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Executives

John G. Nesbett – Investor Relations-IMS

Guy Nissenson – Chairman, President and Chief Executive Officer

Niv Krikov – Executive Vice President, Chief Financial Officer, Principal Accounting Officer and Treasurer

Analysts

Jennifer Wolfertz – Comstock Partners

NTS Inc. (NTS) Q3 2012 Earnings Call November 15, 2012 10:00 AM ET

Operator

Greetings, and welcome to the NTS Inc. third quarter 2012 results conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer-session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Nesbett of IMS. Thank you sir, you may begin.

John G. Nesbett

Good morning and welcome to our conference call to discuss NTS’s financial results for the period ended September 30, 2012. On the call today, we have Guy Nissenson, NTS’s President and Chief Executive Officer, and Niv Krikov, Chief Financial Officer. Guy will review the company’s business operations, and Niv will review the financials. Immediately thereafter, we will take questions from call participants.

I’d just like to take a moment to read the Safe Harbor statement. During this call, we may use forward-looking statements. The words or phrases would be, will, allow and tends to will likely result, are expected to, will continue, is anticipated, estimate, project or similar expressions are intended to identify forward-looking statements.

NTS’s financial and operational results should not be construed by any means as representative of the current or future value of the common stock or bonds. All information set forth on this conference call except historical and factual information represents forward-looking statements. This includes all statements about the company’s plans, believes, estimates and expectation.

These statements are based on current estimates and projections, which evolve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These risks and uncertainties include issues related to rapidly changing technology and evolving standards in the industries in which the company's subsidiaries operate.

The ability to obtain sufficient funding for operations, maintain adequate cash flow, profitably exploit new business, license and sign new agreements, the unpredictable nature of consumer preferences and other factors set forth in the company’s most recently filed annual report, quarterly reports and registration statements.

Call participants are cautioned not to place undue reliance on those forward-looking statements, which reflect management’s analysis only as of the date hereof. The company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

Call participants should carefully review the risks and uncertainties described in other documents that the company files from time to time with the Securities and Exchange Commission.

Okay. I would now like to turn the call over to Guy Nissenson. Go ahead, Guy.

Guy Nissenson

Thank you, John and good morning all. Thank you for joining us today. Our third quarter was another strong quarter with continued growth in fiber revenues shifting revenue composition, higher margins and significant EBITDA growth. As our fiber network grows, we are seeing our revenues grow while our cost of revenues decreases.

Additionally, the third quarter marks our 10th consecutive quarter of improving EBITDA. Our success in adding new fiber markets and securing new customers has resulted in increased fiber revenues which offset the attrition of our legacy corporate customers. As a result, we are seeing improving margins as well as continued stable consolidated revenue.

We’ve made great progress building the network and signing new customers and our efforts in these areas are paying off. NTS continues to manage the network expansion very well, and we are motivated to continue our progress and capitalize on new opportunities in new markets.

As we discussed last quarter, we recently expanded our fiber network to include selected end of Wichita Falls and during the third quarter we began our sales in that market, targeting more than 1000 potential business customers. I am pleased to report that in just three weeks of focused sales period, we sold our services to approximately 25% of the identified businesses.

Wichita Falls is a model for our metro build strategy, which targets specific business customers and leverages our proximity to our existing network, allowing us to apply the scale and knowledge we’ve developed as we deployed our fiber network.

To-date, we have brought our fiber network to 14 communities in Texas, and during the third quarter, we added our first fiber customers in Plainview while continuing to steadily add subscribers in our existing FTTP market.

We also expect to sign our first customers in Iowa Park in the next few weeks. During the third quarter, we transitioned our focus through our fiber build out in Southern Louisiana which will eventually reach the communities of Hammond, Ponchatoula, Natalbany, Tickfaw, Independence and Amite, Louisiana.

As we previously noted, the construction of our fiber network is largely financed using federal stimulus funding. This type of low interest financing is an excellent way to fund our growth. We’ve seen very strong take rates in the new markets we’re entering, which we believe reflects the high level of demand for high speed broadband in these communities, and on the quality of our triple play offering.

As we continue to establish our network in new markets and provide our services to customers in new communities, the revenue contribution for our fiber business is growing, while 23.4% of our business in the third quarter of 2011 to approximately 31.9% of our business in the third quarter of 2012. Our strengthening fiber business also contributed to an approximately 31% increase in our EBITDA from the third quarter of 2011, bringing EBITDA to $3.1 million.

