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Press release from GlobeNewswire (a Nasdaq OMX company)

Clearwire Reports Record Third Quarter 2011 Results

Wednesday, November 02, 2011

Clearwire Reports Record Third Quarter 2011 Results13:01 EDT Wednesday, November 02, 2011Record 3Q 2011 Revenue of $332.2 Million, Up 134% From $142.2 Million, Year Over YearRecord Quarterly Net Wholesale Subscriber Additions of 1.9 Million Representing 29% Sequential Growth in Ending Wholesale Subscribers57% Sequential Improvement in 3Q 2011 Adjusted EBITDA as compared to 2Q 2011 Pro Forma Adjusted EBITDASmartphone Data Traffic Driving Network Demand with 43% Quarter over Quarter Increase in Smartphone Network UsageNew CLEAR Retail Pricing Options Offer Flexibility, Convenience and Unlimited Usage BELLEVUE, Wash., Nov. 2, 2011 (GLOBE NEWSWIRE) -- Clearwire Corporation (Nasdaq:CLWR), a leading provider of 4G wireless broadband services in the U.S., today reported its financial and operating results for third quarter 2011. "Our record third quarter results demonstrate that our efforts to optimize performance are succeeding," said Erik Prusch, President and CEO of Clearwire. "We believe the growth of our subscriber base and improvements in our cost structure resulted in significant Adjusted EBITDA improvement in the third quarter, and support the merits of our business model. Additionally, the continued growth in network usage by our subscribers highlights the rapidly increasing demand for mobile broadband data that Clearwire is best-positioned to deliver. "Today Clearwire is the only operational 4G wholesale business combining an all-IP network, substantial spectrum resources, and a technology roadmap to serve the growing demand for mobile broadband. We believe Clearwire's deep spectrum resources are capable of meeting the urban demand that will likely strain the lower-capacity LTE deployments planned by other wireless operators. Our common global technology roadmap, aligned with members of the Global TDD-LTE Initiative (GTI), including China Mobile, the largest wireless carrier in the world, should position us to benefit from the significant economies of scale of a converged LTE ecosystem. We look forward to opportunities to work with our current wholesale partners, and other wireless carriers, to serve this growing market." Clearwire ended third quarter 2011 with approximately 9.54 million total subscribers, up 240% from 2.81 million subscribers in third quarter 2010. The subscriber base consists of 1.32 million retail subscribers and 8.22 million wholesale subscribers. During third quarter 2011, Clearwire added 1.89 million total net new subscribers, comprised of 35 thousand retail and 1.86 million wholesale net new subscribers. Clearwire's wholesale subscribers consist primarily of Sprint 3G/4G smartphone customers. Third quarter 2011 aggregate network usage by wholesale customers increased 34% compared to second quarter 2011, driven primarily by growth in aggregate smartphone usage, which increased 43% over the same period. Third quarter 2011 revenue was $332.2 million, a 134% increase over third quarter 2010 revenue of $142.2 million. Third quarter 2011 retail revenue and other revenue was $195.0 million, a year over year increase of 55% from $125.6 million in third quarter 2010. Third quarter 2011 retail average revenue per user (ARPU) was $47.05 up from $43.10 in third quarter 2010. Wholesale revenue in third quarter 2011 was $137.2 million, a year over year increase of 730% from $16.5 million in third quarter 2010. Third quarter 2011 wholesale ARPU was $6.20, up from $4.46 in third quarter 2010. Retail cost per gross addition (CPGA) was $288 in the third quarter 2011 compared to $313 in second quarter 2011. Retail churn was 4.2% in third quarter 2011, up from 3.9% in second quarter 2011. Wholesale churn was 1.5% in third quarter 2011, up from second quarter 2011 wholesale churn of 1.3%. Adjusted EBITDA in third quarter 2011 was a loss of $46.4 million, representing a sequential improvement of $62.1 million when compared to second quarter 2011 pro forma Adjusted EBITDA loss of $108.5 million. When compared to second quarter 2011 actual Adjusted EBITDA loss of $79.6 million, third quarter 2011 Adjusted EBITDA improved by $33.2 million. Third quarter 2011 reported net loss from continuing operations attributable to Clearwire was $83.5 million, or $0.34 per basic share. Including the effects of discontinued operations, third quarter 2011 reported net loss attributable to Clearwire was $84.8 million, or $0.35 per basic share. At the end of third quarter 2011, Clearwire operated networks in the U.S. covering areas where approximately 135 million people reside, including approximately 133 million people in 4G markets in the U.S.2011 Outlook Clearwire now expects to exceed its previous guidance of 10 million subscribers by the end of 2011, with most of the new subscribers coming from its wholesale business. Before any impact of an LTE deployment, the company now expects capital expenditures in 2011 to be less than $300 million, approximately $100 million lower