![]() Company Presentation November 2012 Exhibit 99.2 |
![]() 1 Use of Non-GAAP Financial Measures Special Note Regarding Forward-Looking Statements 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. 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 offset expected revenue declines in our Competitive business from legacy voice products and 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. |
![]() 2 Value creation for our customers enhances value for our shareholders. Lumos Networks provides next- generation communication solutions and personalized service to customers over an advanced fiber network. |
![]() 3 Diversified revenue stream served over a dense fiber network 3 Key Events • Oct. 31, 2011 – Spin from NTELOS • 2012 New leadership • Q3-12 • Yr/Yr revenue growth • Strategic Data > 50% of revenue • Margin Expansion Customers and Markets • 21,000 business customers • Relationships with all major carriers in the region Products • Enterprise Data – Metro E, Internet • Carrier Data - up to 10Gig+ • IP Services – Fiber BXL, Video, VoIP Network • 5,800 long haul Fiber Network miles • ~ 300 cell site fiber connections by 12/31/12 • Interconnection to all major data centers in region People • Diversified and experienced leadership team • 400 sales and support personnel deployed across the region • Deep technical expertise |
![]() 4 Highlights Strong Management Team Experienced leadership team Diverse operational background Attractive Revenue Growth Opportunity Significant growth available in existing markets Edge out potential with unique network footprint Margin Expansion Increasing mix of high margin Strategic Data products Leverage existing infrastructure Efficient Capital Management Investments focused on Strategic Data initiatives Disciplined success based capital approach Delight Customers Top Tier SLA standards In Market support teams |
![]() 5 Executive Management with Deep Industry Experience Tim Biltz Chief Executive Officer Joined in April 2012 Over 20 years of operating experience as Chairman of iPCS, COO of Spectrasite and EVP, COO of Vanguard Cellular Systems Harold Covert Chief Financial Officer Joined in October 2011 Over 27 years of experience with technology and telecommunications companies as CFO of six publicly traded companies Joseph McCourt Jr. Chief Revenue Officer Joined in May 2012 Over 25 years of experience in wholesale and enterprise sales in Time Warner Telecom, Level 3 Communications, Dukenet Communications, Zayo Networks, and 1901 Group |
![]() 70% of internet access will come from mobile devices Increase in networked devices 2011- 2016 Enabling rapid growth in rich media Access to cloud services 6 Exponential Growth in Data and Devices… Applications and devices generating constant streams of data Enterprises capturing and processing data : Customers Products Transactions Operations Digitization of records Increasing use of: Cloud and data center storage Back-up file protection and security Source: Cisco VNI June 2012 Big Data Proliferation of Networked Devices mm “90% of the world’s data has been created in the last 2 years” Source: Mark Hurd, Oracle Open World 2012. |
![]() 7 …Driving Demand for Connectivity and Speed Source: Cisco VNI June 2012 U.S. Business IP Traffic More Cloud, More Mobility Business IP traffic to grow 2.5-fold from 2011 to 2016 or CAGR of 20% Mix of Business Data from mobile devices increases from 4% to 19% Enterprise Cloud Spending grows 12.5X from 2011 to 2016 with 35-45% telecom Source: Oppenheimer & Co Estimates Source: Cisco VNI June 2012 20,000 15,000 10,000 5,000 0 2011 2012 2013 2014 2015 100% 80% 60% 40% 20% 0% 2011 2012 2013 2014 2015 2016 Business and IP Traffic Mobile% Business Traffic |
![]() 8 Next-generation network solutions Enterprise Data • Ethernet connectivity among multiple locations • Dedicated Internet connections • Speeds of 1.5M to 10 Gbps IP Services • IP-enabled product offerings that combines voice and data services • Enables advanced features and dynamic bandwidth • Broadband XL high speed Internet over fiber over for 100M+ Carrier Data • IP-based Ethernet transport • Fiber connectivity to cell sites to support 4G growth • High-bandwidth transport (OC-X and wavelengths) |
