![]() Investor Presentation November 2011 Exhibit 99.1 |
![]() 1 Use of Non-GAAP Financial Measures Included in this presentation are certain non-GAAP financial measures that are not determined in accordance with US generally accepted accounting principles. These financial performance measures are not indicative of cash provided or used by operating activities and exclude the effects of certain operating, capital and financing costs and may differ from comparable information provided by other companies, and they should not be considered in isolation, as an alternative to, or more meaningful than measures of financial performance determined in accordance with US generally accepted accounting principles. These financial performance measures are commonly used in the industry and are presented because Lumos Networks Corp. believes they provide relevant and useful information to investors. The Company utilizes these financial performance measures to assess its ability to meet future capital expenditure and working capital requirements, to incur indebtedness if necessary, and to fund continued growth. Lumos Networks Corp. uses these financial performance measures to evaluate the performance of its business, for budget planning purposes and as factors in its employee compensation programs. Special Note Regarding Forward-Looking Statements Any statements contained in this presentation that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. The words “anticipates,” “believes,” “expects,” “intends,” “plans,” “estimates,” “targets,” “projects,” “should,” “may,” “will” and similar words and expressions are intended to identify forward-looking statements. Such forward-looking statements reflect, among other things, our current expectations, plans and strategies, and anticipated financial results, all of which are subject to known and unknown risks, uncertainties and factors that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements. Many of these risks are beyond our ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made. We do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise. Important factors with respect to any such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, include, but are not limited to: rapid development and intense competition in the telecommunications industry; our ability to achieve benefits from our separation from NTELOS Holdings Corp; our ability to successfully integrate the operations of the FiberNet business and increase revenues and manage churn in this business; our ability to offset expected revenue declines in our RLEC business related to the recent regulatory developments and carriers grooming their networks; the failure to realize synergies and cost savings from the acquisition of the FiberNet business or delay in realization thereof; adverse economic conditions; operating and financial restrictions imposed by our senior credit facility; our cash and capital requirements; declining prices for our services; the potential to experience a high rate of customer turnover; federal and state regulatory fees, requirements and developments; our reliance on certain supplier s and vendors; Failure to complete the business separation of the wireless and wireline operations in an orderly fashion as currently structured and other unforeseen difficulties that may occur. These risks and uncertainties are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements and risk factors included in our SEC filings, including our Annual Reports filed on Forms 10-K. |
![]() 2 Investment themes Unique assets provide operating leverage and competitive advantage, positioning Lumos Networks as region’s provider of choice Established platform for growth Attractive combination of growth and income |
![]() Unique assets provide operating leverage and competitive advantage, positioning Lumos Networks as region’s provider of choice |
![]() 4 Advanced, dense regional fiber network Provides service to more than 100 markets in Mid- Atlantic region Network footprint includes approximately 185,000 businesses Supports IP based and Ethernet applications Over 50,000 current customer relationships 5,800 fiber route miles State-of-the-art Cisco IP network RLEC with 98% 6MB+ broadband coverage Video and fiber passes approximately one-third of the RLEC base Provider of Choice |
![]() 5 57 57 57 63 71 91 109 132 0 20 40 60 80 100 120 140 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Fiber-Fed Cell Sites 633 647 687 705 752 830 903 949 500 600 700 800 900 1000 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 On-Net Buildings ¹ 76 86 89 91 143 144 146 147 0 30 60 90 120 150 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Co-locations 2,511 4,746 4,786 4,940 4,941 5,767 5,788 5,801 0 2,000 4,000 6,000 8,000 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Fiber Route Miles Network positioned for the future $266 million invested into network in previous 18 months $ 77 million in capital expenditures; $189 million in acquisitions (network expansion) Connections to major data centers support exploding Cloud computing demand Capacity to support significant market opportunity for on-net retail and wholesale customer expansion Extensive rural fiber network footprint creates competitive advantages in the market 1 On-Net Buildings excludes FiberNet. Provider of Choice |
