SAN DIEGO, April 25, 2012 /PRNewswire/ -- Leap Wireless International, Inc. (NASDAQ: LEAP), a leading provider of innovative and value-driven wireless communications services, today reported operational and financial results for the quarter ended March 31, 2012. Service revenues for the first quarter of 2012 increased 14.1 percent over the prior year quarter to $774.0 million. The Company reported $130.5 million of adjusted operating income before depreciation and amortization (OIBDA) for the first quarter, a 16.0 percent increase over the first quarter of 2011. First quarter 2012 operating loss was $15.8 million compared to an operating loss of $18.1 million for the first quarter of 2011.

(Logo: http://photos.prnewswire.com/prnh/20101220/MM20546LOGO-a)

The Company gained approximately 860,000 gross customer additions in the first quarter of 2012. The Company reported approximately 258,000 net customer additions for the quarter, comprised of approximately 257,000 voice customer additions and 1,000 broadband customer additions. Customer churn for the first quarter was 3.3 percent, an improvement from 3.9 percent for the fourth quarter of 2011 and up from 3.1 percent for the first quarter of 2011.

"Our financial and operational results demonstrate the strength of our business and confirm that our strategy continues to deliver, even in the face of a challenging economic and competitive environment," said Doug Hutcheson, Leap's president and chief executive officer. "Net customer additions were solid, reflecting increased gross customer additions year over year, offset by slightly higher voice churn as well as lower year-over-year broadband gross additions due to the Company's focus on higher-value voice service plans. We also experienced attractive year-over-year adjusted OIBDA improvement, reflecting service revenue growth and continued focus on cost-management, partially offset by device subsidy costs and investment in our national retail expansion. Given the measures we are planning for the balance of the year, including expanded distribution, improved device quality and selection, differentiated products like Muve Music, service plan enhancements and customer experience initiatives, we believe the Company is well positioned to move successfully through today's challenging environment, and the volatility taking place in the wireless industry has not changed our positive long-term view."

Discussion of Financial and Operational Results for the Quarter

Customers and Churn

• End-of-period customers for the first quarter of 2012 were approximately 6,192,000, a 5.9 percent increase from end-of-period customers for the first quarter of 2011.
• Net customer additions for the first quarter of 2012 were approximately 258,000, compared to approximately 331,000 net customer additions for the first quarter of 2011. First quarter 2012 net customer additions were comprised of approximately 257,000 net voice customer additions and 1,000 net broadband customer additions.
  • Net voice customer additions reflected approximately 220,000 net customers added inside Cricket's own network footprint and approximately 38,000 net customers added outside of Cricket's network footprint under the Company's wholesale agreement.  Voice customer additions were primarily driven by continued customer acceptance of the Company's smartphones, Muve Music service and all-inclusive service plans, impacted by churn pressure experienced late in the quarter.
  • Net broadband customer additions were as expected and reflected the Company's continued focus on higher-value service plans, a reduction in emphasis on broadband sales and marketing efforts, and higher device prices.
• Customer churn for the first quarter of 2012 was 3.3 percent, up from 3.1 percent from the first quarter of 2011.
  • Voice customer churn for the first quarter of 2012 was 3.1 percent, an increase from 2.8 percent for the comparable period of the prior year, reflecting competitive and economic pressures experienced late in the quarter.
  • Broadband customer churn for the first quarter of 2012 was 6.5 percent, compared to 5.5 percent for the comparable period of the prior year.
• Nearly 62 percent of the Company's new handset sales in the first quarter of 2012 were for smartphones and Muve Music-enabled devices and approximately 13 percent of the Company's customer base upgraded their handsets during the quarter, typically to better devices coupled with higher-ARPU service plans.

Service Revenues and ARPU

• Service revenues for the first quarter increased to $774.0 million, a 14.1 percent increase over the comparable period of the prior year, primarily due to a 6.6 percent increase in weighted-average customers and continued uptake of the Company's higher-ARPU service plans.
• ARPU for the first quarter of 2012 was $42.59, an increase of $3.24 over the comparable period of the prior year.  The year-over-year increase in ARPU primarily reflected increased customer acceptance of the Company's smartphones and Muve Music devices and their accompanying higher-ARPU service plans.

Adjusted OIBDA and Operating Expenses

• Adjusted OIBDA for the first quarter of 2012 was $130.5 million, an increase of 16.0 percent over the comparable period of the prior year.  The year-over-year increase reflected growth in the Company's service revenues and benefits of the Company's cost management initiatives, partially offset by increased product costs associated with roaming and Muve Music services, increased device subsidy expense and continued investment in the Company's national retail expansion.
• First quarter 2012 operating loss was $15.8 million, compared with an operating loss of $18.1 million for the comparable period of the prior year.  The year-over-year improvement in operating loss resulted primarily from the increase in adjusted OIBDA, offset by increased depreciation and amortization expense associated with network and corporate platform upgrades.
• Net loss attributable to common stockholders for the first quarter of 2012 was $98.4 million, or $1.28 per diluted share, compared to a net loss attributable to common stockholders of $96.2 million, or $1.26 per diluted share, for the first quarter of 2011.  The year-over-year change in net loss attributable to common stockholders was primarily due to increased interest expense, partially offset by the improvement in operating loss described above.
• CCU for the first quarter of 2012 increased 6.6 percent over the prior year quarter to $24.55, primarily reflecting higher telecommunications taxes in connection with increased customer adoption of the Company's all-inclusive service plans, increased product costs associated with roaming and Muve Music services and increased device upgrade activity, partially offset by the reduction in certain operating expenses as a result of the Company's continued focus on cost management.
• CPGA for the first quarter of 2012 increased by 18.8 percent over the prior year quarter, reflecting greater promotional activity and increased device subsidy expense.

