UPCS Ubiquitel Inc. (MM)

UbiquiTel Reports First Quarter 2005 Results CONSHOHOCKEN, Pa., May 2 /PRNewswire-FirstCall/ -- UbiquiTel Inc. (NASDAQ:UPCS), a PCS Affiliate of Sprint (NYSE:FON), today reported financial and operating results for the quarter ended March 31, 2005 and updated 2005 guidance. Highlights for the 1st Quarter 2005: -- Adjusted EBITDA in the first quarter 2005 grew 112% to approximately $24.6 million from the same period a year ago. Adjusted EBITDA margin grew to 26% in the first quarter 2005 from 22% in the fourth quarter 2004 and 15% in the first quarter 2004. -- Service revenues in the first quarter 2005 grew 25% to approximately $96.5 million from the same period a year ago. -- Net income for the first quarter 2005 was $2.5 million, or $0.02 per share, compared to a net loss of $(8.6) million, or $(0.09) per share, in the first quarter 2004. -- The company added approximately 14,400 net subscribers ending the quarter with 412,900 subscribers. 76% of the ending subscriber base was in prime credit classes. Churn in the first quarter 2005 improved to 2.6% from 2.9% in the fourth quarter 2004 and 3.1% in the first quarter 2004. "We expect our year-over-year Adjusted EBITDA growth rate of 112% will lead the wireless industry for the fifth consecutive quarter," said Donald A. Harris, chairman and chief executive officer of UbiquiTel Inc. "We continue to focus on improving profitability with our Adjusted EBITDA margins reaching 26% and churn declining to 2.6%. We achieved both of these results a quarter ahead of our goals." Total revenues were approximately $99.9 million for the first quarter 2005, comprised of $66.9 million of subscriber revenues, $29.6 million of roaming and wholesale revenues and $3.4 million of equipment revenues. Subscriber revenues increased 18% from the first quarter 2004. Roaming and wholesale revenues increased 42% over the same period. Operating income for the quarter was $13.0 million, compared to an operating loss of $(1.3) million in the first quarter 2004. Conference Call to be held May 3 at 10:30 a.m. ET UbiquiTel's management will conduct a conference call on Tuesday, May 3, at 10:30 a.m., Eastern Time, to discuss its results for the three months ended March 31, 2005 and 2005 guidance. Investors and interested parties may listen to the call via a live webcast accessible through the company's website, http://www.ubiquitelpcs.com/. To listen, please register and download audio software at the site at least 15 minutes prior to the start of the call. The call may also be accessed by dialing (800) 638-5439 (domestic) or (617) 614- 3945 (international), passcode 60656460. The webcast will be archived on the site, while a telephone replay of the call will be available for 7 days beginning at 12:30 p.m., Eastern Time, May 3, at 888-286-8010 or 617-801-6888, passcode: 11301287. SUMMARY OF QUARTERLY OPERATING AND FINANCIAL METRICS*: Q1 2005 Q4 2004 Q1 2004 Net additions 14,400 15,100 21,400 Net additions mix Prime 68% 110% 61% Sub-prime 32% (10)% 39% Churn 2.6% 2.9% 3.1% Ending subscribers 412,900 398,500 349,100 Penetration-Covered POPs 5.0% 5.0% 4.4% Ending subscribers mix Prime 76% 76% 74% Sub-prime 24% 24% 26% Reseller subscribers 112,200 98,600 35,200 ARPU $55 $57 $56 CPGA $497 $505 $425 CCPU $40 $43** $43 Adjusted EBITDA $24.6 million $20.6 million** $11.6 million Capital expenditures $10.0 million $8.5 million $5.9 million Free cash flow $(7.9) million $11.7 million $3.2 million Covered POPs 8.3 million 7.9 million 7.9 million Minutes of use per subscriber 941 930 841 System minutes 1,378 million 1,315 million 977 million Reseller minutes 91 million 78 million 15 million Roaming minutes-Inbound 314 million 318 million 249 million Roaming minutes-Outbound 172 million 170 million 142 million Roaming inbound to outbound ratio 1.8 to 1 1.9 to 1 1.8 to 1 * All metrics are reported exclusive of reseller activities except where noted. ** Includes non-recurring net adjustments of $1.2 million or an approximate $1 increase in CCPU. The following table provides an updated range of financial and operating guidance for the year, along with previous guidance. 2005 Guidance Previous Updated Net additions 60,000 to 80,000 60,000 to 80,000 Ending subscribers 458,500 to 478,500 458,500 to 478,500 Average monthly churn 2.5% to 2.8% 2.4% to 2.6% ARPU $55 to $57 $55 to $56 CPGA $460 to $490 $480 to $490 CCPU $41 to $43 $41 to $42 Earnings per share $0.12 to $0.22 $0.14 to $0.24 (Dollars in millions) Total revenues $430.0 to $450.0 $430.0 to $440.0 Adjusted EBITDA $105.0 to $115.0 $107.0 to $117.0 Capital expenditures $40.0 to $50.0 $40.0 to $50.0 Free cash flow $20.0 to $30.0 $20.0 to $30.0 Cash and cash equivalents $112.0 to $122.0 $112.0 to $122.0 About UbiquiTel Inc. UbiquiTel is the exclusive provider of Sprint digital wireless mobility communications network products and services under