MetroPCS Reports Second Quarter 2012 Results
MetroPCS Reports Second Quarter 2012 Results
Highest Quarterly Adjusted EBITDA in Company History
Second Quarter 2012 Highlights Include:
* Quarterly consolidated total revenues of approximately $1.3 billion, an
increase of 6% over the second quarter of 2011
* Quarterly service revenue of approximately $1.2 billion, an increase of 4%
over the second quarter of 2011
* Record Adjusted EBITDA of $477 million, an increase of 33% over the second
quarter of 2011
* Record Adjusted EBITDA margin of 41.1%, an increase of 900 bps over the
second quarter of 2011
* Quarterly net income of $149 million, an increase of 77% over the second
quarter of 2011
* Quarterly churn of 3.4%, down 50 bps from the second quarter of 2011
* Quarterly net subscriber loss of 186 thousand, resulting in a 2% increase
in total subscribers over the prior twelve month period
* Quarterly ARPU of $40.62, an increase of $0.13 over second quarter 2011
* Surpassed 700 thousand 4G LTE subscribers, representing approximately 8%
of total subscribers
Business Wire
DALLAS -- July 26, 2012
MetroPCS Communications, Inc. (NYSE: PCS), the nation’s leading provider of no
annual contract, unlimited, flat-rate wireless communications service, today
announced financial and operational results for the quarter ended June 30,
2012. MetroPCS reported quarterly Adjusted EBITDA of $477 million for the
second quarter 2012 and ended the quarter with 9.3 million subscribers.
Roger D. Linquist, Chairman and Chief Executive Officer of MetroPCS, said,
“During the second quarter, we focused on generating Adjusted EBITDA and cash
flow versus subscriber growth as we position for our anticipated launch of 4G
LTE For All by the end of the third quarter. I’m pleased to report that with
this emphasis, we reported both the highest Adjusted EBITDA as well as the
highest Adjusted EBITDA margin in Company history as a result of this focus.
Second quarter churn of 3.4% was primarily driven by continued investments in
our network as well as lower year-to-date subscriber growth.
“Looking towards the remainder of 2012, we believe demand for high-speed
wireless broadband service will increase and we will be well positioned to
meet that demand with our 4G LTE network, which now serves approximately 8% of
our subscriber base. With our plan to manage our current spectrum holdings, we
believe our subscribers’ current and future anticipated data demands will be
met. Importantly, we should have a full 10MHz dedicated to 4G LTE in most
major metropolitan areas by the end of the year. Our 4G LTE handset ecosystem
is building and we remain on track to launch 4G LTE For All by the end of the
third quarter. During the fourth quarter, we expect our 4G LTE For All
initiative to lead to a return to subscriber growth. As we focus on the launch
of 4G LTE For All late in the third quarter, we expect incremental pressure on
our CPGA and CPU. We believe we are the best deal in town when it comes to
voice and text. In an increasingly data-centric world, our 4G LTE For All
initiative we believe provides unmatched value, with all taxes and regulatory
fees included,” Linquist concluded.
Key Consolidated Financial and Operating Metrics
(in millions, except percentages, per share, per subscriber and subscriber amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 Change 2012 2011 Change
Service $ 1,159 $ 1,113 4 % $ 2,318 $ 2,164 7 %
revenues
Total $ 1,281 $ 1,209 6 % $ 2,558 $ 2,404 6 %
revenues
Income from $ 312 $ 210 48 % $ 410 $ 356 15 %
operations
Net income $ 149 $ 84 77 % $ 170 $ 141 21 %
Diluted EPS $ 0.41 $ 0.23 $ 0.18 $ 0.46 $ 0.38 $ 0.08
Adjusted $ 477 $ 357 33 % $ 739 $ 643 15 %
EBITDA^(1)
Adjusted
EBITDA as a
percentage of 41.1 % 32.1 % 900 bps 31.9 % 29.7 % 220 bps
service
revenues
ARPU^(1) $ 40.62 $ 40.49 $ 0.13 $ 40.59 $ 40.46 $ 0.13
CPGA^(1) $ 190.53 $ 177.88 $ 12.65 $ 215.76 $ 166.60 $ 49.16
CPU^(1) $ 18.40 $ 18.94 $ (0.54 ) $ 20.63 $ 19.35 $ 1.28
Churn-Average 3.4 % 3.9 % (50 bps) 3.3 % 3.6 % (30 bps)
Monthly Rate
Consolidated
Subscribers
End of Period 9,292,251 9,079,865 2 % 9,292,251 9,079,865 2 %
Net Additions (186,062 ) 198,810 (194 %) (54,408 ) 924,755 (106 %)
Penetration
of Covered 9.1 % 9.1 % 0 bps 9.1 % 9.1 % 0 bps
POPs^(2)
(1) For a reconciliation of non-GAAP financial measures, please refer to the
section entitled “Definition of Terms and Reconciliation of non-GAAP Financial
Measures” included at the end of this release.