than previous guidance.New CLEAR Pricing This week, Clearwire launched a family of new, user-friendly service plans for our new customers in order to simplify our CLEAR retail product offerings and focus on our core 4G network. All of the new CLEAR 4G internet plans now feature no long-term contracts and unlimited* Internet usage following successful retail trials in certain markets this summer. In addition, there are no credit checks, consumers and businesses choose from the same plans, and in most cases, the CLEAR service comes with a 15-day Risk-Free Satisfaction Guarantee. The new flexible service plans allow customers to get CLEAR for 2 hours, one day, one week or on a monthly recurring basis. Monthly service prices start at $50 (plus tax) for a 4G Mobile or 4G Home plan. Device prices for new customers start at $39.99 and device leases will no longer be available.Results of Continuing Operations Cost of goods and services and network costs (COGS) for third quarter 2011 decreased 35% to $282.5 million compared to $433.4 million for second quarter 2011. These amounts include non-cash charges for network equipment reserves and other write-downs of $214.6 million and $38.7 million in the second and third quarters of 2011, respectively, and non-cash network related rents of $38.4 million and $65.2 million in the second and third quarters of 2011, respectively. The sequential increase in non-cash network related rents in third quarter 2011 was primarily due to a higher provision for unused tower-related leases and other network agreements. Excluding non-cash expenses, COGS decreased 1.3% sequentially reflecting a full quarter's benefit of outsourcing efficiencies. Selling, general and administrative (SG&A) expense for the third quarter 2011 decreased 1% to $176.5 million compared to $178.2 million for the second quarter 2011. The decrease is primarily attributable to lower general and administrative expenses resulting from workforce reductions and outsourcing arrangements, partially offset by higher non-cash stock compensation expense. Third quarter 2011 capital expenditures (capex) declined to $17 million from $56 million in second quarter 2011 primarily due to favorable settlements on prior capex purchases. The company ended the third quarter 2011 with cash and investments of approximately $711 million invested primarily in U.S. Treasury securities. In October 2011 Clearwire received cash payments totaling $110.1 million for the third installment of the pre-payment and take-or-pay commitment for 2011 in accordance with the Sprint wholesale agreements.                            Clearwire CorporationSummary of Financial Data From Continuing Operations(In thousands)(Unaudited)        Three months ended ActualPro forma (1)Actual September 30,June 30,March 31,June 30,March 31,September 30, 201120112011201120112010               REVENUES             Retail revenues  $ 194,789  $ 190,583  $ 175,242  $ 190,583  $ 175,242  $ 125,002 Wholesale revenues  137,162  102,624  76,974  131,522  60,895  16,525 Other revenue  226  506  671  506  671  635 Total revenues  332,177  293,713  252,887  322,611  236,808  142,162 OPERATING EXPENSES:             Cost of goods and services and network costs (exclusive of items shown separately below)  282,459  433,363  240,145  433,363  240,145  222,035 Selling, general and administrative expense   176,469  178,232  214,864  178,232  214,864  236,178 Depreciation and amortization   165,560  169,640  182,474  169,640  182,474  121,289 Spectrum lease expense  77,696  76,620  74,821  76,620  74,821  72,761 Loss from abandonment of network and other assets  29,129  376,350  171,862  376,350  171,862  9,391 Total operating expenses   731,313  1,234,205  884,166  1,234,205  884,166  661,654 OPERATING LOSS  (399,136)  (940,492)  (631,279)  (911,594)  (647,358)  (519,492)               LESS NON-CASH ITEMS             Non-cash expenses  119,321  71,388  76,243  71,388  76,243  84,716 Non-cash write-downs  67,810  590,948  178,325  590,948  178,325  29,397 Depreciation and amortization  165,560  169,640  182,474  169,640  182,474  121,289 Total non-cash items  352,691  831,976  437,042  831,976  437,042  235,402 Adjusted EBITDA  $ (46,445)  $ (108,516)  $ (194,237)  $ (79,618)  $(210,316)  $ (284,090) Adjusted EBITDA margin -14% -37% -77% -25% -89% -200%               KEY OPERATING METRICS (k for '000's, MM for '000,000's)           Total net subscriber additions 1,893k 1,543k 1,761k 1,543k 1,761k 1,226k Wholesale 1,858k 1,504k 1,610k 1,504k 1,610k 1,077k Retail 35k 39k 151k 39k 151k 149k Total subscribers 9,541k 7,648k 6,105k 7,648k 6,105k 2,805k Wholesale(2) 8,219k 6,360k 4,856k 6,360k 4,856k 1,829k Retail 1,322k 1,288k 1,249k 1,288k 1,249k 976k ARPU             Wholesale  $6.20 $6.18 $6.37 $7.92 $5.04 $4.46 Retail  $47.05 $47.59 $46.80 $47.59 $46.80 $43.10 Churn             Wholesale  1.5% 1.3% 1.3% 1.3% 1.3% 1.3% Retail  4.2% 3.9% 3.3% 3.9% 3.3% 3.4% Retail CPGA $288 $313 $295 $313 $295 $504 Capital expenditures  $17MM   $56MM   $130MM   $56MM   $130MM   $760MM  Domestic 4G covered POPS   132.7MM   132.4MM   125.6MM   132.4MM   