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Company Surpasses 4 Million Subscribers in Early January 2008
Fourth Quarter 2007 Highlights Include:
-- Quarterly service revenues of $511 million, an increase of
approximately 36% over fourth quarter of 2006
-- Quarterly net subscriber additions of 299 thousand
-- Core Market Adjusted EBITDA margin of 45%
-- Reaffirms outlook for continued growth in 2008
Full Year 2007 Highlights Include:
-- Net Income of $100 million, an increase of 87% over 2006
-- Second consecutive year of over 1 million net subscriber
additions
-- Consolidated Adjusted EBITDA of $667 million represents 69%
growth when compared to 2006
DALLAS--(BUSINESS WIRE)--Feb. 27, 2008--MetroPCS Communications,
Inc. (NYSE: PCS), the nation's leading provider of unlimited wireless
communications service for a flat-rate with no signed contract, today
announced financial and operational results for the quarter and year
ended December 31, 2007. MetroPCS reported full year 2007 growth in
Consolidated Adjusted EBITDA of approximately 69% when compared to
2006 and surpassed the 4 million subscriber mark in early January
2008.
"Demonstrating the continued demand for our unlimited fixed-price
service and as consumers increasingly replace their landline phones
with wireless, we added nearly 300 thousand new subscribers during the
fourth quarter of 2007, resulting in total subscriber growth of
approximately 35% over the past 12 months," said Roger D. Linquist,
Chairman, President and Chief Executive Officer of MetroPCS. "Our Core
Markets continue to grow, adding incremental penetration of 1.1% over
last year to a total penetration of 11.3%. With the first full quarter
of results from our Los Angeles market, and the excellent progress we
are making towards meeting the ultimate build-out goals, we anticipate
continued strong growth in this market over the coming quarters. The
other Expansion Markets continue to perform very well in spite of
slower economic conditions."
For the fourth quarter of 2007, MetroPCS reported total revenues
of $591 million, an increase of 30% over the fourth quarter of 2006,
and income from operations of $92 million, an increase of 38% when
compared to the fourth quarter of 2006. The Company reported a fourth
quarter 2007 net loss of $47 million, or $0.14 per common share, as
compared to a net loss of $17 million for the same period in 2006. The
fourth quarter 2007 results include an impairment charge of $83
million related to the Company's investment in auction rate
securities. On a non-GAAP basis excluding the impairment charge, net
income would have been $36 million, or $0.10 per common share.
J. Braxton Carter, Executive Vice President and Chief Financial
Officer of MetroPCS, commented, "We have produced strong financial and
operational results in 2007. For the second consecutive year, we
recorded over 1 million net subscriber additions, and we currently
have over 4 million subscribers. Our focus continues to be on
effectively managing our costs and generating Adjusted EBITDA. I am
proud to say this focus has resulted in 69% year-over-year growth in
Consolidated Adjusted EBITDA. While we are closely monitoring the
trajectory of the overall United States economy, we believe our
service, which offers an affordable and flexible solution, is a
compelling value proposition to a large segment of the U.S. population
and uniquely positions us even if there is a sustained economic
downturn. In addition, with a fully funded business plan and
approximately $1.5 billion in cash and cash equivalents at the end of
2007, we are well positioned to continue our aggressive growth in
2008."
For the full year 2007, MetroPCS reported total revenues of $2.2
billion, an increase of 45% over the same period in 2006, and income
from operations of $460 million, an increase of 94% when compared to
the same period in 2006. In 2007, MetroPCS also generated net income
of $100 million versus $54 million during 2006, representing an
increase of 87%. Diluted net income per common share for full year
2007 was $0.28 per common share compared to $0.10 per common share for
full year 2006.
Key Consolidated Financial and Operating Metrics
(in millions, except percentages, per share, per subscriber and
subscriber amounts)
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
December December December December
31, 2007 31, 2006 31, 2007 31, 2006
----------- ----------- ----------- -----------
Service revenues $ 511 $ 375 $ 1,919 $ 1,291
Total revenues $ 591 $ 453 $ 2,236 $ 1,547
Income from operations $ 92 $ 67 $ 460 $ 237
Net (loss) income $ (47) $ (17) $ 100 $ 54
Diluted net (loss)
income per common
share $ (0.14) $ (0.15) $ 0.28 $ 0.10
Consolidated Adjusted
EBITDA(1) $ 153 $ 110 $ 667 $ 396
Consolidated Adjusted
EBITDA as a
percentage of service
revenues 29.9% 29.4% 34.8% 30.6%
ARPU(1) $ 42.54 $ 43.15 $ 43.03 $ 42.98
CPGA(1) $ 137.51 $ 120.01 $ 124.16 $ 117.58
CPU(1) $ 18.93 $ 19.67 $ 18.33 $ 19.65
Churn-Average Monthly
Rate 4.8% 4.5% 4.7% 4.6%
Consolidated
Subscribers
End of Period 3,962,786 2,940,986 3,962,786 2,940,986
Net Additions 298,568 324,454 1,021,800 1,016,365
(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.
Consolidated Comparison of Quarter Ended December 2007 versus
Quarter Ended December 2006
MetroPCS reported service revenues of $511 million, a 36% increase
when compared to the prior year quarter, which was primarily
attributable to the net addition of over 1 million subscribers since
the fourth quarter of 2006. Equipment revenues increased by $2
million, or 2%, for the quarter primarily as a result of an increase
in gross additions in the Core and Expansion Markets, partially offset
by the sale of lower priced handsets and a decrease in the sale of
handsets to existing subscribers in the Core Markets.
