Syniverse Holdings, Inc. (NYSE:SVR), a leading provider of
mission-critical technology services to wireless telecommunications
companies worldwide, today reported results for the first quarter
2007. Total revenues were $84.4 million for the first quarter 2007,
an 11.9% increase compared to the first quarter 2006. Net revenues,
which excludes off-network database queries or pass-through
revenue, was $82.7 million for the first quarter 2007, a 12.7%
increase compared to the first quarter 2006. Net income was $7.6
million in the first quarter 2007, compared to $3.6 million in the
first quarter 2006. Cash net income, a non-GAAP measure of
profitability, was $14.2 million for the first quarter 2007, a
24.3% increase compared to the first quarter 2006. Cash net income
reflects the positive cash impact resulting from the significant
difference in amortization of goodwill for financial reporting and
tax purposes, and is determined by adding the cash savings arising
from the tax deductible goodwill amortization to adjusted net
income. Cash net income per share was $0.21 in the first quarter
2007, a 24.1% increase compared to the first quarter 2006. Adjusted
EBITDA, a non-GAAP measure of operating cash flow, was $30.7
million for the first quarter 2007, a 14.3% increase compared to
$26.8 million in the first quarter 2006. �Syniverse continued to
make key strategic progress in the first quarter coupled with
strong financial performance,� said Tony Holcombe, President and
CEO of Syniverse. �We continued to see increases in our data
products and the expansion of our services globally. The
competitive environment in North America remains intense, but
Syniverse is responding through efforts to lower our costs and
increase the differentiation of our product offerings.� Chief
Financial Officer Ray Lawless added, �Syniverse grew in the first
quarter by a combination of organic and acquired revenues, with
gross margins again exceeding 60%. Syniverse generated $8.2 million
in free cash from operations in our seasonally slowest quarter, and
we expect to exceed $70 million in free cash flow for 2007.� First
Quarter 2007 Service Line Revenue Technology Interoperability
Services Technology Interoperability Services revenues were $37.8
million in the first quarter 2007, a 46.3% increase compared to the
first quarter 2006, primarily driven by the inclusion of $6.0
million from ITHL and increases in clearing, SMS interoperability
and mobile data roaming. Excluding ITHL, organic revenue growth was
23.3% for Technology Interoperability Services in the first quarter
2007 compared to the same period in 2006. Network Services Network
Services revenues were $30.4 million in the first quarter 2007, a
3.4% decrease compared to the first quarter 2006, primarily driven
by wireline migrations and competitive pricing, and partially
offset by increases in data networking. Number Portability Services
Number Portability Services revenues were $6.1 million in the first
quarter 2007, a 9.3% decrease compared to the first quarter 2006,
as the price impact of certain renewals was nearly offset by
increased revenues from new services provided to Canadian mobile
operators. Call Processing Services Call Processing Services
revenues were $7.2 million in the first quarter 2007, a 0.2%
increase compared to the first quarter 2006, as increases in
international roaming supported by signaling solutions were offset
by a decline in fraud services. Enterprise Solutions Enterprise
Solutions revenues were $1.2 million in the first quarter 2007.
Off-Network Database Queries (Pass-Through) Pass-through revenues
for the first quarter 2007 were $1.7 million. First Quarter 2007
Business Highlights Successful implementation of a wireless number
portability (WNP) clearinghouse solution for all Canadian mobile
operators. Successful migrations of three Vodafone operating
companies to Syniverse platforms. Consolidation of data center
vendors. Continued successful integration of ITHL into Syniverse.
Acquisition of BSG�s Wireless Clearing and Financial Settlement
Business On April 2, Syniverse announced it had signed a definitive
agreement to acquire the wireless clearing and financial settlement
business of Billing Services Group (LSE:BILL), a leading global
provider of clearing, settlement, payment and financial risk
management solutions for communications service providers, for
approximately $290 million in cash (which includes debt to be
refinanced at closing). The transaction is subject to customary
closing conditions, including BSG shareholder approval, which was
received on April 23, and regulatory approvals. Syniverse expects
the transaction to be accretive to adjusted net income and cash net
income in 2007, and anticipates providing updated financial
guidance following the closing. Outlook The company reiterates its
existing outlook for 2007, excluding the impact of the proposed
acquisition. Net Revenues $325 - $335 million Adjusted EBITDA $125
- $130 million Cash Net Income $55 - $60 million Additionally, the
company expects to generate operating free cash flow in excess of
$70 million. Non-GAAP Measures Syniverse's Cash Net Income is
determined by adding the cash benefit of our tax-deductible
goodwill to Adjusted Net Income. This benefit is a result of the
differing treatments of approximately $362 million of goodwill on
our balance sheet created primarily from our acquisitions from
Verizon and of IOS North America. While not amortized for GAAP
purposes, goodwill amortization is deductible in calculating our
taxable income and, hence, reduces cash tax liabilities.