Capital Expenditures

• Capital expenditures during the first quarter of 2012 were $146.3 million.
• Total capital expenditures for 2012 are expected to be between $600 million and $650 million, primarily to support the ongoing maintenance and development of the Company's network and other business assets, the deployment of next-generation LTE network technology and other capital projects.
• Annual capital expenditures for 2012 to support the ongoing maintenance and development of the Company's network within its current footprint are expected to be in the mid-teens as a percentage of annual in-footprint service revenues.
• The Company currently plans to deploy LTE across approximately two-thirds of its current network footprint over the next two to three years. 
  • The Company plans to cover up to approximately 25 million POPs with LTE network technology in 2012.
• Aggregate capital expenditures for LTE deployment are expected to be less than $10 per covered POP. 
  • Approximately half of the estimated capital expenditures for LTE deployment are included in the amounts estimated to be necessary to support the ongoing maintenance and development of the Company's network within its current footprint.
• The actual amount the Company spends to deploy LTE will depend upon multiple factors, including the scope and pace of the Company's deployment activities.

"We are pleased with the performance of our initial LTE launch in Tucson and the progress we're making toward deploying LTE in additional markets," said Bill Ingram, executive vice president, strategy and acting CFO. "We continue to look for opportunities to improve our spectrum position, including the recently announced transaction with T-Mobile that will enable us to enhance our spectrum depth in several markets. In addition, the transaction we announced late last year with Verizon is expected to improve our spectrum position in Chicago and generate net cash proceeds to us of more than $100 million."

Quarterly Highlights

• Appointed Rob Strickland as executive vice president and chief technical officer.
• Selected BrightStar as the Company's exclusive 4PL supply chain services provider.
• Announced the entry into a long-term wholesale 4G LTE agreement with Clearwire.
• Debuted Lionel Richie's new album Tuskegee on Muve Music as part of Cricket's sponsorship of the HSN LIVE concert series on the HSN networks.

Webcast Information

As previously announced, Leap management will host a live webcast at approximately 5:00 p.m. EDT / 2:00 p.m. PDT today to discuss these results. Other forward-looking and material information may also be discussed during this call.

To listen live via telephone, dial 1-800-748-2715 (domestic) or 1-212-231-2920 (international). No participant pass code number is required for this call. If listening via telephone, the accompanying presentation slides may be accessed by visiting http://earnings.leapwireless.com.

More information about this event including a live webcast, the accompanying presentation slides and other supporting materials may be accessed by visiting http://earnings.leapwireless.com. These materials will be available for download at approximately 5:00 p.m. EDT / 2:00 p.m. PDT today.

A replay of the conference call will be available for a limited time via webcast, MP3 or telephone and may be accessed by visiting http://earnings.leapwireless.com or dialing 1-800-633-8284 (domestic) or 1-402-977-9140 (international) and entering reservation number 21584792.

About Leap

Leap provides innovative, high-value wireless services to a fast-growing, young and ethnically diverse customer base. With the value of unlimited wireless services as the foundation of its business, Leap pioneered its Cricket service. Cricket products and services are available nationwide through company-owned stores, dealers, national retailers and at MyCricket.com. Through its affordable, flat-rate service plans, Cricket offers customers a choice of unlimited voice, text, data and mobile Web services. Headquartered in San Diego, Calif., Leap is traded on the NASDAQ Global Select Market under the ticker symbol "LEAP." For more information, please visit www.leapwireless.com.

Notes Regarding Non-GAAP Financial Measures

Information presented in this press release and in the attached financial tables includes financial information prepared in accordance with generally accepted accounting principles in the U.S., or GAAP, as well as non-GAAP financial measures. Generally, a non-GAAP financial measure, within the meaning of Item 10 of Regulation S-K promulgated by the Securities and Exchange Commission (SEC), is a numerical measure of a company's financial performance or cash flows that (a) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, which are included in the most directly comparable measure calculated and presented in accordance with GAAP in the condensed consolidated balance sheets, condensed consolidated statements of comprehensive income or condensed consolidated statements of cash flows; or (b) includes amounts, or is subject to adjustments that have the effect of including amounts, which are excluded from the most directly comparable measure so calculated and presented. As described more fully in the notes to the attached financial tables, management supplements the information provided by financial statement measures with several customer-focused performance metrics that are widely used in the telecommunications industry. Adjusted OIBDA, CPGA, ARPU and CCU are non-GAAP financial measures. Non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. Reconciliations of non-GAAP financial measures used in this release to the most directly comparable GAAP financial measures can be found in the section entitled "Definition of Terms and Reconciliation of Non-GAAP Financial Measures" included toward the end of this release.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements reflect management's current expectations based on currently available operating, financial and competitive information, but are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those anticipated in or implied by the forward-looking statements. Our forward-looking statements include our discussions about planned product and service plan developments, customer activity, future capital expenditures and LTE deployment, pending spectrum transactions, competitiveness and expected financial and operational performance, and are generally identified with words such as "believe," "expect," "intend," "plan," "could," "may" and similar expressions. Risks, uncertainties and assumptions that could affect our forward-looking statements include, among other things:

