Syniverse Holdings, Inc. (NYSE:SVR), a leading provider of
technology and business solutions for the global telecommunications
industry, today reported results for the first quarter 2008. Total
revenues were $115.6 million for first quarter 2008, a 37.1%
increase compared to first quarter 2007. Net revenues, which
exclude off-network database queries or pass-through revenue, were
$114.6 million for first quarter 2008, a 38.5% increase compared to
first quarter 2007. Net income was $15.4 million in first quarter
2008 a 101.3% increase compared to first quarter 2007. Net income
per diluted share was $0.23 in first quarter 2008, a 99.7% increase
compared to first quarter 2007. Cash net income, a non-GAAP
financial measure, was $25.0 million for first quarter 2008, a
76.3% increase compared to first quarter 2007. 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 diluted share was $0.37 in first
quarter 2008, a 74.8% increase compared to first quarter 2007.
Adjusted EBITDA, a non-GAAP financial measure, was $53.0 million
for first quarter 2008, a 72.8% increase compared to first quarter
2007. �Syniverse reported a strong first quarter driven by
continued strength in messaging and mobile data,� said Tony
Holcombe, President and CEO, Syniverse. �The acquisition of BSG
Wireless has significantly increased our global focus, while adding
a complementary financial clearing service. The integration is
successfully underway. And there have been no surprises, and our
plan is on schedule. We continue to anticipate $12 million of
annualized cost synergies as we integrate the two businesses.�
Chief Financial Officer David Hitchcock added, "Syniverse continues
to see a favorable mix shift towards technology interoperability
while diversifying our revenue base globally, enabling us to
generate $23.3 million of cash from operating activities. In
addition, after $7.3 million of capex, we generated $15.9 million
of operating free cash flow in the quarter.� First quarter 2008
Service Line Revenue Technology Interoperability Services
Technology interoperability services revenues were $68.7 million in
first quarter 2008, an 81.8% increase compared to first quarter
2007. The increase included $12.8 million from BSG Wireless, which
was included in Syniverse�s income statement beginning on January
1. Excluding revenues from BSG Wireless, technology
interoperability grew 47.9% driven by strong increases in data
services, such as SMS interoperability and mobile data roaming,
growth in clearing house services, and growth in the company�s
UniRoam product. Network Services Network services revenues were
$29.7 million in first quarter 2008, a 2.2% decrease compared to
first quarter 2007. First quarter results were impacted by customer
migrations offset by increases in data networking and growth in the
company�s Visibility product. Number Portability Services Number
portability services revenues were $7.0 million in first quarter
2008, a 13.8% increase compared to first quarter 2007. Results were
primarily due to full quarter revenues from new services provided
to Canadian mobile operators in 2008 compared to a partial quarter
in first quarter 2007. Call Processing Services Call processing
services revenues were $8.4 million in first quarter 2008, a 16.4%
increase compared to first quarter 2007. Performance was driven by
strong increases in signaling solutions offset by continued
declines in legacy fraud-related services. Enterprise Solutions
Enterprise solutions revenues were $0.8 million in first quarter
2008. Off-Network Database Queries (Pass-Through) Pass-through
revenues for first quarter 2008 were $1.1 million. First quarter
2008 Business Highlights Continued the integration of BSG Wireless,
with significant progress in achieving SG&A synergies. Awarded
2008 "Best Roaming Product or Service" for Syniverse DataNet
anti-fraud product in the GSM Association's (GSMA) 13th annual
Global Mobile Awards at the Mobile World Congress. Continued
gaining market traction from recent product introductions,
including DataNet, GSM Visibility, and financial clearing house
services. Appointed Jeff Gordon as Chief Technology Officer in
January, succeeding Paul Wilcock, who retired. Appointed Alfred de
C�rdenas as Executive Vice President of North America in March.
