134
   
Total Liabilities and Equity $ 647,190 $ 627,990
 
NTELOS Holdings Corp.                
Condensed Consolidated Statements of Operations (unaudited)      
Three Months Ended September 30, Nine Months Ended September 30,
(In thousands, except per share amounts)   2012       2011     2012     2011  
 
Operating Revenues $ 114,466 $ 107,404 $ 336,591 $ 316,633
 
Operating Expenses
Cost of sales and services (exclusive of items shown separately below) 46,270 36,303 127,263 106,135
Customer operations 30,068 27,980 89,459 87,258
Corporate operations 8,599 9,589 24,908 24,922
Depreciation and amortization   15,810     16,098     45,818     45,494  
  100,747     89,970     287,448     263,809  
 
Operating Income 13,719 17,434 49,143 52,824
 
Other Expense
Interest expense (5,432 ) (5,509 ) (16,293 ) (17,918 )
Other expense, net   (50 )   (23 )   (156 )   (1,897 )
  (5,482 )   (5,532 )   (16,449 )   (19,815 )
 
Income from Continuing Operations before Income Taxes 8,237 11,902 32,694 33,009
 
Income Taxes   3,141     4,969     13,130     14,291  
 
Income from Continuing Operations 5,096 6,933 19,564 18,718
 
Discontinued Operations, net   -     6,813     -     19,426  
 
Net Income 5,096 13,746 19,564 38,144
 
Net Income Attributable to Noncontrolling Interests   (488 )   (481 )   (1,498 )   (1,322 )
 
Net Income Attributable to NTELOS Holdings Corp. $ 4,608   $ 13,265   $ 18,066   $ 36,822  
 
 
Earnings per Share Attributable to NTELOS Holdings Corp. 1
 
Basic
Continuing operations $ 0.22 $ 0.31 $ 0.87 $ 0.84
Discontinued operations   -     0.33     -     0.93  
Total $ 0.22   $ 0.64   $ 0.87   $ 1.77  
 
Diluted
Continuing operations $ 0.22 $ 0.31 $ 0.85 $ 0.83
Discontinued operations   -     0.32     -     0.92  
Total $ 0.22   $ 0.63   $ 0.85   $ 1.75  
 
Weighted average shares outstanding - basic   20,900     20,799     20,877     20,767  
 
Weighted average shares outstanding - diluted   21,375     21,084     21,317     21,049  
 
Cash Dividends Declared per Share - Common Stock $ 0.42   $ 0.56   $ 1.26   $ 1.68  
 
1   All share and per share amounts presented in this press release and on the Company's Form 10-Q have been adjusted for the impact of the reverse stock split which occurred after market close on October 31, 2011 in connection with the separation of the Company's wireless and wireline operations.
 
NTELOS Holdings Corp.                
Reconciliation of Net Income Attributable to NTELOS Holdings Corp. to Adjusted EBITDA  
     
Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2012 2011 2012 2011
 
Net Income Attributable to NTELOS Holdings Corp. $ 4,608 $ 13,265 $ 18,066 $ 36,822
Net income attributable to noncontrolling interests   488   481   1,498   1,322
Net Income 5,096 13,746 19,564 38,144
 
Discontinued operations, net   -   6,813   -   19,426
Income from continuing operations 5,096 6,933 19,564 18,718
 
Interest expense 5,432 5,509 16,293 17,918
Income taxes 3,141 4,969 13,130 14,291
Other expense (income), net   50   23   156   1,897
Operating income 13,719 17,434 49,143 52,824
 
Depreciation and amortization 15,810 16,098 45,818 45,494
Accretion of asset retirement obligations 163 176 463 503
Equity-based compensation 1,478 1,611 4,683 4,847
Business separation charges 1   684   3,375   1,604   5,388
Adjusted EBITDA $ 31,854 $ 38,694 $ 101,711 $ 109,056
 
1 Charges in connection with the separation of the Company's wireless and wireline operations.

NTELOS Holdings Corp.
                           

Key Metrics
                      Nine Months Ended:
Quarter Ended:   9/30/2011   12/31/2011   3/31/2012   6/30/2012   9/30/2012 9/30/2012   9/30/2011

Subscribers
                         
Beginning Subscribers   424,800   415,000   414,500   421,300   424,800 414,500   432,400
Prepay 122,800 119,900 122,100 135,300 139,400 122,100 125,600
Postpay 302,000 295,100 292,400 286,000 285,400 292,400 306,800
 
Gross Additions 36,500 41,600 45,900 36,800 42,400 125,100 116,500
Prepay 20,000 20,900 28,900 20,000 20,400 69,300 64,200
Postpay 16,500 20,700 17,000 16,800 22,000 55,800 52,300
 
Disconnections 46,300 42,100 39,100 33,300 36,900 109,300 133,900
Prepay 23,400 19,500 17,300 17,200 19,800 54,300 71,000
Postpay 22,900 22,600 21,800 16,100 17,100 55,000 62,900
 
Net Additions (Losses) (9,800) (500) 6,800 3,500 5,500 15,800 (17,400)
Prepay (3,400) 1,400 11,600 2,800 600 15,000 (6,800)
Postpay (6,400) (1,900) (4,800) 700 4,900 800 (10,600)
 
Ending Subscribers 415,000 414,500 421,300 424,800 430,300 430,300 415,000
Prepay 119,900 122,100 135,300 139,400 141,400 141,400 119,900
Postpay 295,100 292,400 286,000 285,400 288,900 288,900 295,100
 
