Syniverse Holdings, Inc. (NYSE:SVR), a leading provider of
technology and business solutions for the global telecommunications
industry, today reported results for second quarter 2009.
- Total revenue for second quarter
2009 was $113.5 million, an 11.1% decrease compared to second
quarter 2008.
- Net revenue, which excludes
off-network database queries, was $111.8 million, an 11.5% decrease
compared to second quarter 2008.
- Net income was $16.5 million or
$0.24 per diluted share, 19.0% and 19.2% decreases, respectively,
compared to second quarter 2008.
- Cash net income, a non-GAAP
financial measure described below, was $25.4 million or $0.37 per
diluted share, 10.4% and 10.3% decreases respectively compared to
second quarter 2008.
- Adjusted EBITDA, a non-GAAP
financial measure described below, was $51.6 million, an 11.6%
decrease compared to second quarter 2008.
- Net cash provided by operating
activities was $33.3 million in the second quarter 2009 compared to
$40.9 million in the second quarter 2008.
- Operating free cash flow, a
non-GAAP financial measure described below, was $19.2 million in
the second quarter 2009 compared to $33.3 million in the second
quarter 2008.
“Syniverse’s second quarter results reflect our continued
ability to manage the company to deliver earnings,” said Tony
Holcombe, President and CEO. “Our transaction-based business
continues to perform, and we continue to believe that the global
surge in smartphone penetration, messaging and mobile data usage
provides Syniverse with a solid operating environment.”
David Hitchcock, Executive Vice President and CFO, said focused
cost management helped Syniverse drive margins and maintain strong
cash flow during the second quarter.
“The ongoing impact of the proactive cost control program we
implemented last fall has been very positive for Syniverse,”
Hitchcock said. “Despite revenues that were softer than expected,
we continued to generate healthy cash net income and adjusted
EBITDA, and we continued building cash balances that will give us
strategic flexibility.”
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 non-GAAP financial measures
as well as a reconciliation of such non-GAAP financial measures to
GAAP financial measures.
Second Quarter 2009 Service Line Revenue
Technology Interoperability Services
Technology interoperability services revenues were $66.3 million
in the quarter, a 17.3% decrease compared to second quarter 2008.
Clearing house revenues were down while growth in messaging and
mobile data slowed due to customer-specific events, including major
customer renewals, certain insourcing decisions and customer
consolidation activities.
Network Services
Network services revenues were $30.8 million in the quarter, a
2.6% decrease compared to second quarter 2008, primarily due to
decreases in intelligent database services.
Number Portability Services
Number portability services revenues were $7.8 million in the
quarter, a 21.0% increase compared to second quarter 2008 due to
increased porting volumes.
Call Processing Services
Call processing services revenues were $6.4 million in the
quarter, a 12.0% decrease compared to second quarter 2008 primarily
due to expected declines in signaling solutions and legacy
fraud-related services.
Enterprise Solutions
Enterprise solutions revenues were $0.4 million in second
quarter 2009.
Off-Network Database Queries (Pass-Through)
Pass-through revenues for second quarter 2009 were $1.7
million.
Second Quarter 2009 Business Highlights
- Syniverse commercially launched
Syniverse MORESM, an extensive portfolio of roaming hub solutions
designed to meet the diverse roaming needs of all types of
operators both today and in the future.
- Syniverse acquired the assets of
Wireless Solutions International (WSI), a Boca Raton, Fla.-based
provider of global managed roaming and wireless network
solutions.
- The company continued its
successful integration of BSG Wireless, with $8.8 million of
annualized run-rate cost savings realized through June 30,
2009.
Outlook
Syniverse affirms its outlook for net income, Adjusted EBITDA
and cash net income for 2009 as set forth below:
Net Income
$64.5 – 74 million
Adjusted EBITDA $210 - $225 million Cash Net Income $99 -
$108 million
Syniverse currently believes that 2009 net revenues will be
close to the lower end of the 2009 guidance of $460
million. However, due to the uncertainty related to the timing
of its sales of technology turn-key solutions and the uncertainty
surrounding the peak summer month roaming volumes, Syniverse cannot
specifically determine whether its revenues will exceed or fall
short of $460 million. Syniverse believes that for 2009 it
will generate approximately $90 million of operating free cash
flow, rather than its previous guidance of “in excess of $100
million.” The difference in operating free cash flow is due to
the expected timing of certain payments.