Income from operations increased $25 million, or 38%, for the
quarter ended December 31, 2007 as compared to the prior year's
quarter. This was due in part to an increase in total revenues of $138
million, which was offset by a higher cost of service of $45 million
and higher cost of equipment of $13 million. The increase in cost of
service was principally related to the increase in total subscribers
and the launch of service in the Los Angeles metropolitan area in
September 2007. Cost of equipment increased as a result of an increase
in gross additions in the Core and Expansion Markets, and an increase
in the sale of handsets to existing subscribers in the Expansion
Markets, partially offset by a decrease in cost of equipment due to
the sale of lower priced handsets in the Core and Expansion Markets as
well as a decrease in the sale of handsets to existing subscribers in
the Core Markets compared to the same period in 2006. Selling, general
and administrative expenses increased $40 million for the quarter
which was largely related to supporting the Company's continued growth
in the Expansion Markets. Depreciation and amortization increased by
$13 million for the quarter due to a larger amount of property, plant
and equipment in service, primarily within the Expansion Markets as a
result of the launch of service in the Los Angeles market in September
2007. Consolidated Adjusted EBITDA of $153 million increased $43
million when compared to the same period in the previous year.
Average revenue per user (ARPU) of $42.54 represents a decrease of
$0.61 when compared to the fourth quarter of 2006. The change in ARPU
is predominantly attributable to higher participation in our Family
Plans. The Company's cost per gross addition (CPGA) of $137.51 for the
quarter represents an increase of $17 when compared to the prior
year's fourth quarter but continues to be among the lowest in the
wireless industry. The increase in CPGA was primarily driven by the
Expansion Markets with the launch of service in the Los Angeles
metropolitan area. The reduction in the cost per user (CPU) to $18.93,
a reduction of 4% over the fourth quarter of 2006, demonstrates the
company's ability to continue to scale the business and generate
substantial operating cash flow.
During the fourth quarter of 2007, the company recorded an $83
million unrealized loss on marketable securities relating to
investments totaling $134 million in auction rate securities.
Including the $15 million write-down recorded during the third quarter
of 2007, the remaining investment in marketable securities, as of
December 31, 2007, totals $36 million. The Company is closely
monitoring these securities; however the impairment charge does not
have a material impact on the Company's liquidity or financial
flexibility. MetroPCS believes that based on the company's current
cash and cash equivalents balance of approximately $1.5 billion at
December 31, 2007 and expected cash flows, the current lack of
liquidity in the credit and capital markets will not have a material
impact on the company's liquidity, cash flow, financial flexibility or
its ability to fund its operations, including it's planned build-out
of additional markets.
Consolidated Comparison of Year Ended December 2007 versus Year
Ended December 2006
For the year ended December 31, 2007, MetroPCS reported service
revenues of $1.9 billion, an increase of 49% over the prior year,
which was primarily attributable to the net addition of over 1 million
subscribers during 2007. Equipment revenues increased by $61 million,
or 24%, for the full year mainly as a result of an increase in gross
additions in the Core and Expansion Markets as well as an increase in
the sale of handsets to existing subscribers, partially offset by the
sale of lower priced handsets in both the Core and Expansion Markets.
Income from operations increased $223 million, or 94%, for the
year ended December 31, 2007 as compared to the prior year. This was
due in part to an increase in total revenues of $689 million, which
was offset by a higher cost of service of $202 million and higher cost
of equipment of $120 million. The increase in cost of service was
primarily related to the increase in total subscribers as well as the
launch of service in the Los Angeles market in September 2007. Cost of
equipment increased primarily as a result of higher gross additions as
well as an increase in the sale of handsets to existing subscribers in
both the Core and Expansion Markets offset by a decrease in cost of
equipment due to the sale of lower priced handsets. Selling, general
and administrative expenses increased $108 million for the year
largely related to supporting the company's continued growth in the
Expansion Markets. Depreciation and amortization increased by $43
million for the year due to a larger amount of property, plant and
equipment in service, principally within the Expansion Markets.
Consolidated Adjusted EBITDA of $667 million increased $271 million
when compared to the same period in the previous year.
Average revenue per user (ARPU) of $43.03 represents an increase
of $0.05 when compared to the prior year. The company's cost per gross
addition (CPGA) of $124.16 for 2007 represents an increase of $6.58
when compared to the prior year and continues to be among the lowest
in the wireless industry. The reduction in the cost per user (CPU) to
$18.33, a decrease of 7% over 2006, demonstrates the company's ability
to continue to scale the business.
Core Markets Segment Results
(in millions, except percentages and subscriber amounts)
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
December December December December
31, 2007 31, 2006 31, 2007 31, 2006
----------- ----------- ----------- -----------
Service revenues $ 363 $ 307 $ 1,415 $ 1,138
Total revenues $ 415 $ 366 $ 1,635 $ 1,346
Income from operations $ 135 $ 97 $ 529 $ 367
Adjusted EBITDA $ 165 $ 128 $ 654 $ 493
Adjusted EBITDA as a
percentage of service
revenues 45.4% 41.8% 46.2% 43.3%
Subscribers
End of Period 2,658,905 2,300,958 2,658,905 2,300,958
Net Additions 80,886 126,694 357,947 429,293
Core Markets Comparison of Quarter Ended December 2007 versus
Quarter Ended December 2006
The Core Markets continued to grow and ended the quarter with
approximately 2.7 million subscribers. The additional 358 thousand
subscribers acquired since December 31, 2006, generated an additional
$56 million of service revenue for the quarter ended December 31, 2007
when compared to fourth quarter of 2006. Sales of lower-priced handset
models, and a decrease in the sale of handsets to existing
subscribers, offset by an increase in gross additions, resulted in a
$7 million decrease in equipment revenues for the quarter.