Outlook The company is revising guidance and providing the
following outlook for 2008: Net Revenues � $455 - $465 million Net
Income $59 - $64 million Adjusted EBITDA $207 - $214 million Cash
Net Income $97 - $102 million Additionally, the company expects to
generate operating free cash flow in excess of $108 million for
2008. Syniverse expects to realize approximately $12 million of
annualized run rate cost savings in connection with its integration
of BSG Wireless. Approximately one-third of this total is expected
to be realized by year end 2008, with the remainder to be realized
in 2009. Expected Adjusted EBITDA and Cash Net Income have been
adjusted to exclude the one-time costs related to integrating the
businesses and the duplicative costs that are expected to be
eliminated by the end of 2009. Non-GAAP Measures Syniverse's
Adjusted Net Income is determined by adding the following to net
income: provision for income taxes, restructuring, SFAS 123R
non-cash compensation, purchase accounting amortization and BSG
Wireless transition expenses to arrive at Adjusted Net Income
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. 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 EBITDA is determined by
adding the following to net income: interest expense, net,
provision for income taxes, depreciation and amortization,
restructuring, SFAS 123R non-cash compensation, and BSG Wireless
transition expenses. A reconciliation of Adjusted EBITDA, Adjusted
Net Income and Cash Net Income to net income is presented in the
financial tables contained herein. Syniverse's Operating Free Cash
Flow is determined by adding (or subtracting) 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 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 certain 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. We rely on Adjusted Net Income and Cash Net Income as
primary measures of the company�s earnings exclusive of these
certain and other non-cash cash charges. 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 company and 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. None of these
non-GAAP measures should be reviewed without consideration of our
net income, cash from operations and other GAAP measures. We
believe that Adjusted EBITDA, Operating 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 are
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
that do not directly affect our ongoing operating performance or
cash flows. Adjusted EBITDA, Operating 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
Operating 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, Operating Free Cash Flow, Adjusted Net Income and
Cash Net Income as supplemental information. First quarter 2008
Earnings Call Syniverse will host a conference call today at 4:30
p.m. ET to discuss these results and accompanying slides have been
posted to the Syniverse website. To participate on this call, U.S.
callers may dial toll-free 1-866-770-7129; international callers
may dial direct (+1) 617-213-8067. The passcode for this call is
39041124. This event also 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 shortly after the call
concludes through May 20 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
61108448. About Syniverse Syniverse Technologies (NYSE:SVR) makes
it possible for over 500 communications companies in more than 100
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. 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, strategy, net revenue, net income, adjusted
EBTIDA, cash net income and operating free cash flow outlook for
2008, expected synergies and cost savings related to the
integration of BSG Wireless, 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;
adverse changes in our agreements with our vendors or partners; the
impact of international expansion efforts on our business; changes
in our tax status; risks or uncertainties inherent in or related to
the integration of BSG Wireless (including unanticipated operating
costs and business disruptions); and other risks and uncertainties
described in our quarterly and annual reports filed with the
Securities and Exchange Commission. These and other risks and
uncertainties associated with our business are described in our
filings with the Securities and Exchange Commission. We assume no
obligation to update any forward-looking information contained in
this press release as a result of new information, future events or
otherwise. Syniverse Holdings, Inc. Condensed Consolidated
