Syniverse Holdings, Inc. (NYSE:SVR), a leading provider of
technology and business solutions for the global telecommunications
industry, today reported results for second quarter 2010.
“Key drivers propelling performance during the reporting period
included the increasing use of mobile data and the growing
popularity of mobile messaging for personal and business
communications,” said Tony Holcombe, President and CEO. “Strong
organic growth fueled by sales to new and existing customers, plus
a renewal rate of 99%, led us to increase full-year guidance to
reflect our market momentum.”
Syniverse cited solid results for the quarter:
- Total revenue for second quarter
2010 was $158.8 million, a 39.9% increase compared to second
quarter 2009.
- Net revenue, which excludes
off-network database queries, was $157.5 million, a 40.9% increase
compared to second quarter 2009.
- Net income was $22.3 million or
$0.32 per diluted share, 35.6% and 34.4% increases, respectively,
compared to second quarter 2009.
- Cash net income, a non-GAAP
financial measure described below, was $34.0 million or $0.49 per
diluted share, 33.7% and 32.0% increases, respectively, compared to
second quarter 2009.
- Adjusted EBITDA, a non-GAAP
financial measure described below, was $66.0 million, a 28.1%
increase compared to second quarter 2009.
- Net cash provided by operating
activities was $39.3 million in the second quarter 2010, an 18.1%
increase compared to second quarter 2009.
- Operating free cash flow, a
non-GAAP financial measure described below, was $24.8 million in
the second quarter 2010, a 29.5% increase compared to second
quarter 2009.
David Hitchcock, Executive Vice President and CFO, said the
momentum Syniverse saw during the first quarter continued
throughout the first half of the year.
“Execution remains strong, and Syniverse continues to generate
solid earnings and cash flow,” he said. “As for the integration of
our acquired messaging assets, we continue on schedule and expect
the process to be substantially completed by year end.”
Please refer to the information set forth at the end of this
news release under the headings “Non-GAAP Measures” and
“Reconciliation of Non-GAAP Measures to GAAP” for an explanation of
non-GAAP financial measures as well as a reconciliation of such
non-GAAP financial measures to GAAP financial measures.
Second Quarter 2010 Operating Segment Review: Segment
revenue and operating income are summarized in the tables included
with this press release.
Roaming Services
Roaming revenues were $73.0 million in the
quarter, a 14.0% increase compared to second quarter 2009. Revenues
were higher due primarily to increased volumes in our roaming
clearing house; increases in UniRoam, a service used for
interstandard roaming; Signaling Solutions; and Mobile Data
Roaming.
Messaging Services
Messaging revenues were $49.3 million
compared to $7.9 million in the second quarter 2009. The increase
was driven by our messaging acquisition, which contributed $43.1
million of revenue in the quarter.
Network Services
Network revenues, excluding Off-Network
Database Queries of $1.3 million, were $31.7 million, a 9.5%
decrease from second quarter 2009. This decrease is primarily due
to certain customer migrations from our SS7 solutions, partially
offset by increases in our IPX transport services.
Outlook
The company is revising guidance and providing the following
outlook for 2010:
Net Revenues $615 – 635 million Net Income $82
– 89 million Adjusted EBITDA $255 – 265 million Cash Net Income
$129 – 135.5 million Operating Free Cash Flow $100 million or
greater
Expected Adjusted EBITDA and cash net income have been adjusted
to exclude the expected one-time costs in 2010 related to the
integration of the messaging business.
Second Quarter 2010 Earnings Call
Syniverse will host a conference call at 4:30 p.m. ET to discuss
the results. To participate on this call, U.S. callers may dial
toll free 1-866-202-4367; international callers may dial direct +1
617-213-8845. The passcode for this call is 65311239. This event
also will be webcast live over the Internet in listen-only mode at
http://www.syniverse.com/investorevents.
A replay of this call will be available beginning at
approximately 7:30 p.m. ET on Aug. 2 and will remain available
through Aug. 9 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 48098778.
About Syniverse
Syniverse Technologies (NYSE:SVR) makes mobile work for more
than 800 mobile operators, cable and Internet providers, and
enterprises in over 160 countries. With unmatched expertise and
more than 20 years simplifying the complexities of roaming,
messaging and networking, Syniverse serves as the force at the
center of the mobile communications universe, keeping people
connected today and forging new connections for tomorrow. Nobody
knows mobile like Syniverse. For more information, visit
www.syniverse.com, follow Syniverse on Twitter or find Syniverse on
Facebook.