Income from operations increased $38 million, or 38%, for the
quarter ended December 31, 2007 as compared to the fourth quarter of
2006. This increase was due in part to growth in total revenues of $49
million, which was offset by a higher cost of service of $26 million
due to growth in our Core Markets subscriber base and the deployment
of additional network infrastructure over the past twelve months. Cost
of equipment in the quarter decreased $8 million due to a decrease in
the sale of handsets to existing subscribers as well as the sale of
lower priced handsets, partially offset by an increase in cost of
equipment due to the increase in gross subscriber additions. Selling,
general and administrative expenses decreased $5 million for the
quarter primarily related to the increasing scale of our business in
our Core Markets.
Core Markets Comparison of Year Ended December 2007 versus Year
Ended December 2006
The Core Markets ended the year with approximately 2.7 million
subscribers, an increase of 1.1% in penetration of covered population
over the prior year. The additional 358 thousand subscribers acquired
since December 31, 2006, generated an additional $277 million of
service revenues as well as an increase in equipment revenues of $12
million for the year ended December 31, 2007 when compared to prior
year.
Income from operations increased $162 million, or 44%, for the
year ended December 31, 2007 as compared to the prior year. This
increase was due in part to growth in total revenues of $289 million
which was offset by a higher cost of service of $100 million due to
growth in our Core Markets subscriber base and the deployment of
additional network infrastructure over the past twelve months. Cost of
equipment increased $21 million largely due to the increase in gross
additions for the year ended December 31, 2007 when compared to prior
year as well as an increase in sales of handsets to existing
subscribers, partially offset by the sale of lower priced handsets.
Selling, general and administrative expenses increased $10 million for
the year primarily related to an increase in selling expenses incurred
to support the company's continued growth in the Core Markets.
Expansion Markets Segment Results
(in millions, except percentages and subscriber amounts)
Three Three Twelve Twelve
Months Months Months Months
Ended Ended Ended Ended
December December December December
31, 2007 31, 2006 31, 2007 31, 2006
----------- --------- ----------- ---------
Service revenues $ 148 $ 68 $ 504 $ 153
Total revenues $ 176 $ 87 $ 601 $ 201
Loss from operations $ (37) $ (29) $ (59) $ (126)
Adjusted EBITDA (Deficit) $ (12) $ (18) $ 13 $ (97)
Adjusted EBITDA as a
percentage of service
revenues n/m n/m 2.6% n/m
Subscribers
End of Period 1,303,881 640,028 1,303,881 640,028
Net Additions 217,682 197,760 663,853 587,072
Expansion Markets Comparison of Quarter Ended December 2007 versus
Quarter Ended December 2006
The Expansion Markets ended the quarter with approximately 1.3
million subscribers representing an increase of 664 thousand
subscribers since December 31, 2006. This increase in subscribers
generated an additional $80 million of service revenues for the
quarter ended December 31, 2007 when compared to the fourth quarter of
2006. The increase in gross additions as well as an increase in the
sale of handsets to existing subscribers, partially offset by the sale
of lower priced handsets, resulted in an increase in equipment
revenues of $9 million for the quarter.
Loss from operations increased $8 million, or 26%, for the quarter
ended December 31, 2007 as compared to the fourth quarter of 2006.
This was in part due to higher cost of service of $19 million and
higher cost of equipment of $21 million which were both related
primarily to growth in the Expansion Markets' subscriber base and the
launch of service in the Los Angeles market in September 2007. In
addition, higher selling, general and administrative expenses of $45
million were principally the result of supporting Expansion Market
subscriber growth of over 100% since December 31, 2006 as well as
expenses incurred in connection with the launch of service in the Los
Angeles metropolitan area and expenses related to the construction of
the New York, Philadelphia, Boston and Las Vegas metropolitan areas.
These increases were partially offset by an increase in total revenues
of $89 million for the quarter. The Expansion Markets generated an
Adjusted EBITDA deficit of $12 million for the quarter versus an
Adjusted EBITDA deficit of $18 million for the same quarter a year
ago.
Expansion Markets Comparison of Year Ended December 2007 versus
Year Ended December 2006
The Expansion Markets' subscribers grew over 100% in 2007. The
additional 664 thousand subscribers that were acquired since December
31, 2006, generated an additional $351 million of service revenues for
the year ended December 31, 2007 when compared to the prior year.
Increases in gross additions and the sale of handsets to existing
subscribers were the primary drivers of the increase in equipment
revenues of $49 million for the year, partially offset by the sale of
lower priced handsets.
Loss from operations decreased $67 million, or 53% for the year
ended December 31, 2007 as compared to the prior year. This was in
part due to the increase in total revenues of $400 million, which was
offset by a higher cost of service of $102 million due primarily to
the growth in the Expansion Markets' subscriber base and the launch of
service in the Los Angeles metropolitan area in September 2007. Cost
of equipment increased $99 million, which was related predominantly to
growth in the Expansion Markets' gross subscriber additions and an
increase in the sale of handsets to existing subscribers, slightly
offset by the sale of lower priced handsets. Higher selling, general
and administrative expenses of $99 million were largely the result of
supporting Expansion Markets subscriber growth of over 100% since
December 31, 2006, expenses incurred in connection with the launch of
service in the Los Angeles market, and build-out expenses related to
the New York, Philadelphia, Boston and Las Vegas metropolitan areas.
