Syniverse Holdings, Inc. (NYSE:SVR), a leading provider of
technology and business solutions for the global telecommunications
industry, today reported results for the second quarter 2008. Total
revenues were $127.6 million for second quarter 2008, a 39.7%
increase compared to second quarter 2007. Net revenues, which
exclude off-network database queries or pass-through revenue, were
$126.2 million for second quarter 2008, a 40.6% increase compared
to second quarter 2007. Net income was $20.4 million in second
quarter 2008, a 74.4% increase compared to second quarter 2007. Net
income per diluted share was $0.30 in second quarter 2008, a 72.7%
increase compared to second quarter 2007. Cash net income, a
non-GAAP financial measure, was $28.4 million for second quarter
2008, a 58.9% increase compared to second 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 $0.42 in
second quarter 2008, a 57.3% increase compared to second quarter
2007. Adjusted EBITDA, a non-GAAP financial measure, was $58.3
million for second quarter 2008, a 57.3% increase compared to
second quarter 2007. �Syniverse continues to report record results
driven by double-digit organic growth and successful acquisition
integration,� said Tony Holcombe, President and CEO, Syniverse. �We
are capitalizing on the growth in messaging and wireless data while
increasing our market share, and now provide services to more than
600 operators worldwide. Syniverse also is successfully executing
our plan to integrate BSG Wireless, and we continue to anticipate
$12 million of annualized cost synergies as we integrate the two
businesses.� Chief Financial Officer David Hitchcock added,
"Organic net revenue growth exceeded 25% during the second quarter
as technology interoperability services continue to accelerate.
Costs were again well contained as we realize the benefits of our
increasing scale, leading to $40.9 million of cash from operating
activities. In addition, inclusive of $13.0 million of capital
expenditures, we generated $33.3 million of operating free cash
flow in the quarter.� Please refer to the information set forth
below under the captions �Non-GAAP Measures� and �Reconciliation of
Non-GAAP Measures to GAAP� for an explanation of the foregoing
non-GAAP financial measures as well as a reconciliation of such
non-GAAP financial measures to GAAP financial measures. Second
Quarter 2008 Service Line Revenue Technology Interoperability
Services Technology interoperability services revenues were $80.2
million in second quarter 2008, a 90.7% increase compared to second
quarter 2007. The increase included $13.7 million of revenues
attributable to BSG Wireless, which was included in Syniverse�s
income statement beginning on January 1. Excluding revenues from
BSG Wireless, technology interoperability revenue grew 58.1% during
the second quarter of 2008 driven by increases across the product
line. Data services, such as SMS interoperability and mobile data
roaming, continue their explosive growth, while growth in clearing
house services, UniRoam� and technology products from ITHL all
showed strong double-digit increases. Network Services Network
services revenues were $31.6 million in second quarter 2008, 1.3%
increase compared to second quarter 2007. Increases in SS7, data
networking and Visibility� were largely offset by continued
declines elsewhere. Number Portability Services Number portability
services revenues were $6.4 million in second quarter 2008, a 7.2%
decrease compared to second quarter 2007. Results were primarily
due to lower volumes in 2008. Call Processing Services Call
processing services revenues were $7.3 million in second quarter
2008, a 13.2% decrease compared to second quarter 2007. This
decrease was attributable to continued declines in legacy
fraud-related services and a decline in signaling solutions.
Enterprise Solutions Enterprise solutions revenues were $0.6
million in second quarter 2008. Off-Network Database Queries
(Pass-Through) Pass-through revenues for second quarter 2008 were
$1.4 million. Second Quarter 2008 Business Highlights Continued the
integration of BSG Wireless. Gained additional market traction with
recent product introductions, including DataNet, GSM Visibility and
financial clearing house services. Completed implementation for
June launch of true number portability in Singapore. Outlook The
company is revising its guidance and providing the following
outlook for 2008: Net Revenues $485 - 495 million Net Income $69 -
74 million Adjusted EBITDA $223 - $230 million Cash Net Income $105
- $110 million Additionally, the company expects to generate
operating free cash flow in excess of $118 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 Cash
Net Income is determined by first calculating Adjusted Net Income.