Cautionary Notice Regarding Forward-Looking
Statements
Certain of the statements in this press release may constitute
“forward-looking statements” for purposes of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and as such may
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of
Syniverse to be materially different from the future results,
performance or achievements expressed or implied by such
forward-looking statements. Such forward-looking statements
include, without limitation, statements regarding Syniverse’s
expectations of continued growth of its product portfolio and
competitive position; Syniverse’s ability to successfully integrate
its acquired businesses and the expected cost of such integration;
Syniverse’s belief of the value of Non-GAAP measures to its
investors; and Syniverse’s guidance for 2010, as contained under
the caption “Outlook,” including, without limitation, expected net
revenues, net income, Adjusted EBITDA, cash net income and
operating free cash flow for 2010, as well as the assumptions,
estimates, and judgments applied in creating such guidance.
These forward-looking statements are based upon information
presently available to the company’s management and are inherently
subjective, uncertain and subject to change, due to any number of
risks and uncertainties, including, without limitation, those other
risks and factors discussed in Syniverse’s Annual Report on Form
10-K for the year ended Dec. 31, 2009, and Quarterly Report on Form
10-Q for the quarter ended March 31, 2010, under the captions
“Cautionary Notice Regarding Forward-Looking Statements” and “Risk
Factors” and otherwise in Syniverse’s reports and filings that it
makes with the Securities and Exchange Commission.
You should not place undue reliance on any forward-looking
statements, since those statements speak only as of the date that
they are made. Syniverse has no obligation and does not undertake
to publicly update, revise or correct any of the forward-looking
statements after the date of this news release or after the
respective dates on which such statements otherwise are made,
whether as a result of new information, future events or otherwise,
except as otherwise may be required by law.
Syniverse Holdings, Inc. Condensed Consolidated
Statements of Income (unaudited) (In thousands except per
share information) Three Months
Ended Six Months Ended June 30, June 30,
2010 2009 2010 2009 Revenues
from external customers $ 157,543 $ 111,775 $ 305,416 $ 219,457
Off-Network Database Queries 1,262 1,703
2,405 2,945 Total Revenues
158,805 113,478 307,821 222,402 Cost of operations
59,880 40,904 116,149
80,862 Gross Margin 98,925 72,574 191,672 141,540
Gross Margin % 62.3 % 64.0 % 62.3 % 63.6 %
Gross Margin % before Off-Network
Database Queries
62.8 % 64.9 % 62.8 % 64.5 % Sales and marketing 13,677 8,835
26,308 17,523 General and administrative 23,686 17,005 46,389
34,003 Depreciation and amortization 18,365
14,037 37,284 27,621
115,608 80,781 226,130
160,009 Operating income 43,197 32,697 81,691 62,393
Other expense, net: Interest expense, net (6,797 ) (7,446 )
(13,604 ) (14,610 ) Other, net 180 851
804 1,134 (6,617 ) (6,595
) (12,800 ) (13,476 ) Income before provision
for income taxes 36,580 26,102 68,891 48,917 Provision for income
taxes 14,244 9,624 26,826
16,407 Net income 22,336 16,478 42,065 32,510
Net loss attributable to noncontrolling interest 281
53 559 53 Net income
attributable to Syniverse Holdings, Inc. $ 22,617 $ 16,531
$ 42,624 $ 32,563 Net income per common
share: Basic $ 0.32 $ 0.24 $ 0.61 $ 0.47
Diluted $ 0.32 $ 0.24 $ 0.61 $ 0.47
Weighted average common shares outstanding: Basic
68,518 67,945 68,402
67,907 Diluted 68,899 68,029
68,738 67,980
Syniverse
Holdings, Inc. Condensed Consolidated Balance Sheets
(In thousands except share data)
June 30, December 31, 2010 2009
(Unaudited) ASSETS Current assets: Cash $ 120,724 $
91,934 Accounts receivable, net of allowances of $7,481 and $7,290,
respectively 136,577 126,127 Prepaid and other current assets
26,513 20,813 Total current assets
283,814 238,874 Property and equipment, net 74,191 64,315
Capitalized software, net 67,680 75,249 Deferred costs, net 6,534
7,388 Goodwill 657,002 685,710 Identifiable intangibles, net
215,370 234,938 Other assets 1,636 3,250
Total assets $ 1,306,227 $ 1,309,724