125.6MM   82.3MM  Cash, cash equivalents and investments  $711MM   $848MM   $1,245MM   $848MM   $1,245MM   $1,390MM               (1) Pro Forma revenue includes the impact of approximately $16.1 million of wholesale revenue related to Q1 2011 that was recorded in Q2 2011   and approximately $12.8 million of wholesale revenue recorded in Q2 2011 to settle disputes related to prior usage. (2) Includes non-launched markets.Management Webcast Clearwire executives will host a conference call and simultaneous webcast to discuss the company's third quarter 2011 financial results at 4:30 p.m. Eastern Time today. A live broadcast of the conference call will be available online on the company's investor relations website located at http://investors.clearwire.com. Interested parties can access the conference call by dialing 1- 877-392-9886, or from outside the United States by dialing 1-707-287-9329, five minutes prior to the start time. A replay of the call will be available beginning at approximately 7:30 p.m. Eastern Time on November 2, through Wednesday, November 9, by calling 1-855-859-2056, or from outside the United States by dialing 1-404-537-3406. The passcode for the replay is 19135355.About Clearwire Clearwire Corporation (Nasdaq:CLWR), through its operating subsidiaries, is a leading provider of mobile broadband services. Clearwire's 4G network currently provides coverage in areas of the U.S. where more than 130 million people live. Clearwire's open all-IP network, combined with significant spectrum holdings, provides an unprecedented combination of speed and mobility to deliver next generation broadband access. The company markets its 4G service through its own brand called CLEAR® as well as through its wholesale relationships with companies such as Sprint, Comcast, Time Warner Cable, Locus Telecommunications, Cbeyond, Mitel, NetZero and Best Buy. Strategic investors include Intel Capital, Comcast, Sprint, Google, Time Warner Cable, and Bright House Networks. Clearwire is headquartered in Bellevue, Wash. Additional information is available at http://www.clearwire.com. The Clearwire Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=8493Forward-Looking Statements This release, and other written and oral statements made by Clearwire from time to time, contain forward-looking statements which are based on management's current expectations and beliefs, as well as on a number of assumptions concerning future events made with information that is currently available. Forward-looking statements may include, without limitation, management's expectations regarding future financial and operating performance and financial condition; proposed transactions; network development and market launch plans; strategic plans and objectives; industry conditions; the strength of the balance sheet; and liquidity and financing needs. The words "will," "would," "may," "should," "estimate," "project," "forecast," "intend," "expect," "believe," "target," "designed," "plan" and similar expressions are intended to identify forward-looking statements. Readers are cautioned not to put undue reliance on such forward- looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside of Clearwire's control, which could cause actual results to differ materially and adversely from such statements. Some factors that could cause actual results to differ are: We have a history of operating losses and we expect to continue to realize significant net losses for the foreseeable future. If our business fails to perform as we expect or if we incur unforeseen expenses in the near term, we will require additional capital to fund our current business. Also, we will need substantial additional capital over the intermediate and long-term. Such additional capital may not be available on acceptable terms or at all. If we fail to obtain additional capital, our business prospects, financial condition and results of operations will likely be materially and adversely affected, and we will be forced to consider all available alternatives. Our current plans and projections are based on a number of assumptions about our future performance, which may prove to be inaccurate, such as our ability to substantially expand our wholesale business and implement various cost savings initiatives. Our business has become increasingly dependent on our wholesale partners, and Sprint in particular. If we do not receive the amount of revenues we expect from existing wholesale partners or if we are unable to enter into new agreements with Sprint and additional wholesale partners for new wholesale commitments, our business prospects, results of operations and financial condition could be adversely affected, or we could be forced to consider all available alternatives. For instance, Sprint has recently made a series of announcements that will likely adversely affect our wholesale business over the long term, including announcing: plans to deploy its own nationwide 4G LTE network, that it is only committed to selling mobile WiMAX devices through 2012, that it has commenced sales of Apple's iPhone, and that it is limiting mobile