Syniverse Holdings, Inc. (NYSE:SVR), a leading provider of
mission-critical technology services to wireless telecommunications
companies worldwide, today reported results for the fourth quarter
and full year 2006. Total revenues were $85.8 million for the
fourth quarter 2006, a 2.7% increase compared to the fourth quarter
2005. For the year 2006, total revenues were $337.0 million, a 1.4%
decrease from 2005. Net revenues, which excludes off-network
database queries or pass-through revenue, was $84.6 million for the
fourth quarter 2006, a 3.0% increase compared to the fourth quarter
2005. For the year 2006, net revenues were $328.9 million, a 0.7%
decrease from 2005. Net income attributable to common stockholders
was $59.1 million in the fourth quarter 2006, compared to $15.3
million in the fourth quarter 2005. For the year 2006, net income
attributable to common stockholders was $89.7 million compared to
$5.6 million in 2005. Cash net income, a non-GAAP measure of
profitability, was $13.8 million for the fourth quarter 2006,
compared to $17.1 million in the fourth quarter 2005. For the year,
cash net income was $57.3 million compared to $65.2 million in
2005. 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
$0.20 in the fourth quarter 2006 compared to the $0.25 reported in
the fourth quarter 2005. For the year 2006, cash net income per
share was $0.85 compared to $0.96 in 2005. Adjusted EBITDA, a
non-GAAP measure of operating cash flow, was $31.2 million for the
fourth quarter 2006, compared to $36.3 million in the fourth
quarter 2005. For the year Adjusted EBITDA was $127.7 million
compared to $146.4 million in 2005. �2006 was a challenging year
for the company and a year in which we implemented a number of
significant changes in the business,� said Syniverse President and
CEO Tony Holcombe. �We made significant progress expanding our
footprint outside of North America by furthering our relationships
with key global operators such as Vodafone and TeliaSonera, and by
acquiring Hong Kong-based ITHL in July. Our voice and data
clearinghouse products also continued to demonstrate solid growth
during the year. Nonetheless, 2006 also brought increased
competitive pressures that had negative implications in our core
North American clearinghouse and network services markets and
impacted our growth profile. As a result, we are focused on
refining our strategy and operational model to adjust for the
current market environment in order to better position the business
for longer-term growth.� Chief Financial Officer Ray Lawless added,
�Our fourth quarter and full year net revenues were within our
guidance, but our margins were below our historic levels, causing
adjusted EBITDA and cash net income to fall below the range that we
had set. Part of this difference relates to a $2.4 million revenue
adjustment in the fourth quarter related to a billing error during
the first 9 months of 2006. The adjustment did not impact our
operating free cash flow, and for the year, Syniverse generated
$74.1 million in free cash flow from operations.� Lawless
continued: �Looking forward to 2007, we expect to see continued
growth from our data products and in the international arena to
offset in part continued competitive pressure in North America. As
a result, we expect revenue, adjusted EBITDA and cash net income to
be largely flat in 2007, which is below our long-term growth
expectations for the business. We anticipate Syniverse to again
deliver strong free cash flow of over $70 million from operations
during the year.� Fourth Quarter 2006 Service Line Revenue
Technology Interoperability Services Technology Interoperability
Services revenues were $39.0 million in the fourth quarter 2006, a
42.6% increase compared to the fourth quarter 2005, primarily
driven by the inclusion of ITHL, increases in clearing, Message
Manager, and Mobile Data Roaming. Fourth quarter 2006 results
include a $2.4 million revenue adjustment for a billing error
during the first 9 months of 2006. Network Services Network
Services revenues were $29.9 million in the fourth quarter 2006, a
4.4% decrease compared to the fourth quarter 2005, primarily driven
by competitive pricing, partially offset by increases in data
networking. Number Portability Services Number Portability Services
revenues were $7.1 million in the fourth quarter 2006, a 46.2%
decrease compared to the fourth quarter 2005, primarily driven by
the previously disclosed migration of the Sprint port center. Call
Processing Services Call Processing Services revenues were $7.2
million in the fourth quarter 2006, a 6.4% decrease compared to the
fourth quarter 2005, with increases in international roaming
supported by Signaling Solutions, offset by a decline in fraud
services. Enterprise Solutions Enterprise Solutions revenues were
$1.3 million in the fourth quarter 2006. Off-Network Database
Queries (Pass-Through) Pass-through revenues for the third quarter
2006 were $1.3 million. Fourth Quarter 2006 Business Highlights
Successful migrations of five operating companies from Vodafone and
TeliaSonera to Syniverse platforms. Continued traction in Asia
through strategic wins and renewals in Thailand, Hong Kong,
Singapore, Malaysia, Indonesia, and Vietnam. Continued the
successful integration of ITHL into Syniverse. Outlook The company
provides the following outlook for 2007: 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 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. Fourth Quarter 2006 Earnings
Call Syniverse Technologies will host a conference call at 4:30
p.m. EST to discuss these results. To participate on the call, U.S.