Statements of Income (unaudited) and Other Supplemental Information
(In thousands except per share information) � � Three Months Ended
Three Months Ended March 31, 2008 March 31, 2007 Technology
Interoperability Services $ 68,701 $ 37,795 Network Services 29,741
30,424 Number Portability Services 6,950 6,106 Call Processing
Services 8,389 7,208 Enterprise Solution � 786 � � 1,191 � Revenues
excluding Off Network Database Queries 114,567 82,724 Off Network
Database Queries � 1,078 � � 1,654 � Total Revenues 115,645 84,378
� Cost of operations � 37,978 � � 33,441 � � Gross Margin 77,667
50,937 � Gross Margin % 67.2 % 60.4 % Gross Margin % before Off
Network Database Queries 67.8 % 61.6 % � Sales and marketing 10,754
6,812 General and administrative 18,142 13,987 Depreciation and
amortization 13,633 10,279 Restructuring � 17 � � 1,782 � �
Operating income 35,121 18,077 � Other expense, net Interest
expense, net (9,290 ) (5,624 ) Other, net � 57 � � 53 � � (9,233 )
� (5,571 ) � Income before provision for income taxes 25,888 12,506
� Provision for income taxes � 10,495 � � 4,860 � � Net income $
15,393 � $ 7,646 � � � Net income per share Basic $ 0.23 $ 0.11
Diluted $ 0.23 $ 0.11 � Shares used in calculation Basic 67,509
67,221 Diluted 67,909 67,353 � Other Supplemental Information: �
Revenue by region(1) (unaudited): Quarter Ended Quarter Ended March
31, 2008 March 31, 2007 North America $ 82,213 $ 65,352 Asia
Pacific 10,218 9,721 Caribbean and Latin America 7,859 5,190
Europe, Middle East and Africa � 14,277 � � 2,461 � Subtotal non-
North American Revenue � 32,354 � � 17,372 � Revenues excluding Off
Network Database Queries 114,567 82,724 Off Network Database
Queries � 1,078 � � 1,654 � Total Revenues $ 115,645 � $ 84,378 � �
� (1) Based on "bill to" location on invoice. Syniverse Holdings,
Inc. Condensed Consolidated Balance Sheets (In thousands except
share amounts) � � � � March 31, December 31, 2008 � 2007 �
(unaudited) ASSETS Current assets: Cash $ 64,525 $ 49,086 Accounts
receivable, net of allowances of $927 and $762, respectively 84,244
79,378 Prepaid and other current assets � 16,091 � � 12,240 � Total
current assets � 164,860 � � 140,704 � � Property and equipment,
net 43,084 43,856 Capitalized software, net 62,833 62,615 Deferred
costs, net 10,343 10,786 Goodwill 630,249 616,304 Identifiable
intangibles, net 231,104 232,023 Other assets � 2,507 � � 1,262 �
Total assets $ 1,144,980 � $ 1,107,550 � � LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,077
$ 5,006 Accrued payroll and related benefits 11,968 12,016 Accrued
interest 1,792 5,910 Deferred revenues 4,511 5,327 Other accrued
liabilities 31,889 34,789 Current portion of Term Note B � 3,585 �
� 3,459 � Total current liabilities � 58,822 � � 66,507 � Long-term
liabilities: Deferred tax liabilities 57,579 43,587 7 3/4% senior
subordinated notes due 2013 175,000 175,000 Term Note B, less
current maturities 353,097 344,476 Other long-term liabilities �
7,241 � � 7,188 � Total long-term liabilities � 592,917 � � 570,251
� � Commitments and contingencies � 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; 68,711,605 shares issued and 68,319,607 shares
outstanding and 68,683,075 shares issued and 68,302,956 shares
outstanding at March 31, 2008 and December 31, 2007, respectively �
68 68 Additional paid-in capital 464,804 463,711 Retained earnings
20,240 4,851 Accumulated other comprehensive income 8,159 2,191
Common stock held in treasury, at cost; 391,998 and 380,119 at
March 31, 2008 and December 31, 2007, respectively � (30 ) � (29 )
Total stockholders' equity � 493,241 � � 470,792 � Total
liabilities and stockholders' equity $ 1,144,980 � $ 1,107,550 �
Syniverse Holdings, Inc. Condensed Consolidated Statement of Cash
Flows (unaudited) (In thousands) � � Three Months Ended March 31,
2008 2007 � � Cash flows from operating activities Net income $
15,393 $ 7,646 Adjustments to reconcile net income to net cash
provided by operating activities: � Depreciation and amortization
including amortization of deferred debt issuance costs 14,076
10,496 Provision for uncollectible accounts 169 78 Deferred income
tax expense 8,760 3,432 Stock-based compensation 1,077 486 Loss on
disposition of property - 294 Changes in operating assets and
liabilities, net of acquisitions: Accounts receivable (4,535 )
1,207 Other current assets (3,546 ) (2,578 ) Accounts payable 9
(1,690 ) Other current liabilities (8,178 ) 2,055 Other assets and