WiMAX usage on non-smartphone devices. We regularly evaluate our plans, and we may elect to pursue new or alternative strategies which we believe would be beneficial to our business, including among other things, expanding our network coverage to new markets, augmenting our network coverage in existing markets, changing our sales and marketing strategy and/or acquiring additional spectrum. Such modifications to our plans could significantly change our capital requirements. With Sprint's recent announcements about its plans to switch to LTE, and that it is committed to selling mobile WiMAX devices only through 2012, we believe we will need to deploy LTE on our wireless broadband network, alongside mobile WiMAX, to be able to continue to operate in the long term. We will incur significant costs to deploy such technology, and will need to raise substantial additional capital to cover such costs. Additionally, LTE technology, or other alternative technologies that we may consider, may not perform as we expect on our network and deploying such technologies would result in additional risks to the company, including uncertainty regarding our ability to successfully add a new technology to our current network and to operate dual technology networks without disruptions to customer service, as well as our ability to generate new wholesale customers for the new network. We currently depend on our commercial partners to develop and deliver the equipment for our legacy and mobile WiMAX networks. Many of our competitors for our retail business are better established and have significantly greater resources, and may subsidize their competitive offerings with other products and services. Our substantial indebtedness and restrictive debt covenants could limit our financing options and liquidity position and may limit our ability to grow our business. Sprint owns just less than a majority of our common shares, is our largest shareholder, and has the contractual ability to obtain enough shares to hold the majority voting interest in the company, and Sprint may have, or may develop in the future, interests that may diverge from other stockholders. Future sales of large blocks of our common stock may adversely impact our stock price. For a more detailed description of the factors that could cause such a difference, please refer to Clearwire's filings with the Securities and Exchange Commission, including the information under the heading "Risk Factors" in our Annual Report on Form 10-K filed on February 22, 2011 and subsequent Form 10-Q filings. Clearwire assumes no obligation to update or supplement such forward-looking statements. *Please note, unlimited plans subject to CLEAR's Acceptable Use Policy, posted at www.clear.com/legal.aup.      CLEARWIRE CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except par value)(Unaudited)    September 30,December 31, 20112010       ASSETS     Current assets:     Cash and cash equivalents   $ 188,199  $ 1,230,242 Short-term investments  509,609  502,316 Restricted cash  1,000  1,000 Accounts receivable, net of allowance of $11,715 and $3,792  98,117  24,653 Inventory, net  8,710  17,432 Prepaids and other assets  67,887  82,580 Total current assets  873,522  1,858,223 Property, plant and equipment, net   3,306,387  4,447,374 Restricted cash  5,881  29,355 Long-term investments  13,567  15,251 Spectrum licenses, net  4,311,917  4,348,882 Other intangible assets, net  45,853  60,884 Investments in equity investees  12,629  14,263 Other assets  156,250  169,489 Assets of discontinued operations  38,599  96,765 Total assets  $ 8,764,605  $ 11,040,486       LIABILITIES AND STOCKHOLDERS' EQUITY           Current liabilities:     Accounts payable and accrued expenses  $ 282,762  $ 448,789 Other current liabilities  202,309  226,997 Total current liabilities  485,071  675,786 Long-term debt, net  4,019,326  4,017,019 Deferred tax liabilities, net  28,212  838 Other long-term liabilities   598,658  444,774 Liabilities of discontinued operations  26,968  32,071 Total liabilities   5,158,235  5,170,488 Commitments and contingencies           Stockholders' equity:     Class A common stock, par value $0.0001, 1,500,000 shares authorized; 249,705 and 243,544 shares outstanding  25  24 Class B common stock, par value $0.0001, 1,000,000 shares authorized; 666,068 and 743,481 shares outstanding  66  74 Additional paid-in capital  2,250,661  2,221,110 Accumulated other comprehensive income  3,288  2,495 Accumulated deficit  (1,380,977)  (900,493) Total Clearwire Corporation stockholders' equity  873,063  1,323,210 Non-controlling interests  2,733,307  4,546,788 Total stockholders' equity  3,606,370  5,869,998 Total liabilities and stockholders' equity  $ 8,764,605  $ 11,040,486            CLEARWIRE CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)(Unaudited)    Three Months Ended September 30, 20112010       Revenues  $ 332,177  $ 142,162 Operating expenses:     Cost of goods and services and network costs (exclusive of items shown separately below)  282,459  222,035 Selling, general and administrative expense   176,469  236,178 