the Sprint brand name to midsize markets in the Western and Midwestern United States that include a population of approximately 10.8 million residents and cover portions of California, Nevada, Washington, Idaho, Wyoming, Utah, Indiana, Kentucky and Tennessee. About Sprint Sprint offers an extensive range of innovative communication products and solutions, including global IP, wireless, local and multiproduct bundles. A Fortune 100 company with more than $27 billion in annual revenues in 2004, Sprint is widely recognized for developing, engineering and deploying state- of-the-art network technologies, including the United States' first nationwide all-digital, fiber-optic network; an award-winning Tier 1 Internet backbone; and one of the largest 100-percent digital, nationwide wireless networks in the United States. For more information, visit http://www.sprint.com/mr. Financial Measures and Definitions of Terms Used UbiquiTel provides certain financial measures that are calculated in accordance with accounting principles generally accepted in the United States (GAAP) and adjustments to GAAP (non-GAAP) to assess the company's financial performance. In addition, the company uses certain non-financial terms, such as churn, which are metrics used in the wireless communications industry and are not measures of financial performance under GAAP. The non-GAAP financial measures reflect industry measures of liquidity, profitability or performance and the non-financial metrics reflect industry conventions, both of which are commonly used by the investment community for comparability purposes. The reconciliation of the non-GAAP financial measures with comparable measures under GAAP and the determination of non-financial metrics used in this release are included in an attachment to this release. Because the company does not predict special items that might occur in the future, and our forecasts are developed at a level of detail different than that used to prepare GAAP-based financial measures, the company does not provide reconciliations to GAAP of its forward-looking financial measures. The non-financial metrics and non- GAAP financial measures used in this release include the following: Churn is the monthly rate of customer turnover expressed as the percentage of customers of the beginning customer base that both voluntarily and involuntarily discontinued service during the period. Churn is computed by dividing the number of customers that discontinued service during the month, net of 30 day returns, by the beginning customer base for the period. ARPU is average revenue per user and summarizes the average monthly service revenue per customer, excluding wholesale revenue. ARPU is computed by dividing subscriber revenue by the average subscribers for the period. The company believes ARPU is a useful measure to assist in evaluating the company's past and forecasting its future subscriber revenue. In addition, it provides a gauge to compare the company's subscriber revenue to that of other wireless communications providers, although other wireless communications providers may include or exclude certain items from their calculations which may make the comparison less meaningful. CPGA is cost per gross addition and summarizes the average cost to acquire new customers during the period. CPGA is computed by adding the income statement components of selling and marketing and the cost of products sold, and reducing that amount by the equipment revenue recorded. The net result of these components is then divided by the gross customers acquired during the period. The company believes CPGA is a useful measure used to compare the company's average cost to acquire a new subscriber to that of other wireless communications providers, although other wireless communications providers may include or exclude certain items from their calculations which may make the comparison less meaningful. The inclusion of cost of products sold net of the equipment revenues earned is critical to the company's understanding of how much it costs the company to acquire a new customer. CCPU is cash cost per user and summarizes the average monthly cash costs to provide digital wireless mobility communications services per customer. CCPU is computed by dividing the sum of cost of service and operations and general and administrative expenses by the average subscribers for the period. The company believes CCPU is a useful measure used to compare the company's cash cost of operations per customer to that of other wireless communications providers, although other wireless communications providers may include or exclude certain items from their calculations which may make the comparison less meaningful. The company's calculation of CCPU excludes depreciation, amortization and accretion expenses. Adjusted EBITDA represents net income (loss) before income tax expense, gain on debt retirements, interest expense, interest income, depreciation, amortization and accretion and non-cash compensation expense. The company believes Adjusted EBITDA is an important operating measure for comparability to other wireless companies and it is not intended to represent the results of the company's operations in accordance with GAAP. Adjusted EBITDA should not be considered as a substitute for net income, income from operations, net cash provided by operating activities or any other operating or liquidity measure prepared in accordance with GAAP. Additionally, the company's Adjusted EBITDA computation may not be comparable to other similarly titled measures of other companies. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by service revenues. Free cash flow summarizes the cash flow from operating activities and capital expenditures and is computed by adding net cash provided by operating activities and capital expenditures. The company believes free cash flow is an important measure of liquidity to meet the company's debt service requirements. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Statements contained in this news release that are forward-looking statements are subject to various risks and uncertainties. Such forward- looking statements are made pursuant to the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995 and are made based on management's current expectations or beliefs as well as assumptions made by, and information currently available to, management. A variety of factors could cause actual results to differ materially from those anticipated in UbiquiTel's forward-looking statements, including the following factors: UbiquiTel's dependence on its affiliation with Sprint; the potential impact of the pending Sprint-Nextel business combination on UbiquiTel's affiliation with Sprint as well as Sprint's competitiveness in the wireless industry; the competitiveness of and changes in Sprint's pricing plans, products and services; increased competition in UbiquiTel's markets; rates of penetration in the wireless communications industry; the potential to experience a high rate of customer turnover; customer quality; potential declines in roaming and wholesale revenue; UbiquiTel's reliance on the timeliness, accuracy and sufficiency of financial and other data and information received from Sprint; the ability of Sprint to provide back office, customer care and other services; UbiquiTel's debt level; adequacy of bad debt and other reserves; UbiquiTel's ability to manage anticipated growth and rapid expansion; changes in population; changes or advances in technology; effects of mergers and consolidations within the wireless communications industry and unexpected announcements or developments from others in the wireless communications industry; and general market and economic conditions. Certain of these and other applicable risks, cautionary statements and factors that could cause actual results to differ from UbiquiTel's forward-looking statements are included in UbiquiTel's filings with the Securities and Exchange Commission ("SEC"), specifically in the "Business-Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of its Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and in subsequent filings with the SEC. Except as otherwise required under federal securities laws and the rules and regulations of the SEC, the company does not have any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise. UbiquiTel Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except per share data) March 31, 2005 December 31, 2004 ASSETS CURRENT ASSETS: Cash and cash equivalents $84,287 $91,781 Accounts receivable, net of allowance for doubtful accounts of $2,908 and $3,358 at March 31, 2005 and December 31, 2004, respectively 22,780 22,609 Inventory, net 5,013 4,025 Prepaid expenses and other assets 18,274 17,680 Total current assets 130,354 136,095 PROPERTY AND EQUIPMENT, NET 245,147 243,679 CONSTRUCTION IN PROGRESS 4,681 1,867 DEFERRED FINANCING COSTS, NET 10,429 10,868 GOODWILL 38,138 38,138 INTANGIBLES, NET 63,489 64,565 OTHER LONG-TERM ASSETS 2,403 2,595 Total assets $494,641 $497,807 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $227 $223 Accounts payable 8,905 3,124 Accrued expenses 18,386 18,824 Accrued compensation and benefits 1,415 4,591 Interest payable 3,456 13,825 Taxes payable 3,051 2,672 Deferred revenue 12,396 12,274 Other 2,132 1,501 Total current liabilities 49,968 57,034 LONG-TERM LIABILITIES, EXCLUDING CURRENT MATURITIES 423,803 423,893 OTHER LONG-TERM LIABILITIES 13,088 11,462 Total long-term liabilities 436,891 435,355 Total liabilities 486,859 492,389 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, par value $0.001; 10,000 shares authorized; 0 shares issued and outstanding at March 31, 2005 and December 31, 2004 - - Common stock, par value $0.0005; 240,000 shares