![]() Company Presentation March 2012 Exhibit 99.1 |
![]() 1 Use of Non-GAAP Financial Measures 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 increase revenues and manage churn in the recently acquired FiberNet business; our ability to offset expected revenue declines in our RLEC business related to the recent regulatory developments and carriers grooming their networks; 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 suppliers and vendors; 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. 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. |
![]() 2 Enhancing efficiencies for our customers… Lumos Networks provides next- generation communication solutions and personalized service to customers in the Mid-Atlantic region, over an advanced fiber network. |
![]() 3 Lumos Networks’ product strategy is to be first to offer next-generation products to customers in our regional markets Next-generation communication solutions Metro Ethernet • Ethernet connectivity among multiple locations in the same city or region • Speeds ranging from 1.5 Mbps to 10 Gbps IP Services • IP-enabled product offerings that combine voice and data services over a dedicated broadband facility utilizing VoIP protocols • Enables advanced features and dynamic bandwidth allocation Broadband • Dedicated Internet connections – up to 10 Gbps • Broadband XL high speed Internet over fiber – 10 to 20 Mbps • DSL over copper with speeds up to 6 Mbps Wholesale Carrier Services • IP-based Ethernet transport over fiber • Fiber connectivity to cell sites for wireless carriers facilitates rapidly growing demand for data, driven by 4G • High-bandwidth transport over copper Flagship Products |
![]() 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 IP network RLEC with 98% 6MB+ broadband coverage Video and fiber passes approximately one-third of the RLEC base Advanced, dense regional fiber network serves attractive markets |
![]() 5 Network positioned for the future Significant network investments (~$300 million) in previous 24 months Enhancement through capital expenditures; Expansion through acquisitions Ongoing investments to support growth 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 allowing Lumos Networks to offer next-generation communication products in regional markets |
![]() 6 Brand positioning highlights our innovative services and commitment to provide support from well- trained, dedicated and accessible employees “Our technology comes with people” Experienced direct sales and sales engineering teams in-market Exceptional customer service 94% of calls answered in less than one minute 88% 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 75% of monthly recurring revenues of $1,000 or greater in 2007 are still billing 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 |
![]() 7 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 cloud computing 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 Opportunities offer attractive returns as revenue density enhances capital efficiency and on-network sales drive margin growth Strategies for growth ~23 ~185 Businesses (000) 148 ~2,000 Wireless Cell Sites Lumos Networks Market Opportunity |
![]() 8 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 Yesterday • Data circuits • Monthly Recurring Revenue (MRR) = $11K • Data circuits, Internet bandwidth, IP voice and connection to major data center • Increased MRR to $29K • Capital investment = $100K • Payback ~ 7 months Enterprise Case Study A Education Customer 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 |
![]() Double-digit enterprise growth trends in key verticals Up-sell existing enterprise customers Monthly recurring revenue (MRR) in key verticals has grown 22% annually (CAGR) from 2007 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 9 Note: Organic growth, excluding acquisitions. “Large Customers” are defined as customers with $1,000 or greater MRR. ($mm) |
![]() Fiber to the cell site: High growth wholesale opportunity 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 10 Three to Five Carriers Annual EBITDA: $45K to $90K Payback: 1 to 2 years Contracts of 5 to 10 years and multiple carriers per site drive long-term profitable revenue streams Approximately 2,000 sites within three miles of existing network First customer provides a five-year payback and funds the site Average of more than two carriers per site Second and successive customers drive cash flow and margin Long-term growth in bandwidth demand and additional carriers continue to enhance returns |
![]() Wholesale growth: Strong and accelerating with 4G Monthly Recurring Revenue (MRR) from Top 6 wireless carriers has grown 41% annually (CAGR) from 2007 to 2011 Early-stage: Significant increases in demand will be driven by future 4G deployment 4G deployment in Lumos Networks region commenced in the second half of 2011 and is expected through 2014 11 ($mm) Existing contracts to build fiber connections to 150 additional cell sites |
![]() 12 Key Success Factors Leveraging Network Infrastructure • 5,800 route-mile state-of-the-art fiber optic network • Unique regional footprint with attractive enterprise and wholesale markets • Position in multiple key vertical markets Focus on Revenue Growth: Data Opportunity • Continue innovative leadership position • Expand product offerings • Leverage up-sell opportunity of existing accounts Solid Execution • Sales force expansion and productivity • Installation streamlining and productivity • Automated customer interfaces Financial Performance • Adjusted EBITDA generation • Capital expenditure efficiency • Cash flow from operations • Return to shareholders |