Syniverse's Adjusted Net Income is determined by adding the
following to net income (loss): provision for income taxes,
restructuring costs, amortization of intangibles recorded in
purchase accounting, loss on extinguishment of debt, headquarters
facilities move expenses, transition expenses of integrating the
IOS North America business, loss from disposal of assets, SFAS 123R
non-cash compensation, data processing contract termination fee,
litigation settlement and less non-operating gains to arrive at
Adjusted Net Income (loss) before provision for income taxes. This
adjusted pre-tax result is then further adjusted for a provision
for income taxes at an assumed long-term tax rate of 39%, which
excludes the effect of our NOLs. We present Adjusted Net Income and
Cash Net Income because we believe that Adjusted Net Income and
Cash Net Income provide useful information regarding our operating
results in addition to our GAAP measures. We believe that Adjusted
Net Income provides our investors with valuable insight into our
profitability exclusive of unusual adjustments, and Cash Net Income
provides further insight into the cash impact resulting from the
different treatments of goodwill for financial reporting and tax
purposes. Neither of these non-GAAP measures should be reviewed
without consideration of our net income and other GAAP measures.
Syniverse's Adjusted EBITDA is determined by adding the following
to net income (loss): net interest expense, provision for income
taxes, depreciation, amortization, restructuring charges, loss on
extinguishment of debt, headquarters facilities move expenses, the
transition expenses of integrating the IOS North America business,
loss from disposal of assets, SFAS 123R non-cash compensation, data
processing contract termination fee, litigation settlement and less
non-operating gains. A reconciliation of Adjusted EBITDA, Adjusted
Net Income and Cash Net Income to net income (loss) is presented in
the financial tables contained herein. Syniverse's Free Cash Flow
is determined by adding the following to Net cash provided by
operating activities: (capital expenditures), cash paid (received)
in legal settlement and (accrued but not yet paid acquisition
earn-out). We present Adjusted EBITDA and Free Cash Flow because we
believe that Adjusted EBITDA and Free Cash Flow provide useful
information regarding our continuing operating results. We rely on
Adjusted EBITDA and Free Cash Flow as a primary measures to review
and assess the operating performance of our company and our
management team in connection with our executive compensation and
bonus plans. We also review Adjusted EBITDA and Free Cash Flow to
compare our current operating results with corresponding periods
and with the operating results of other companies in our industry.
In addition, we also utilize Adjusted EBITDA and Free Cash Flow as
an assessment of our overall liquidity and our ability to meet our
debt service obligations. We believe that Adjusted EBITDA, Free
Cash Flow, Adjusted Net Income and Cash Net Income are useful to
investors to provide disclosures of our operating results on the
same basis as that used by our management. We also believe that
these measures can assist investors in comparing our performance to
that of other companies on a consistent basis without regard to
certain items, which do not directly affect our ongoing operating
performance or cash flows. Adjusted EBITDA, Free Cash Flow,
Adjusted Net Income and Cash Net Income have limitations as
analytical tools, and you should not consider them in isolation or
as a substitute for net income, cash flows from operating
activities, and other consolidated income or cash flows statement
data prepared in accordance with accounting principles generally
accepted in the United States. Because of these limitations,
Adjusted EBITDA and Free Cash Flow should not be considered as
measures of discretionary cash available to us to invest in the
growth of our business, and Adjusted Net Income and Cash Net Income
should not be considered as a replacement for net income. We
compensate for these limitations by relying primarily on our GAAP
results and using Adjusted EBITDA, Free Cash Flow, Adjusted Net
Income and Cash Net Income as supplemental information. First
Quarter 2007 Earnings Call Syniverse Technologies will host a
conference call at 4:30 p.m. ET to discuss these results. To
participate on this call, U.S. callers may dial toll-free
1-866-383-8009; international callers may dial direct (+1)
617-597-5342. The passcode for this call is 86268781. This event
will be webcast live over the Internet in listen-only mode at
www.syniverse.com/investorevents. A replay of this call will be
available beginning April 30 at 6:30 p.m. through May 14, 2007, at
11:59 p.m. ET. To access the replay, U.S. callers may dial
toll-free 1-888-286-8010; international callers may dial direct
(+1) 617-801-6888. The replay passcode is 52569843 In addition,
this earnings call will be archived on the Syniverse Technologies
corporate web site www.syniverse.com under Investors � Webcasts and
Presentations. About Syniverse Syniverse Technologies (NYSE:SVR)
makes it possible for over 350 communications companies in more
than 50 countries to address market changes and demands as they
deliver everything from voice calls to sophisticated data and video
services. By ensuring that disparate technologies and standards
interoperate, Syniverse allows operators to provide seamless,
interactive mobile services to their subscribers wherever and
whenever they need them. Celebrating its 20th anniversary in 2007,
Syniverse is headquartered in Tampa, Florida, U.S.A., and has
offices in major cities around the globe. Syniverse is ISO
9001:2000 certified and TL 9000 approved, adhering to the
principles of customer focus and quality improvement practices.