callers may dial toll-free 1-866-271-0675; international callers
may dial direct (+1) 617-213-8892. The passcode for the call is
40598279. The event will be webcast live over the Internet in
listen-only mode at http://www.syniverse.com/investorevents. A
replay of the call will be available beginning Feb. 27 at 7:30 p.m.
EST through Mar. 12, 2007, at 11:59 p.m. EST. 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
31298541. 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; and changes in our
tax status. 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
Year Ended Year Ended Dec. 31, 2005 Dec. 31, 2006 Dec. 31, 2005
Dec. 31, 2006 Technology Interoperability Services $ 27,368� $
39,024� $ 108,429� $ 138,655� Network Services 31,246� 29,879�
132,120� 124,832� Number Portability Services 13,260� 7,134�
50,836� 28,766� Call Processing Services 7,735� 7,240� 28,619�
29,315� Enterprise Solution � 2,500� � 1,283� � 11,026� � 7,289�
Revenues excluding Off Network Database Queries 82,109� 84,560�
331,030� 328,857� Off Network Database Queries � 1,509� � 1,281� �
10,761� � 8,162� Total Revenues 83,618� 85,841� 341,791� 337,019� �
Cost of operations � 30,715� � 34,694� � 129,190� � 134,641� �
Gross Margin 52,903� 51,147� 212,601� 202,378� � Gross Margin %
63.3% 59.6% 62.2% 60.0% Gross Margin % before Off Network Database
Queries 64.4% 60.5% 64.2% 61.5% � Sales and marketing 5,643� 6,785�
23,344� 25,446� General and administrative 13,213� 13,958� 49,396�
58,508� Depreciation and amortization 11,494� 10,638� 46,815�
41,172� Restructuring � -� � -� � 143� � 1,006� � Operating income
22,553� 19,766� 92,903� 76,246� � Other expense, net Interest
expense, net (6,428) (6,443) (32,690) (25,504) Loss on
extinguishment of debt -� -� (42,804) (924) Other, net � 1,442� �
(55) � 1,436� � 332� � (4,986) � (6,498) � (74,058) � (26,096) �
Income before provision for (benefit from) income taxes 17,567�
13,268� 18,845� 50,150� � Provision for (benefit from) income taxes
� 2,294� � (45,837) � 9,041� � (39,574) � Net income 15,273�
59,105� 9,804� 89,724� � Preferred stock dividends � -� � -� �
(4,195) � -� � Net income attributable to common stockholders $
15,273� $ 59,105� $ 5,609� $ 89,724� � Net income per share Basic $
0.23� $ 0.88� $ 0.09� $ 1.34� Diluted $ 0.23� $ 0.88� $ 0.09� $
1.33� IPO pro forma(1) $ 0.23� $ 0.87� $ 0.14� $ 1.33� � Shares
used in calculation Basic 66,518� 67,106� 61,973� 66,943� Diluted
67,345� 67,320� 62,978� 67,298� IPO pro forma(2) 67,667� 67,667�
67,667� 67,667� � � Notes: � 1) Assumes no preferred stock
dividends since all of the outstanding preferred stock was either
redeemed or converted to common shares after our IPO. � 2) Assumes
shares outstanding after our IPO were outstanding for the full
period above. � Selected Balance Sheet Data (unaudited): As of (in
thousands) Dec. 31, 2006 Cash $ 26,704� Senior subordinated notes $
175,000� Term note B � 136,561� Total debt $ 311,561� Common stock
and additional paid-in capital $ 459,165� Accumulated deficit and
other comprehensive income � (44,371) Total stockholders' equity $
414,794� Syniverse Holdings, Inc. Reconciliation of Non GAAP