![]() 9 Enterprise Data enables networking and addresses future growth needs Attractive Available Markets Current Share ~ 10% Ethernet represents a disproportionate share of the overall telecom growth with overall growth 3-4% and TDM flat to declining Enterprise Data Demand growth 45%+ annually Ethernet market has 50% at speeds of 100Mbps or below Fastest growth segment of Ethernet is 100Mbps+ with 24% looking for speeds at 1Gig + Source: Heavy Reading Study 2012, Oracle Openworld 2012 Future Edge Out Markets Current Markets |
![]() 10 Customer Demand Drives Growth Education Customer Started with several data circuits - $11K monthly recurring charge (“MRC”) Expanded into IP based services – Bandwidth to data centers + IP voice MRC now $29K for $100K capital investment Regional Healthcare Provider Several small locations with leased voice access - $2K MRC Today 37 locations, most are on-net Buying voice and Metro E MRC of $29K with a $1.0M capital investment |
![]() Transport opportunity greatly enhanced with edge out opportunities like Atlanta interconnection 11 Carrier Today Provide transport across region Responded to RFP for cell sites across region Sites coming on line now New RFP for next wave of sites….. 1/3 as second tenant New Opportunity with Atlanta interconnection Diversity to I-95 national carrier routes High speed connections – 10Gig + Expands overall market for carriers Attractive Available Markets 2012 Future Edge Out Opportunity Current Markets |
![]() Fiber to the cell site: End-to-End Transport opportunity Approximately 5,000 sites within 10 miles of existing network Goal to double sites annually with the expansion of 4G roll out Long-term growth in bandwidth creates opportunity for significant ROI Illustrative Wireless Cell Site Economics Average Capital Investment $75K-$100K per site Two Carrier Equivalent Annual EBITDA: $30K to $36K Payback: 2 to 3 years 12 Three to Five Carrier Equivalent 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 |
![]() Legacy TDM Voice Revenue RLEC voice continuing moderate decline with strong cash generation Legacy Competitive voice focus on mix shift to larger and higher margin customers, churn low margin base 13 ($000) ($000) |
![]() Access Revenue RLEC access reform underway: Lower rates, long term transition funding continues strong cash generation Competitive Access: Continuing moderate declines with good cash generation 14 ($000) ($000) 0 500 1,000 1,500 2,000 2,500 3,000 3,500 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Competitive Access 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 RLEC Access |
![]() Well positioned for the competitive environment 15 Network Capability • Dense fiber with available or expandable capacity • Most complete fiber network in our markets • High quality ring based network Customer Relationship • Strategic partnership • Care and sales support in region • Technical support expertise and responsiveness Products • First to bring products to addressed markets • Top Tier SLAs • Competitive pricing |
![]() 16 Key Success Factors Revenue Growth • Strong portfolio of Strategic Data products • Significant opportunity to grow in current markets • Meaningful edge-out opportunities Leverage Infrastructure Solid Execution • Sales force expansion and productivity • Installation streamlining and productivity • Automated customer interfaces Financial Performance • High margin product mix • Capital expenditure efficiency • Cash flow from operations • Current return to shareholders • Maximizing network efficiency • On-net or near-net customers • Focused capital deployment |
![]() 17 Business Transformation Shift to Strategic Data products Enhanced sales organization Improve mix to more on-net or near-net customers Effective expense management > 75% 19% 31% 50% 22% 36% 42% Legacy Voice Access Strategic Data Legacy Voice Access Strategic Data Legacy Voice Access Strategic Data 2011 2012 Long Term Target |
![]() Income Statement Overview 18 Quarterly Revenue EBITDA $M Q3-12 results highlight the transformation Strategic Data now > 50% of total revenue % Margin Data - % Rev $M 30% 35% 40% 45% 50% 55% 60% 0 5 10 15 20 25 30 35 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Strategic Data Legacy Voice and Access % Data Revenue 48% 45% 43% 42% 43% 30% 35% 40% 45% 50% 15.0 17.0 19.0 21.0 23.0 25.0 27.0 29.0 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 EBITDA % Margin |