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 5,056 $ 8,020 Transition services payable -
16,609 Accrued payroll and related benefits 14,166 9,832 Accrued
interest 5,149 5,150 Accrued income taxes 877 1,468 Deferred
revenues 7,190 6,197 Other accrued liabilities 26,366 32,042
Current portion of Term Note B 3,261 3,452
Total current liabilities 62,065 82,770 Long-term
liabilities: Deferred tax liabilities 93,390 87,254 7 3/4% senior
subordinated notes due 2013 175,000 175,000 Term Note B, less
current maturities 313,825 334,012 Other long-term liabilities
11,267 9,534 Total liabilities
655,547 688,570 Stockholders' equity:
Preferred stock, $0.001 par value; 300,000 shares authorized; no
shares issued - -
Common stock, $0.001 par value;
100,300,000 shares authorized; 70,026,259 shares issued and
69,826,261 shares outstanding and 69,574,505 shares issued and
69,382,507 shares outstanding at June 30, 2010 and December 31,
2009, respectively
70 69 Additional paid-in capital 493,578 483,227 Retained earnings
192,206 149,582 Accumulated other comprehensive loss (36,189 )
(12,205 )
Common stock held in treasury, at
cost; 199,998 at June 30, 2010 and 191,998 at Dec. 31, 2009
(15 ) (15 ) Total Syniverse Holdings, Inc.
stockholders' equity 649,650 620,658 Noncontrolling interest
1,030 496 Total equity 650,680
621,154 Total liabilities and stockholders' equity $
1,306,227 $ 1,309,724
Syniverse Holdings, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(In thousands) Six Months Ended June
30, 2010 2009 Cash flows from operating
activities Net income $ 42,065 $ 32,510
Adjustments to reconcile net
income to net cash provided by operating activities:
Depreciation and amortization
including amortization of deferred debt issuance costs
38,138 28,481 Provision for uncollectible accounts 512 356 Deferred
income tax expense 4,733 5,604 Stock-based compensation 5,992 3,015
Other, net (57 ) 66 Changes in operating assets and liabilities,
net of acquisition: Accounts receivable (12,978 ) 3,320
Prepaids and other current
assets
(5,878 ) (9,626 ) Accounts payable 1,449 (7,967 ) Transition
services payable (16,609 ) - Other current liabilities (2,939 )
(7,946 ) Other long-term assets and liabilities 3,050
2,461 Net cash provided by operating activities
57,478 50,274
Cash flows from
investing activities Capital expenditures (27,959 ) (20,936 )
Acquisition, net of acquired cash (497 ) (3,182 ) Net
cash used in investing activities (28,456 ) (24,118 )
Cash flows from financing activities Principal
payments on senior credit facility (1,657 ) (1,705 ) Issuance of
stock under employee stock purchase plan 1,132 415 Issuance of
stock for stock options exercised 3,783 95 Minimum tax withholding
on restricted stock awards (555 ) (266 ) Capital contribution from
noncontrolling interest in a joint venture 1,092
981 Net cash provided by (used in) financing
activities 3,795 (480 ) Effect of
exchange rate changes on cash (4,027 ) (3,435 )
Net increase in cash 28,790 22,241 Cash at beginning of
period 91,934 165,605 Cash at
end of period $ 120,724 $ 187,846
Supplemental cash flow information Interest paid $ 12,776 $
13,327 Income taxes paid 22,949 21,768
Syniverse Holdings,
Inc. Segment Results Supplemental Information
(unaudited)
Segment results: Three Months Ended June 30, Six
Months Ended June 30, 2010 2009
Change %
2010 2009 Change % (In
thousands) (In thousands) Revenues: Roaming
services $ 73,023 $ 64,049 14.0 % $ 138,928 $ 123,409 12.6 %
Messaging services 49,336 7,944 521.0 % 96,748 17,366 457.1 %
Network services (1) 32,935 36,701 -10.3 % 66,337 71,950 -7.8 %
Corporate and Other 3,511 4,784 -26.6 %
5,808 9,677 -40.0 % Consolidated
revenue $ 158,805 $ 113,478 39.9 % $ 307,821 $
222,402 38.4 %
Segment operating income
(loss): Roaming services $ 45,468 $ 38,547 18.0 % $ 85,135 $
73,578 15.7 % Messaging services 20,460 2,945 594.7 % 38,854 7,114
446.1 % Network services 8,272 12,402 -33.3 % 18,983 24,192 -21.5 %
Corporate and Other (31,003 ) (21,197 ) 46.3 %
(61,281 ) (42,491 ) 44.2 % Consolidated operating income $
43,197 $ 32,697 32.1 % $ 81,691 $ 62,393
30.9 % (1) Includes Off-Network Database Query
revenues of $1,262 and $1,703 for the three months ended June 30,
2010 and 2009, respectively, and $2,405 and $2,945 for the six
months ended June 30, 2010 and 2009, respectively.
