SOURCE: ERF Wireless Inc.

ERF Wireless Inc.

May 24, 2011 08:05 ET

ERF Wireless Reports Positive Adjusted EBITDA of $1.298 Million and Net Income of $167,000 for the First Quarter Ended March 31, 2011

Results Include a $2.6-Million Improvement in Liquidity, a $1.2-Million Improvement in Shareholders' Equity and a 211% Increase in Revenues in the Company's Oil and Gas Energy Broadband Subsidiary

LEAGUE CITY, TX--(Marketwire - May 24, 2011) - ERF Wireless (OTCBB: ERFW), a leading provider of enterprise-class wireless and broadband products and services, announced today that the company has filed its Form 10-Q with the Securities and Exchange Commission reporting results for the first quarter ended March 31, 2011. The company reported Positive Adjusted EBITDA, as defined below, of $1,298,000 for the quarter ended March 31, 2011, including a one-time gain of $1,176,000 on the divestiture of certain non-core assets and operations. Positive Adjusted EBITDA, excluding the one-time gain, was $122,000 for the period ended March 31, 2011, as compared to an Adjusted EBITDA loss of ($1,005,000) for the same prior year period ended March 31, 2010; an improvement of $1,127,000.

Dr. H. Dean Cubley, CEO of ERF Wireless, commented, "During the first calendar quarter ended March 31, 2011, we experienced dramatically improved financial and operational results as evidenced by our achieving $1.298 million in Positive Adjusted EBITDA. These results are consistent with our recent strategic decisions to divest certain wireless assets and operations that were not core to our oil and gas vertical market focus. We continued to lay the foundation for future growth by partnering with other large wireless network operators to provide wireless broadband connectivity in regions where ERF Wireless does not currently own networks and thus expand our operational footprint in active oil and gas drilling regions in preparation for the dramatic increases being experienced in the oil and gas industry. Given the foundation that we have put in place during the last two years, we expect to begin realizing substantially more recurring wireless circuit, construction and services revenues from all of our oil and gas contracts for the balance of calendar year 2011."

  • The company's financial condition improved dramatically as compared to the most recent fiscal year ended December 31, 2010, and the prior year's same quarterly reporting period ended March 31, 2010, including the following highlights:
    • The company reported a Net Income of $167,000 for the quarter ended March 31, 2011, as compared to a Net Loss of ($2,075,000) for the same prior year quarter ended March 31, 2010, including a $1,176,000 gain associated with the recent divestiture of certain non-core wireless broadband assets and operations.
    • The company reported Income from Continuing Operations of $245,000 for the quarter ended March 31, 2011, as compared to Loss from Continuing Operations of ($1,884,000) for the same prior year quarter ended March 31, 2010, an improvement of $2,129,000.
    • The company's Energy Broadband Inc. subsidiary reported revenues of $535,000 for the quarter ended March 31, 2011, as compared to revenues of $172,000 for the same prior year quarter ended March 31, 2010, an increase of $363,000 or 211%.
    • The company's overall revenues increased by 24% as compared to the same prior year quarter, comprised of a decline of $122,000 in wireless Internet services, a $19,000 decline in wireless messaging services, a $5,000 decline in enterprise network services, offset by the $363,000 increase in revenues in our oil and gas operations subsidiary, Energy Broadband Inc.
    • The company reported Gross Profit of $406,000 for the quarter ended March 31, 2011, as compared to Gross Profit of $215,000 for the same prior year quarter ended March 31, 2010, an increase of $191,000 or 89%. The Gross Profit percentage for the quarter ended March 31, 2011, was 36% of Net Sales as compared to Gross Profit percentage for the quarter ended March 31, 2010, of 24%. The Gross Profit increase of $191,000 and 12% overall Gross Profit percentage improvement was achieved as a result of the higher percentage mix and higher gross profit margins on our oil and gas revenues achieved in the current quarter as compared to the prior year quarter.
    • During the three months ended March 31, 2011, approximately 48% of our revenues were generated from wireless Internet services, 48% of our revenues were generated from providing broadband services to the energy industry and 4% of our revenues were generated from construction services. For comparison purposes, during the prior year three month period ended March 31, 2010, approximately 73% of our revenues were generated from wireless Internet services, 19% of our revenues were generated from providing broadband services to the energy industry, 6% of our revenues were generated from construction services and 2% were generated from wireless messaging services.
    • The company reported a reduction of $714,000 or 38% decline in Operating Expenses in the quarter ended March 31, 2011, as compared to the same prior year quarter ended March 31, 2010.
    • The company reported a $1,266,000 improvement in Shareholders' Equity for the quarter ended March 31, 2011, as compared to the most recent balance sheet at fiscal year ended December 31, 2010.
    • The company's liquidity position improved by $2,564,000 for the quarter ended March 31, 2011, as compared to the most recent balance sheet at fiscal year ended December 31, 2010, including a $1,211,000 increase in Current Assets, a $1,353,000 decrease in Current Liabilities that included $624,000 retirement of Long-Term Debt and Capital Lease obligations.
    • Lastly, the company invested $717,000 in cash during the quarter ended March 31, 2011, for the purchase of assets in its Energy Broadband Inc. subsidiary for the continued expansion of networks and infrastructure, including increasing its Mobile Broadband Trailer (MBT) fleet associated with the increased oil and gas business growth being experienced.