The Expansion Markets generated an Adjusted EBITDA of $13 million for
the year versus an Adjusted EBITDA deficit of $97 million when
compared to the prior year.
Operational and Financial Outlook
For the year ending December 31, 2008, MetroPCS reaffirms guidance
the Company provided on November 14, 2007, of net subscriber additions
to be in the range of 1.25 million to 1.52 million on a consolidated
basis, with 250 thousand to 320 thousand in the Core Markets and 1.0
million to 1.2 million in the Expansion Markets, which includes 75
thousand to 125 thousand in the AWS Markets. The company currently
expects Consolidated Adjusted EBITDA to be in the range of $750 - $850
million for the year ending December 31, 2008 which is inclusive of an
Adjusted EBITDA loss in the range of $125 - $175 million in the AWS
Markets.
MetroPCS currently expects to incur capital expenditures in the
range of $1.1 billion to $1.3 billion for the year ending December 31,
2008 in its Core and Expansion Markets, which includes $600 million to
$700 million in its AWS Markets.
The company currently plans to focus on building out approximately
40 million of the total population in its Auction 66 Markets with a
primary focus on the New York, Philadelphia, Boston and Las Vegas.
MetroPCS anticipates launching service in these metropolitan areas as
follows:
-- Las Vegas - second quarter of 2008
-- Philadelphia - fourth quarter of 2008
-- Boston - first quarter of 2009
-- New York - first half of 2009
Of the approximate 40 million total population in these areas,
MetroPCS is targeting launch of operations with an initial covered
population of approximately 30 to 32 million. Initial launch dates
will vary in the Auction 66 Markets and launch dates in the larger
metropolitan areas may be accomplished in phases.
MetroPCS Conference Call Information
MetroPCS Communications, Inc. will host a conference call to
discuss its Fourth Quarter and Year End 2007 Earnings Results at 9:00
a.m. (ET) on Wednesday, February 27, 2008.
Date: Wednesday, February 27, 2008
Time: 9:00 a.m. (ET)
Call-in Numbers: Toll free: 888-464-7607
International: 706-634-9318
Participant Passcode: 32182617
Please plan on accessing the conference call ten minutes prior to
the start time.
The conference call will be broadcast live via the Company's
Investor Relations website at http://investor.metropcs.com. A replay
of the webcast will be available on the website beginning at
approximately 12:30 p.m. (ET) on February 27, 2008.
A replay of the conference call will be available for two weeks
starting shortly after the call concludes and can be accessed by
dialing 800-642-1687 (toll free) or 706-645-9291 (International). The
passcode required to listen to the replay is 32182617.
To automatically receive MetroPCS financial news by email, please
visit the Investor Relations portion of the MetroPCS website,
http://www.metropcs.com, and subscribe to E-mail Alerts.
About MetroPCS Communications, Inc.
Dallas-based MetroPCS Communications, Inc. (NYSE: PCS) is a
provider of unlimited wireless communications service for a flat-rate
with no signed contract. MetroPCS owns or has access to licenses
covering a population of approximately 140 million people in 14 of the
top 25 largest metropolitan areas in the United States, including New
York, Philadelphia, Boston, Miami, Orlando, Sarasota, Tampa, Atlanta,
Dallas, Detroit, Las Vegas, Los Angeles, San Francisco and Sacramento.
As of December 31, 2007, MetroPCS had approximately 4 million
subscribers and offers service in the Miami, Orlando, Sarasota, Tampa,
Atlanta, Dallas, Detroit, Los Angeles, San Francisco, and Sacramento
metropolitan areas. MetroPCS is among the first wireless operators to
deploy or use an all-digital network based on third-generation
infrastructure and handsets. For more information please visit
www.metropcs.com.
Forward-Looking Statements
This news release includes "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, as
amended. Any statements made in this news 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. Forward-looking statements include information
concerning possible or assumed future results of operations, including
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," "projects," "should," "would,"
"could," "may," "will," "forecast," and other similar expressions.
These forward-looking statements or projections are based on
reasonable assumptions at the time they are made, including our
current expectations, plans and assumptions that have been made 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.
Forward-looking statements or projections 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 and projections. Factors that may
materially affect such forward-looking statements and projections
include:
-- the highly competitive nature of our industry;
-- the rapid technological changes in our industry;
-- our ability to maintain adequate customer care and manage our
churn rate;
-- our ability to sustain the growth rates we are projecting;
-- our ability to access the funds necessary to build and operate
our Auction 66 Markets;
-- the costs associated with being a public company and our
ability to comply with the internal financial and disclosure
control and reporting obligations of public companies;
-- our ability to manage our rapid growth, train additional
personnel and improve our financial and disclosure controls
and procedures;
-- our ability to secure the necessary spectrum and network
infrastructure equipment;
-- our ability to clear the Auction 66 Market spectrum of
incumbent licensees;
-- our ability to adequately enforce or protect our intellectual
property rights;
-- governmental regulation of our services and the costs of
compliance and our failure to comply with such regulations;
-- our capital structure, including our indebtedness amounts;
-- changes in consumer preferences or demand for our products;
-- our inability to attract and retain key members of management;
and
-- other factors described or referenced from time to time in our
filings with the Securities and Exchange Commission.