![]() 13 Strong margins and recurring free cash flow ($ in millions) (1) Pro forma 2010 includes FiberNet results from January 1, 2010. (2) Throughout this presentation, Free Cash Flow is defined as consolidated adjusted EBITDA less CAPEX. (3) 2011 includes one-time capital expenditures related to the integration of FiberNet. Free Cash Flow (2)(3) Total Revenue Adj. EBITDA/Margin % Capital Expenditures (3) Historical/Actual Pro forma for FiberNet Pro forma (1) Pro forma (1) Pro forma (1) Pro forma (1) 2011 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 ($0.56 per share) |
![]() 14 Adjusted EBITDA (1) Revenue (1) Operating strategy and acquisitions successfully shifting business mix Competitive RLEC Data focus drives growth in the Competitive segment: 17% year over year data revenue growth 2 RLEC access revenues impacted by Regulatory Reform and continued network grooming by carriers Competitive Data 2 RLEC ($ mm) ($ mm) Competitive Voice & Other (1) Reported results; not pro forma for acquisitions. (2) Includes enterprise, wholesale and SMB/residential data; 4Q 2011 up 17% over 4Q 2010, pro forma for FiberNet |
![]() 15 Addressable market significantly increased Recent network investments made to generate increasing returns in 2012 and beyond Metro Ethernet or IP data products were launched into 30 new markets in 2011, an increase of 79% for the year Metro fiber ring reach in 27 new markets; Two additional to be added in 2012 As markets mature, revenues grow with increased penetration and data demand Early stages of revenue growth potential from acquisitions 7% 64% 54% 78% ($ mm) 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 2007 2011 Competitive Revenues Virginia Enterprise Data SMB Data Wholesale Voice - |
![]() Capitalization 16 As of December 31, 2011 ($mm) Cash and cash equivalents $10.5 Restricted cash 7.6 $18.1 Revolver ($60 million total) $15.0 Term Loan A 110.0 Term Loan B 199.5 324.5 Capital leases 2.1 Total Debt $326.6 Total Debt / LTM Adjusted EBITDA 3.4x Net Debt / LTM Adjusted EBITDA 3.3x Available capital to support growth initiatives |
![]() Business Outlook 17 Cash needs funded from operations (Dollars in millions) 2011 Three to Five Year Actual Low High Expectations Revenue Competitive $155 $159 $164 5% Annual Growth % of total revenue 75% 80% 80% 90% RLEC $52 $41 $41 10% Annual Decline % of total revenue 25% 21% 20% 10% Total Revenue $207 $200 $205 Adjusted EBITDA $97 $85 $90 % of total revenue 47% 43% 44% 45% Capital Expenditures $62 $52 $60 % of total revenue 30% 26% 29% 25% Free Cash Flow (adjusted EBITDA less Capex) $35 $33 $30 % of total revenue 17% 17% 15% 20% Cash Interest $3 $14 $14 % of total revenue 1% 7% 7% 5% Cash Taxes $1 $1 $1 % of total revenue - 1% - 5% Dividends $3 $12 $12 % of total revenue 1% 6% 6% 5% Debt Repayment $1 $2 $2 % of total revenue - 1% 1% 5% 2012 Guidance Range |
![]() 18 Key Success Factors Leveraging Network Infrastructure • 5,800 route-mile state-of-the-art fiber optic network • Unique regional footprint with attractive enterprise and wholesale markets • Position in multiple key vertical markets Focus on Revenue Growth: Data Opportunity • Continue innovative leadership position • Expand product offerings • Leverage up-sell opportunity of existing accounts Solid Execution • Sales force expansion and productivity • Installation streamlining and productivity • Automated customer interfaces Financial Performance • Adjusted EBITDA generation • Capital expenditure efficiency • Cash flow from operations • Return to shareholders Q & A (live presentation only) |
![]() Appendix |
![]() 20 Adjusted EBITDA Reconciliation ($ in millions) 2007 2008 2009 2010 2011 Operating Income (Loss) $36 $39 $41 $41 ($36) Depreciation and Amortization 27 27 29 31 43 Equity Based Compensation 1 1 - 2 2 Asset Impairment Charge - - - - 86 Business Separation Charges - - - - 2 Acquisition Related Charges - - - 3 - Voluntary Retirement and Workforce Reduction Plans - 1 - - - Adjusted EBITDA $64 $68 $70 $77 $97 Year Ended 3/31/10 6/30/10 9/30/10 12/31/10 3/31/11 6/30/11 9/30/11 12/31/11 Operating Income (Loss) $11 $10 $11 $9 $12 $13 $13 ($75) Depreciation and Amortization 7 8 7 9 11 11 11 10 Equity Based Compensation 1 - 1 1 1 1 1 - Asset Impairment Charge - - - - - - - 86 Business Separation Charges - - - - - - - 2 Acquisition Related Charges - - - 2 - - - - Adjusted EBITDA $19 $18 $19 $21 $24 $25 $25 $23 Three Months Ended |
![]() 21 2012 Financial Guidance 1 (as of February 27, 2012) ($ in millions) (1) These estimates are based on management’s current expectations. These estimates are forward-looking and actual results may differ materially. Please see “Special Note from the Company Regarding Forward-Looking Statements" in the Lumos Networks Corp. fourth quarter 2011 earnings release dated February 27, 2012. (2) Based on the mid-points of the above guidance ranges. (3) Represents the most recent cash dividend paid, annualized. Dividend payments are reviewed quarterly by the board of directors and are subject to change. (4) Primarily cash reimbursements received from Federal stimulus awards, which provide 50% funding to bring broadband services and infrastructure to Alleghany County, Virginia. (5) Before discretionary payments to the credit facility Revolver loan and changes to working capital. Business Outlook 1 Operating Revenues 50 $ to 51 $ 200 $ to 205 $ Adjusted EBITDA 21 $ to 22 $ 85 $ to 90 $ Capital Expenditures 52 $ to 60 $ Reconciliation of Operating Income to Adjusted EBITDA Operating Income 11 $ to 12 $ 44 $ to 46 $ Depreciation and amortization 9 38 to 40 Equity based compensation charges 1 3 to 4 Adjusted EBITDA 21 $ to 22 $ 85 $ to 90 $ Projected Cash Flows for the Year 2012 1 Adjusted EBITDA 2 88 $ Less: Capital expenditures 2 (56) 32 Less: Cash interest, net of interest income (14) Cash taxes (1) Cash flows, net, before dividends and debt payments 17 Less: Cash dividends: $0.14 per share per quarter 3 (12) Scheduled 2012 debt payments (2) Plus: Other, net 4 7 Projected Cash Flows, net 5 10 $ First Quarter 2012 2012 Annual |