Adjusted Net Income is calculated by adding the following items 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. To calculate Cash Net Income, the cash benefit of our
tax-deductible goodwill is added to Adjusted Net Income. This cash
benefit is a result of the differing treatments of approximately
$362 million of goodwill on our balance sheet that primarily is the
result of acquisitions that we made from Verizon and IOS North
America. 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 Adjusted EBITDA is
determined by adding to net income the following items: interest
expense, net, provision for income taxes, depreciation and
amortization, restructuring, SFAS 123R non-cash compensation and
BSG Wireless transition expenses. Syniverse's Operating Free Cash
Flow is determined by adding to (or subtracting from) Net cash
provided by operating activities the following items: (capital
expenditures), cash paid (received) in legal settlement and accrued
but not yet paid acquisition-related earn-out and other contingent
payments. A reconciliation of Adjusted Net Income, Cash Net Income
and Adjusted EBITDA to net income, the closest GAAP measure, is
presented in the financial tables below under the caption
�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, is presented in the financial
tables below under the caption �Reconciliation of Non-GAAP Measures
to GAAP.� 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 Syniverse�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. We believe that the disclosure of
Adjusted EBITDA, Operating Free Cash Flow, Adjusted Net Income 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 an investor a greater understanding of,
and an enhanced level of transparency into, the means by which our
management team operates our company. 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 rely upon them or consider them 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, and
Adjusted Net Income and Cash Net Income should not be considered as
a replacement for, or in lieu of, net income. We attempt to
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
only. Second Quarter 2008 Earnings Call Syniverse will host a
conference call today at 4:30 p.m. ET to discuss these results, and
the accompanying slides for the conference call have been posted to
the Syniverse website at www.syniverse.com. To participate on this
call, U.S. callers may dial toll-free free 1-888-873-4896;
international callers may dial direct (+1) 617-213-8850. The
passcode for this call is 66117475. 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 at approximately 6:30 p.m. ET on August 4 and
will remain available through August 18 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 63723020. About Syniverse Syniverse Technologies
(NYSE:SVR) provides solutions that allow more than 600
communications companies in over 120 countries to provide seamless
mobile services by making it possible for disparate technologies
and standards to interoperate. Syniverse's flexibility and customer
focus permit its customers to quickly react to market changes and
demands, enabling the delivery of everything from voice calls to
sophisticated data and video services wherever and whenever
subscribers need them. With more than 20 years in the industry,
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. 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 and Section 21E of the Securities Act of 1934, 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
ability to continue to report strong results, whether as a result
of organic growth and acquisitions or otherwise; Syniverse�s
ability to continue to capitalize on the positive growth in
messaging and wireless data; Syniverse�s ability to successfully
and timely integrate BSG Wireless, and to realize the anticipated
cost savings of that integration when and in the amounts
anticipated; the ability of Syniverse to gain market acceptance and
penetration in respect of several recent product introductions,
including Datanet, GSM Visibility and Financial Clearing House
services; Syniverse�s guidance for 2008, 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 2008, 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 December 31, 2007 under the captions
�Management�s Discussion and Analysis of Financial Condition and
Results of Operations � 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 Press 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) and Other Supplemental Information
(In thousands except per share information) � � � � � Three Months
Ended Six Months Ended June 30, 2008 June 30, 2007 June 30, 2008
June 30, 2007 Technology Interoperability Services $ 80,209 $
42,061 $ 148,911 $ 79,856 Network Services 31,643 31,245 61,384
61,669 Number Portability Services 6,435 6,938 13,385 13,044 Call
Processing Services 7,313 8,422 15,702 15,630 Enterprise Solution �
634 � � 1,089 � � 1,419 � � 2,280 � Revenues excluding Off Network
Database Queries 126,234 � 89,755 240,801 172,479 Off Network
Database Queries � 1,385 � � 1,620 � � 2,463 � � 3,274 � Total
Revenues 127,619 � 91,375 243,264 175,753 � Cost of operations �
41,589 � � 34,075 � � 79,567 � � 67,516 � � Gross Margin 86,030 �
57,300 163,697 108,237 � Gross Margin % 67.4 % 62.7 % 67.3 % 61.6 %
Gross Margin % before Off Network Database Queries 68.2 % 63.8 %
68.0 % 62.8 % � Sales and marketing 12,200 7,652 22,954 14,464
General and administrative 19,868 13,616 38,010 27,603 Depreciation
and amortization 13,791 10,724 27,424 21,003 Restructuring � - � �
773 � � 17 � � 2,555 � � Operating income 40,171 � 24,535 75,292
42,612 � Other expense, net Interest expense, net (8,925 ) (5,572 )
(18,215 ) (11,196 ) Other, net � (272 ) � 75 � � (215 ) � 128 � �
(9,197 ) � (5,497 ) � (18,430 ) � (11,068 ) � Income before
provision for income taxes 30,974 � 19,038 56,862 31,544 �
Provision for income taxes � 10,622 � � 7,370 � � 21,117 � � 12,230
� � Net income $ 20,352 � � $ 11,668 � $ 35,745 � $ 19,314 � � �
Net income per share Basic $ 0.30 $ 0.17 $ 0.53 $ 0.29 Diluted $
0.30 $ 0.17 $ 0.53 $ 0.29 � Shares used in calculation Basic 67,619
67,294 67,564 67,257 Diluted 68,112 67,439 68,010 67,396 � Other
Supplemental Information: � Revenue by region (1) (unaudited):
Three Months Ended Six Months Ended June 30, 2008 June 30, 2007
June 30, 2008 June 30, 2007 North America $ 90,932 $ 70,593 $
173,145 $ 135,945 Asia Pacific 11,855 9,528 22,073 19,249 Caribbean
and Latin America 7,456 5,594 15,315 10,784 Europe, Middle East and
Africa � 15,991 � � 4,040 � � 30,268 � � 6,501 � Subtotal non-
North American Revenue � 35,302 � � 19,162 � � 67,656 � � 36,534 �
Revenues excluding Off Network Database Queries 126,234 89,755
240,801 172,479 Off Network Database Queries � 1,385 � � 1,620 � �
2,463 � � 3,274 � Total Revenues $ 127,619 � $ 91,375 � $ 243,264 �
$ 175,753 � � � (1) Based on "bill to" location on invoice.