The forward-looking statements and projections are subject to and
involve risks, uncertainties and assumptions, many of which are beyond
our ability to control or ability to predict. You should not place
undue reliance on these forward-looking statements and projections,
which are based on current expectations and speak only as of the date
of this release. MetroPCS Communications, Inc. is not obligated to,
and does not undertake a duty to, update any forward-looking statement
or projection to reflect events after the date of this release, except
as required by law. The Company 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)
As of December 31,
----------------------
2007 2006
----------- ----------
CURRENT ASSETS:
Cash and cash equivalents $1,470,208 $ 161,498
Short-term investments -- 390,651
Restricted short-term investments -- 607
Inventories, net 109,139 92,915
Accounts receivable (net of allowance for
uncollectible accounts of $2,908 and $1,950
at December 31, 2007 and 2006, respectively) 31,809 28,140
Prepaid charges 60,469 33,109
Deferred charges 34,635 26,509
Deferred tax asset 4,920 815
Other current assets 21,704 24,283
----------- ----------
Total current assets 1,732,884 758,527
Property and equipment, net 1,891,411 1,256,162
Long-term investments 36,050 1,865
FCC licenses 2,072,895 2,072,885
Microwave relocation costs 10,105 9,187
Other assets 62,785 54,496
----------- ----------
Total assets $5,806,130 $4,153,122
=========== ==========
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 439,449 $ 325,681
Current maturities of long-term debt 16,000 16,000
Deferred revenue 120,481 90,501
Other current liabilities 4,560 3,447
----------- ----------
Total current liabilities 580,490 435,629
Long-term debt, net 2,986,177 2,580,000
Deferred tax liabilities 290,128 177,197
Deferred rents 35,779 22,203
Redeemable minority interest 5,032 4,029
Other long-term liabilities 59,778 26,316
----------- ----------
Total liabilities 3,957,384 3,245,374
COMMITMENTS AND CONTINGENCIES
SERIES D CUMULATIVE CONVERTIBLE REDEEMABLE
PARTICIPATING PREFERRED STOCK, par value
$0.0001 per share, 4,000,000 shares designated
at December 31, 2006, 0 and 3,500,993 shares
issued and outstanding at December 31, 2007
and 2006, respectively; Liquidation preference
of $447,388 at December 31, 2006 -- 443,368
SERIES E CUMULATIVE CONVERTIBLE REDEEMABLE
PARTICIPATING PREFERRED STOCK, par value
$0.0001 per share, 500,000 shares designated
at December 31, 2006, 0 and 500,000 shares
issued and outstanding at December 31, 2007
and 2006, respectively; Liquidation preference
of $54,019 at December 31, 2006 -- 51,135
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.0001 per share,
100,000,000 shares authorized, 4,000,000 of
which were designated as Series D Preferred
Stock and 500,000 of which were designated as
Series E Preferred Stock at December 31, 2006;
no shares of preferred stock other than Series
D & E Preferred Stock (presented above) issued
and outstanding at December 31, 2007 and 2006 -- --
Common stock, par value $0.0001 per share,
1,000,000,000 shares authorized, 348,108,027
and 157,052,097 shares issued and outstanding
at December 31, 2007 and 2006, respectively 35 16
Additional paid-in capital 1,524,769 166,315
Retained earnings 338,411 245,690
Accumulated other comprehensive (loss) income (14,469) 1,224
----------- ----------
Total stockholders' equity 1,848,746 413,245
----------- ----------
Total liabilities and stockholders' equity $5,806,130 $4,153,122
=========== ==========
MetroPCS Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Comprehensive Income
(in thousands, except share and per share information)
For the three months ended
December 31,
---------------------------
2007 2006
------------- -------------
REVENUES:
Service revenues $ 511,209 $ 374,768
Equipment revenues 79,925 78,324
------------- -------------
Total revenues 591,134 453,092
OPERATING EXPENSES:
Cost of service (exclusive of
depreciation and amortization expense
of $45,313, $35,004, $157,387 and
$122,606, shown separately below) 176,277 131,771
Cost of equipment 159,308 145,979
Selling, general and administrative
expenses (exclusive of depreciation and
amortization expense of $6,892, $3,837,
$20,815 and $12,422 shown separately
below) 111,869 71,697
Depreciation and amortization 52,205 38,841
(Gain) loss on disposal of assets (763) (1,957)
------------- -------------
Total operating expenses 498,896 386,331
------------- -------------
Income from operations 92,238 66,761
OTHER EXPENSE (INCOME):
Interest expense 49,028 48,576
Accretion of put option in majority-
owned subsidiary 257 207
Interest and other income (18,969) (6,438)
Impairment loss on investment securities 82,794 --
Loss on extinguishment of debt -- 51,762
------------- -------------
Total other expense 113,110 94,107
(Loss) income before provision for
income taxes (20,872) (27,346)
Provision for income taxes (26,278) 10,528
------------- -------------
Net (loss) income (47,150) (16,818)
Accrued dividends on Series D
Preferred Stock -- (5,295)
Accrued dividends on Series E
Preferred Stock -- (756)
Accretion on Series D Preferred Stock -- (118)
Accretion on Series E Preferred Stock -- (85)
------------- -------------
Net (loss) income applicable to common
stock $ (47,150) $ (23,072)
============= =============
Net (loss) income $ (47,150) $ (16,818)
Other comprehensive income (loss):
Unrealized gains (losses) on
available-for-sale securities, net of
tax 277 (318)
Unrealized (losses) gains on cash flow
hedging derivatives, net of tax (9,457) 1,121
Reclassification adjustment for
(gains) losses included in net
income, net of tax (1,174) (789)
------------- -------------
Comprehensive income (loss) $ (57,504) $ (16,804)
============= =============
Net (loss) income per common share:
Net (loss) income per common share --
basic $ (0.14) $ (0.15)
============= =============