authorized; 93,184 and 93,016 shares issued and outstanding at March 31, 2005 and December 31, 2004, respectively 46 46 Additional paid-in-capital 303,742 303,830 Accumulated deficit (296,006) (298,458) Total stockholders' equity 7,782 5,418 Total liabilities and stockholders' equity $494,641 $497,807 UbiquiTel Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) (In thousands, except per share data) Three Months Ended March 31, 2005 2004 (Restated) REVENUES: Subscriber revenues $66,892 $56,571 Roaming and wholesale revenues 29,606 20,867 Service revenues 96,498 77,438 Equipment revenues 3,433 3,872 Total revenues 99,931 81,310 COSTS AND EXPENSES: Cost of service and operations (exclusive of depreciation as shown separately below) 44,006 39,138 Cost of products sold 10,385 9,215 Selling and marketing 15,926 16,977 General and administrative expenses excluding non-cash compensation charges 4,988 4,383 Non-cash compensation for general and administrative matters (521) - Depreciation, amortization and accretion 12,157 12,930 Total costs and expenses 86,941 82,643 OPERATING INCOME (LOSS) 12,990 (1,333) INTEREST INCOME 526 135 INTEREST EXPENSE (10,935) (8,430) GAIN ON DEBT RETIREMENT - 1,109 INCOME (LOSS) BEFORE INCOME TAXES 2,581 (8,519) INCOME TAX EXPENSE (129) (72) NET INCOME (LOSS) $2,452 $(8,591) NET INCOME (LOSS) PER SHARE: BASIC $0.03 $(0.09) DILUTED $0.02 $(0.09) WEIGHTED AVERAGE SHARES OUTSTANDING: BASIC 93,103 92,579 DILUTED 98,644 92,579 UbiquiTel Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) Three Months Ended March 31, 2005 2004 (Restated) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $2,452 $(8,591) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Amortization of deferred financing costs 439 410 Amortization of debt discount (32) 303 Amortization of intangible assets 1,076 1,076 Depreciation and accretion 11,080 11,854 Interest accrued on discount notes - 3,149 Non-cash compensation from stock options granted to employees (521) - Deferred income taxes 69 72 Gain on sale of equipment (71) (58) Gain on debt retirement - (1,109) Changes in operating assets and liabilities exclusive of capital expenditures, net (12,334) 2,074 Net cash provided by operating activities 2,158 9,180 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (10,031) (5,941) Net cash used in investing activities (10,031) (5,941) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of 9.875% senior notes - 265,302 Repayments under senior secured credit facility - (230,000) Repayment of 14% Series B senior discount notes - (12,478) Purchase of 14% senior discount notes - (15,872) Financing costs - (8,296) Change in book cash overdraft - (5,671) Proceeds from issuance of common stock 106 - Proceeds from exercise of stock options 327 - Repayment of capital lease obligations and other long-term debt (54) (110) Net cash provided by (used in) financing activities 379 (7,125) NET DECREASE IN CASH AND CASH EQUIVALENTS (7,494) (3,886) CASH AND CASH EQUIVALENTS, beginning of period 91,781 57,225 CASH AND CASH EQUIVALENTS, end of period $84,287 $53,339 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $20,847 $3,489 Cash paid for taxes 3 8 UbiquiTel Inc. and Subsidiaries Reconciliation of Non-GAAP Financial Measures and Determination of Non- Financial Metrics (Unaudited) Three Months Ended March 31, 2005 2004 (Restated) ADJUSTED EBITDA: Net income (loss) $2,452,000 $(8,591,000) Income tax expense 129,000 72,000 Gain on debt retirement - (1,109,000) Interest expense 10,935,000 8,430,000 Interest income (526,000) (135,000) Depreciation, amortization and accretion 12,157,000 12,930,000 Non-cash compensation for general and administrative matters (521,000) - Adjusted EBITDA $24,626,000 $11,597,000 AVERAGE REVENUE PER USER (ARPU): Subscriber revenues $66,892,000 $56,571,000 Average subscribers 404,300 338,400 ARPU $55 $56 CASH COST PER USER (CCPU): Cost of service and operations $44,006,000 $39,137,000 Add: General and administrative expenses 4,988,000 4,384,000 Total cash costs $48,994,000 $43,521,000 Average subscribers 404,300 338,400 CCPU $40 $43 COST PER GROSS ADDITION (CPGA): Selling and marketing $15,926,000 $16,977,000 Add: Cost of products sold 10,385,000 9,215,000 Less: Equipment revenue (3,433,000) (3,872,000) Total cost of gross additions $22,878,000 $22,320,000 Gross additions 46,000 52,500 CPGA $497 $425 FREE CASH FLOW: Net cash provided by operating activities $2,158,000 $9,180,000 Capital expenditures (10,031,000) (5,941,000) Free cash flow $(7,873,000) $3,239,000 DATASOURCE: UbiquiTel Inc. CONTACT: Dava Guerin of Guerin Public Relations, Inc., +1-215-914-2040 or +1-215-262-0740 (wireless), for UbiquiTel Inc.; or Brighid de Garay of UbiquiTel Inc., +1-610-832-3311 or +1-610-453-7495 (wireless) Web site: http://www.sprint.com/mr Web site: http://www.ubiquitelpcs.com/

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