Revenue by region: Three Months Ended June 30,
Six Months Ended June 30, 2010 2009
2010 2009 (In thousands) (In thousands)
North America (U.S. and Canada) $ 124,542 $ 81,731 $ 241,362 $
159,940 Asia Pacific 10,103 9,406 18,891 18,871 Caribbean and Latin
America (includes Mexico) 9,764 7,707 19,461 15,658 Europe, Middle
East and Africa 13,134 12,931
25,702 24,988 Non-North American Revenue
33,001 30,044 64,054
59,517 Revenues excluding Off-Network Database
Queries 157,543 111,775 305,416 219,457 Off-Network Database
Queries (i) 1,262 1,703 2,405
2,945 Total Revenues $ 158,805 $
113,478 $ 307,821 $ 222,402
(i) Off-Network Database Queries
are not allocated to geographic regions.
Syniverse Holdings, Inc. Reconciliation of Non GAAP
Measures to GAAP (unaudited) (In thousands except share data
and per share information) Three
Months Ended June 30, Six Months Ended June 30,
2010 2009 2010 2009
Reconciliation to adjusted EBITDA Net income $ 22,336 $
16,478 $ 42,065 $ 32,510 Interest expense, net 6,797 7,446 13,604
14,610 Provision for income taxes 14,244 9,624 26,826 16,407
Depreciation and amortization 18,365 14,037 37,284 27,621 Non-cash
stock compensation 3,165 1,908 5,992 3,015 BSG Wireless transition
expenses - 2,059 - 4,625 Messaging acquisition and integration
expenses 1,116 - 1,798
- Adjusted EBITDA $ 66,023 $ 51,552 $
127,569 $ 98,788
Three Months Ended
June 30, Six Months Ended June 30, 2010
2009 2010 2009 Reconciliation to cash net
income Net income $ 22,336 $ 16,478 $ 42,065 $ 32,510 Add
provision for income taxes 14,244 9,624
26,826 16,407 Income before provision
for income taxes 36,580
26,102 68,891 48,917 Non-cash stock compensation 3,165 1,908
5,992 3,015 Purchase accounting amortization 9,082 6,917 18,285
13,708 BSG Wireless transition expenses - 2,059 - 4,625 Messaging
acquisition and integration expenses 1,116 -
1,798 - Adjusted income before
provision for income taxes 49,943 36,986 94,966 70,265 Less
assumed provision for income taxes at 37.5% (18,728 ) (13,870 )
(35,612 ) (26,349 ) Add cash savings of tax deductible goodwill(1)
2,777 2,301 5,553
4,602 Cash net income $ 33,992 $ 25,417
$ 64,907 $ 48,518 Cash net income per share $
0.49 $ 0.37 $ 0.94 $ 0.71 Diluted shares outstanding 68,899 68,029
68,738 67,980
(1) Represents the cash benefit
realized currently as a result of the tax deductibility of goodwill
amortization.
Three Months Ended June 30, Six Months
Ended June 30, 2010 2009 2010 2009
Reconciliation to operating free cash flow Net cash provided
by operating activities $ 39,311 $ 33,273 $ 57,478 $ 50,274 Capital
expenditures (14,517 ) (14,121 ) (27,959 )
(20,936 ) Operating Free Cash Flow $ 24,794 $ 19,152
$ 29,519 $ 29,338
Syniverse Holdings
Inc. 2010 Guidance Reconciliation of Non GAAP
Measures to GAAP (unaudited) (In millions)
2010E 2010E Low High Reconciliation
to adjusted EBITDA Net income $ 82.0 $ 89.0 Interest expense,
net 27.0 27.0 Provision for income taxes 53.0 56.0 Depreciation and
amortization 76.0 76.0 Non-cash stock compensation 13.0 13.0
Messaging transition expenses 4.0 4.0
Adjusted EBITDA $ 255.0 $ 265.0
Reconciliation to cash net income Net income $ 82.0 $ 89.0
Add provision for income taxes 53.0 56.0
Income before provision for income taxes 135.0 145.0
Purchase accounting amortization 37.0 37.0 Non-cash stock
compensation 13.0 13.0 Messaging acquisition and integration
expenses 4.0 4.0 Adjusted income before
provision for income taxes 189.0 199.0 Less assumed
provision for income taxes (71.1 ) (74.6 ) Add cash savings of tax
deductible goodwill (1) 11.1 11.1
Cash net
income $ 129.0 $ 135.5 (1) Represents the
cash benefit realized currently as a result of the tax
deductibility of goodwill amortization.