(2) Number of covered POPs covered by MetroPCS Communications, Inc. network
increased 1.9 million from 6/30/11 to 6/30/12 to 102 million.
Quarterly Consolidated Results
* Consolidated service revenues of approximately $1.2 billion for the second
quarter of 2012, an increase of $46 million, or 4%, when compared to the
prior year’s second quarter.
* Income from operations increased $102 million, or 48%, for the second
quarter of 2012 when compared to the prior year’s second quarter.
* Net income increased $65 million, or 77%, for the second quarter of 2012
when compared to the prior year’s second quarter.
* Adjusted EBITDA of $477 million increased by $120 million for the second
quarter of 2012, or 33%, when compared to the prior year’s second quarter.
* Average revenue per user (ARPU) of $40.62 for the second quarter of 2012
represents an increase of $0.13 when compared to the second quarter of
2011. The increase in ARPU was primarily attributable to continued demand
for our Wireless for All and 4G LTE service plans offset by promotional
service plans and an increase in family plan penetration from 38% of our
customer base as of June 30, 2011 to 42% of our customer base as of June
30, 2012.
* The Company’s cost per gross addition (CPGA) of $191 for the second
quarter of 2012 represents an increase of $13 when compared to the prior
year’s second quarter. The increase is primarily driven by lower gross
additions partially offset by decreased promotional activities as compared
to the three months ended June 30, 2011.
* Cost per user (CPU) decreased to $18.40 in the second quarter of 2012, or
a 3% decrease over the second quarter of 2011. The decrease in CPU is
primarily driven by a decrease in retention expense for existing customers
as well as a decrease in long distance cost and taxes and regulatory fees.
These items were partially offset by an increase in costs associated with
our 4G LTE network upgrade and roaming expenses associated with Metro USA.
During the quarter we experienced $3.06 in CPU directly related to handset
upgrades compared to $3.73 in the prior year’s second quarter.
* Churn decreased 50 basis points from 3.9% to 3.4% when compared to the
second quarter of 2011. The decrease in churn was primarily driven by
continued investments in our network and lower year-to-date subscriber
growth.
Financial Guidance for 2012
For the year ending December 31, 2012, MetroPCS today reaffirms its prior
guidance, originally provided on February 23, 2012. MetroPCS currently expects
to incur capital expenditures in the range of $900 million to $1.0 billion on
a consolidated basis for the year ending December 31, 2012.
MetroPCS Conference Call Information
MetroPCS Communications, Inc. will host a conference call to discuss its
Second Quarter 2012 Earnings Results at 9:00 a.m. Eastern Time (ET) on
Thursday, July 26, 2012.
Date: Thursday, July 26, 2012
Time: 9:00 a.m. ET
Call-in Numbers: Toll free: 800-432-9830
International: 719-234-7318
Participant Passcode: 3440910
Please plan on accessing the conference call ten minutes prior to the
scheduled start time.
The conference call will be broadcast live via the Company’s Investor
Relations website at investor.metropcs.com. A replay of the webcast will be
available on the website beginning at approximately 12:30 p.m. ET on July 26,
2012.