liabilities � 37 � � (396 ) Net cash provided by operating
activities � 23,262 � � 21,030 � � Cash flows from investing
activities Capital expenditures (7,341 ) (9,589 ) Acquisition of
BSG Wireless (767 ) - Acquisition of ITHL � - � � (735 ) Net cash
used in investing activities � (8,108 ) � (10,324 ) � Cash flows
from financing activities Principal payments on senior credit
facility (891 ) (348 ) Employee stock purchase plan 3 - Stock
options exercised 194 16 Minimum tax withholding on restricted
stock awards (181 ) (80 ) Purchase of treasury stock � (1 ) � (1 )
Net cash used in financing activities � (876 ) � (413 ) � Effect of
exchange rate changes on cash � 1,161 � � 54 � � Net increase in
cash 15,439 10,347 Cash at beginning of period � 49,086 � � 26,704
� � Cash at end of period $ 64,525 � $ 37,051 � Syniverse Holdings,
Inc. Reconciliation of Non GAAP Measures to GAAP (unaudited) (In
thousands except per share information) � � Three Months Ended
Three Months Ended March 31, 2008 March 31, 2007 � Reconciliation
to adjusted EBITDA Net income $ 15,393 $ 7,646 Interest expense,
net 9,290 5,624 Provision for income taxes 10,495 4,860
Depreciation and amortization 13,633 10,279 Restructuring 17 1,782
SFAS 123R non-cash compensation 1,077 486 BSG Wireless transition
expenses � 3,107 � � - � Adjusted EBITDA $ 53,012 � $ 30,677 � � �
� Three Months Ended Three Months Ended March 31, 2008 March 31,
2007 Reconciliation to adjusted net income and cash net income Net
income $ 15,393 $ 7,646 Add provision for income taxes � 10,495 � �
4,860 � Income before provision for income taxes 25,888 12,506 �
Restructuring 17 1,782 SFAS 123R non-cash compensation 1,077 486
Purchase accounting amortization 7,119 4,703 BSG Wireless
transition expenses 3,107 - Adjusted income before provision for
income taxes 37,208 19,477 � Less assumed provision for income
taxes at 39% � (14,511 ) � (7,596 ) � Adjusted net income 22,697
11,881 � Add cash savings of tax deductible goodwill(1) � 2,301 � �
2,301 � � Cash net income $ 24,998 � $ 14,182 � � Adjusted net
income per share $ 0.33 $ 0.18 Cash net income per share $ 0.37 $
0.21 Diluted shares outstanding 67,909 67,353 � � 1) Represents the
cash benefit realized currently as a result of the tax
deductibility of goodwill amortization. � � Three Months Ended
Three Months Ended March 31, 2008 March 31, 2007 Reconciliation to
operating free cash flow Net cash provided by operating activities
$ 23,262 $ 21,030 Capital expenditures (7,341 ) (9,589 ) Cash
received in legal settlement - (2,500 ) Change in working capital
due to ITHL contingent payment � - � � (735 ) Operating Free Cash
Flow $ 15,921 � $ 8,206 � � Supplemental cash flow information:
Cash interest paid $ 13,351 $ 9,252 Cash income taxes paid 1,510 -
Syniverse Holdings Inc. Reconciliation of Non GAAP Measure
Estimates to GAAP (unaudited) � � 2008E 2008E (in millions) � Low �
High Reconciliation to adjusted EBITDA Net income $ 59.0 $ 64.0
Interest expense, net 34.5 34.5 Provision for income taxes 40.0
42.0 Depreciation and amortization(1) 55.5 55.5 SFAS 123R non-cash
compensation 4.5 4.5 BSGW transition expenses(2) � 13.5 � � 13.5 �
Adjusted EBITDA $ 207.0 � $ 214.0 � � � Reconciliation to adjusted
net income and cash net income Net income $ 59.0 $ 64.0 Add
provision for income taxes � 40.0 � � 42.0 � Income (loss) before
provision for income taxes 99.0 106.0 � Adjustments income (loss)
before provision for income taxes � Purchase accounting
amortizations 28.5 28.5 SFAS 123R non-cash compensation 4.5 4.5
BSGW transition expenses(2) � 13.5 � � 13.5 � Adjusted income
(loss) before provision for income taxes 145.5 152.5 � Less assumed
provision for income taxes (57.7 ) (59.7 ) � Adjusted net income
87.8 92.8 � Add cash savings of tax deductible goodwill(3) 9.2 9.2
� � Cash net income $ 97.0 � $ 102.0 � � � 1) Includes preliminary
estimates of purchase accounting amortizations for BSGW. 2)
Represents certain costs that we do not expect to continue in the
business upon full integration including: a) Integration specific
expenses, including any temporary headcount needed for the
migrations, travel for the integration teams, and other one-time
costs related to the integration project and: b) Duplicative data
processing and headcount expenses that we do not plan to remain
following the full integration. 3) Represents the cash benefit
realized currently as a result of the tax deductibility of goodwill
amortization.
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