![]() 19 Disciplined approach to capital investment Guiding principles include: Achievement of capital efficiency goals Focus on success based projects Compliance with liquidity goals Maintain current shareholder dividend Metric Target Near – Term Revenue Opportunity Capital ~75% Capex to Revenue Ratio ~2.0x - 3.0x EBITDA Payback ~36 – 48 Months Return on Investment (EBITDA After Tax) ~15% - 20% Capex as a % of Revenue ~30-35% |
![]() ($mm) Cash -.0 $ - Restricted cash 6.8 Total Assets 504.4 Revolver ($60M) 4.7 Long-term debt 314.4 Liquidity Overview 20 9/30/12 |
![]() Cash Flow Overview 21 FY 2012 Guidance $M 88 55 Cash Resources $143M EBITDA Line of Credit 12 16 Cash Uses $88M Capital Investment Dividend Interest, Debt Payment, Cash Tax 60 |
![]() Financial Model 22 % of revenue % of revenue % of revenue 2011 Q3-12 Q4-12 FY 2012 (Dollars in millions) Actual Actual Guidance Guidance Annual Long Term Goals Revenue Strategic Data Revenue 88.2 26.1 27.0 - 27.5 102.5-103.0 + 15-20% 42.5% 50.2% 53.0% 50% Legacy Voice Revenue 74.3 16.1 15.0 - 15.5 63.5 - 64.0 -10-15% 35.8% 31.0% 31.0% 31% Access Revenue 44.9 9.7 9.0 - 9.0 39.0 - 39.0 -10-15% 21.6% 18.7% 16.0% 19% Total 207.4 52.0 52.0 206.0 + 5% EBITDA $ 96.9 22.3 22.0 88.0 NA % 46.7% 42.9% 42.3% 42.7% 47%+ Capital Expenditures % Success Based 45% 75% 75% 75% 75% Total 61.5 14.9 16.0 60.0 ~30-35% of revenue |
![]() 23 2012 Financial Guidance 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. third quarter 2012 earnings release dated November 1, 2012. Business Outlook 1 (as of November 1, 2012) (In millions) Operating Revenues 52 $ 206 $ Adjusted EBITDA 22 $ 88 $ Capital Expenditures 60 Reconciliation of Operating Income to Adjusted EBITDA Operating Income 10 $ 44 $ Depreciation and amortization 9 38 Equity based compensation charges 3 4 Amortization of actuarial losses - 2 Adjusted EBITDA 22 $ 88 $ Fourth Quarter 2012 2012 Annual 2012 Guidance 1 $ Approximately Approximately Approximately Approximately Approximately Approximately Approximately Approximately Approximately |
![]() 24 Key Success Factors Revenue Growth • Strong portfolio of Strategic Data products • Significant opportunity to grow in current markets • Meaningful edge-out opportunities Leverage Infrastructure Solid Execution • Sales force expansion and productivity • Installation streamlining and productivity • Automated customer interfaces Financial Performance • High margin product mix • Capital expenditure efficiency • Cash flow from operations • Current return to shareholders • Maximizing network efficiency • On-net or near-net customers • Focused capital deployment |
![]() 25 Reconciliation of Net Income Attributable to Lumos Networks Corp. to Operating Income ($ in millions) 2007 2008 2009 2010 2011 Net income attributable to Lumos Networks Corp. $21 $23 $23 $21 ($44) Net income attributable to noncontrolling interests - - - - - Net income 21 23 23 21 (44) Interest expense 2 1 1 6 12 Loss on interest rate derivatives - - - - - Income tax expense (benefit) 14 15 16 14 (4) Other income, net (1) - 1 - - Operating Income (Loss) $36 $39 $41 $41 ($36) Year Ended 12/31/2010 3/31/2011 6/30/2011 9/30/2011 12/31/2011 3/31/2012 6/30/2012 9/30/2012 Net income attributable to Lumos Networks Corp. $4 $5 $7 $6 ($62) $5 $3 $6 Net income attributable to noncontrolling interests - - - - - - - - Net income 4 5 7 6 (62) 5 3 6 Interest expense 2 3 3 3 3 3 3 3 Loss on interest rate derivatives - - - - - - - - Income tax expense (benefit) 3 4 4 4 (17) 3 3 4 Other income, net - - - - - - - - Operating Income (Loss) $9 $12 $13 $13 ($75) $12 $9 $13 Three Months Ended |
![]() 26 Adjusted EBITDA Reconciliation ($ 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 $71 $77 $97 Year Ended 12/31/2010 3/31/2011 6/30/2011 9/30/2011 12/31/2011 3/31/2012 6/30/2012 9/30/2012 Operating Income (Loss) $9 $12 $13 $13 ($75) $12 $9 $13 Depreciation and Amortization 9 11 11 11 10 9 9 10 Equity Based Compensation 1 1 1 1 - 1 1 1 Asset Impairment Charge - - - - 86 - - - Business Separation Charges - - - - 2 - - - Acquisition Related Charges 2 - - - - - - - Employee Separation Charges - - - - - - 2 - Gain on Settlements, net - - - - - - - (2) Adjusted EBITDA $21 $24 $25 $25 $23 $22 $21 $22 Three Months Ended |
![]() 27 Thank You |