• our ability to attract and retain customers in an extremely competitive marketplace;
• the duration and severity of the current economic downturn in the United States and changes in economic conditions, including interest rates, consumer credit conditions, consumer debt levels, consumer confidence, unemployment rates, energy and transportation costs and other macro-economic factors that could adversely affect demand for the services we provide;
• the impact of competitors' initiatives;
• our ability to successfully implement product and service plan offerings, expand our retail distribution and execute effectively on our other strategic activities;
• our ability to obtain and maintain roaming and wholesale services from other carriers at cost-effective rates;
• our ability to maintain effective internal control over financial reporting;
• our ability to attract, integrate, motivate and retain an experienced workforce, including members of senior management;
• future customer usage of our wireless services, which could exceed our expectations, and our ability to manage or increase network capacity to meet increasing customer demand;
• our ability to acquire or obtain access to additional spectrum in the future at a reasonable cost or on a timely basis;
• our ability to comply with the covenants in any credit agreement, indenture or similar instrument governing any of our existing or future indebtedness;
• failure of our network or information technology systems to perform according to expectations and risks associated with the upgrade or transition of certain of those systems, including our customer billing system; and
• other factors detailed in the section entitled "Risk Factors" included in our periodic reports filed with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on February 21, 2012 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, which we expect to file shortly with the SEC.

All forward-looking statements included in this news release should be considered in the context of these risks. All forward-looking statements speak only as of April 25, 2012, and we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Investors and prospective investors are cautioned not to place undue reliance on our forward-looking statements.

Leap is a U.S. registered trademark and the Leap logo is a trademark of Leap. Cricket, Cricket Wireless, Cricket Clicks, Muve Music, MyPerks, Flex Bucket, Real Unlimited Unreal Savings and the Cricket "K" are U.S. registered trademarks of Cricket. In addition, the following are trademarks or service marks of Cricket: BridgePay, Cricket By Week, Cricket Choice, Cricket Connect, Cricket Nation, Cricket PAYGo, Muve, Muve Money, Muve First, Muve Headliners, Cricket Crosswave, Seek Music, Cricket MyPerks and Cricket Wireless Internet Service. All other trademarks are the property of their respective owners.

Explanatory Notes to Financial Statements

The following tables summarize operating data for the Company's consolidated operations for the three months ended March 31, 2012 and 2011 (unaudited; in thousands, except percentages):

Definition of Terms and Reconciliation of Non-GAAP Financial Measures

The Company utilizes certain financial measures that are widely used in the telecommunications industry and are not calculated based on GAAP. Certain of these financial measures are considered non-GAAP financial measures within the meaning of Item 10 of Regulation S-K promulgated by the SEC.

The following table reconciles total service revenues used in the calculation of ARPU to service revenues, which we consider to be the most directly comparable GAAP financial measure to ARPU (unaudited; in thousands, except weighted-average number of customers and ARPU):

The following table reconciles total costs used in the calculation of CPGA to selling and marketing expense, which we consider to be the most directly comparable GAAP financial measure to CPGA (unaudited; in thousands, except gross customer additions and CPGA):

The following table reconciles total costs used in the calculation of CCU to cost of service, which we consider to be the most directly comparable GAAP financial measure to CCU (unaudited; in thousands, except weighted-average number of customers and CCU):

Adjusted OIBDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include:

• it does not reflect capital expenditures;
• although it does not include depreciation and amortization, the assets being depreciated and amortized will often have  to be replaced in the future and adjusted OIBDA does not reflect cash requirements for such replacements;
• it does not reflect costs associated with share-based awards exchanged for employee services;
• it does not reflect the interest expense necessary to service interest or principal payments on current or future indebtedness;
• it does not reflect expenses incurred for the payment of income taxes and other taxes; and
• other companies, including companies in our industry, may calculate this measure differently than we do, limiting its usefulness as a comparative measure.

Management understands these limitations and considers adjusted OIBDA as a financial performance measure that supplements but does not replace the information provided to management by our GAAP results.

The following table reconciles adjusted OIBDA to operating loss, which we consider to be the most directly comparable GAAP financial measure to adjusted OIBDA (unaudited; in thousands):

CONTACT: Greg Lund, Media Relations, +1-858-882-9105, glund@leapwireless.com, or Amy Wakeham, Investor Relations, +1-858-882-9876, awakeham@leapwireless.com, both of Leap