Q1 2011 Earnings Call
May 04, 2011 4:15 pm ET
Erik Prusch - Chief Operating Officer
John Saw - Chief Technology Officer and Senior Vice President
Hope Cochran - Chief Financial Officer
John Stanton - Chairman, Interim Chief Executive Officer and Member of Audit Committee
Paul Blalock - Senior Vice President, Investor Relations
Anthony Klarman - Deutsche Bank AG
Shing Yin - Citadel Securities, LLC
Walter Piecyk - BTIG, LLC
Philip Cusick - JP Morgan Chase & Co
Michael Funk - BofA Merrill Lynch
Ben Abramovitz - Kaufman Bros., L.P.
Ana Goshko - BofA Merrill Lynch
Jonathan Chaplin - Crédit Suisse AG
Richard Prentiss - Raymond James & Associates, Inc.
Simon Flannery - Morgan Stanley
Michael Rollins - Citigroup Inc
Previous Statements by CLWR
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Thank you, Devin. Good afternoon, and welcome to Clearwire's First Quarter 2011 Financial Results Conference Call. With me today are John Stanton, our Chairman and Interim CEO; Erik Prusch, Clearwire's new Chief Operating Officer; and Hope Cochran, our new Chief Financial Officer. We are very pleased to report subscriber growth, improvement in key operating metrics and a demonstrable path toward positive EBITDA.
Today's call is being webcast live on the Clearwire Investor Relations website and will be archived on that site and available for replay shortly after we conclude. A reconciliation of pro forma financial information and any non-GAAP financial measures discussed on this call can be found in our press release. In particular, we have pro forma first quarter income statement including pro forma wholesale revenue and pro forma wholesale ARPU and pro forma net loss, which give effect to the new wholesale pricing agreement with Sprint previously announced on April 18, 2011, and applicable to first quarter results.
In addition, today's call may contain forward-looking statements reflecting management's beliefs and assumptions concerning future events and trends in or expectations regarding financial results. Forward-looking statements include, among other things, our future financial and operating performance and financial condition, including projections and targets for 2011 and subsequent periods, subscriber growth, network development and market launch plans, strategic plans and objectives and the need for additional financing.
These forward-looking statements are all based on currently available operating, financial and competitive information and are subject to various risks and uncertainties. Listeners are cautioned not to put undue reliance on any forward-looking statements as they are not a guarantee of future performance. Please refer to our press release and our filings with the SEC for more information concerning risk factors that could cause actual results to differ materially from those in the forward-looking statements. The company assumes no obligation to update any of these forward-looking statements.
I will now turn the call over to John Stanton.
Thanks, Paul. Good afternoon, and thanks for joining us today. Our team is focused on achieving profitability. We have 4 simple goals: first, drive wholesale revenue growth, particularly by working closely with Sprint and our cable partners; second, optimize the retail channel and generate double-digit retail subscriber and revenue growth this year; third, cut costs; and fourth, develop and implement a long-term technology and funding plan.
On this call today, Erik will comment on the operating strategies and Hope on the numbers that demonstrate substantial progress towards achieving our goals. I'll comment on the relationship with Sprint and our long-term plans, and later I'll wrap up with an update on our search for a permanent CEO.
On Sprint, I believe that our team's strong relationships with Sprint executives have enabled us to substantially strengthen our business partnership with their company over the last several months. Last month, we announced an agreement with Sprint on a new usage-based pricing model, which will apply to their fast growing subscriber base. That agreement further solidifies our permanent relationship with Sprint, enabling them to uniquely meet their 4G customer demands. There are other important features of the agreement, including re-wholesaling and custom network solutions, which we believe will enable Sprint and Clearwire to resell 4G services to new customer segments such as government and enterprise clients.
We are now in discussions with Sprint regarding our role in their network modernization. We believe that we have the spectrum in urban areas that they need to fulfill their promises to their customers and to differentiate them from their competitors. We expect to grow our footprint and evolve our technology based on our close relationship with Sprint and our other partners as we continue to seek new funding to fuel our growth.
Now I'd like to turn the call over to Erik.
Thanks, John. Clearwire has achieved a record quarter of results, led by substantial subscriber additions and revenue increases, and just recently, a new $1 billion plus wholesale pricing agreement with Sprint. As John briefly described, we grew rapidly when we successfully cut significant costs. In fact, we reported record subscriber growth, adding 1.8 million new subscribers during the quarter, consisting of 1.6 million new wholesale subscribers and 155,000 retail subscribers and ending the first quarter with 6.1 million total subscribers. We now expect to finish 2011 with approximately 9.5 million subscribers.
Our retail growth is the result of strong performance during the quarter in all of our retail channels. Going forward, we expect to pace our retail growth during the rest of the year as we purposely focus on our most profitable channels such as web, telesales and other low-cost retailers and de-emphasize some of our more expensive retail channels. The combination of pace growth and channel optimization will result in retail contributing cash to fix costs in 2011 for the first time.