Depreciation and amortization   165,560  121,289 Spectrum lease expense  77,696  72,761 Loss from abandonment of network and other assets  29,129  9,391 Total operating expenses   731,313  661,654 Operating loss  (399,136)  (519,492) Other income (expense):     Interest income  534  1,325 Interest expense   (128,596)  (26,563) Gain on derivative instruments  59,729  --  Other income (expense), net   (1,261)  (3,739) Total other income (expense), net   (69,594)  (28,977) Loss from continuing operations before income taxes  (468,730)  (548,469) Income tax provision  (10,727)  (206) Net loss from continuing operations   (479,457)  (548,675) Less: non-controlling interests in net loss from continuing operations of consolidated subsidiaries  395,955  413,174 Net loss from continuing operations attributable to Clearwire Corporation  (83,502)  (135,501) Net loss from discontinued operations attributable to Clearwire Corporation  (1,289)  (3,919) Net loss attributable to Clearwire Corporation  $ (84,791)  $ (139,420)       Net loss from continuing operations attributable to Clearwire Corporation per Class A common share:     Basic  $ (0.34)  $ (0.56) Diluted   $ (0.53)  $ (0.56)       Net loss attributable to Clearwire Corporation per Class A common share:     Basic  $ (0.35)  $ (0.58) Diluted   $ (0.54)  $ (0.58)       Weighted average Class A common shares outstanding:     Basic  248,796  242,332 Diluted   914,864  985,813            CLEARWIRE CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share data)(Unaudited)    Nine Months Ended September 30, 20112010       Revenues  $ 891,596  $ 359,953 Operating expenses:     Cost of goods and services and network costs (exclusive of items shown separately below)  955,967  641,124 Selling, general and administrative expense   569,565  647,086 Depreciation and amortization   517,674  278,842 Spectrum lease expense  229,137  207,604 Loss from abandonment of network and other assets  577,341  10,762 Total operating expenses   2,849,684  1,785,418 Operating loss  (1,958,088)  (1,425,465) Other income (expense):     Interest income  2,063  4,080 Interest expense   (377,133)  (84,869) Gain on derivative instruments  148,227  --  Other income (expense), net   966  (5,384) Total other income (expense), net   (225,877)  (86,173) Loss from continuing operations before income taxes  (2,183,965)  (1,511,638) Income tax provision  (28,422)  (997) Net loss from continuing operations   (2,212,387)  (1,512,635) Less: non-controlling interests in net loss from continuing operations of consolidated subsidiaries  1,751,483  1,162,074 Net loss from continuing operations attributable to Clearwire Corporation  (460,904)  (350,561) Net loss from discontinued operations attributable to Clearwire Corporation  (19,580)  (8,867) Net loss attributable to Clearwire Corporation  $ (480,484)  $ (359,428)       Net loss from continuing operations attributable to Clearwire Corporation per Class A common share:     Basic  $ (1.87)  $ (1.63) Diluted   $ (2.34)  $ (1.63)       Net loss attributable to Clearwire Corporation per Class A common share:     Basic  $ (1.95)  $ (1.67) Diluted  $ (2.42)  $ (1.67)       Weighted average Class A common shares outstanding:     Basic  246,621  215,515 Diluted   955,507  215,515      CLEARWIRE CORPORATION AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)(Unaudited)    Nine Months Ended September 30, 20112010       Cash flows from operating activities:     Net loss from continuing operations  $ (2,212,387)  $ (1,512,635) Adjustments to reconcile net loss to net cash used in operating activities:     Deferred income taxes  27,374  --  Losses from equity investees, net   1,691  1,563 Non-cash gain on derivative instruments  (148,227)  --  Accretion of discount on debt  30,390  2,954 Depreciation and amortization  517,674  278,842 Amortization of spectrum leases  40,699  43,644 Non-cash rent expense  205,098  149,909 Share-based compensation   21,156  40,370 Loss on property, plant and equipment   837,083  121,224 Changes in assets and liabilities:     Inventory  8,608  (2,512) Accounts receivable  (68,767)  (16,444) Prepaids and other assets  19,371  (88,910) Prepaid spectrum licenses  (4,371)  (2,775) Accounts payable and other liabilities  82,716  147,106 Net cash used in operating activities of continuing operations  (641,892)  (837,664) Net cash (used in) provided by operating activities of discontinued operations  1,284  (3,177) Net cash used in operating activities  (640,608)  (840,841) Cash flows from investing activities:     Payments to acquire property, plant and equipment  (387,099)  (1,946,386) Payments for spectrum licenses and other intangible assets  (1,396)  (11,050) Purchases of available-for-sale investments  (857,035)  (1,873,966) Disposition of available-for-sale investments  847,222  2,752,050 Other investing   23,474  (34,756) Net cash used in investing activities of continuing operations  (374,834)  (1,114,108) Net cash used in investing activities of discontinued operations  (3,030)  (374) Net cash used in investing activities   (377,864)  (1,114,482) Cash flows from financing