A replay of the conference call will be available for one week starting
shortly after the call concludes and can be accessed by dialing 888-203-1112
(toll free) or 719-457-0820 (international). The passcode required to listen
to the replay is 3440910.
To automatically receive MetroPCS financial news by e-mail, please visit the
Investor Relations portion of the MetroPCS website, investor.metropcs.com, and
subscribe to E-mail Alerts.
All registered marks, including but not limited to, Wireless for All, are
registered service marks of MetroPCS Wireless, Inc. All rights reserved. All
other company and product names mentioned may be trademarks or registered
marks of the respective companies with which they are associated.
About MetroPCS Communications, Inc.
Dallas-based MetroPCS Communications, Inc. (NYSE: PCS) is a provider of no
annual contract, unlimited wireless communications service for a flat-rate.
MetroPCS is the fifth largest facilities-based wireless carrier in the United
States based on number of subscribers served. With Metro USA(SM), MetroPCS
customers can use their service in areas throughout the United States covering
a population of over 280 million people. As of June 30, 2012, MetroPCS had
approximately 9.3 million subscribers. For more information please visit
www.metropcs.com.
Forward-Looking Statements
This release includes “forward-looking statements” for the purpose of the
“safe harbor” provisions within the meaning of the Private Securities
Litigation Reform Act of 1995, as amended, and rule 3(b)-6 under the
Securities Exchange Act of 1934, as amended. Any statements made in this
release that are not statements of historical fact, including statements about
our plans, beliefs, opinions, projections, and expectations, are
forward-looking statements and should be evaluated as such. Forward-looking
statements include information concerning the reasons for our operational and
financial results, the demand for wireless broadband services, our ability to
meet customer demands, the projected launch date of our 4G LTE for All plan,
our network capabilities, our ability to increase subscribers, expectations
regarding future CPGA, our planned additions to and time of availability of
handsets and the prices for such handsets, our ability to drive profitable
growth, our guidance on capital expenditures for 2012 and statements that may
relate to our plans, objectives, strategies, goals, future events, future
revenues or performance, capital expenditures, financing needs, and other
information that is not historical information. These forward-looking
statements often include words such as “anticipate,” “expect,” “suggests,”
“plan,” “believe,” “intend,” “estimates,” “targets,” “views,” “becomes,”
“projects,” “should,” “would,” “could,” “may,” “will,” “forecast,” and other
similar expressions.
These forward-looking statements are based on reasonable assumptions at the
time they are made, including our current expectations, plans, beliefs,
opinions and assumptions in light of our experience in the industry, as well
as our perceptions of historical trends, current conditions, expected future
developments and other factors we believe are appropriate under the
circumstances and at such times. Forward-looking statements are not guarantees
of future performance or results. Actual financial results, performance or
results of operations may differ materially from those expressed in the
forward-looking statements. Factors that may materially affect such
forward-looking statements include, but are not limited to:
* the ability of our vendors to supply the handsets we need in the time
frames we require;
* our and our competitor’s current and planned promotions, marketing, sales
and other initiatives and our ability to respond to and support them;
* our ability to manage our networks to deliver the services, content,
service quality and speed our customers expect and demand and to maintain
and increase the capacity of our networks and business systems to satisfy
the demands of our customers and the demands placed by devices on our
networks;
* the highly competitive nature of our industry and changes in the
competitive landscape;
* the current economic environment in the United States; disruptions to the
credit and financial markets in the United States; and contractions or