Net (loss) income per common share --
diluted $ (0.14) $ (0.15)
============= =============
Weighted average shares:
Basic 347,475,947 150,260,506
============= =============
Diluted 347,475,947 150,260,506
============= =============
For the twelve months ended
December 31,
---------------------------
2007 2006
------------- -------------
REVENUES:
Service revenues $ 1,919,197 $ 1,290,947
Equipment revenues 316,537 255,916
------------- -------------
Total revenues 2,235,734 1,546,863
OPERATING EXPENSES:
Cost of service (exclusive of depreciation
and amortization expense of $45,313,
$35,004, $157,387 and $122,606, shown
separately below) 647,510 445,281
Cost of equipment 597,233 476,877
Selling, general and administrative
expenses (exclusive of depreciation and
amortization expense of $6,892, $3,837,
$20,815 and $12,422 shown separately
below) 352,020 243,618
Depreciation and amortization 178,202 135,028
(Gain) loss on disposal of assets 655 8,806
------------- -------------
Total operating expenses 1,775,620 1,309,610
------------- -------------
Income from operations 460,114 237,253
OTHER EXPENSE (INCOME):
Interest expense 201,746 115,985
Accretion of put option in majority-owned
subsidiary 1,003 770
Interest and other income (63,936) (21,543)
Impairment loss on investment securities 97,800 --
Loss on extinguishment of debt -- 51,518
------------- -------------
Total other expense 236,613 146,730
(Loss) income before provision for income
taxes 223,501 90,523
Provision for income taxes (123,098) (36,717)
------------- -------------
Net (loss) income 100,403 53,806
Accrued dividends on Series D Preferred
Stock (6,499) (21,006)
Accrued dividends on Series E Preferred
Stock (929) (3,000)
Accretion on Series D Preferred Stock (148) (473)
Accretion on Series E Preferred Stock (106) (339)
------------- -------------
Net (loss) income applicable to common
stock $ 92,721 $ 28,988
============= =============
Net (loss) income $ 100,403 $ 53,806
Other comprehensive income (loss):
Unrealized gains (losses) on available-
for-sale securities, net of tax 6,640 (1,211)
Unrealized (losses) gains on cash flow
hedging derivatives, net of tax (13,614) 1,959
Reclassification adjustment for (gains)
losses included in net income, net of
tax (8,719) (1,307)
------------- -------------
Comprehensive income (loss) $ 84,710 $ 53,247
============= =============
Net (loss) income per common share:
Net (loss) income per common share --
basic $ 0.29 $ 0.11
============= =============
Net (loss) income per common share --
diluted $ 0.28 $ 0.10
============= =============
Weighted average shares:
Basic 287,692,280 155,820,381
============= =============
Diluted 296,337,724 159,696,608
============= =============
MetroPCS Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
For the twelve months
ended
December 31,
-------------------------
2007 2006
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 100,403 $ 53,806
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 178,202 135,028
Provision for uncollectible accounts
receivable 129 31
Deferred rent expense 13,745 7,464
Cost of abandoned cell sites 6,704 3,783
Stock-based compensation expense 28,024 14,472
Non-cash interest expense 3,259 6,964
Loss on disposal of assets 655 8,806
Loss on extinguishment of debt -- 51,518
Gain on sale of investments (10,506) (2,385)
Impairment loss on investment securities 97,800 --
Accretion of asset retirement obligation 1,439 769
Accretion of put option in majority-owned
subsidiary 1,003 770
Deferred income taxes 118,524 32,341
Changes in assets and liabilities:
Inventories (16,275) (53,320)
Accounts receivable (3,797) (12,143)
Prepaid expenses (6,887) (6,538)
Deferred charges (8,126) (13,239)
Other assets (11,345) (9,231)
Accounts payable and accrued expenses 63,884 108,492
Deferred revenue 30,013 33,957
Other liabilities 2,458 3,416
------------ ------------
Net cash provided by operating activities 589,306 364,761
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (767,709) (550,749)
Change in prepaid purchases of property
and equipment (19,992) (5,262)
Proceeds from sale of property and
equipment 3,759 3,021
Purchase of investments (3,358,427) (1,269,919)
Proceeds from sale of investments 3,625,648 1,272,424
Change in restricted cash and investments 294 2,406
Purchases of and deposits for FCC licenses -- (1,391,586)
Proceeds from sale of FCC licenses -- --
Microwave relocation costs (661) --
------------ ------------
Net cash used in investing activities (517,088) (1,939,665)
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in book overdraft 4,111 11,368
Payment upon execution of cash flow
hedging derivative -- --
Proceeds from bridge credit agreements -- 1,500,000
Proceeds from Senior Secured Credit
Facility -- 1,600,000
Proceeds from 9 1/4% Senior Notes Due 2014 423,500 1,000,000
Proceeds from Credit Agreements -- --
Proceeds from initial public offering 862,500 --
Cost of raising capital (44,234) --
Debt issuance costs (3,091) (58,789)
Repayment of debt (16,000) (2,437,985)
Proceeds from minority interest in
majority-owned subsidiary -- 2,000
Proceeds from termination of cash flow
hedging derivative -- 4,355
Proceeds from repayment of subscriptions
receivable -- --
Proceeds from issuance of preferred stock,
net of issuance costs -- --
Proceeds from exercise of stock options
and warrants 9,706 2,744
------------ ------------
Net cash provided by financing activities 1,236,492 1,623,693
------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS 1,308,710 48,789
CASH AND CASH EQUIVALENTS, beginning of
period 161,498 112,709
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 1,470,208 $ 161,498
============ ============
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, and cost per user, or CPU, 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 non-GAAP financial measures with the
Company's financial statements presented in accordance with GAAP.