We are very pleased with our solid performance in this quarter and we remain focused on the opportunities we see to continue the expansion of our fiber network in new communities.

Now, I’ll turn it over to Niv to review the financials, Niv?

Niv Krikov

Thank you, Guy. Revenues from the company’s FTTP triple play business grew 39.2% to $4.8 million in the third quarter of 2012 as compared to $3.4 million in the third quarter of 2011. Sequentially, fiber revenues grew 5.4%.

FTTP revenues represented 31.9% of total revenues for the quarter as compared to 23.4% of total revenues for the third quarter of 2011. Consolidated revenues for the third quarter were $14.9 million, an increase of 2.2% compared to the prior year period.

The increase in the consolidated revenues is related to the increase in contribution of revenues from the FTTP business, which compensated for a decrease in revenues from the residential non-FTTP customers. EBITDA for the third quarter of 2012 was $3.1 million, increase of 31% over the same quarter last year, and a 7.8% increase sequentially when compared to the second quarter of 2012.

The company recorded a net financing expenses of $1.3 million in the third quarter of 2012 compared to net financing income of $421,000 in the same period in 2011. The increase in net financing was related to interest on the new advance of long-term loans as well as the valuation of the U.S. dollar to the New Israeli shekel.

In the third quarter of 2012, NTS reported a net loss from continued operations of $32000 or less than $0.01 per share assuming 41.2 million shares outstanding compared to net income of $1 million or $0.04 per diluted share, assuming 21.1 million fully diluted shares outstanding in the third quarter of 2011.

Average Revenue Per User at September 30, 2012 for residential FTTP customer was approximately $99 per month with business FTTP customer at approximately $418 per month. That concludes my review of the results. However, should anyone have any specific question related to the company’s financial performance, I’ll be happy to address them during the question-and-answer, please. Guy?

Guy Nissenson

Thanks, Niv. Following the close of the quarter we had some developments from a corporate governance standpoint, and as a result we’ve expanded our size of the board to nine members from six members.

The slate of directors for the 2012 annual meeting of the shareholders will include four incumbent directors and the following five new nominees: Alan Bazaar, Don Bell, Richard Colemen, Jeffrey Eberwein, and Andrew MacMillan.

We believe the slate of directors, we selected will add stronger shareholder representation, and I look forward to working with them to drive long-term value for shareholders. We are very pleased with the progress of our fiber network build out in Texas, and energized about our opportunities we see as we establish our fiber network in Louisiana.

As I said earlier, we are very encouraged by the preliminary results from our Wichita Falls metro build, and that market will serve as our template for future metro build. As we expanded our fiber network, we are able to offset the declines we have experienced in our legacy corporate business and drive increased margins and consolidated overall revenue growth.

Our project management and sales and marketing organizations are maximizing our opportunities to grow our business in new and existing markets, and we believe we are well positioned for continued success.

With that, I will now turn the call over to questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Thank you. Our first question comes from the line of Jennifer Wolfertz with Comstock Partners. Please proceed with your question.

Jennifer Wolfertz – Comstock Partners

Good morning.

Guy Nissenson

Good morning.

Jennifer Wolfertz – Comstock Partners

It seems like you made a lot of progress, and a good job with Wichita Falls. Could you give us a few more details around your strategy around the smart natural build?

Guy Nissenson

Yeah. We’ve been very successful so far in Wichita Falls, building the network very quickly and managing in just about three weeks of concentrated sale vessel to reach more than 25% and sign up more than 25% of the potential business system.

The idea behind the metro build is as follows. We have a strong presence in select markets like Wichita Falls, like Abilene, Amarillo and other areas and we are dependent on underlying copper network for (inaudible). So the idea with them, smart metro build is to go in, build our own fiber network and move customers from corporate to fiber, and at the same time approach customers that would otherwise not come with NTS because of the bandwidth capacity.

So this is both a proactive approach, and a defensive approach that should help us move revenues to fiber and grow our kind of bottom-line and EBITDA numbers as well.

Jennifer Wolfertz – Comstock Partners.

Great, it makes sense, sounds good. Thanks very much.

Guy Nissenson

Thank you.

Operator

(Operator Instructions) It appears we have no further questions at this time. I would now like to turn the floor back over to management for closing or additional comments.

Guy Nissenson

Okay. Thank you so much for joining us today. As I said, we are extremely excited about this quarter, and we really thank you for your continued support and hope you all join us today on our 2012 Annual Call. Thank you very much.

Operator

Ladies and gentlemen this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

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