Churn, net 3.7% 3.4% 3.1% 2.6% 2.9% 2.9% 3.5%
Prepay 6.5% 5.4% 4.5% 4.2% 4.7% 4.5% 6.3%
Postpay 2.6% 2.6% 2.5% 1.9% 2.0% 2.1% 2.3%
 

Other Items
                         
 
ARPU $ 49.77 $ 48.57 $ 49.08 $ 49.41 $ 50.93 $ 49.82 $ 50.18
Prepay $ 33.68 $ 33.01 $ 36.56 $ 34.89 $ 34.50 $ 35.28 $ 34.00
Postpay $ 56.26 $ 54.94 $ 54.63 $ 56.42 $ 58.97 $ 56.67 $ 56.86
 
Data ARPU $ 16.17 $ 17.36 $ 19.05 $ 19.65 $ 20.25 $ 19.65 $ 15.38
 
Licensed Population (millions) 8.1 8.1 8.1 8.1 8.1 8.1 8.1
 
Covered Population (millions) 5.9 5.9 5.9 6.0 6.0 6.0 5.9
 
Total Cell Sites 1,337 1,353 1,365 1,378 1,396 1,396 1,337
 
Strategic Network Alliance Revenues (000's)
Total Voice $ 22,824 $ 23,122 $ 23,533 $ 23,856 $ 24,655 $ 72,044 $ 65,557
Total Data   12,579     14,780     16,347     16,536     16,971   49,854     33,551
Total $ 35,403   $ 37,902   $ 39,880   $ 40,392   $ 41,626 $ 121,898   $ 99,108
 
NTELOS Holdings Corp.                
ARPU Reconciliation  

Three Months Ended September 30,
  Nine Months Ended September 30,
Average Monthly Revenue per User (ARPU) 1   2012       2011     2012       2011  
(In thousands, except for subscribers and ARPU)
 
Operating Revenues $ 114,466 $ 107,404 $ 336,592 $ 316,633
Less: Equipment revenue from sales to new customers (3,333 ) (2,284 ) (11,233 ) (6,214 )
Less: Equipment revenue from sales to existing customers (3,416 ) (4,859 ) (11,722 ) (14,151 )
Less: Wholesale, other and adjustments (42,380 ) (37,715 ) (124,278 ) (104,151 )
       
Gross subscriber revenue 65,337 62,546 189,359 192,117
 
Less: prepay subscriber revenue (14,103 ) (11,946 ) (41,507 ) (37,170 )
Less: adjustments to prepay subscriber revenue   (434 )   (235 )   (1,469 )   (871 )
Gross postpay subscriber revenue $ 50,800   $ 50,365   $ 146,383   $ 154,076  
 
Prepay subscriber revenue $ 14,103 $ 11,946 $ 41,507 $ 37,170
Plus: adjustments to prepay subscriber revenue   434     235     1,469     871  
Gross prepay subscriber revenue $ 14,537   $ 12,181   $ 42,976   $ 38,041  
 
Average number of subscribers   427,610     418,923     422,351     425,391  
Total ARPU $ 50.93   $ 49.77   $ 49.82   $ 50.18  
 
Average number of postpay subscribers   287,165     298,387     287,015     301,064  
Postpay ARPU $ 58.97   $ 56.26   $ 56.67   $ 56.86  
 
Average number of prepay subscribers   140,446     120,536     135,336     124,327  
Prepay ARPU $ 34.50   $ 33.68   $ 35.28   $ 34.00  
 
Gross subscriber revenue $ 65,337 $ 62,546 $ 189,359 $ 192,117
Less: voice and other feature revenue   (39,366 )   (42,218 )   (114,653 )   (133,233 )
Data revenue $ 25,971   $ 20,328   $ 74,706   $ 58,884  
 
Average number of subscribers   427,610     418,923     422,351     425,391  
Total Data ARPU $ 20.25   $ 16.17   $ 19.65   $ 15.38  
 
Gross postpay subscriber revenue $ 50,800 $ 50,365 $ 146,383 $ 154,076
Less: postpay voice and other feature revenue   (33,028 )   (36,028 )   (95,950 )   (110,890 )
Postpay data revenue $ 17,772   $ 14,337   $ 50,433   $ 43,186  
 
Gross prepay subscriber revenue $ 14,537 $ 12,181 $ 42,976 $ 38,041
Less: prepay voice and other feature revenue   (6,338 )   (6,190 )   (18,703 )   (22,340 )
Prepay data revenue $ 8,199   $ 5,991   $ 24,273   $ 15,701  
 
Average number of postpay subscribers   287,165     298,387     287,015     301,064  
Postpay data ARPU $ 20.63   $ 16.02   $ 19.52   $ 15.94  
 
Average number of prepay subscribers   140,445     120,536     135,336     124,327  
Prepay data ARPU $ 19.46   $ 16.57   $ 19.93   $ 14.03  
 
1   Average monthly revenue per user (ARPU) is computed by dividing service revenues per period divided by the average number of subscribers during that period. ARPU as defined may not be similar to ARPU measures of other companies, is not a measurement under GAAP and should be considered in addition to, but not as a substitute for, the information contained in the Company’s unaudited condensed consolidated statements of operations. The Company closely monitors the effects of new rate plans and service offerings on ARPU in order to determine their effectiveness. ARPU provides management useful information concerning the appeal of NTELOS rate plans and service offerings and the Company’s performance in attracting and retaining high-value customers.

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