Lumos Networks (LMOS) 8-K Results of Operations and Financial Condition

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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Appendix

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