ARPU -- The Company utilizes ARPU to evaluate per-customer service
revenue realization and to assist in forecasting future service
revenues. ARPU is calculated exclusive of activation revenues, as
these amounts are a component of costs of acquiring new customers and
are included in the calculation of CPGA. ARPU is also calculated
exclusive of E-911, FUSF and vendor's compensation charges, as these
are generally 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 following
table shows the calculation of ARPU for the periods indicated.
Three Months Year Ended
Ended December 31, December 31,
----------------------- -----------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
(in thousands, except average number
of customers and ARPU)
Calculation of Average
Revenue Per User
(ARPU):
Service revenues $ 511,209 $ 374,768 $1,919,197 $1,290,947
Less:
Activation revenues (3,287) (2,272) (11,425) (8,297)
E-911, FUSF and
vendor's
compensation
charges (24,741) (16,418) (95,946) (45,640)
----------- ----------- ----------- -----------
Net service revenues $ 483,181 $ 356,078 $1,811,826 $1,237,010
Divided by: Average
number of customers 3,785,880 2,750,943 3,508,497 2,398,682
----------- ----------- ----------- -----------
ARPU $ 42.54 $ 43.15 $ 43.03 $ 42.98
=========== =========== =========== ===========
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 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 PCS providers. Activation revenues and 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 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 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 Year Ended
Ended December 31, December 31,
------------------- -----------------------
2007 2006 2007 2006
--------- --------- ----------- -----------
(in thousands, except gross customer
additions and CPGA)
Calculation of Cost Per
Gross Addition (CPGA):
Selling expenses $ 53,969 $ 31,823 $ 153,065 $ 104,620
Less: Activation
revenues (3,287) (2,272) (11,425) (8,297)
Less: Equipment revenues (79,925) (78,324) (316,537) (255,916)
Add: Equipment revenue
not associated with new
customers 35,330 33,822 142,822 114,392
Add: Cost of equipment 159,308 145,979 597,233 476,877
Less: Equipment costs
not associated with new
customers (49,936) (47,638) (192,153) (155,930)
--------- --------- ----------- -----------
Gross addition expenses $115,459 $ 83,390 $ 373,005 $ 275,746
Divided by: Gross customer
additions 839,666 694,853 3,004,177 2,345,135
--------- --------- ----------- -----------
CPGA $ 137.51 $ 120.01 $ 124.16 $ 117.58
========= ========= =========== ===========
CPU -- CPU is cost of service and general and administrative costs
(excluding applicable non-cash stock-based compensation expense
included in cost of service and general and administrative expense)
plus net loss on equipment transactions unrelated to initial customer
acquisition (which includes the gain or loss on sale of handsets to
existing customers and costs associated with handset replacements and
repairs (other than warranty costs which are the responsibility of the
handset manufacturers)) exclusive of E-911, FUSF and vendor's
compensation charges, divided by the sum of the average monthly number
of customers during such period. CPU does not include any depreciation
and amortization expense. Management uses 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 providers. We believe investors use CPU primarily as a tool
to track changes in our non-selling cash costs over time and to
compare our non-selling cash costs to those of other wireless
providers. Other wireless carriers 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 Year Ended
Ended December 31, December 31,
----------------------- -----------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
(in thousands, except average number
of customers and CPU)
Calculation of Cost
Per User (CPU):
Cost of service $ 176,277 $ 131,771 $ 647,510 $ 445,281
Add: General and
administrative
expense 57,900 39,874 198,955 138,998
Add: Net loss on
equipment
transactions
unrelated to
initial customer
acquisition 14,606 13,816 49,331 41,538
Less: Stock-based
compensation
expense included in
cost of service and
general and
administrative
expense (9,053) (6,722) (28,024) (14,472)
Less: E-911, FUSF
and vendor's
compensation
revenues (24,740) (16,418) (95,946) (45,640)
----------- ----------- ----------- -----------
Total costs used in
the calculation of
CPU $ 214,990 $ 162,321 $ 771,826 $ 565,705
Divided by: Average
number of customers 3,785,880 2,750,943 3,508,497 2,398,682
----------- ----------- ----------- -----------
CPU $ 18.93 $ 19.67 $ 18.33 $ 19.65
=========== =========== =========== ===========
The Company's senior secured credit facility calculates
consolidated Adjusted EBITDA as: consolidated net income plus
depreciation and amortization; gain (loss) on disposal of assets;
non-cash expenses; gain (loss) on extinguishment of debt; provision
for income taxes; interest expense; and certain expenses of MetroPCS
Communications, Inc. minus interest and other income and non-cash
items increasing consolidated net income. The Company considers
Adjusted EBITDA, as defined above, to be an important indicator to
investors because it provides information related to the Company's
ability to provide cash flows to meet future debt service, capital
expenditures and working capital requirements and fund future growth.