limited growth on consumer spending as a result of the uncertainty in the
United States economy;
* our ability to manage our growth, achieve planned growth, manage churn
rates, maintain our cost structure, and achieve additional economies of
scale;
* our ability to negotiate and maintain acceptable agreements with our
suppliers and vendors, including roaming arrangements;
* the seasonality of our business and any failure to have strong customer
growth in the first and fourth quarters;
* increases or changes in taxes and regulatory fees or the services to, or
the manner in, which such taxes and fees are applied, calculated or
collected;
* the rapid technological changes in our industry, our ability to adapt,
respond and deploy new technologies, and successfully offer new services
using such new technology;
* our ability to fulfill the demands and expectations of our customers,
provide the customer care our customers demand, secure the products,
services, applications, content and network infrastructure equipment we
need, or which our customers or potential customers want, expect or
demand;
* the availability of additional spectrum, our ability to secure additional
spectrum, or secure it at acceptable prices, when we need it;
* our ability to adequately defend against suits filed by others and to
enforce or protect our intellectual property rights;
* our capital structure, including our indebtedness amount, the limitations
imposed by the covenants in our indebtedness and the maintenance of our
financial and disclosure controls and procedures;
* our ability to attract and retain key members of management and train
personnel;
* our reliance on third parties to provide distribution, products, software
content and services that are integral, used or sold by to our business
and the ability of our suppliers to perform, develop and timely provide us
with technological developments, products and services we need to remain
competitive;
* possible disruptions or intrusions of our network, billing, operational
support and customer care systems which may limit or disrupt our ability
to provide service or which may cause disclosure or improper use of our
customers’ information and the associated harm to our customers, our
systems, our reputation and our goodwill;
* the rates, nature, collectability and applicability of taxes and
regulatory fees on the services we provide;
* governmental regulation affecting our services and changes in government
regulation, and the costs of compliance and our failure to comply with
such regulations; and
* other factors described or referenced in our annual report on Form 10-K
for the year ended December 31, 2011 filed on February 29, 2012 and from
time to time in our quarterly report on Form 10-Q, for the quarter ended
June 30, 2012, to be filed on or before August 9, 2012, as well as
subsequent quarterly reports on Form 10-Q, or current reports on Form 8-K,
all of which are on file with the SEC and may be obtained free of charge
through the SEC’s website http://www.sec.gov, from the Company’s website
at www.metropcs.com under the investor relations tab, or from the Company
by contacting the Investor Relations department.
The forward-looking statements speak only as of the date made, are based on
current assumptions and expectations, and are subject to the factors above,
among other things, and involve risks, uncertainties, events, circumstances
and assumptions, many of which are beyond our ability to foresee, control or
predict. You should not place undue reliance on these forward-looking
statements. All future written and oral forward looking statements
attributable to us or persons acting on our behalf are expressly qualified in
their entirety by our cautionary statements. MetroPCS Communications, Inc.
does not intend to, is not obligated to, and does not undertake a duty to,
update any forward-looking statement to reflect the occurrence of events or
circumstances after the date of this release, except as required by law. The
results for the second quarter of 2012 may not be reflective of results for
any subsequent period or the full year 2012. MetroPCS does not plan to update
nor reaffirm guidance except through formal public disclosure pursuant to
Regulation FD.
MetroPCS Communications, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share information)