![]() 6 Brand positioning highlights our innovative services and commitment to provide support from well- trained, dedicated employees Experienced direct sales and sales engineering teams in-market Exceptional customer service 93% of calls answered within 10 seconds 91% first-call resolution Net Promoter scores in top tier across all industries Strong long-term customer relationships 90% of key vertical account revenues in 2007 are still billing in 2011 75% of revenues in all customer accounts with monthly recurring revenues of $1,000 or greater in 2007 are still billing in 2011 – 0.6% monthly churn Experienced management team Each member of operating management has 10 or more years of experience with wireline business Key contributors to development of Competitive segment and transition to data strategy Led execution and integration of recent acquisitions “Our technology comes with people” Provider of Choice |
![]() Established platform for growth ********************* |
![]() 8 Leverage regional scale Sell advanced data services to recently-entered Pennsylvania and West Virginia markets Increase on-net buildings and expand reach in existing markets Leverage sophisticated sales and sales engineering teams Up-sell existing enterprise customers to capture growing data demand Sell advanced services, including managed services and hosting On-network profile facilitates growth of bandwidth and new applications with minimal incremental investment Aggressively pursue fiber-to-the-cell opportunities Strong early-stage wireless carrier demand in footprint Positioned for regional 4G deployment expected in 2012 and beyond Expand footprint through organic edge-out and accretive acquisitions Strategies for growth and revenue opportunities Platform for Growth Opportunities offer attractive returns as revenue density enhances capital efficiency and on-network sales drive margin growth ~2000 |
![]() 9 Up-sell existing enterprise customers • 2 locations - Leased facilities and fiber • Primarily Voice Service • Monthly Recurring Revenue (MRR) = $2K • 37 locations - Primarily On-net locations • Voice Service + Metro Ethernet Network • Increased MRR to $65K • Capital investment = $1.0M • Payback ~ 18 months Enterprise Case Study B Healthcare Customer Yesterday Today Today Enterprise Case Study A Education Customer Yesterday • Data circuits • Monthly Recurring Revenue (MRR) = $11K Platform for Growth Advanced Ethernet products meet key vertical customers’ growing broadband needs Dense fiber network in under-served markets differentiates Lumos Networks as the provider of choice On-network existing customer up-sell drives incrementally higher margins • Data circuits, Internet bandwidth, IP voice and connection to major data center • Increased MRR to $29K • Capital investment = $100K • Payback ~ 7 months |
![]() Early-Stage Enterprise Ready Market Colo Colo A A Colo Colo B B Long haul Fiber Haul Fiber Mid-Stage Enterprise Ready Market Colo Colo A A Colo Colo B B Additional customer Additional customer sites + New sites + New customers customers Natural market evolution provides opportunity Early-stage markets generate sufficient revenues to meet initial capital ROI requirements As markets mature, incremental customers, remote locations and additional rings are added Approximately 75% of addressable in-market businesses are early-stage Drives free cash flow growth from operating leverage and capital efficiency 10 Platform for Growth |
![]() Impressive enterprise growth trends in key verticals Up-sell existing enterprise customers Monthly recurring revenue (MRR) in key verticals has grown 20% annually (CAGR) from 2007 to 2011 and is 45% of large account revenue Average MRR per customer is growing Market evolution provides opportunity for new enterprise customers Number of “Large Customer” accounts in key verticals has grown 12% annually (CAGR) from 2007 to 2011 11 Platform for Growth 0.0 0.5 1.0 1.5 2.0 2007 2011 Monthly Recurring Revenue Regional Banking Local/Regional Government Education Healthcare 0 50 100 150 200 250 300 350 2007 2011 Large Customer Accounts Regional Banking Local/Regional Government Education Healthcare ($mm) Note: Organic growth, excluding recent acquisitions. “Large Customers” are defined as customers with $1,000 or greater MRR. |
