SOURCE Leap Wireless International, Inc./ PR Newswire
~New Initiatives Being Introduced to Drive Improved Customer Activity and Financial Performance
~ ~ Initiatives Include Higher-Quality Devices, Enhanced Service Offerings and Customer Experience Improvements
~– Third quarter customer results reflect higher entry-level smartphone pricing, expected second quarter churn pressures and wireless industry softness
— Adjusted OIBDA impacted by marketing and other expenses associated with transition
— Significant sequential improvement to free cash flow
— Operating income of $81 million includes net gain on spectrum transaction
— Earnings per share of $0.32
SAN DIEGO, — Leap Wireless International, Inc. (NASDAQ: LEAP) today reported operational and financial results for the three and nine months ended September 30, 2012. Service revenues for the third quarter of 2012 increased 0.7 percent over the prior year quarter to $722.0 million. The Company reported $131.6 million of adjusted operating income before depreciation and amortization (OIBDA) for the third quarter, compared to $154.3 million for the prior year quarter. Third quarter 2012 operating income was $81.4 million, compared to an operating loss of $16.1 million for the third quarter of 2011, and reflected an approximate $130 million net gain resulting from an exchange of spectrum licenses.
The Company reported approximately 563,000 gross customer additions for the third quarter of 2012 and approximately 269,000 net customer losses. Customer churn for the third quarter of 2012 was 4.8 percent.
“During the third quarter, we continued a significant transition of our business to meet the changing needs of our customers and improve our financial performance,” said S. Douglas Hutcheson, Leap’s president and chief executive officer. “We increased pricing on entry-level smartphones to improve customer survival and plan to continue adding higher-quality, higher-priced handsets to our device portfolio. We also added compelling, new features and updated pricing for our service plans and enhanced our Muve Music service, all to provide customers with increased value at a selection of different price points. Third quarter customer results also reflect previously discussed churn pressures from the effects of certain retention programs and handset quality issues we experienced in the second quarter, as well as general industry softness. We believe that the new initiatives that are being introduced will enhance the customer experience, improve our customer value proposition and drive improvements to churn.
“We also remain focused on improving our financial performance and profitability, evidenced by the significant sequential improvement in free cash flow. The year-over-year change in third quarter adjusted OIBDA reflected increased marketing costs for the launch of our new devices and service plans and increased product costs associated with uptake of our all-inclusive offerings. In addition, we are reducing projected 2012 capital expenditures by approximately $85 million, principally by managing 3G network capacity investments, exploring cost-effective alternatives to deliver 4G LTE services and exercising increased financial discipline. We also recently strengthened our balance sheet by refinancing $300 million of senior indebtedness due in 2015 through a new $400 million senior secured term loan facility maturing in 2019. Our top priorities remain improving our customers’ experience and continuing to drive free cash flow.”
Financial Results and Operating Metrics (1)
|(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. Information relating to population and potential customers (POPs) is based on population estimates provided by Claritas Inc. for the relevant year.|
|(2)||The Company recognizes a gross customer addition for each Cricket Wireless, Cricket Broadband and Cricket PAYGo™ line of service activated by a customer.|
Discussion of Financial and Operational Results for the Quarter
Service Revenues and ARPU
Operating Expenses, Adjusted OIBDA & Financial Metrics
Capital Expenditures and Free Cash Flow
Updated Business Outlook
Other Business & Operational Highlights
As previously announced, Leap management will host a live webcast at approximately 11:00 a.m. EST / 8:00 a.m. PST today to discuss these results. Other forward-looking and material information may also be discussed during this call.
To listen live via telephone, dial 1-800-748-2715 (domestic) or 1-212-231-2926 (international). No participant pass code number is required for this call.
More information about this event including a live webcast, the accompanying presentation slides and other supporting materials may be accessed by visiting http://earnings.leapwireless.
A replay of the conference call will be available for a limited time via webcast, MP3 or telephone and may be accessed by visiting http://earnings.leapwireless.
Leap provides innovative, high-value wireless services to a young and ethnically diverse customer base. With the value of unlimited wireless services as the foundation of its business, Leap pioneered its Cricket service. Cricket products and services are available nationwide through company-owned stores, dealers, national retailers and at MyCricket.com. Through its affordable, flat-rate service plans, Cricket offers customers a choice of unlimited voice, text, data and mobile Web services. Headquartered in San Diego, Calif., Leap is traded on the NASDAQ Global Select Market under the ticker symbol “LEAP.” For more information, please visit www.leapwireless.com.
Notes Regarding Non-GAAP Financial Measures
Information presented in this press release and in the attached financial tables includes financial information prepared in accordance with generally accepted accounting principles in the U.S., or GAAP, as well as non-GAAP financial measures. Generally, a non-GAAP financial measure, within the meaning of Item 10 of Regulation S-K promulgated by the Securities and Exchange Commission (SEC), is a numerical measure of a company’s financial performance or cash flows that (a) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, which are included in the most directly comparable measure calculated and presented in accordance with GAAP in the condensed consolidated balance sheets, condensed consolidated statements of comprehensive income or condensed consolidated statements of cash flows; or (b) includes amounts, or is subject to adjustments that have the effect of including amounts, which are excluded from the most directly comparable measure so calculated and presented. As described more fully in the notes to the attached financial tables, management supplements the information provided by financial statement measures with several customer-focused performance metrics that are widely used in the telecommunications industry. Adjusted OIBDA, free cash flow, CPGA, ARPU and CCU are non-GAAP financial measures. Non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. Reconciliations of non-GAAP financial measures used in this release to the most directly comparable GAAP financial measures can be found in the section entitled “Definition of Terms and Reconciliation of Non-GAAP Financial Measures” included toward the end of this release.
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect management’s current expectations based on currently available operating, financial and competitive information, but are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated in or implied by the forward-looking statements. Our forward-looking statements include our discussions about planned product and service plan developments, expected customer activity, future capital expenditures and LTE deployment and expected financial and operational performance, and are generally identified with words such as “believe,” “expect,” “intend,” “plan,” “could,” “may” and similar expressions. Risks, uncertainties and assumptions that could affect our forward-looking statements include, among other things:
All forward-looking statements included in this news release should be considered in the context of these risks. All forward-looking statements speak only as of November 7, 2012, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Investors and prospective investors are cautioned not to place undue reliance on our forward-looking statements.
Leap is a U.S. registered trademark and the Leap logo is a trademark of Leap. Cricket, Cricket Wireless, Cricket Clicks, Muve Music, MyPerks, Flex Bucket, Real Unlimited Unreal Savings and the Cricket “K” are U.S. registered trademarks of Cricket. In addition, the following are trademarks or service marks of Cricket: BridgePay, Cricket By Week, Cricket Choice, Cricket Connect, Cricket Nation, Cricket PAYGo, Muve, Muve Money, Muve First, Muve Headliners, Cricket Crosswave, Seek Music, Cricket MyPerks and Cricket Wireless Internet Service. All other trademarks are the property of their respective owners.
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