(Unaudited)
June 30, December 31,
2012 2011
CURRENT ASSETS:
Cash and cash equivalents $ 1,901,168 $ 1,943,282
Short-term investments 447,386 299,972
Inventories 259,011 239,648
Accounts receivable (net of allowance for
uncollectible accounts of $639 and $601 at 87,860 78,023
June 30, 2012 and December 31, 2011,
respectively)
Prepaid expenses 88,087 55,712
Deferred charges 82,365 74,970
Deferred tax assets 7,214 7,214
Other current assets 22,709 44,772
Total current assets 2,895,800 2,743,593
Property and equipment, net 4,069,340 4,017,999
Restricted cash and investments 2,076 2,576
Long-term investments 6,319 6,319
FCC licenses 2,561,904 2,539,041
Other assets 194,193 173,403
Total assets $ 9,729,632 $ 9,482,931
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 431,919 $ 512,346
Current maturities of long-term debt 35,306 33,460
Deferred revenue 244,390 245,705
Other current liabilities 30,263 25,212
Total current liabilities 741,878 816,723
Long-term debt, net 4,726,434 4,711,021
Deferred tax liabilities 924,613 817,106
Deferred rents 129,289 120,028
Other long-term liabilities 91,128 90,453
Total liabilities 6,613,342 6,555,331
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Preferred stock, par value $0.0001 per
share, 100,000,000 shares authorized; no
shares of preferred stock issued and — —
outstanding at June 30, 2012 and December
31, 2011
Common stock, par value $0.0001 per share,
1,000,000,000 shares authorized, 363,402,032
and 362,460,395 shares issued and 36 36
outstanding at June 30, 2012 and December
31, 2011, respectively
Additional paid-in capital 1,804,923 1,784,273
Retained earnings 1,329,257 1,159,418
Accumulated other comprehensive loss (8,586 ) (9,295 )
Less treasury stock, at cost, 873,008 and
602,881 treasury shares at June 30, 2012 and (9,340 ) (6,832 )
December 31, 2011, respectively
Total stockholders’ equity 3,116,290 2,927,600
Total liabilities and stockholders’ equity $ 9,729,632 $ 9,482,931
MetroPCS Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Comprehensive Income
(in thousands, except share and per share information)
(Unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2012 2011 2012 2011
REVENUES:
Service revenues $ 1,158,942 $ 1,113,292 $ 2,317,721 $ 2,163,509
Equipment revenues 122,238 96,161 240,049 240,320
Total revenues 1,281,180 1,209,453 2,557,770 2,403,829
OPERATING
EXPENSES:
Cost of service
(excluding
depreciation and
amortization
expense of 368,418 366,030 757,345 707,447
$133,736,
$115,455, $265,959
and $227,282 shown
separately below)
Cost of equipment 277,922 342,534 736,786 751,796
Selling, general
and administrative
expenses
(excluding
depreciation and
amortization 167,494 154,556 344,088 324,327
expense of
$19,615, $19,070,
$40,210 and
$35,937 shown
separately below)
Depreciation and 153,351 134,525 306,169 263,219
amortization
Loss on disposal 2,047 1,553 3,166 1,448
of assets
Total operating 969,232 999,198 2,147,554 2,048,237
expenses
Income from 311,948 210,255 410,216 355,592
operations
OTHER EXPENSE
(INCOME):
Interest expense 69,486 66,980 139,569 123,541
Interest income (374 ) (511 ) (748 ) (1,026 )
Other (income) (210 ) (186 ) (313 ) (442 )
expense, net
Loss on
extinguishment of — 9,536 — 9,536
debt
Total other 68,902 75,819 138,508 131,609
expense
Income before
provision for 243,046 134,436 271,708 223,983
income taxes
Provision for (94,211 ) (50,101 ) (101,869 ) (83,269 )
income taxes
Net income $ 148,835 $ 84,335 $ 169,839 $ 140,714
Other
comprehensive
income (loss):
Unrealized gains
on
available-for-sale
securities, net of 64 66 81 165
tax of $42, $40,
$51 and $102,
respectively
Unrealized losses
on cash flow
hedging
derivatives, net (1,032 ) (13,374 ) (4,165 ) (12,774 )
of tax benefit of
$1,034, $8,299,
$2,606 and $7,923,
respectively
Reclassification
adjustment for
gains on
available-for-sale
securities (15 ) (93 ) (39 ) (197 )
included in net
income, net of tax
of $12, $57, $25
and $122,
respectively
Reclassification
adjustment for
losses on cash
flow hedging
derivatives
included in net 1,945 3,762 4,832 6,639
income, net of tax
benefit of $1,575,
$2,319, $3,023 and
$4,118,
respectively
Total other
comprehensive 962 (9,639 ) 709 (6,167 )
income (loss)
Comprehensive $ 149,797 $ 74,696 $ 170,548 $ 134,547
income
Net income per
common share:
Basic $ 0.41 $ 0.23 $ 0.46 $ 0.39
Diluted $ 0.41 $ 0.23 $ 0.46 $ 0.38
