stanu78
14 years ago
Nice Q2 earning, nice cash balance, nice dividend, nice cost control, nice/tighter guidance, Congrats USMO management!
========================
SPRINGFIELD, Va.--(BUSINESS WIRE)--USA Mobility, Inc. (Nasdaq: USMO - News), a leading provider of wireless messaging and communications services, today announced operating results for the second quarter ended June 30, 2010.
In addition, the Company’s Board of Directors declared a regular quarterly cash distribution of $0.25 per share, payable on September 10, 2010 to stockholders of record on August 19, 2010. Of the $0.25 cash distribution, the Company expects $0.23 will be a return of capital and $0.02 will be a dividend distribution.
Total revenue for the second quarter was $59.1 million, compared to $62.8 million in the first quarter of 2010 and $75.1 million in the year-earlier quarter. Second quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $20.4 million, compared to $22.0 million in the first quarter and $24.0 million in the second quarter of 2009.
Net income for the second quarter was $13.1 million, or $0.58 per fully diluted share, compared to $8.9 million, or $0.39 per fully diluted share, in the first quarter, and $44.7 million, or $1.93 per fully diluted share, in the year-earlier quarter. The second quarter of 2009 net income included a one-time income tax benefit of $37.0 million due to the settlement of uncertain tax positions and tax refund claims and a litigation settlement expense of $4.0 million. Excluding those two items, net income in the year-earlier quarter would have been $10.1 million, or $0.43 per fully diluted share. In the second quarter of 2010, the Company reassessed the expected level of the Company’s 2010 taxable income, which allowed the Company to reduce the deferred tax asset valuation allowance by $4.7 million with a corresponding reduction in income tax expense. Absent the reduction in income tax expense, net income would have been $8.4 million or $0.37 per fully diluted share.
Second quarter results included:
Net unit loss was 72,000 in the second quarter, compared to 83,000 in the prior quarter and 158,000 in the second quarter of 2009. Units in service totaled 2,027,000 at June 30, 2010, compared to 2,449,000 a year earlier.
The quarterly rate of subscriber loss improved to 3.5 percent, compared to 3.8 percent in the first quarter and 6.0 percent in the second quarter of 2009. The annual rate of subscriber erosion also improved to 17.2 percent in the second quarter from 19.5 percent in the first quarter and 22.9 percent in the year-earlier quarter.
Total paging ARPU (average revenue per unit) was $8.87 in the second quarter, compared to $9.00 in the first quarter and $8.96 in the year-earlier quarter.
The quarterly rate of revenue erosion was 5.8 percent, compared to 4.0 percent in the prior quarter and 5.7 percent in the second quarter of 2009. The annual rate of revenue erosion was 21.3 percent, compared to 21.2 percent in the first quarter and 18.4 percent in the year-earlier quarter.
Operating expenses (excluding depreciation, amortization and accretion) totaled $38.7 million in the second quarter, a reduction of $12.5 million, or 24.4 percent, from $51.2 million in the second quarter of 2009. Operating expenses declined 5.3 percent from the prior quarter.
EBITDA margin (or EBITDA as a percentage of revenue) was 34.6 percent, compared to 31.9 percent in the second quarter of 2009.
Capital expenses were $0.6 million in the quarter, compared to $4.4 million in the year-earlier quarter, due to fewer paging device purchases.
The Company repurchased 176,839 shares of common stock during the quarter under its buy back program, and approximately $18.1 million remains available for purchases under the currently approved plan.
The Company’s cash balance at June 30, 2010 was $129.1 million.
Vincent D. Kelly, president and chief executive officer, said: “USA Mobility reported another quarter of solid operating results, meeting or exceeding the majority of our key performance objectives. We were particularly pleased to see continued improvement in the pace of subscriber erosion, which slowed for the third consecutive quarter. At the same time, revenue, ARPU, and operating margins remained at high levels while our expense reduction efforts continued on track, all consistent with the financial guidance we provided earlier this year. In addition, we again generated sufficient cash flow during the quarter to return significant capital to stockholders in the form of cash distributions and share repurchases.”
Thomas L. Schilling, chief operating officer and chief financial officer, said the Company continued to pursue various cost reduction initiatives during the quarter. “Operating expenses (excluding depreciation, amortization and accretion) decreased 5.3 percent from the first quarter and 24.4 percent over the past 12 months,” Schilling noted, “including significant reductions in payroll expense and site rent expense. Operating expense as a percentage of revenue was 65.4 percent in the quarter, compared to 68.1 percent in the year-earlier quarter, with the lower expenses contributing to an EBITDA margin of 34.6 percent versus 31.9 percent in the same quarter of 2009.”