The Company presents Adjusted EBITDA because covenants in its senior
secured credit facility contain ratios based on this measure. If the
Company's Adjusted EBITDA were to decline below certain levels,
covenants in the Company's senior secured credit facility that are
based on Adjusted EBITDA, including the maximum senior secured
leverage ratio covenant, may be violated and could cause, among other
things, an inability to incur further indebtedness and in certain
circumstances a default or mandatory prepayment under the Company's
senior secured credit facility. The Company's maximum senior secured
leverage ratio is required to be less than 4.5 to 1.0 based on
Adjusted EBITDA plus the impact of certain new markets. The lenders
under the senior secured credit facility use the senior secured
leverage ratio to measure the Company's ability to meet its
obligations on its senior secured debt by comparing the total amount
of such debt to its Adjusted EBITDA, which the Company's lenders use
to estimate its cash flow from operations. The senior secured leverage
ratio is calculated as the ratio of senior secured indebtedness to
Adjusted EBITDA, as defined by the senior secured credit facility.
Adjusted EBITDA is not a measure calculated in accordance with GAAP,
and should not be considered a substitute for, operating income
(loss), net income (loss), or any other measure of financial
performance reported in accordance with GAAP. In addition, Adjusted
EBITDA should not be construed as an alternative to, or more
meaningful than cash flows from operating activities, as determined in
accordance with GAAP.
The following table shows the calculation of our consolidated
Adjusted EBITDA, as defined in the Company's senior secured credit
facility, for the three months and year ended December 31, 2007 and
2006.
Three Months Year Ended
Ended December 31, December 31,
------------------- -------------------
2007 2006 2007 2006
--------- --------- --------- ---------
(in thousands)
Calculation of Consolidated
Adjusted EBITDA:
Net (loss) income $(47,150) $(16,818) $100,403 $ 53,806
Adjustments:
Depreciation and
amortization 52,205 38,841 178,202 135,028
(Gain) loss on disposal of
assets (763) (1,957) 655 8,806
Stock-based compensation
expense (1) 9,053 6,722 28,024 14,472
Interest expense 49,028 48,576 201,746 115,985
Accretion of put option in
majority-owned subsidiary
(1) 257 207 1,003 770
Interest and other income (18,969) (6,438) (63,936) (21,543)
Impairment loss on
investment securities 82,794 -- 97,800 --
Gain on extinguishment of
debt -- 51,762 -- 51,518
Provision for income taxes 26,278 (10,528) 123,098 36,717
--------- --------- --------- ---------
Consolidated Adjusted EBITDA $152,733 $110,367 $666,995 $395,559
========= ========= ========= =========
(1) Represents a non-cash expense, as defined by our senior
secured credit facility.
In addition, for further information, the following table
reconciles consolidated Adjusted EBITDA, as defined in the Company's
senior secured credit facility, to cash flows from operating
activities for the three months and year ended December 31, 2007 and
2006.
Three Months Year Ended
Ended December 31, December 31,
------------------- --------------------
2007 2006 2007 2006
--------- --------- ---------- ---------
(in thousands)
Reconciliation of Net Cash
Provided by Operating
Activities to Consolidated
Adjusted EBITDA:
Net cash provided by
operating activities $149,526 $ 80,073 $ 589,306 $364,761
Adjustments:
Interest expense 49,028 48,576 201,746 115,985
Non-cash interest expense (602) (3,262) (3,259) (6,964)
Interest and other income (18,969) (6,438) (63,936) (21,543)
Recovery of (provision for)
uncollectible accounts
receivable (99) 33 (129) (31)
Deferred rent expense (7,163) (2,099) (13,745) (7,464)
Cost of abandoned cell
sites (1,828) (1,714) (6,704) (3,783)
Accretion of asset
retirement obligation (540) (300) (1,439) (769)
Gain on sale of investments 1,983 510 10,506 2,385
Provision for income taxes 26,278 (10,528) 123,098 36,717
Deferred income taxes (23,266) 9,451 (118,524) (32,341)
Changes in working capital (21,615) (3,935) (49,925) (51,394)
--------- --------- ---------- ---------
Consolidated Adjusted EBITDA $152,733 $110,367 $ 666,995 $395,559
========= ========= ========== =========
The following table reconciles segment Adjusted EBITDA (deficit)
for the three months and year ended December 31, 2007 and 2006 to
consolidated income before provision for income taxes:
Three Months Year Ended
Ended December 31, December 31,
------------------- ---------------------
2007 2006 2007 2006
--------- --------- ---------- ----------
(in thousands)
Segment Adjusted EBITDA
(Deficit):
Core Markets Adjusted EBITDA $164,938 $128,187 $ 654,112 $ 492,773
Expansion Markets Adjusted
EBITDA (Deficit) (12,205) (17,820) 12,883 (97,214)
--------- --------- ---------- ----------
Total 152,733 110,367 666,995 395,559
Depreciation and
amortization (52,205) (38,841) (178,202) (135,028)
Gain (loss) on disposal of
assets 763 1,957 (655) (8,806)
Stock-based compensation
expense (9,053) (6,722) (28,024) (14,472)
Interest expense (49,028) (48,576) (201,746) (115,985)
Accretion of put option in
majority-owned subsidiary (257) (207) (1,003) (770)
Interest and other income 18,969 6,438 63,936 21,543
Impairment loss on
investment securities (82,794) -- (97,800) --
Gain on extinguishment of
debt -- (51,762) -- (51,518)
--------- --------- ---------- ----------
Consolidated income (loss)
before provision for income
taxes $(20,872) $(27,346) $ 223,501 $ 90,523
========= ========= ========== ==========
CONTACT: MetroPCS Communications, Inc.
Keith Terreri, 214-570-4641
Vice President - Finance & Treasurer
investor_relations@metropcs.com
or
Joele Frank, Wilkinson Brimmer Katcher
Joele Frank / Dan Katcher / Jamie Moser, 212-355-4449
SOURCE: MetroPCS Communications, Inc.