Weighted average
shares:
Basic 363,263,805 360,226,487 362,991,209 358,616,324
Diluted 363,514,983 365,390,280 364,148,811 363,153,234
MetroPCS Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
For the Six Months Ended
June 30,
2012 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 169,839 $ 140,714
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 306,169 263,219
Provision for uncollectible accounts 3,238 261
receivable
Deferred rent expense 9,374 7,832
Cost of abandoned cell sites 941 380
Stock-based compensation expense 19,499 22,244
Non-cash interest expense 3,663 4,015
Loss on disposal of assets 3,166 1,448
Loss on extinguishment of debt — 9,536
Gain on sale of investments (64 ) (319 )
Accretion of asset retirement obligations 3,219 2,762
Deferred income taxes 107,237 81,395
Changes in assets and liabilities:
Inventories (19,363 ) 21,001
Accounts receivable, net (9,832 ) (4,710 )
Prepaid expenses (32,292 ) (14,512 )
Deferred charges (7,395 ) (5,157 )
Other assets 20,325 20,081
Accounts payable and accrued expenses (122,685 ) (85,346 )
Deferred revenue (1,315 ) 10,990
Other liabilities 2,846 6,266
Net cash provided by operating activities 456,570 482,100
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (326,215 ) (451,573 )
Change in prepaid purchases of property and (15,386 ) (17,691 )
equipment
Proceeds from sale of property and equipment 888 603
Purchase of investments (447,285 ) (299,826 )
Proceeds from maturity of investments 300,000 375,000
Change in restricted cash and investments 500 —
Acquisitions of FCC licenses and microwave (22,831 ) (3,283 )
clearing costs
Cash used in asset acquisitions — (7,495 )
Net cash used in investing activities (510,329 ) (404,265 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft 29,261 1,263
Proceeds from debt issuance, net of discount — 1,497,500
Debt issuance costs — (15,351 )
Repayment of debt (12,695 ) (11,598 )
Retirement of senior secured credit facility — (535,792 )
debt
Payments on capital lease obligations (4,211 ) (4,474 )
Purchase of treasury stock (2,508 ) (3,591 )
Proceeds from exercise of stock options 1,798 53,671
Net cash provided by financing activities 11,645 981,628
(DECREASE) INCREASE CASH AND CASH (42,114 ) 1,059,463
EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of 1,943,282 796,531
period
CASH AND CASH EQUIVALENTS, end of period $ 1,901,168 $ 1,855,994
Definition of Terms and Reconciliation of Non-GAAP Financial Measures
The Company utilizes certain financial measures and key performance indicators
that are not calculated in accordance with GAAP to assess our financial and
operating performance. A non-GAAP financial measure is defined as a numerical
measure of a company's financial performance that (i) excludes amounts, or is
subject to adjustments that have the effect of excluding amounts, that are
included in the comparable measure calculated and presented in accordance with
GAAP in the statement of income or statement of cash flows, or (ii) includes
amounts, or is subject to adjustments that have the effect of including
amounts, that are excluded from the comparable measure so calculated and
presented.
Average revenue per user, or ARPU, cost per gross addition, or CPGA, cost per
user, or CPU, and Adjusted EBITDA are non-GAAP financial measures utilized by
the Company's management to judge the Company's ability to meet its liquidity
requirements and to evaluate its operating performance. Management believes
that these measures are important in understanding the performance of the
Company's operations from period to period, and although every company in the
wireless industry does not define each of these measures in precisely the same
way, management believes that these measures (which are common in the wireless
industry) facilitate key liquidity and operating performance comparisons with
other companies in the wireless industry. The following tables reconcile the
Company's non-GAAP financial measures with the Company's financial statements
presented in accordance with GAAP.
ARPU - The Company utilizes ARPU to evaluate its per-customer service revenue
realization and to assist in forecasting future service revenues. ARPU is
calculated exclusive of pass through charges that the Company collects from
its customers and remits to the appropriate government agencies.