activities:     Principal payments on long-term debt  (23,633)  (122) Debt financing fees  (1,158)  (21,918) Equity investment by strategic investors  --   54,839 Proceeds from issuance of common stock  3,619  303,630 Net cash (used in) provided by financing activities of continuing operations  (21,172)  336,429 Net cash (used in) provided by financing activities of discontinued operations  --   --  Net cash (used in) provided by financing activities   (21,172)  336,429 Effect of foreign currency exchange rates on cash and cash equivalents   (4,145)  (880) Net decrease in cash and cash equivalents  (1,043,789)  (1,619,774) Cash and cash equivalents:     Beginning of period  1,233,562  1,698,017 End of period   189,773  78,243 Less: cash and cash equivalents of discontinued operations at end of period  1,574  3,914 Cash and cash equivalents of continuing operations at end of period  $ 188,199  $ 74,329 Supplemental cash flow disclosures:     Cash paid for interest including capitalized interest  $ 237,132  $ 168,931 Non-cash investing activities:     Fixed asset purchases in accounts payable and accrued expenses  $ 25,903  $ 206,452 Fixed asset purchases financed by long-term debt  $ 11,204  $ 91,312 Non-cash financing activities:     Vendor financing obligations  $ (3,166)  $ (45,392) Capital lease obligations  $ (8,038)  $ (45,920)Definitions of Terms and Reconciliations of Non-GAAP Financial Measures to Unaudited Condensed Consolidated Statements of Operations The company utilizes certain non-GAAP financial measures which are widely used in the telecommunications industry and are not calculated based on accounting principles generally accepted in the United States of America (GAAP). Other companies may calculate these measures differently.(1) Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined as consolidated operating loss less depreciation and amortization expenses, non-cash expenses related to operating leases (towers, spectrum leases and buildings), stock-based compensation expense, loss from abandonment of network and other assets, impairment charges, charges for differences between recorded amounts and the results of physical counts, and charges for excessive and obsolete network equipment and CPE inventory. A reconciliation of operating loss to Adjusted EBITDA is as follows:                Three months ended (Unaudited) ActualPro formaActual September 30,June 30,March 31,June 30,March 31,September 30, 201120112011201120112010(in thousands)             Operating loss  $ (399,136)  $ (940,492)  $ (631,279)  $ (911,594)  $ (647,358)  $ (519,492)               Non-cash expenses:             Spectrum lease expense  38,845  28,519  34,748  28,519  34,748  24,300 Building and network related rents*  70,584  37,965  35,135  37,965  35,135  50,640 Stock compensation*  9,892  4,904  6,360  4,904  6,360  9,776 Non-cash expenses  119,321  71,388  76,243  71,388  76,243  84,716               Non-cash write-downs:             Loss from abandonment of network and other assets  29,129  376,350  171,862  376,350  171,862  9,391 Network equipment reserves and other write-downs  38,681  214,598  6,463  214,598  6,463  20,006 Non-cash write-downs  67,810  590,948  178,325  590,948  178,325  29,397               Depreciation and amortization  165,560  169,640  182,474  169,640  182,474  121,289               Adjusted EBITDA  $ (46,445)  $ (108,516)  $ (194,237)  $ (79,618)  $ (210,316)  $ (284,090)               *Amounts included in COGS and SG&A.             In a capital-intensive industry, management believes Adjusted EBITDA to be a meaningful measure of the company's operating performance. The company provides this non-GAAP measure as a supplemental performance measure because management believes it facilitates comparisons of the company's operating performance from period to period and comparisons of the company's operating performance to that of other companies by backing out potential differences caused by non-cash expenses related to long-term leases, share-based compensation and non-cash write-downs. Because this non-GAAP measure facilitates internal comparisons of the company's historical operating performance, management also uses this non-GAAP measure for business planning purposes and in measuring the company's performance relative to that of its competitors. In addition, Clearwire believes that Adjusted EBITDA and similar measures are widely used by investors, financial analysts and credit rating agencies as a measure of the company's financial performance over time and to compare the company's financial performance with that of other companies in the industry.(2) ARPU (Average Revenue Per User) is revenue, less acquired businesses revenue (revenue from entities that were acquired by Old Clearwire), the revenue generated from the sales of devices, and shipping revenue, divided by the weighted average number of subscribers in the period, divided by the number of months in the period. Wholesale ARPU is wholesale revenue divided by the average number of wholesale subscribers in the period, divided by the number of months in the period. Retail ARPU is retail revenue less acquired businesses revenue (revenue from entities that were acquired by Old Clearwire), the revenue generated from the sales of devices, and shipping revenue; divided by the weighted average number of retail subscribers in the period, divided by the number of months in the period.                