Based on current trends, the Company is revising its financial guidance for 2010. Revenues are now expected to be between $230 million to $235 million, operating expenses (excluding depreciation, amortization and accretion) between $156 million to $159 million, and capital expenses between $7 million to $9 million.
TycoonSoon
15 years ago
I'm not in USMO, but saw this news and
thought I'd post in this board, since noone had done so yet.
Hope you do well with it.
USA Mobility Reports Second Quarter Operating Results; Board Declares Quarterly Cash Distribution
Average Revenue Per Unit, Recurring Cash Flow Margins Reach New Highs; Company Continues to Reduce Operating Expenses
* Press Release
* Source: USA Mobility, Inc.
* On Wednesday July 29, 2009, 4:30 pm EDT
ALEXANDRIA, Va.--(BUSINESS WIRE)--USA Mobility, Inc. (Nasdaq: USMO - News), a leading provider of wireless messaging and communications services, today announced operating results for the second quarter ended June 30, 2009.
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In addition, the Company’s Board of Directors declared a regular quarterly cash distribution of $0.25 per share, payable on September 10, 2009 to stockholders of record on August 14, 2009. The Company expects the entire distribution to be paid as a return of capital.
Total revenue was $75.1 million for the second quarter, compared to $79.7 million in the first quarter and $92.1 million in the second quarter of 2008. Operating income was $12.8 million for the second quarter, while EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $24.0 million, compared to $28.6 million in the first quarter and $30.6 million in the year-earlier quarter. Second quarter results were negatively impacted by a one-time settlement expense of $4.0 million in connection with patent litigation. Absent the one-time litigation settlement expense, operating income would have been $16.8 million and EBITDA $28.0 million.
Net income for the second quarter was $44.7 million, or $1.93 per fully diluted share, compared to net income of $10.3 million, or $0.37 per fully diluted share, in the second quarter of 2008. The significant increase in net income in the second quarter was largely the result of a one-time income tax benefit of $37.0 million due to the effective settlement of uncertain tax positions, and tax refund claims. Excluding the one-time tax adjustment and $4.0 million litigation settlement expense, net income in the second quarter would have been $10.1 million, or $0.43 per fully diluted share.
Second quarter results included:
* Total paging ARPU (average revenue per unit) increased to $8.96 in the second quarter, its highest level since the third quarter of 2005, from $8.86 in the first quarter and $8.54 in the year-earlier quarter.
* The quarterly rate of revenue erosion was 5.7 percent, compared to 5.4 percent in the first quarter and 2.8 percent in the second quarter of 2008. The annual rate of revenue erosion was 18.4 percent, compared to 15.9 percent in the first quarter and 14.3 percent in the year-earlier quarter.
* Net unit loss in the second quarter was 158,000, compared to 208,000 in the first quarter and 157,000 in the second quarter of 2008. Total units in service were 2,449,000 at June 30, 2009, compared to 2,607,000 at March 31, 2009.
* The quarterly rate of subscriber loss was 6.0 percent in the second quarter, compared to 7.4 percent in the first quarter and 4.7 percent in the second quarter of 2008. The annual rate of subscriber erosion was 22.9 percent in the second quarter, compared to 21.8 percent in the first quarter and 15.5 percent in the year-earlier quarter.
* Operating expenses (excluding depreciation, amortization and accretion) totaled $51.2 million, compared to $51.1 million in the first quarter of 2009. Absent the one-time litigation settlement expense of $4.0 million, operating expenses in the second quarter would have been $47.2 million, a reduction of $14.3 million, or 23.3 percent, from $61.5 million in the second quarter of 2008.
* EBITDA margin (or EBITDA as a percentage of revenue) was 31.9 percent, compared to 35.9 percent in the first quarter and 33.2 percent in the year-earlier quarter. Excluding the one-time litigation settlement expense of $4.0 million, EBITDA margin in the second quarter would have been 37.2 percent, the highest level since the Company’s merger in 2004.
* Based on the completion of the IRS income tax audits for 2005 and 2006 and certain refund claims, the Company recorded a $37.0 million reduction to income tax expense in the quarter.
* Capital expenses were $4.4 million, compared to $6.1 million in the first quarter of 2009.
* The Company’s cash balance at June 30, 2009 was $79.6 million.