Average number of customers for any measurement period is determined by
dividing (a) the sum of the average monthly number of customers for the
measurement period by (b) the number of months in such period. Average monthly
number of customers for any month represents the sum of the number of
customers on the first day of the month and the last day of the month divided
by two. The Company believes 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 broadband mobile providers,
although other providers may calculate this measure differently. The following
table reconciles total revenues used in the calculation of ARPU to service
revenues, which we consider to be the most directly comparable GAAP financial
measure to ARPU.
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
(in thousands, except average number of customers and ARPU)
Calculation
of Average
Revenue Per
User
(ARPU):
Service $ 1,158,942 $ 1,113,292 $ 2,317,721 $ 2,163,509
revenues
Less: Pass
through (15,645 ) (20,735 ) (32,150 ) (42,010 )
charges
Net service $ 1,143,297 $ 1,092,557 $ 2,285,571 $ 2,121,499
revenues
Divided by:
Average 9,381,638 8,994,405 9,385,051 8,739,720
number of
customers
ARPU $ 40.62 $ 40.49 $ 40.59 $ 40.46
CPGA - The Company utilizes CPGA to assess the efficiency of its distribution
strategy, validate the initial capital invested in its customers and determine
the number of months to recover its customer acquisition costs. This measure
also allows management to compare the Company's average acquisition costs per
new customer to those of other wireless broadband mobile providers, although
other providers may calculate this measure differently. Equipment revenues
related to new customers are deducted from selling expenses in this
calculation as they represent amounts paid by customers at the time their
service is activated that reduce the Company's acquisition cost of those
customers. Additionally, equipment costs associated with existing customers,
net of related revenues, are excluded as this measure is intended to reflect
only the acquisition costs related to new customers. The Company believes
investors use CPGA primarily as a tool to track changes in our average cost of
acquiring new customers and to compare our per customer acquisition costs to
those of other wireless broadband mobile providers, although other providers
may calculate this measure differently. The following table reconciles total
costs used in the calculation of CPGA to selling expenses, which the Company
considers to be the most directly comparable GAAP financial measure to CPGA.
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
(in thousands, except gross customer additions and CPGA)
Calculation
of Cost Per
Gross
Addition
(CPGA):
Selling $ 79,170 $ 78,522 $ 174,711 $ 170,384
expenses
Less:
Equipment (122,238 ) (96,161 ) (240,049 ) (240,320 )
revenues
Add:
Equipment
revenue not 84,581 59,355 178,649 134,589
associated
with new
customers
Add: Cost
of 277,922 342,534 736,786 751,796
equipment
Less:
Equipment
costs not (170,565 ) (159,931 ) (465,394 ) (352,133 )
associated
with new
customers
Gross
addition $ 148,870 $ 224,319 $ 384,703 $ 464,316
expenses
Divided by:
Gross 781,349 1,261,091 1,782,985 2,786,971
customer
additions
CPGA $ 190.53 $ 177.88 $ 215.76 $ 166.60
CPU - The Company utilizes CPU as a tool to evaluate the non-selling cash
expenses associated with ongoing business operations on a per customer basis,
to track changes in these non-selling cash costs over time, and to help
evaluate how changes in the Company's business operations affect non-selling
cash costs per customer. In addition, CPU provides management with a useful
measure to compare our non-selling cash costs per customer with those of other
wireless broadband mobile providers. The Company believes investors use CPU
primarily as a tool to track changes in the Company's non-selling cash costs
over time and to compare the Company's non-selling cash costs to those of
other wireless broadband mobile providers, although other providers may
calculate this measure differently. The following table reconciles total costs
used in the calculation of CPU to cost of service, which we consider to be the
most directly comparable GAAP financial measure to CPU.