Three months ended (Unaudited) ActualPro formaActual September 30,June 30,March 31,June 30,March 31,September 30, 201120112011201120112010(in thousands)             Total revenue  $ 332,177  $ 293,713  $ 252,887  $ 322,611  $ 236,808  $ 142,162 Acquired companies & other revenue  (10,850)  (9,509)  (10,830)  (9,509)  (10,830)  (6,502) Total ARPU Revenue  321,327  284,204  242,057  313,102  225,978  135,660               Wholesale ARPU revenue  137,109  102,624  76,974  131,522  60,895  16,525 Retail ARPU revenue  184,218  181,580  165,083  181,580  165,083  119,135 Total ARPU revenue  321,327  284,204  242,057  313,102  225,978  135,660                              Three months ended (Unaudited) ActualPro formaActual September 30,June 30,March 31,June 30,March 31,September 30, 201120112011201120112010(in thousands)             Wholesale ARPU revenue  137,109  102,624  76,974  131,522  60,895  16,525               Average wholesale customers  7,371  5,533  4,025  5,533  4,025  1,236 Months in period  3  3  3  3  3  3 Wholesale ARPU  $ 6.20  $ 6.18  $ 6.37  $ 7.92  $ 5.04  $ 4.46                              Three months ended (Unaudited) ActualPro formaActual September 30,June 30,March 31,June 30,March 31,September 30, 201120112011201120112010(in thousands)             Retail ARPU revenue  184,218  181,580  165,083  181,580  165,083  119,135               Average retail customers  1,305  1,272  1,176  1,272  1,176  921 Months in period  3  3  3  3  3  3 Retail ARPU  $ 47.05  $ 47.59  $ 46.80  $ 47.59  $ 46.80  $ 43.10 Management uses ARPU to identify average revenue per customer, to track changes in average customer revenues over time, to help evaluate how changes in the business, including changes in the company's service offerings and fees, affect average revenue per customer, and to assist in forecasting future service revenue. In addition, ARPU provides management with a useful measure to compare the company's customer revenue to that of other wireless communications providers. The company believes investors use ARPU primarily as a tool to track changes in the company's average revenue per customer and to compare Clearwire's per customer service revenues to those of other wireless communications providers.(3) Pro Forma Reconciliation The unaudited pro forma condensed consolidated statements of operations that follow are presented for informational purposes only and should not be taken as representative of the future consolidated results of operations of the company. Management believes the unaudited pro forma condensed consolidated statements of operations are useful because they more accurately reflect the revenue-generating activities during the relevant periods and facilitate period to period comparisons of the company's operating performance. The following unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2011 and June 30, 2011 were prepared using the unaudited condensed consolidated statement of operations of Clearwire for the three months ended March 31, 2011 and June 30, 2011. The unaudited pro forma condensed consolidated statement of operations should be read in conjunction with the separate historical financial statements and accompanying notes thereto. The pricing provisions agreed to in the 4G Amendment and the other new Sprint wholesale agreements are applicable from and after January 1, 2011. However, in accordance with GAAP applicable to revenue recognition, Clearwire's first quarter results did not reflect additional revenues due to the company as a result of the amendments contained in the Sprint wholesale amendments which were signed on April 18, 2011. During the second quarter of 2011, Clearwire recognized revenue of approximately $16.1 million attributable to services provided in the first quarter of 2011. On April 27, 2011 Clearwire received a cash payment of $181.5 million comprised of the initial installments of the take-or-pay commitment for 2011 and the agreed-upon pre-payment, as well as a $28.2 million settlement amount in accordance with the Sprint wholesale amendments. In the second quarter of 2011, in addition to revenues earned during the second quarter, the company recorded the $16.1 million of revenue attributable to services provided in the first quarter, and $12.8 million of the $28.2 million of cash received related to services provided in periods prior to December 31, 2010. Had the Sprint wholesale amendments been in effect as of March 31, 2011, and the portion of the settlement related to prior periods been recorded in the attributable service periods, Clearwire's pro forma revenues for the second quarter of 2011 would have decreased by $28.9 million and the pro forma net loss from continuing operations attributable to Clearwire Corporation would have increased by $6.5 million or $0.03 per