![]() Fiber to the cell site: A high growth wholesale opportunity Approximately 2,000 sites within three miles of existing network First customer provides a five-year payback and funds the site Average of more than two carriers per site Second and successive customers drive cash flow and margin Long-term growth in bandwidth demand and additional carriers continue to enhance returns Illustrative Wireless Cell Site Economics Average Capital Investment $80K/site One Carrier Annual EBITDA: $15K to $18K Payback: 5 years Two Carriers Annual EBITDA: $30K to $36K Payback: 2 to 3 years 12 Three to Five Carriers Annual EBITDA: $45K to $90K Payback: 1 to 2 years Platform for Growth Contracts of 5 to 10 years and multiple carriers per site drive long-term profitable revenue streams |
![]() Wholesale growth: Strong and accelerating with 4G Monthly Recurring Revenue (MRR) from Top 6 wireless carriers has grown 33% annually (CAGR) from 2007 to 2011 Early-stage: Significant increases in demand will be driven by future 4G deployment 4G deployment in Lumos Networks region commenced in the second half of 2011 and is expected through 2014 13 Platform for Growth |
![]() Attractive combination of growth and income |
![]() Pro forma capitalization: Strong balance sheet 15 Pro forma as of September 30, 2011 ($mm) Cash and cash equivalents $20.5 Restricted cash 8.1 $28.5 Revolver ($60mm total) $30.0 Term Loan A 110.0 Term Loan B 200.0 340.0 Capital leases 2.3 Total Debt $342.3 PF Total Debt / LTM Adjusted EBITDA 3.5x PF Net Debt / LTM Adjusted EBITDA 3.2x Available capital to support growth initiatives Growth and Income |
![]() Competitive segment revenue composition: Transition to data Competitive segment now accounts for 75% of company revenues Strong data growth offsetting voice declines Wholesale, enterprise data and SMB/Residential revenues are up 11% year over year; now nearly 60% of segment revenues Significance of voice revenues declining; now only about one-third of segment revenues 16 Note: 2010 revenue is Pro Forma for FiberNet. Growth and Income $15.8 $15.7 $15.6 $15.1 $14.4 $13.8 $13.4 $19.2 $19.6 $20.2 $20.6 $20.8 $21.6 $22.4 3.8 3.2 3.4 3.4 3.2 3.1 2.8 2 7 12 17 22 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Voice & LD Wholesale / Enterprise Data/SMB-Residential Data Other ($mm) |
![]() 17 Addressable market significantly increased Recent network investments made to generate increasing returns in 2012 and beyond Metro Ethernet products have been launched into 24 new markets in 2011; 7 more planned by year-end, totaling an increase of 79% for the year Metro fiber ring reach in 18 markets; planned to be 29 by year-end As markets mature, revenues grow with increased penetration and data demand Early stages of revenue growth potential from recent acquisitions Growth and Income |
![]() 18 Adjusted EBITDA (1) Revenue (1) Operating strategy and acquisitions successfully shifting business mix Competitive RLEC Competitive Data RLEC ($ mm) ($ mm) Growth and Income Competitive Voice & Other (1) Reported results; not pro forma for acquisitions Data focus drives growth in the Competitive segment Access revenues will be impacted by Regulatory Reform and continued network grooming by carriers |
![]() 19 Strong margins and recurring free cash flow ($ in millions) (1) Pro forma 2010 includes FiberNet results from January 1, 2010. LTM pro forma for the twelve months ended September 30, 2011, reflects results of FiberNet from July 1, 2010. (2) Throughout this presentation, Free Cash Flow is defined as consolidated adjusted EBITDA less CAPEX, exclusive of assets acquired from Allegheny Energy, Inc. on December 31, 2009 and FiberNet on December 1, 2010. (3) LTM includes approximately $6 million of one-time capital expenditures related to the integration of FiberNet. Free Cash Flow (2) Total Revenue Adj. EBITDA/Margin % Capital Expenditures Historical Pro forma for FiberNet Pro forma (1) Pro forma (1) Pro forma (1)(3) Pro forma (1)(3) Growth and Income LTM reflects post acquisition network capital investments to support market expansion and service offerings Recurring cash flow stream to support dividend: Unique among Competitive providers Current annualized dividend of $12 million ($0.56 per share) |
![]() 20 Investment themes Unique assets provide operating leverage and competitive advantage, positioning Lumos Networks as region’s provider of choice Established platform for growth Attractive combination of growth and income |
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![]() 22 Adjusted EBITDA Reconciliation ($ in millions) 2006 2007 2008 2009 2010 Operating Income $36 $36 $39 $41 $41 Depreciation and Amortization 26 27 27 29 31 Equity Based Compensation 2 1 1 - 2 Voluntary Early Retirement and Workforce Reduction Plans - - 1 - 3 Adjusted EBITDA $64 $64 $68 $70 $77 Year Ended - 3/31/10 6/30/10 9/30/10 12/31/10 3/31/11 6/30/11 9/30/11 Operating Income $10 $10 $11 $10 $12 $13 $13 Depreciation and Amortization 7 8 7 9 11 11 11 Equity Based Compensation 1 - 1 - 1 1 Voluntary Early Retirement and Workforce Reduction Plans - - - 2 - - - Adjusted EBITDA $18 $18 $19 $21 $24 $24 $25 Three Months Ended |