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
(in thousands, except average number of customers and CPU)
Calculation of
Cost Per User
(CPU):
Cost of $ 368,418 $ 366,030 $ 757,345 $ 707,447
service
Add: General
and 88,324 76,034 169,377 153,943
administrative
expense
Add: Net loss
on equipment
transactions
unrelated to 85,984 100,576 286,745 217,544
initial
customer
acquisition
Less:
Stock-based
compensation
expense
included in (9,343 ) (10,960 ) (19,499 ) (22,244 )
cost of
service and
general and
administrative
expense
Less: Pass
through (15,645 ) (20,735 ) (32,150 ) (42,010 )
charges
Total costs
used in the $ 517,738 $ 510,945 $ 1,161,818 $ 1,014,680
calculation of
CPU
Divided by:
Average number 9,381,638 8,994,405 9,385,051 8,739,720
of customers
CPU $ 18.40 $ 18.94 $ 20.63 $ 19.35
Adjusted EBITDA - The Company utilizes Adjusted EBITDA to monitor the
financial performance of its operations. This measurement, together with GAAP
measures such as revenue and income from operations, assists management in its
decision-making process related to the operations of the company's business.
Adjusted EBITDA has limitations as an analytical tool and should not be
considered in isolation or as a substitute for income from operations, net
income, or any other measure of financial performance reported in accordance
with GAAP. In addition, other providers may calculate this measure
differently.
The Company believes that analysts and investors use Adjusted EBITDA as a
supplemental measure to evaluate its overall operating performance and that
this metric facilitates the comparisons with other wireless communications
companies. The Company uses Adjusted EBITDA internally as a metric to evaluate
and compensate its personnel and management for their performance, and as a
benchmark to evaluate its operating performance in comparison to its
competitors. Management also uses Adjusted EBITDA to measure, from
period-to-period, the company's ability to provide cash flows to meet future
debt services, capital expenditures and working capital requirements and fund
future growth.
The following tables illustrate the calculation of Adjusted EBITDA and
reconcile Adjusted EBITDA to net income and cash flows from operating
activities, which we consider to be the most directly comparable GAAP
financial measures to Adjusted EBITDA.
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
(in thousands)
Calculation of
Adjusted
EBITDA:
Net income $ 148,835 $ 84,335 $ 169,839 $ 140,714
Adjustments:
Depreciation
and 153,351 134,525 306,169 263,219
amortization
Loss on
disposal of 2,047 1,553 3,166 1,448
assets
Stock-based
compensation 9,343 10,960 19,499 22,244
expense
Interest 69,486 66,980 139,569 123,541
expense
Interest (374 ) (511 ) (748 ) (1,026 )
income
Other (income) (210 ) (186 ) (313 ) (442 )
expense, net
Loss on
extinguishment — 9,536 — 9,536
of debt
Provision for 94,211 50,101 101,869 83,269
income taxes
Adjusted $ 476,689 $ 357,293 $ 739,050 $ 642,503
EBITDA
Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
(in thousands)
Reconciliation
of Net Cash
Provided by
Operating
Activities to
Adjusted
EBITDA:
Net cash
provided by $ 319,665 $ 343,786 $ 456,570 $ 482,100
operating
activities
Adjustments:
Interest 69,486 66,980 139,569 123,541
expense
Non-cash
interest (1,833 ) (2,022 ) (3,663 ) (4,015 )
expense
Interest (374 ) (511 ) (748 ) (1,026 )
income
Other (income) (210 ) (186 ) (313 ) (442 )
expense, net
Provision for
uncollectible (3,345 ) (95 ) (3,238 ) (261 )
accounts
receivable
Deferred rent (4,582 ) (3,738 ) (9,374 ) (7,832 )
expense
Cost of
abandoned cell (518 ) (323 ) (941 ) (380 )
sites
Gain on sale
and maturity 27 151 64 319
of investments
Accretion of
asset (1,630 ) (1,449 ) (3,219 ) (2,762 )
retirement
obligations
Provision for 94,211 50,101 101,869 83,269
income taxes
Deferred (92,880 ) (49,138 ) (107,237 ) (81,395 )
income taxes
Changes in
working 98,672 (46,263 ) 169,711 51,387
capital
Adjusted $ 476,689 $ 357,293 $ 739,050 $ 642,503
EBITDA
Contact:
MetroPCS Communications, Inc.
Keith Terreri, 214-570-4641
Vice President - Finance & Treasurer
or
Jim Mathias, 214-570-4641
Director – Investor Relations
investor_relations@metropcs.com
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