Measures to GAAP (unaudited) (In thousands except per share
information) � � Quarter Ended Quarter Ended Year Ended Year Ended
Dec. 31, 2005 Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2006 �
Reconciliation to adjusted EBITDA Net income $ 15,273� $ 59,105� $
9,804� $ 89,724� Interest expense, net 6,428� 6,443� 32,690�
25,504� Provision for (benefit from) income taxes 2,294� (45,837)
9,041� (39,574) Depreciation and amortization 11,494� 10,638�
46,815� 41,172� Restructuring -� -� 143� 1,006� Loss from disposal
of assets -� -� 612� -� SFAS 123R non-cash compensation -� 787� -�
1,820� IOS North America transition expenses 704� (8) 3,777� 786�
Facilities move expense 1,567� 25� 2,172� 5,298� Loss on
extinguishment of debt -� -� 42,804� 924� Data processing contract
termination fee -� 962� -� 962� Litigation settlement -� (966) -�
402� Non-operating gains (1,446) -� (1,446) (330) Adjusted EBITDA $
36,314� $ 31,149� $ 146,412� $ 127,694� � � � Quarter Ended Quarter
Ended Year Ended Year Ended Dec. 31, 2005 Dec. 31, 2006 Dec. 31,
2005 Dec. 31, 2006 Reconciliation to adjusted net income (loss) and
cash net income Net income $ 15,273� $ 59,105� $ 9,804� $ 89,724�
Add provision for (benefit from) income taxes 2,294� (45,837)
9,041� (39,574) Income before provision for income taxes 17,567�
13,268� 18,845� 50,150� � Restructuring -� -� 143� 1,006� Loss from
disposal of assets -� -� 612� -� SFAS 123R non-cash compensation -�
787� -� 1,820� Purchase accounting amortization 5,774� 4,717�
24,359� 17,848� IOS North America transition expenses 704� (8)
3,777� 786� Facilities move expense 1,655� 25� 2,671� 5,298� Loss
on extinguishment of debt -� -� 42,804� 924� Data processing
contract termination fee -� 962� -� 962� Litigation settlement -�
(966) -� 402� Non-operating gains (1,446) -� (1,446) (330) Adjusted
income before provision for income taxes 24,254� 18,785� 91,765�
78,866� � Less assumed provision for income taxes at 39% (9,459)
(7,326) (35,788) (30,758) � Adjusted net income 14,795� 11,459�
55,977� 48,108� � Add cash savings of tax deductible goodwill(1)
2,300� 2,300� 9,201� 9,200� � Cash net income $ 17,095� $ 13,759� $
65,178� $ 57,308� � Adjusted net income per share after IPO $ 0.22�
$ 0.17� $ 0.83� $ 0.71� Cash net income per share after IPO $ 0.25�
$ 0.20� $ 0.96� $ 0.85� Shares outstanding after IPO(2) 67,667�
67,667� 67,667� 67,667� � � 1) Represents the cash benefit realized
currently as a result of the tax deductibility of goodwill
amortization. 2) Assumes shares outstanding after our IPO were
outstanding for all periods above. � � Quarter Ended Quarter Ended
Year Ended Year Ended Dec. 31, 2005 Dec. 31, 2006 Dec. 31, 2005
Dec. 31, 2006 Reconciliation to free cash flow Cash from operations
40,173� 44,151� 110,577� 97,811� Capital expenditures (14,709)
(3,393) (34,001) (19,921) Add cash paid in legal settlement -� -�
-� 2,400� Less accrued but not yet paid acquisition earn out -�
(6,160) -� (6,160) Free Cash Flows 25,464� 34,598� 76,576� 74,130�
Supplemental information: Cash interest paid 2,714� 3,012� 40,695�
26,455� Cash income taxes paid -� 764� 140� 764�
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