“We continued to make excellent progress during the second quarter,” said Vincent D. Kelly, president and chief executive officer, “as operating results met or exceeded the majority of our performance objectives and were consistent with the financial guidance we provided earlier this year. ARPU and recurring cash flow margins rose to their highest levels in years, recurring operating expenses were further reduced, and we continued to provide cost effective and reliable wireless communications services to our customers on a profitable basis.” Kelly added: “While subscriber cancellations were higher than anticipated, due in large part to a weak economy nationwide, we continued to see lower net unit losses in our Healthcare market segment, which now represents approximately 50 percent of our customer base.”
Kelly said USA Mobility again returned capital to stockholders in the second quarter in the form of cash distributions, consistent with its goal of generating sufficient free cash flow to regularly return capital to stockholders. “We produced $25.3 million in cash from operations in the quarter, allowing us to pay a regular quarterly cash distribution of $0.25 per share on June 18, 2009, representing a return of capital to our stockholders of approximately $5.7 million. Including the second quarter distribution, we have now returned $311.1 million to stockholders over the past four years.”
Thomas L. Schilling, chief operating officer and chief financial officer, said the Company continued to reduce operating expenses during the second quarter through a combination of internal consolidations and company-wide cost control initiatives. “Absent the one-time litigation settlement expense of $4.0 million, operating expenses (excluding depreciation, amortization and accretion) decreased 23.3 percent from the year-earlier quarter, once again outpacing the year-over-year decline in revenue of 18.4 percent. In addition,” Schilling noted, “excluding the one-time litigation settlement expense, second quarter operating expenses as a percentage of revenue were at their lowest level in more than four years.”
Commenting on the Company’s financial expectations for the balance of the year, Schilling said, “Based on our performance through the first half of the year, we are revising our financial guidance for 2009 to revenue between $286 million to $291 million, operating expenses (excluding depreciation, amortization and accretion) between $194 million to $197 million, and capital expenses between $16 million to $18 million.
* * * * * * * * *
USA Mobility plans to host a conference call for investors on its second quarter results at 10:00 a.m. Eastern Time on Thursday, July 30, 2009. The dial-in number for the call is 888-801-6494 (toll-free) or 913-312-0970 (toll). The pass code for the call is 8045078. A replay of the call will be available from 3:00 p.m. ET on July 30 until 11:59 p.m. on Thursday, August 13. The replay number is 888-203-1112 (toll-free) or 719-457-0820 (toll). The pass code for the replay is 8045078.
sidesh0wb0b
16 years ago
Form 10-Q for USA MOBILITY, INC
9-May-2008
Quarterly Report
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This quarterly report contains forward-looking statements and information relating to USA Mobility, Inc. and its subsidiaries ("USA Mobility" or the "Company") that are based on management's beliefs as well as assumptions made by and information currently available to management. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "anticipate", "believe", "estimate", "expect", "intend" and similar expressions, as they relate to USA Mobility and its subsidiaries or its management are forward-looking statements. Although these statements are based upon assumptions management considers reasonable, they are subject to certain risks, uncertainties and assumptions, including but not limited to those factors set forth below and under the captions "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")," and "Part I - Item 1A - Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2007, filed with the Securities and Exchange Commission (the "SEC") on March 13, 2008 (the "Annual Report"). Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein as anticipated, believed, estimated, expected or intended. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their respective dates. The Company undertakes no obligation to update or revise any forward-looking statements. All subsequent written or oral forward-looking statements attributable to USA Mobility, Inc. and its subsidiaries or persons acting on their behalf are expressly qualified in their entirety by the discussion under "Item 1A. Risk Factors" section.
Overview
In preparing the discussion and analysis contained in this Item 2, the Company presumes that readers have read or have access to the discussion and analysis contained in the Annual Report. In addition, the following discussion and analysis should be read in conjunction with USA Mobility's condensed consolidated financial statements and related notes and "Part I - Item 1A - Risk Factors", which describe key risks associated with the Company's operations and industry, and "Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" section of the Annual Report.
Sales and Marketing
USA Mobility markets and distributes its services through a direct sales force and a small indirect sales force.
Direct. The direct sales force rents or sells products and messaging services directly to customers ranging from small and medium-sized businesses to companies in the Fortune 1000, healthcare and related businesses and Federal, state and local government agencies. USA Mobility intends to continue to market to commercial enterprises utilizing its direct sales force as these commercial enterprises have typically disconnected service at a lower rate than individual consumers. As of March 31, 2008, USA Mobility sales personnel were located in approximately 58 offices in 30 states throughout the United States. In addition, the Company maintains several corporate sales groups focused on medical sales; Federal government accounts; large enterprises; advanced wireless services; systems sales applications; emergency/mass notification services and other product offerings.