Non-GAAP Measures
Syniverse's Adjusted EBITDA is determined by adding the
following items to net income: interest expense, net, provision for
income taxes, depreciation and amortization, non-cash stock
compensation, and acquisition-related expenses, including
transition and integration costs.
Syniverse's cash net income is calculated by (i) adding the
following items to net income: provision for income taxes, non-cash
stock compensation, acquisition-related expenses, including
transition and integration costs and purchase accounting
amortization; (ii) adjusting the resulting pre-tax sum for a
provision for income taxes at an assumed long-term tax rate of
37.5%, which excludes the effect of our net operating losses; and
(iii) adding to that sum the cash benefit of our
tax-deductible goodwill. The cash benefit is a result of the
differing treatments of approximately $436 million of goodwill on
our balance sheet, which primarily is the result of acquisitions
that we made from Verizon in February 2002, IOS North America in
September 2004 and VeriSign's mobile messaging business in October
2009. Specifically, while this goodwill is not amortized for GAAP
purposes, the amortization of goodwill is, nonetheless, deductible
in calculating our taxable income and, hence, reduces actual cash
tax liabilities.
Syniverse's operating free cash flow is determined by
subtracting capital expenditures from net cash provided by
operating activities.
A reconciliation of net income, the closest GAAP financial
measure, to Adjusted EBITDA and cash net income is presented in the
financial tables above under the heading "Reconciliation of
Non-GAAP Measures to GAAP." A reconciliation of operating free cash
flow to net cash provided by operating activities, the closest GAAP
measure, also is presented in the financial tables above under the
heading "Reconciliation of Non-GAAP Measures to GAAP."
We present Adjusted EBITDA and operating free cash flow because
we believe that Adjusted EBITDA and operating free cash flow
provide useful information regarding our continuing operating
results. We rely on Adjusted EBITDA and operating free cash flow as
primary measures to review and assess the operating performance of
our management team in connection with our executive compensation
and bonus plans. We also review Adjusted EBITDA and operating 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 utilize Adjusted EBITDA
and operating free cash flow as an assessment of our overall
liquidity and our ability to meet our debt service obligations.
We present cash net income and the related per-share amount
because we believe it provides useful information regarding our
operating results in addition to our GAAP measures. We believe that
cash net income provides our investors with valuable insight into
our profitability exclusive of certain adjustments. In addition,
cash net income provides further insight into the cash impact
resulting from the different treatments of goodwill for financial
reporting and tax purposes. We rely on cash net income as the
primary measure of Syniverse's earnings exclusive of these certain
non-cash charges.
We believe that the disclosure of Adjusted EBITDA, operating
free cash flow and cash net income is useful to investors as these
non-GAAP measures form the basis of how our management team reviews
and considers our operating results. By disclosing these non-GAAP
measures, we believe that we create for investors a greater
understanding of and an enhanced level of transparency into the
means by which our management team operates our company. We also
believe these measures can assist investors in comparing our
performance to that of other companies on a consistent basis
without regard to certain items that do not directly affect our
ongoing operating performance or cash flows.
Adjusted EBITDA, operating free cash flow and cash net income
have limitations as analytical tools and should not be relied upon
or considered in isolation or as a substitute for GAAP measures,
such as net income, cash flows from operating activities and other
consolidated income or other cash flows statement data prepared in
accordance with GAAP. In addition, these non-GAAP measures may not
be comparable to other similarly titled measures of other
companies. Because of these limitations, Adjusted EBITDA and
operating free cash flow should not be considered as measures of
discretionary cash available to us to invest in the growth of our
business. Cash net income also should not be considered as a
replacement for, or a measure that should be used or analyzed in
lieu of, net income. We attempt to compensate for these limitations
by relying primarily upon our GAAP results and using Adjusted
EBITDA, operating free cash flow and cash net income as
supplemental information only.
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