With the continuing successful integration of BSG Wireless,
Syniverse expects to realize approximately $12.0 million of
annualized run-rate cost savings by the end of 2009. Approximately
$8.8 million of the expected cost savings have been realized
through June 30, 2009, with the remainder to be realized by the end
of 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. For periods beginning on Jan. 1,
2009, cash net income assumes a long-term effective tax rate of
37.5%; for periods through Dec. 31, 2008, the long-term effective
tax rate assumption was 39%.
Non-GAAP Measures
Syniverse's cash net income is determined by first calculating
adjusted net income. Adjusted net income is calculated by (i)
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; (ii)
adjusting the resulting pre-tax sum for a provision for income
taxes at an assumed long-term tax rate of 37.5% (39.0% for all
periods through Dec. 31, 2008), 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 $362.0 million of goodwill on
our balance sheet, which primarily is the result of acquisitions
that we made from Verizon in February 2002 and IOS North America in
September 2004. 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 the
following items to net income: 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
subtracting capital expenditures from net cash provided by
operating activities.
A reconciliation of adjusted net income, cash net income and
Adjusted EBITDA to net income, the closest GAAP financial measure,
is presented in the financial tables below 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, is presented in the financial
tables below under the heading “Reconciliation of Non-GAAP Measures
to GAAP.”
We present adjusted net income, cash net income and related
per-share amounts because we believe they 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. 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 adjusted net income and cash net income as primary measures
of Syniverse’s earnings exclusive of these certain and other
non-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 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
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, 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. Adjusted net income and 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, adjusted net income and cash net income as supplemental
information only.
Second Quarter 2009 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 1-800-706-7748; international callers may dial direct
(+1) 617-614-3473. The passcode for this call is 52358746. 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 7:30 p.m. ET on Aug. 5 and will remain available
through Aug. 19 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
17857005.
About Syniverse
Syniverse Technologies (NYSE:SVR) solutions allow more than 650
communications companies in over 140 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. The contents of
our website are not incorporated into or otherwise a part of this
press release.
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
position for long-term success; Syniverse’s ability to continue to
manage its costs; global wireless trends such as smartphone
penetration, growth in messaging and mobile data usage, and
competitive market pricing trends; Syniverse’s expectations of
several new products, including Syniverse MORE; Syniverse’s ability
to continue to report positive results in future periods and/or to
continue to experience growth; Syniverse’s ability to successfully
integrate its acquisition of the assets of Wireless Solutions
International; Syniverse’s ability to continue to successfully and
timely integrate BSG Wireless, and to realize the anticipated cost
savings of that integration when and in the amounts anticipated;
Syniverse’s belief of the value of Non-GAAP measures to its
investors; Syniverse’s ability to reduce its long-term effective
tax rate; and Syniverse’s guidance for 2009, 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 2009, 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, 2008 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 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, 2009 June 30, 2008 June 30, 2009 June 30,
2008 Technology Interoperability Services $ 66,343 $ 80,209 $
129,263 $ 148,911 Network Services 30,819 31,643 60,794 61,384
Number Portability Services 7,788 6,435 15,028 13,385 Call
Processing Services 6,435 7,313 13,592 15,702 Enterprise Solutions
390 634 780 1,419
Revenues excluding Off-Network Database Queries 111,775
126,234 219,457 240,801 Off-Network Database Queries 1,703
1,385 2,945 2,463
Total revenues 113,478
127,619 222,402 243,264 Cost of operations 40,904
41,589 80,862 79,567
Gross Margin 72,574
86,030 141,540 163,697 Gross Margin % 64.0 % 67.4 % 63.6 %
67.3 % Gross Margin % before Off-Network Database Queries 64.9 %
68.2 % 64.5 % 68.0 % Sales and marketing 8,835 12,200 17,523
22,954 General and administrative 17,005 19,868 34,003 38,010
Depreciation and amortization 14,037 13,791 27,621 27,424
Restructuring - - -
17 Operating income 32,697
40,171 62,393 75,292 Other income (expense), net Interest
expense, net (7,446 ) (8,925 ) (14,610 ) (18,215 ) Other,
net 851 (272 ) 1,134 (215
) (6,595 ) (9,197 ) (13,476 ) (18,430 )
Income before provision for income taxes 26,102
30,974 48,917 56,862 Provision for income taxes 9,624
10,622 16,407 21,117
Net income 16,478
20,352 32,510 35,745 Less: Net loss attributable to noncontrolling
interest (53 ) - (53 ) -
Net income attributable to Syniverse Holdings, Inc. $ 16,531
$ 20,352 $ 32,563 $ 35,745 Net income
per share Basic $ 0.24 $ 0.30 $ 0.47 $ 0.53 Diluted $ 0.24 $ 0.30 $
0.47 $ 0.52 Shares used in calculation Basic 67,945 67,619
67,907 67,564 Diluted 68,029 67,740 67,980 67,649
Other
Supplemental Information: Revenue by region (1)
(unaudited): Three Months Ended Six Months Ended June 30, 2009
June 30, 2008 June 30, 2009 June 30, 2008 North America (U.S. and
Canada) $ 81,731 $ 90,932 $ 159,940 $ 173,145 Asia Pacific 9,406
11,855 18,871 22,073 Caribbean and Latin America (includes Mexico)
7,707 7,456 15,658 15,315 Europe, Middle East and Africa
12,931 15,991 24,988
30,268 Subtotal non- North American Revenue 30,044
35,302 59,517 67,656
Revenues excluding Off Network Database Queries 111,775
126,234 219,457 240,801 Off-Network Database Query Fees
1,703 1,385 2,945 2,463
Total Revenues $ 113,478 $ 127,619 $ 222,402
$ 243,264 (1) Based on "bill to"
location on invoice.