Indirect. Within the indirect channel the Company contracts with and invoices an intermediary for airtime services (which includes telemetry services). The intermediary or "reseller" in turn markets, sells, and provides customer service to the end user. Generally, there is no contractual relationship that exists between USA Mobility and the end subscriber. Therefore, operating costs per unit to provide these services are lower than those required in the direct distribution channel. Indirect units in service typically have lower average revenue per unit than direct units in service. The rate at which subscribers disconnect service in the indirect distribution channel has generally been higher than the rate experienced with direct customers, and USA Mobility expects this to continue in the foreseeable future.
The following table summarizes the breakdown of the Company's direct and indirect units in service at specified dates:
As of As of As of
March 31, December 31, March 31,
2007 2007 2008
Distribution Channel Units % of Total Units % of Total Units % of Total
(Units in thousands)
Direct 3,442 88.0 % 3,075 88.2 % 2,939 88.2 %
Indirect 470 12.0 % 410 11.8 % 394 11.8 %
Total 3,912 100.0 % 3,485 100.0 % 3,333 100.0 %
The following table sets forth information on the Company's direct units in service by account size for the periods stated:
Change in Units
For the Three Months Ended March 31, Between
2007 % of Total 2008 % of Total 2007 and 2008
(Units in thousands)
1 to 3 Units 251 7.2 % 184 6.2 % (67 )
4 to 10 Units 150 4.4 % 112 3.8 % (38 )
11 to 50 Units 368 10.7 % 276 9.4 % (92 )
51 to 100 Units 215 6.2 % 164 5.6 % (51 )
101 to 1000 Units 924 26.9 % 784 26.7 % (140 )
> 1000 Units 1,534 44.6 % 1,419 48.3 % (115 )
Total direct units in service 3,442 100.0 % 2,939 100.0 % (503 )
Customers may subscribe to one-way or two-way messaging services for a periodic (monthly, quarterly or annual) service fee which is generally based upon the type of service provided, the geographic area covered, the number of devices provided to the customer and the period of commitment. Voice mail, personalized greeting and equipment loss and/or maintenance protection may be added to either one-way or two-way messaging services, as applicable, for an additional monthly fee. Equipment loss protection allows subscribers who lease devices to limit their cost of replacement upon loss or destruction of a messaging device. Maintenance services are offered to subscribers who own their device.
A subscriber to one-way messaging services may select coverage on a local, regional or nationwide basis to best meet their messaging needs. Local coverage generally allows the subscriber to receive messages within a small geographic area, such as a city. Regional coverage allows a subscriber to receive messages in a larger area, which may include a large portion of a state or sometimes groups of states. Nationwide coverage allows a subscriber to receive messages in major markets throughout the United States. The monthly fee generally increases with coverage area. Two-way messaging is generally offered on a nationwide basis.
The following table summarizes the breakdown of the Company's one-way and two-way units in service at specified dates:
As of As of As of
March 31, December 31, March 31,
2007 2007 2008
Service Type Units % of Total Units % of Total Units % of Total
(Units in thousands)
One-way messaging 3,557 90.9 % 3,166 90.8 % 3,017 90.5 %
Two-way messaging 355 9.1 % 319 9.2 % 316 9.5 %
Total 3,912 100.0 % 3,485 100.0 % 3,333 100.0 %
The demand for one-way and two-way messaging services declined at each specified date and USA Mobility believes demand will continue to decline for the foreseeable future.
USA Mobility provides wireless messaging services to subscribers for a periodic fee, as described above. In addition, subscribers either lease a messaging device from the Company for an additional fixed monthly fee or they own a device, having purchased it either from the Company or from another vendor. USA Mobility also sells devices to resellers who lease or resell devices to their subscribers and then sell messaging services utilizing the Company's networks.