More information is available at www.syniverse.com. Cautions about
Forward-Looking Statements This press release contains
forward-looking statements, including statements about business
outlook and strategy, and statements about historical results that
may suggest trends for our business. These statements are based on
estimates and information available to us at the time of this press
release and are not guarantees of future performance. Actual
results could differ materially from our current expectations as a
result of many factors, including: unpredictable quarterly
fluctuations in our business; the effects of competition or
consumer and merchant use of our service; any adverse changes in
our agreements with our listings providers; the impact of
international expansion efforts on our business; changes in our tax
status and risks or uncertainties inherent in or related to the
integration of the business we proposed to acquire (including
unanticipated operating costs and business disruptions following
the proposed transaction); our ability to secure financing for the
proposed acquisition; the timing or impact of any regulatory or
governmental approvals; satisfaction of the various closing
conditions set forth in the share purchase agreement for the
proposed acquisition. These and other risks and uncertainties
associated with our business are described in our filings with the
Securities and Exchange Commission. Syniverse Holdings, Inc
Condensed Consolidated Statements of Operations (unaudited) (In
thousands except per share information) � � � Quarter Ended Quarter
Ended March 31, 2006 March 31, 2007 Technology Interoperability
Services $ 25,837� $ 37,795� Network Services 31,493� 30,424�
Number Portability Services 6,730� 6,106� Call Processing Services
7,191� 7,208� Enterprise Solution 2,130� 1,191� Revenues excluding
Off Network Database Queries 73,381� 82,724� Off Network Database
Queries 2,036� 1,654� Total Revenues 75,417� 84,378� � Cost of
operations 31,206� 33,441� � Gross Margin 44,211� 50,937� � Gross
Margin % 58.6% 60.4% Gross Margin % before Off Network Database
Queries 60.2% 61.6% � Sales and marketing 5,493� 6,812� General and
administrative 17,311� 13,987� Depreciation and amortization 9,981�
10,279� Restructuring 338� 1,782� � Operating income 11,088�
18,077� � Other expense, net Interest expense, net (6,108) (5,624)
Loss on extinguishment of debt (924) -� Other, net 119� 53� (6,913)
(5,571) � Income before provision for income taxes 4,175� 12,506� �
Provision for income taxes 625� 4,860� � Net income $ 3,550� $
7,646� � � Net income per share Basic $ 0.05� $ 0.11� Diluted $
0.05� $ 0.11� � Shares used in calculation Basic 66,747� 67,221�
Diluted 67,262� 67,353� � � � � Selected Balance Sheet Data
(unaudited): As of (in thousands) March 31, 2007 Cash $ 37,051� �
Senior subordinated notes $ 175,000� Term note B 136,213� Total
debt $ 311,213� � � Common stock and additional paid-in capital $
459,585� Accumulated deficit and other comprehensive income
(39,572) Total stockholders' equity $ 420,013� Syniverse Holdings,
Inc Reconciliation of Non GAAP Measures to GAAP (unaudited) (In
thousands except per share information) � � � Quarter Ended Quarter
Ended March 31, 2006 March 31, 2007 � Reconciliation to adjusted
EBITDA Net income $ 3,550� $ 7,646� Interest expense, net 6,108�
5,624� Provision for income taxes 625� 4,860� Depreciation and
amortization 9,981� 10,279� Restructuring 338� 1,782� SFAS 123R
non-cash compensation -� 486� IOS North America transition expenses
1,053� -� Facilities move expense 4,334� -� Loss on extinguishment
of debt 924� -� Non-operating gains (119) -� Adjusted EBITDA $
26,794� $ 30,677� � � � Quarter Ended Quarter Ended March 31, 2006
March 31, 2007 Reconciliation to adjusted net income and cash net
income Net income $ 3,550� $ 7,646� Add provision for income taxes
625� 4,860� Income before provision for income taxes 4,175� 12,506�
� Restructuring 338� 1,782� SFAS 123R non-cash compensation -� 486�
Purchase accounting amortization 4,227� 4,703� IOS North America
transition expenses 1,053� -� Facilities move expense 4,334� -�
Loss on extinguishment of debt 924� -� Non-operating gains (119) -�
Adjusted income before provision for income taxes 14,932� 19,477� �
Less assumed provision for income taxes at 39% (5,823) (7,596) �
Adjusted net income 9,109� 11,881� � Add cash savings of tax
deductible goodwill(1) 2,300� 2,301� � Cash net income $ 11,409� $
14,182� � Adjusted net income per share $ 0.14� $ 0.18� Cash net
income per share $ 0.17� $ 0.21� Diluted shares outstanding 67,262�
67,353� � � � (1) Represents the cash benefit realized currently as
a result of the tax deductibility of goodwill amortization. � �
Quarter Ended Quarter Ended March 31, 2006 March 31, 2007
Reconciliation to free cash flow Cash from operations $ 1,351� $
21,030� Capital expenditures (4,775) (9,589) Less cash received in
legal settlement -� (2,500) Less contingent payment for ITHL
acquisition -� (735) Free Cash Flows $ (3,424) $ 8,206� �
Supplemental information: Cash interest paid $ 10,237� $ 9,252�
Cash income taxes paid 21� -�
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