Syniverse Holdings, Inc. Condensed Consolidated Balance Sheets (In
thousands except share information) � � � June 30, December 31, �
2008 � � 2007 � (unaudited) ASSETS Current assets: Cash $ 92,775 $
49,086 Accounts receivable, net of allowances of $588 and $762,
respectively 93,846 79,378 Prepaid and other current assets �
15,818 � � 12,240 � Total current assets � 202,439 � � 140,704 � �
Property and equipment, net 47,262 43,856 Capitalized software, net
62,924 62,615 Deferred costs, net 9,901 10,786 Goodwill 628,621
616,304 Identifiable intangibles, net 226,065 232,023 Other assets
� 2,315 � � 1,262 � Total assets $ 1,179,527 � $ 1,107,550 � �
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts
payable $ 6,395 $ 5,006 Accrued payroll and related benefits 12,744
12,016 Accrued interest 8,908 5,910 Deferred revenues 4,996 5,327
Other accrued liabilities 29,955 34,789 Current portion of Term
Note B � 3,585 � � 3,459 � Total current liabilities � 66,583 � �
66,507 � Long-term liabilities: Deferred tax liabilities 62,175
43,587 7 3/4% senior subordinated notes due 2013 175,000 175,000
Term Note B, less current maturities 352,192 344,476 Other
long-term liabilities � 7,090 � � 7,188 � Total long-term
liabilities � 596,457 � � 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; 68,821,784 shares issued and
68,429,786 shares outstanding and 68,683,075 shares issued and
68,302,956 shares outstanding at June 30, 2008 and December 31,
2007, respectively 68 68 Additional paid-in capital 467,485 463,711
Retained earnings 40,596 4,851 Accumulated other comprehensive
income 8,368 2,191 Common stock held in treasury, at cost; 391,998
and 380,119 at June 30, 2008 and December 31, 2007, respectively �
(30 ) � (29 ) Total stockholders' equity � 516,487 � � 470,792 �
Total liabilities and stockholders' equity $ 1,179,527 � $
1,107,550 � Syniverse Holdings, Inc. Condensed Consolidated
Statements of Cash Flows (unaudited) (In thousands) � � � � Six
Months Ended June 30, � 2008 � � 2007 � � � Cash flows from
operating activities Net income $ 35,745 $ 19,314 Adjustments to
reconcile net income to net cash provided by operating activities:
� Depreciation and amortization including amortization of deferred
debt issuance costs 28,309 21,428 Provision for (recovery of)
uncollectible accounts (153 ) 131 Deferred income tax expense
13,991 9,910 Stock-based compensation 2,424 1,469 Loss on
disposition of property 18 348 Changes in operating assets and
liabilities, net of acquisitions: Accounts receivable (13,766 )
(1,553 ) Other current assets (3,266 ) (1,973 ) Accounts payable
2,096 (480 ) Other current liabilities (1,146 ) (7,643 ) Other
assets and liabilities � (126 ) � (2,216 ) Net cash provided by
operating activities � 64,126 � � 38,735 � � Cash flows from
investing activities Capital expenditures (20,361 ) (16,053 )
Acquisition of BSG Wireless (823 ) - Acquisition of ITHL � - � �
(735 ) Net cash used in investing activities � (21,184 ) � (16,788
) � Cash flows from financing activities Principal payments on
senior credit facility (1,786 ) (696 ) Employee stock purchase plan
388 430 Stock options exercised 1,391 16 Minimum tax withholding on
restricted stock awards (429 ) (275 ) Purchase of treasury stock �
(1 ) � (1 ) Net cash used in financing activities � (437 ) � (526 )
� Effect of exchange rate changes on cash � 1,184 � � 114 � � Net
increase in cash 43,689 21,535 Cash at beginning of period � 49,086
� � 26,704 � � Cash at end of period $ 92,775 � $ 48,239 � �
Supplemental cash flow information Interest paid $ 15,180 $ 11,763
Income taxes paid 6,367 1,650 Syniverse Holdings, Inc
Reconciliation of Non GAAP Measures to GAAP (unaudited) (In