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, 2009
June 30, 2008 June 30, 2009 June 30, 2008
Reconciliation to adjusted EBITDA Net income $ 16,478 $
20,352 $ 32,510 $ 35,745 Interest expense, net 7,446 8,925 14,610
18,215 Provision for income taxes 9,624 10,622 16,407 21,117
Depreciation and amortization 14,037 13,791 27,621 27,424
Restructuring - - - 17 SFAS 123R non-cash compensation 1,908 1,347
3,015 2,424 BSG Wireless transition expenses 2,059
3,294 4,625 6,401
Adjusted EBITDA $ 51,552
$ 58,331 $ 98,788 $ 111,343
Three Months Ended Six Months Ended June 30, 2009 June 30, 2008
June 30, 2009 June 30, 2008
Reconciliation to adjusted
net income and cash net income Net income $ 16,478 $ 20,352 $
32,510 $ 35,745 Add provision for income taxes 9,624
10,622 16,407 21,117
Income before provision for income taxes 26,102
30,974 48,917 56,862 Restructuring - - - 17 SFAS 123R
non-cash compensation 1,908 1,347 3,015 2,424 Purchase accounting
amortization 6,917 7,119 13,708 14,238 BSG Wireless transition
expenses 2,059 3,294 4,625
6,401 Adjusted income before provision for
income taxes 36,986
42,734 70,265 79,942 Less assumed provision for income taxes
at 37.5% for 2009 and 39% for 2008 (13,870 )
(16,666 ) (26,349 ) (31,177 ) Adjusted
net income 23,116
26,068 43,916 48,765 Add cash savings of tax deductible
goodwill(1) 2,301 2,301 4,602
4,602 Cash net income $ 25,417
$ 28,369 $ 48,518 $ 53,367 Adjusted net
income per share $ 0.34 $ 0.38 $ 0.65 $ 0.72 Cash net income per
share $ 0.37 $ 0.42 $ 0.71 $ 0.78 Diluted shares outstanding 68,029
67,740 67,980 67,649 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,
2009 June 30, 2008 June 30, 2009 June 30, 2008
Reconciliation to operating free cash flow Net cash provided
by operating activities $ 33,273 $ 40,864 $ 50,274 $ 64,126 Capital
expenditures (14,121 ) (13,020 ) (20,936 ) (20,361 ) Change in
working capital due to payment of BSG pre-acquisition contractual
obligation - 5,440 -
5,440 Operating Free Cash Flow $ 19,152 $
33,284 $ 29,338 $ 49,205 Supplemental
cash flow information: Cash interest paid $ 3,256 $ 1,829 $ 13,327
$ 15,180 Cash income taxes paid 12,870 4,857 $ 21,768 6,367
Syniverse Holdings,
Inc.