The following table summarizes the number of units in service owned by the Company, its subscribers and indirect customers at specified dates:
As of As of As of
March 31, December 31, March 31,
2007 2007 2008
Ownership Units % of Total Units % of Total Units % of Total
(Units in thousands)
Owned by the Company and leased to
subscribers 3,183 81.4 % 2,864 82.2 % 2,746 82.4 %
Owned by subscribers 259 6.6 % 211 6.0 % 193 5.8 %
Owned by indirect customers or
their subscribers 470 12.0 % 410 11.8 % 394 11.8 %
Total 3,912 100.0 % 3,485 100.0 % 3,333 100.0 %
USA Mobility derives the majority of its revenues from fixed monthly or other periodic fees charged to subscribers for wireless messaging services. Such fees are not generally dependent on usage. As long as a subscriber maintains service, operating results benefit from recurring payment of these fees. Revenues are generally based upon the number of units in service and the monthly charge per unit. The number of units in service changes based on subscribers added, referred to as gross placements, less subscriber cancellations, or disconnects. The net of gross placements and disconnects is commonly referred to as net gains or losses of units in service. The absolute number of gross placements as well as the number of gross placements relative to average units in service in a period, referred to as the gross placement rate, is monitored on a monthly basis. Disconnects are also monitored on a monthly basis. The ratio of units disconnected in a period to average units in service for the same period, called the disconnect rate, is an indicator of the Company's success at retaining subscribers, which is important in order to maintain recurring revenues and to control operating expenses.
The following table sets forth the Company's gross placements and disconnects for the periods stated:
For the Three Months Ended
March 31, 2007 December 31, 2007 March 31, 2008
Gross Gross Gross
Distribution Channel Placements Disconnects Placements Disconnects Placements Disconnects
(Units in thousands)
Direct 103 259 91 209 85 221
Indirect 27 64 36 53 33 49
Total 130 323 127 262 118 270
The following table sets forth information on the disconnect rate by account size for the Company's direct customers for the periods stated:
For the
Three Months Ended March 31, Favorable/
2007 2008 (Unfavorable)
1 to 3 Units (9.0 %) (7.8 %) 1.2 %
4 to 10 Units (7.9 %) (6.5 %) 1.4 %
11 to 50 Units (7.5 %) (7.6 %) (0.1 %)
51 to 100 Units (4.9 %) (6.9 %) (2.0 %)
101 to 1000 Units (4.4 %) (5.2 %) (0.8 %)
> 1000 Units (2.2 %) (2.4 %) (0.2 %)
Total direct net unit loss% (4.3 %) (4.4 %) (0.1 %)
The other factor that contributes to revenue, in addition to the number of units in service, is the monthly charge per unit. As previously discussed, the monthly charge per unit is dependent on the subscriber's service, extent of geographic coverage, whether the subscriber leases or owns the messaging device and the number of units the customer has in the account. The ratio of revenues for a period to the average units in service for the same period, commonly referred to as average revenue per unit ("ARPU"), is a key revenue measurement as it indicates whether charges for similar services and distribution channels are increasing or decreasing. ARPU by distribution channel and messaging service are monitored regularly.
The following table sets forth ARPU by distribution channel for the periods stated:
ARPU For the Three Months Ended
March 31, December 31, March 31,
Distribution Channel 2007 2007 2008
Direct $ 9.18 $ 9.09 $ 8.95
Indirect 4.79 5.06 4.97
Consolidated 8.65 8.62 8.49
While ARPU for similar services and distribution channels is indicative of changes in monthly charges and the revenue rate applicable to new subscribers, this measurement on a consolidated basis is affected by several factors, including the mix of units in service and the pricing of the various components of the Company's services. Gross revenues decreased year over year, and the Company expects future sequential annual revenues to decline in line with recent trends. The decreases in consolidated ARPU for the quarter ended March 31, 2008 from the quarters ended March 31, 2007 and December 31, 2007 were due primarily to the change in composition of the Company's customer base as the percentage of units in service attributable to larger customers continues to increase. The change in ARPU in the direct distribution channel is the most significant indicator of rate-related changes in the Company's revenues. One-time price increases that were implemented for smaller customers in certain channels and in the indirect channel as well as improvements in the rate of service credits in part contributed to increases in ARPU in 2007. Going forward without further price adjustments the Company believes ARPU will continue to decline for both the direct and indirect distribution channels.
The following table sets forth information on direct ARPU by account size for the period stated.
For the
Three Months
Ended Change in ARPU
March 31, Between
2007 2008 2007 and 2008
1 to 3 Units $ 14.68 $ 14.66 $ (0.02 )
4 to 10 Units 13.41 13.56 0.15
11 to 50 Units 10.95 10.99 0.04
51 to 100 Units 9.44 9.57 0.13
101 to 1000 Units 8.24 8.23 (0.01 )
> 1000 Units 7.93 7.75 (0.18 )
Total direct ARPU $ 9.18 $ 8.95 $ (0.23 )
Operations
USA Mobility's operating expenses are presented in functional categories. Certain of the Company's functional categories are especially important to overall expense control; these operating expenses are categorized as follows:
• Service, rental and maintenance. These are expenses associated with the operation of the Company's networks and the provision of messaging services. Expenses consist largely of telecommunications expenses to deliver messages over the Company's networks, site rent expenses for transmitter locations and payroll and related expenses for the Company's engineering and pager repair functions.