thousands except per share information) � � � � � � � Three Months
Ended Six Months Ended June 30, 2008 June 30, 2007 June 30, 2008
June 30, 2007 � Reconciliation to adjusted EBITDA Net income $
20,352 $ 11,668 $ 35,745 $ 19,314 Interest expense, net 8,925 5,572
18,215 11,196 Provision for income taxes 10,622 7,370 21,117 12,230
Depreciation and amortization 13,791 10,724 27,424 21,003
Restructuring - 773 17 2,555 SFAS 123R non-cash compensation 1,347
984 2,424 1,469 BSG Wireless transition expenses � 3,294 � � - � �
6,401 � � - � Adjusted EBITDA $ 58,331 � � $ 37,091 � $ 111,343 � $
67,767 � � � � Three Months Ended Six Months Ended June 30, 2008
June 30, 2007 June 30, 2008 June 30, 2007 Reconciliation to
adjusted net income and cash net income Net income $ 20,352 $
11,668 $ 35,745 $ 19,314 Add provision for income taxes � 10,622 �
� 7,370 � � 21,117 � � 12,230 � Income before provision for income
taxes 30,974 � 19,038 56,862 31,544 � Restructuring - 773 17 2,555
SFAS 123R non-cash compensation 1,347 984 2,424 1,469 Purchase
accounting amortization 7,119 4,703 14,238 9,406 BSG Wireless
transition expenses � 3,294 � � - � � 6,401 � � - � Adjusted income
before provision for income taxes 42,734 � 25,498 79,942 44,974 �
Less assumed provision for income taxes at 39% � (16,666 ) � (9,944
) � (31,177 ) � (17,540 ) � Adjusted net income 26,068 � 15,554
48,765 27,434 � Add cash savings of tax deductible goodwill(1) �
2,301 � � 2,301 � � 4,602 � � 4,602 � � Cash net income $ 28,369 �
$ 17,855 � $ 53,367 � � $ 32,036 � � Adjusted net income per share
$ 0.38 $ 0.23 $ 0.72 $ 0.41 Cash net income per share $ 0.42 $ 0.26
$ 0.78 $ 0.48 Diluted shares outstanding 68,112 67,439 68,010
67,396 � � � 1) Represents the cash benefit realized currently as a
result of the tax deductibility of goodwill amortization. � � Three
Months Ended Six Months Ended June 30, 2008 June 30, 2007 June 30,
2008 June 30, 2007 Reconciliation to operating free cash flow Net
cash provided by operating activities $ 40,864 $ 17,705 $ 64,126 $
38,735 Capital expenditures (13,020 ) (6,464 ) (20,361 ) (16,053 )
Cash received in legal settlement - - - (2,500 ) Change in working
capital due to ITHL contingent payment - 6,895 - 6,160 Change in
working capital due to payment of BSG pre-acquisition contractual
obligation � 5,440 � � - � � 5,440 � � - � Operating Free Cash Flow
$ 33,284 � $ 18,136 � $ 49,205 � $ 26,342 � � Supplemental cash
flow information: Cash interest paid $ 1,829 $ 2,511 $ 15,180 $
11,763 Cash income taxes paid 4,857 1,650 6,367 1,650 Syniverse
Holdings Inc. Reconciliation of Non GAAP Measure Estimates to GAAP
(unaudited) � � 2008E 2008E (in millions) � Low � High
Reconciliation to adjusted EBITDA Net income $ 69.0 $ 74.0 Interest
expense, net 36.0 36.0 Provision for income taxes 42.0 44.0
Depreciation and amortization(1) 57.0 57.0 SFAS 123R non-cash
compensation 5.5 5.5 BSGW transition expenses(2) � 13.5 � � 13.5 �
Adjusted EBITDA $ 223.0 � $ 230.0 � � � Reconciliation to adjusted
net income and cash net income Net income $ 69.0 $ 74.0 Add
provision for income taxes � 42.0 � � 44.0 � Income (loss) before
provision for income taxes 111.0 118.0 � Adjustments income (loss)
before provision for income taxes � Purchase accounting
amortizations 28.5 28.5 SFAS 123R non-cash compensation 5.5 5.5
BSGW transition expenses(2) � 13.5 � � 13.5 � Adjusted income
(loss) before provision for income taxes 158.5 165.5 � Less assumed
provision for income taxes (62.7 ) (64.7 ) � Adjusted net income
95.8 100.8 � Add cash savings of tax deductible goodwill(3) 9.2 9.2
� � Cash net income $ 105.0 � $ 110.0 � � � 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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