Condensed Consolidated Balance
Sheets
(In thousands except share
data)
June 30, December 31, 2009
2008 (Unaudited) ASSETS Current assets: Cash $
187,846 $ 165,605 Accounts receivable, net of allowances of $4,018
and $2,347, respectively 86,005 88,782 Prepaid and other current
assets 30,626 20,971 Total current
assets 304,477 275,358 Property
and equipment, net 54,749 50,251 Capitalized software, net 59,752
60,184 Deferred costs, net 8,255 7,288 Goodwill 601,588 596,662
Identifiable intangibles, net 199,508 208,518 Other assets
1,701 1,573 Total assets $ 1,230,030 $
1,199,834
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable $ 12,049 $ 7,311 Accrued
payroll and related benefits 7,275 20,111 Accrued interest 5,177
5,160 Accrued income taxes 2,168 9,891 Deferred revenues 3,916
4,260 Other accrued liabilities 27,552 28,975 Current portion of
Term Note B 3,427 3,431 Total current
liabilities 61,564 79,139 Long-term
liabilities: Deferred tax liabilities 73,625 65,546 7 3/4% senior
subordinated notes due 2013 175,000 175,000 Term Note B, less
current maturities 333,237 335,382 Other long-term liabilities
10,089 8,925 Total liabilities
653,515 663,992 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; 68,930,279 shares issued and
68,738,281 shares outstanding and 68,847,632 shares issued and
68,455,634 shares outstanding at June 30, 2009 and December 31,
2008, respectively
68 68 Additional paid-in capital 474,768 471,524 Retained earnings
115,878 83,315 Accumulated other comprehensive loss (15,173 )
(19,035 )
Common stock held in treasury, at
cost; 191,998 at June 30, 2009 and 391,998 at December 31, 2008
(15 ) (30 ) Total Syniverse Holdings, Inc.
stockholders' equity 575,526 535,842 Noncontrolling interest
989 - Total equity 576,515
535,842 Total liabilities and stockholders' equity $
1,230,030 $ 1,199,834
Syniverse Holdings,
Inc.
Condensed Consolidated
Statements of Cash Flows (Unaudited)
(In thousands)
Six Months Ended June 30, 2009
2008 Cash flows from operating activities Net
income $ 32,510 $ 35,745
Adjustments to reconcile net
income to net cash provided by operating activities:
Depreciation and amortization
including amortization of deferred debt issuance costs
28,481 28,309 Provision for (recovery of) uncollectible accounts
356 (153 ) Deferred income tax expense 5,604 13,991 Stock-based
compensation 3,015 2,424 Other, net 66 18 Changes in
operating assets and liabilities, net of acquisitions: Accounts
receivable 3,320 (13,766 ) Other current assets (9,626 ) (3,266 )
Accounts payable, accrued payroll and related benefits (7,967 )
2,096 Other current liabilities (7,946 ) (1,146 ) Other assets and
liabilities 2,461 (126 ) Net cash provided by
operating activities 50,274 64,126
Cash flows from investing activities Capital
expenditures (20,936 ) (20,361 ) Acquisition of WSI, net of
acquired cash (3,182 ) - Acquisition of BSG Wireless, net of
acquired cash - (823 ) Net cash used in
investing activities (24,118 ) (21,184 )
Cash flows from financing activities Principal payments on
senior credit facility (1,705 ) (1,786 ) Issuances of stock under
employee stock purchase plan 415 388 Issuance of stock for stock
options exercised 95 1,391 Minimum tax withholding on restricted
stock awards (266 ) (429 ) Purchase of treasury stock - (1 )
Capital contribution from noncontrolling interest in a joint
venture 981 - Net cash provided by
(used in) financing activities (480 ) (437 )
Effect of exchange rate changes on cash (3,435 )
1,184 Net increase in cash 22,241 43,689 Cash at
beginning of period 165,605 49,086
Cash at end of period $ 187,846 $ 92,775
Supplemental cash flow information Interest paid $
13,327 $ 15,180 Income taxes paid 21,768 6,367
Syniverse Holdings Inc.
Reconciliation of Non GAAP
Measure Estimates to GAAP (unaudited)
2009E 2009E (in millions)
Low High Reconciliation to adjusted
EBITDA Net income $ 64.5 $ 74.0 Interest expense, net 32.0 32.0
Provision for income taxes 38.0 43.5 Depreciation and
amortization(1) 62.5 62.5 SFAS 123R non-cash compensation 5.5 5.5
BSGW transition expenses(2) 7.5 7.5
Adjusted EBITDA $ 210.0 $ 225.0
Reconciliation to adjusted net income and cash net income
Net income $ 64.5 $ 74.0 Add provision for income taxes 38.0
43.5 Income before provision for income taxes
102.5 117.5 Adjustments to income 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)
7.5 7.5 Adjusted income before
provision for income taxes 144.0 159.0 Less assumed
provision for income taxes (54.2 ) (60.2 )
Adjusted net
income 89.8 98.8 Add cash savings of tax deductible
goodwill(3) 9.2 9.2
Cash net income $ 99.0
$ 108.0 1) Includes purchase accounting
amortizations.
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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