• Selling and marketing. These are expenses associated with the Company's direct and indirect sales forces and marketing expenses in support of those sales forces. This classification consists primarily of salaries, commissions, and other payroll related expenses.
• General and administrative. These are expenses associated with customer service, inventory management, billing, collections, bad debt and other administrative functions. This classification consists primarily of salaries, outside service costs and office facility expenses.
USA Mobility reviews the percentages of these operating expenses to revenues on a regular basis. Even though the operating expenses are classified as described above, expense controls are also performed by expense category. For the three months ended March 31, 2008, approximately 70% of the operating expenses referred to above were incurred in three expense categories: payroll and related expenses, site rent expenses, and telecommunications expenses.
Payroll and related expenses include wages, incentives, employee benefits and related taxes. USA Mobility reviews the number of employees in major functional categories such as direct sales, engineering and technical staff, customer service, collections and inventory on a monthly basis. The Company also reviews the design and physical locations of functional groups to continuously improve efficiency, to simplify organizational structures and to minimize the number of physical locations. The Company has reduced its employee base by approximately 18% from 1,183 full time equivalent employees ("FTEs") at March 31, 2007 to 968 FTEs at March 31, 2008. The Company anticipates continued staffing reductions in 2008; however, the Company anticipates these staffing reductions will be less significant than the reductions in 2007.
Site rent expenses for transmitter locations are largely dependent on the Company's paging networks. USA Mobility operates local, regional and nationwide one-way and two-way paging networks. These networks each require locations on which to place transmitters, receivers and antennae. Generally, site rent expenses are incurred for each transmitter location. Therefore, site rent expenses for transmitter locations are highly dependent on the number of transmitters, which, in turn, is dependent on the number of networks. In addition, these expenses generally do not vary directly with the number of subscribers or units in service, which is detrimental to the Company's operating margin as revenues decline. In order to reduce these expenses, USA Mobility has an active
program to consolidate the number of networks and thus transmitter locations, which the Company refers to as network rationalization.
Telecommunications expenses are incurred to interconnect USA Mobility's paging networks and to provide telephone numbers for customer use, points of contact for customer service and connectivity among the Company's offices. These expenses are dependent on the number of units in service and the number of office and network locations the Company maintains. The dependence on units in service is related to the number of telephone numbers provided to customers and the number of telephone calls made to the Company's call centers, though this is not always a direct dependency. For example, the number or duration of telephone calls to call centers may vary from period to period based on factors other than the number of units in service, which could cause telecommunications expenses to vary regardless of the number of units in service. In addition, certain phone numbers USA Mobility provides to its customers may have a usage component based on the number and duration of calls to the subscriber's messaging device. Telecommunications expenses do not necessarily vary in direct relationship to units in service. Therefore, based on the factors discussed above, efforts are underway to review and reduce telephone circuit inventories and capacities and to reduce the number of transmitter and office locations from which the Company operates.
The total of USA Mobility's cost of products sold; service, rental and maintenance; selling and marketing; and general and administrative expenses was $76.4 million and $64.7 million for the three months ended March 31, 2007 and 2008, respectively. Since the Company believes the demand for, and the Company's revenues from, one-way and two-way messaging will continue to decline in future years, expense reductions will continue to be necessary in order for USA Mobility to mitigate the financial impact of such revenue declines on its cash from operating activities. However, there can be no assurance that the Company will be able to maintain margins or generate continuing net cash from operating activities.