Richard Royall, CFO of ERF Wireless, commented, "During the first calendar quarter of 2011, we experienced a dramatic improvement in the oil and gas sector and substantially improved financial condition, including 211% increase in Net Sales for our oil and gas subsidiary, Energy Broadband Inc., a $2.6 million improvement in our liquidity position and a $1.2 million improvement in our Shareholders' Equity. With the recently completed divestiture of our Central and North Texas WISP operations, we retired certain debt and capital leases resulting in a $1.4 million decrease in current liabilities and an increase of $1.2 million in current assets. In addition to the cash we have utilized and have on our balance sheet we still have approximately $300,000 of cash proceeds from the recent divestiture that we expect to collect in the second quarter ending June 30, 2011. We will continue to allocate additional proceeds toward additional strategic acquisitions in oil and gas territories, Mobile Broadband Trailers (MBTs), wireless equipment and general working capital."

Recent Events

During the first quarter of fiscal 2011, the company continued to make progress with its strategic business plan as evidenced by the completion and announcement of numerous significant agreements and activities. These include:

  • The completion, closing and funding associated with the divestiture of certain wireless broadband assets and operations that were not core to the company's vertical market focus in oil and gas through its subsidiary, Energy Broadband Inc. ERF Wireless received $3 million in cash and 100,000 shares of KeyOn Communications Holdings Inc. stock for two wireless networks that were sold, specifically the Central Texas network west of Austin and the smaller North Texas network in Granbury. The primary allocation of the cash proceeds was used to retire certain liabilities and to provide for aggressive growth for our oil and gas vertical subsidiary, Energy Broadband.
  • The announcement that the company recently entered into four separate contractual agreements with four Texas Independent School Districts to design, engineer and construct wireless broadband networks utilizing the respective districts' 2.5-GHz Education Broadband Service (EBS) licenses. Three of the four contracts represent one-time revenues to be recorded in the second fiscal quarter to end on June 30, 2011, while the fourth contract represents a five-year agreement for providing Direct Internet Access and Internet Protocol bandwidth circuits connecting all of the campuses in that school district under a Master Capacity Services Agreement. These agreements mark the company's entry into a new strategic education vertical market that has been under development for some time.
  • The completion of a Master Services Agreement with KeyOn Communications to deliver digital oilfield solutions in 4 of the 11 states where KeyOn has networks, with initial focus in Texas and Kansas.
  • The completion of a Master Services Agreement with Bluebird Broadband Services to deliver digital oilfield solutions in the Haynesville Shale market, covering northwest Louisiana and northeast Texas.
  • The completion of a Master Services Agreement with Advanced Data Technologies to deliver digital oilfield solutions in the western Eagle Ford Shale formation in South Texas.
  • The announcement that the company received correspondence from the U.S. Patent Office that the second patent previously applied for relating other aspects of the CryptoVue encrypted security device has been approved and that the patent will be issued as soon as the forms are submitted.

About ERF Wireless

ERF Wireless Inc. is a fully reporting public corporation located in League City, Texas, and is the parent company of Energy Broadband Inc., ERF Enterprise Network Services, ERF Bundled Wireless Services, ERF Wireless Messaging Services and ERF Network Services. The company specializes in providing wireless and broadband product and service solutions to enterprise, commercial and residential clients on a regional, national and international basis. Its principals have been in the wireless broadband, network integration, triple-play FTTH, IPTV and content delivery business for more than 40 years. For more information, please visit our websites at www.erfwireless.com and www.erfwireless.net or call 281-538-2101. (ERFWG)

The company refers in this press release to a non-GAAP financial measure called Adjusted EBITDA for illustration purposes because of management's belief that this measure is a financial indicator of the company's ability to internally generate operating cash flow. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization and stock based compensation expense. Management also believes that this non-GAAP financial measure is useful information to investors because it is widely used by professional research analysts in the valuation and investment recommendation of companies in the company's peer group. Adjusted EBITDA is not utilized in any of the company's SEC filings and should not be considered an alternative to net income, as defined by U.S. GAAP.

Forward-looking statements in this release regarding ERF Wireless Inc. are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, without limitation, continued acceptance of the company's products, increased levels of competition, new products and technological changes, the company's dependence upon third-party suppliers, intellectual property rights, and other risks detailed from time to time in the company's periodic reports filed with the Securities and Exchange Commission.

Contact Information

  • Contact:
    ERF Wireless Inc.
    Clareen O'Quinn
    281-538-2101 ext. 113
    Email Contact