basic share. The following table reconciles as reported results to the pro forma results for the three months ended March 30, 2011 and June 30, 2011 (in thousands):                Three Months Ended June 30, 2011Three Months Ended March 31, 2011 (Unaudited)(Unaudited) Amounts as reportedAdjustments (1)Pro forma amountsAmounts as reportedAdjustments (1)Pro forma amounts Revenues:             Retail revenue  $ 190,583  $ --   $ 190,583  $ 175,242  $ --   $ 175,242 Wholesale revenue  131,522  (28,898)  102,624  60,895  16,079  76,974 Other revenue  506    506  671    671 Total revenues  322,611  (28,898)  293,713  236,808  16,079  252,887 Total expenses  (1,262,381)    (1,262,381)  (1,029,968)    (1,029,968) Net loss from continuing operations   (939,770)  (28,898)  (968,668)  (793,160)  16,079  (777,081) Less: non-controlling interests in net loss from continuing operations of consolidated subsidiaries  779,245  22,382  801,627  576,283  (12,087)  564,196 Net loss from continuing operations attributable to Clearwire Corporation  (160,525)  (6,516)  (167,041)  (216,877)  3,992  (212,885) Net loss from discontinued operations attributable to Clearwire Corporation  (8,213)  --   (8,213)  (10,078)  --   (10,078) Net loss attributable to Clearwire Corporation  $ (168,738)  $ (6,516)  $ (175,254)  $ (226,955)  $ 3,992  $ (222,963)               Net loss from continuing operations attributable to Clearwire Corporation per Class A Common Share:             Basic  $ (0.65)    $ (0.68)  $ (0.89)    $ (0.87) Diluted   $ (0.98)    $ (1.00)  $ (0.89)    $ (0.87)               Net loss attributable to Clearwire Corporation per Class A Common Share:             Basic  $ (0.68)    $ (0.71)  $ (0.93)    $ (0.91) Diluted  $ (1.01)    $ (1.03)  $ (0.93)    $ (0.91)               Wholesale ARPU  $ 7.92    $ 6.18  $ 5.04    $ 6.37                            (1) Pro Forma revenue includes the impact of approximately $16.1 million of wholesale revenue related to Q1 2011 that was recorded in Q2 2011   and approximately $12.8 million of wholesale revenue recorded in Q2 2011 to settle disputes related to prior usage. (4) Churn, which measures customer turnover, is calculated as the number of subscribers that terminate service in a given month divided by the average number of subscribers in that month using the actual number of subscribers. Subscribers that discontinue service in the first 30 days of service for any reason, or in the first 90 days of service under certain circumstances, are deducted from the company's gross customer additions and therefore not included in any of the churn calculations. Wholesale churn is calculated as the wholesale subscriber deactivations during the reporting period divided by the weighted average wholesale subscriber base for the period divided by the number of months in the period. Retail churn is calculated as the retail subscriber deactivations during the reporting period divided by the weighted average retail subscriber base for the period divided by the number of months in the period. Management uses churn to measure retention of the company's subscribers, to measure changes in customer retention over time, and to help evaluate how changes in the business affect customer retention. The company believes investors use churn primarily as a tool to track changes in the company's customer retention. Other companies may calculate this measure differently.5) Retail CPGA (Cost per Gross Addition) is selling, general and administrative costs, less general and administrative costs and acquired businesses costs (costs from entities that were acquired by Old Clearwire) plus devices equipment subsidy, divided by gross retail customer additions in the period.            Three months ended (Unaudited) September 30,June 30,March 31,September 30, 2011201120112010 (in thousands)       Retail CPGA       Selling, general and administrative  176,469  $ 178,232  $ 214,864  236,178 G&A and other  (118,923)  (120,033)  (136,105)  (113,633) Total selling expense  57,546  58,199  78,759  122,545           Total gross adds  200  186  267  243 Total retail CPGA  $ 288  $ 313  $ 295  $ 504 Management uses retail CPGA to measure the efficiency of the company's customer acquisition efforts, to track changes in Clearwire's average cost of acquiring new subscribers over time, and to help evaluate how changes in the company's sales and distribution strategies affect the cost-efficiency of the company's customer acquisition efforts. Clearwire believes investors use retail CPGA primarily as a tool to track changes in the company's average cost of acquiring new subscribers.(6) Market EBITDA is the equivalent of Adjusted EBITDA (see definition (1) Adjusted EBITDA) at the market level. This calculation does not include an allocation of corporate general and administrative expenses or spectrum lease expense.CONTACT: Investor Relations: Alice Ryder, 425-636-5828 alice.ryder@clearwire.com Media Relations: Susan Johnston, 425-216-7913 susan.johnston@clearwire.com JLM Partners for Clearwire: Mike DiGioia or Jeremy Pemble, 206-381-3600 mike@jlmpartners.com or jeremy@jlmpartners.com