Results of Operations
Comparison of Revenues and Selected Operating Expenses for the Three Months
Ended March 31, 2007 and 2008
For the Three Months Ended March 31,
2007 2008 Change Between
% of % of 2007 and 2008
Amount Revenue Amount Revenue Amount %
(Dollars in thousands)
Revenues:
Service, rental and maintenance, net $ 107,142 96.1 % $ 89,887 94.9 % $ (17,255) (16.1 %)
Product sales, net 4,400 3.9 % 4,871 5.1 % 471 10.7 %
Total $ 111,542 100.0 % $ 94,758 100.0 % $ (16,784) (15.0 %)
Selected operating expenses:
Cost of products sold $ 687 0.6 % $ 1,081 1.1 % $ 394 57.4 %
Service, rental and maintenance 39,033 35.0 % 33,969 35.8 % (5,064) (13.0 %)
Selling and marketing 10,242 9.2 % 7,836 8.3 % (2,406) (23.5 %)
General and administrative 26,448 23.7 % 21,808 23.0 % (4,640) (17.5 %)
Total $ 76,410 68.5 % $ 64,694 68.2 % $ (11,716) (15.3 %)
FTEs 1,183 968 (215) (18.2 %)
Revenues
Service, rental and maintenance revenues consist primarily of recurring fees associated with the provision of messaging services and rental of leased units and is net of service credits. Product sales consist primarily of revenues associated with the sale of devices and charges for leased devices that are not returned and is net of anticipated credits. The decrease in revenues reflects the decrease in demand for the Company's wireless services. USA Mobility's total revenues were $111.5 million and $94.8 million for the three months ended March 31, 2007 and 2008, respectively. The table below details total service, rental and maintenance revenues for the periods stated:
For the
Three Months Ended March 31,
2007 2008
(Dollars in thousands)
Service, rental and maintenance revenues, net:
Paging:
Direct:
One-way messaging $ 77,547 $ 65,615
Two-way messaging 19,426 15,167
96,973 80,782
Indirect:
One-way messaging 5,301 3,676
Two-way messaging 1,729 2,315
$ 7,030 $ 5,991
OptionMonster
16 years ago
USA Mobility Reports First Quarter Operating Results, Board Declares Quarterly Cash Distribution
USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging and communications services, today announced operating results for the first quarter ended March 31, 2008.
Total revenue for the first quarter was $94.8 million, compared to $100.2 in the fourth quarter of 2007 and $111.5 million in the year-earlier quarter. EBITDA (earnings before interest, taxes, depreciation, amortization, accretion and goodwill impairment) in the first quarter totaled $29.9 million, compared to $24.5 million in the fourth quarter of 2007 and $35.1 million in the first quarter of 2007. First quarter net loss was $177.8 million, or $6.48 per fully diluted share, compared to net income of $13.0 million, or $0.47 per fully diluted share, in the first quarter of 2007. The loss resulted from a goodwill impairment for which the Company incurred a $188.2 million non-cash expense to write-off its entire goodwill balance. Absent the goodwill write-down, net income in the first quarter would have been $10.4 million, or $0.38 per fully diluted share.
First quarter results included: EBITDA margin (or EBITDA as a percentage of revenue) increased to 31.6 percent in the first quarter, compared to 24.5 percent in the fourth quarter of 2007. This represents the highest EBITDA margin since the Company was formed in late 2004 by the merger of Arch Wireless, Inc. and subsidiaries and Metrocall Holdings, Inc. and subsidiaries.
The annual rate of subscriber erosion improved to 14.8 percent from 15.1 percent in the fourth quarter of 2007 and 15.6 percent in the year-earlier quarter. The quarterly rate of subscriber loss improved to 4.4 percent in the first quarter, historically the quarter with the highest net churn, compared to 4.7 percent in the first quarter of 2007.
Net unit loss was 152,000 in the first quarter, compared to 193,000 in the first quarter of 2007. Units in service totaled 3,333,000 at March 31, 2008, compared to 3,485,000 at December 31, 2007.
The annual rate of revenue erosion improved to 15.0 percent from 17.3 percent in the first quarter of 2007.
Operating expenses, excluding depreciation, amortization, accretion and goodwill impairment, totaled $64.8 million in the first quarter, a reduction of $10.8 million, or 14.3 percent, from $75.7 million in the fourth quarter of 2007. Quarterly operating expenses declined 15.2 percent from the first quarter 2007, and, in both dollars and as a percentage of revenue, are at their lowest level in nearly four years.
Total paging ARPU (average revenue per unit) decreased to $8.49 in the first quarter from $8.62 in the fourth quarter of 2007 and $8.65 in the year-earlier quarter.
Capital expenses were $4.0 million, compared to $5.2 million in the fourth quarter of 2007.
The Company’s cash balance at March 31, 2008 was $69.0 million.
“USA Mobility reported another solid operating performance in the first quarter,” said Vincent D. Kelly, president and chief executive officer, “meeting or exceeding a majority of the performance objectives contained in our business plan and consistent with the financial guidance we provided earlier this year. Our rate of annual subscriber and revenue erosion showed further improvement during the quarter as we continued to concentrate our sales and marketing efforts on our core market segments of Healthcare, Government and Large Enterprise. In addition, despite ongoing business risks, we continued to generate substantial free cash flow while successfully managing the business profitably with a low-cost operating structure.” Kelly added, “During the quarter we gained sales traction on several new products we launched last year for Healthcare accounts, including ReadyCall, our wide-area network coaster pager that hospitals and doctors use to eliminate congestion in waiting rooms, and our Private Medical Messaging Network, a dedicated paging and communications system that manages messaging traffic within a single hospital or multiple hospital campus network. In addition, we are very enthused about the initial response we have received to our new product PageSync, which allows our paging customers to receive their pages on a BlackBerry® or SMS handset. We believe this product solves a critical need by giving our customers a solution that unifies paging with voice and e-mail in data-centric handsets, like BlackBerrys, providing the unique benefits of both solutions on one device. While our sales force is just beginning to acquaint customers with the benefits of this innovative product, the feedback they have received to date has been very positive.” Kelly said the Company again returned capital to stockholders in the first quarter consistent with its stated goal, paying a regular quarterly cash distribution of $0.65 per share, or an aggregate amount of approximately $17.8 million, on March 13, 2008. In addition, the Board of Directors on May 2, 2008 declared a regular quarterly cash distribution of $0.25 per share, payable on June 19, 2008 to stockholders of record on May 19, 2008. The Company expects the cash distribution, a total of approximately $6.8 million, to be paid as a return of capital. “As previously discussed,” Kelly stated, “the Board of Directors and management set the revised cash distribution rate at a level that is sustainable on a longer term basis over the next several years. The decision to re-set the rate was made to strengthen our financial position while maintaining a respectable yield on our stock, and was not the result of a sudden weakening in our near-term outlook. In fact, our first quarter cash flow performance and record EBITDA margin of 31.6 percent reflect our ability to generate significant cash flow notwithstanding the many challenges we face. Our commitment to return the cash we generate to our stockholders has not changed. Since the merger, which formed USA Mobility, Inc. in late 2004, and prior to today’s announcement, we have already returned $9.40 per share, representing $255.6 million, to our stockholders. Our current cash balance is approximately $2.50 per share and we expect to generate significant cash over the remainder of this year. We are currently awaiting the result of our challenge to the Federal Communications Commission (FCC) on the Back-Up Power Order appeal and we anticipate resolution by the end of the summer, at which point we may be in a position to return additional cash above the level of our recurring quarterly distributions to our stockholders either in the form of a stock repurchase program, special distributions as we have done in the past or a combination of both.” Thomas L. Schilling, chief operating officer and chief financial officer, said the Company’s expenses declined significantly during the first quarter as a result of ongoing cost control initiatives. “Operating expenses (excluding depreciation, amortization, accretion and goodwill impairment) decreased 15.2 percent from the year-earlier quarter,” he said, “outpacing the year-over-year decline in revenue of 15.0 percent. In addition,” Schilling noted, “operating expense as a percentage of revenue was 68.4 percent in the first quarter, the lowest level in almost four years.” Schilling added, “The combination of lower expenses and improving revenue trends contributed to an increase in first quarter EBITDA and EBITDA margin compared to the prior quarter. While we are pleased and encouraged by these financial trends, we are maintaining our previous financial guidance for 2008 of revenues between $345 million to $355 million, operating expenses – excluding depreciation, amortization, accretion and goodwill impairment – between $250 million to $255 million, and capital expenses between $18 million to $20 million.” Commenting on the Company’s decision to write-off goodwill, Schilling said, “The significant change in our market capitalization at March 31, 2008, compared to December 31, 2007, necessitated a goodwill impairment analysis to be performed earlier than our normal annual test. Based on the lower market value and the accounting rules related to goodwill, we recorded a $188.2 million non-cash expense in the first quarter to write-off our entire goodwill balance. This expense has no impact on our underlying operations or cash flows.” USA Mobility plans to host a conference call for investors on its first quarter results at 10:00 a.m. Eastern Time on Wednesday, May 7, 2008. The dial-in number for the call is 877-419-6603 (toll-free) or 719-325-4903 (toll). The pass code for the call is 4055284. A replay of the call will be available from 4:00 p.m. ET on May 7 until 11:59 p.m. on Wednesday, May 21. The replay number is 888-203-1112 (toll-free) or 719-457-0820 (toll). The pass code for the replay is 4055284.
USA Mobility’s Annual Meeting of Stockholders will be held at 10:00 a.m. Eastern Time on Wednesday, May 14, 2008 in Alexandria, VA.
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