Syniverse Holdings, Inc. (NYSE:SVR), a leading provider of
technology and business solutions for the global telecommunications
industry, today reported results for the third quarter 2008. Total
revenue for third quarter 2008 was $137.2 million, a 36.8% increase
compared to third quarter 2007. Net revenue, which excludes
off-network database queries, was $135.8 million, a 36.9% increase
compared to third quarter 2007. Net income was $25.5 million, or
$0.37 per diluted share, 54.5% and 53.2% increases respectively,
compared to third quarter 2007. Cash net income, a non-GAAP
financial measure described below, was $34.2 million, or $0.50 per
diluted share, 54.7% and 53.4% increases, respectively, compared to
third quarter 2007. Adjusted EBITDA, a non-GAAP financial measure
described below, was $67.6 million, a 51.0% increase compared to
third quarter 2007. Cash flow from operations was $45.8 million, a
56.3% increase compared to the third quarter 2007. �I am pleased to
report that Syniverse has once again achieved solid results this
quarter,� said Tony Holcombe, President and CEO. �Our seventh
consecutive quarter of organic growth was driven by the ongoing
strong performance of our technology interoperability business. The
people and technology investments we made early last year continue
to generate solid returns for our shareholders. Furthermore, a
global renewal rate of 99 percent is a clear proof point of the
service quality and value we provide our customers.� David
Hitchcock, Executive Vice President and CFO, added, �I am proud to
announce that the company generated record quarterly net revenues
of $135.8 million as a result of organic growth that exceeded 20%.
These results contributed free cash flow of $36.7 million for 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 non-GAAP financial measures
as well as a reconciliation of such non-GAAP financial measures to
GAAP financial measures. Third Quarter 2008 Service Line Revenue
Technology Interoperability Services Technology interoperability
services revenues were $88.6 million in the quarter, a 73.6%
increase compared to third quarter 2007. The increase includes
$15.8 million of revenues attributable to BSG Wireless, which was
included in Syniverse�s income statement beginning on January 1,
2008. Excluding revenues from BSG Wireless, technology
interoperability revenue grew 42.7%, driven by increases in
messaging and mobile data services, clearing house services and
UniRoam�. Network Services Network services revenues were $31.1
million in the quarter, a 2.8% decrease compared to third quarter
2007. Increases in SS7 transport, data networking and Visibility�
Services were offset by expected continued declines in other parts
of the segment. Number Portability Services Number portability
services revenues were $8.1 million in the quarter, a 14.4%
increase compared to third quarter 2007. Results were driven by
increased porting volumes in 2008. Call Processing Services Call
processing services revenues were $7.5 million in the quarter, a
7.9% decrease compared to third quarter 2007. This decrease was
primarily due to continued declines in legacy fraud-related
services. Enterprise Solutions Enterprise solutions revenues were
$0.5 million in third quarter 2008. Off-Network Database Queries
(Pass-Through) Pass-through revenues for third quarter 2008 were
$1.4 million. Third Quarter 2008 Business Highlights The successful
integration of BSG Wireless continues on schedule. Colibria and
Syniverse announced a joint development agreement for an advanced
messaging hub that will drive seamless interworking and
interconnections between IM, SMS, MMS and presence applications for
mobile operators. Entel PCS switched to Syniverse� complete set of
roaming solutions. Verizon Wireless and Syniverse announced a
three-year contract extension for ongoing data clearing and roaming
services. Outlook Syniverse reiterates its existing guidance for
2008: Net Revenues $485 - 495 million Net Income $69 - 74 million
Adjusted EBITDA $223 - $230 million Cash Net Income $105 - $110
million Operating Free Cash Flow in excess of $118 million Assuming
we continue to be successful integrating BSG Wireless, Syniverse
expects to realize approximately $12 million of annualized cost
savings. Approximately $4 million of the expected cost savings are
expected to be realized in 2008, with the remainder to be realized
in 2009. 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: (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 39%, 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 million of goodwill on our balance sheet
which 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 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 adding the following items to (or subtracting
them from) net cash provided by operating activities: (capital
expenditures), (cash received in legal settlement), change in
working capital due to ITHL contingent payment and change in
working capital due to payment of BSG pre-acquisition contractual
obligation. A reconciliation of each 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 and cash
net income 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
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 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. Third 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
1-866-713-8565; international callers may dial direct (+1)
617-597-5324. The passcode for this call is 69317082. 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 today and will
remain available through Nov. 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 87044381. 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 positive results in future periods
and/or to continue to experience organic growth; Syniverse�s
ability to realize the benefits of investments that it has made in
its people and technology; Syniverse�s ability to continue to
realize a positive global renewal rate; Syniverse�s ability to
provide a high level of service quality and value to its customers;
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; and 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 Nine Months
Ended Sept. 30,2008 � � Sept. 30,2007 � Sept. 30,2008 � � Sept. 30,
2007 � Technology Interoperability Services $ 88,568 $ 51,006 $
237,577 $ 130,862 Network Services 31,097 31,990 92,382 93,659
Number Portability Services 8,076 7,060 21,462 20,104 Call
Processing Services 7,546 8,191 23,248 23,821 Enterprise Solutions
� 524 � � 943 � � 1,943 � � 3,223 � Revenues excluding Off Network
Database Queries 135,811 � 99,190 376,612 271,669 Off Network
Database Queries � 1,358 � � 1,088 � � 3,821 � � 4,362 � Total
Revenues 137,169 � 100,278 380,433 276,031 � Cost of operations �
43,133 � � 34,584 � � 122,700 � � 102,100 � � Gross Margin 94,036 �
65,694 257,733 173,931 � Gross Margin % 68.6 % 65.5 % 67.7 % 63.0 %
Gross Margin % before Off Network Database Queries 69.2 % 66.2 %
68.4 % 64.0 % � Sales and marketing 11,071 7,483 34,025 21,947
General and administrative 19,784 14,317 57,794 41,920 Depreciation
and amortization 13,809 10,861 41,233 31,864 Restructuring � (46 )
� (319 ) � (29 ) � 2,236 � � Operating income 49,418 � 33,352
124,710 75,964 � Other expense, net Interest expense, net (8,686 )
(6,201 ) (26,901 ) (17,397 ) Other, net � (164 ) � (90 ) � (379 ) �
38 � � (8,850 ) � (6,291 ) � (27,280 ) � (17,359 ) � Income before
provision for income taxes 40,568 � 27,061 97,430 58,605 �
Provision for income taxes � 15,101 � � 10,582 � � 36,218 � �
22,812 � � Net income $ 25,467 � � $ 16,479 � $ 61,212 � $ 35,793 �
� � Net income per share Basic $ 0.38 $ 0.24 $ 0.91 $ 0.53 Diluted
$ 0.37 $ 0.24 $ 0.90 $ 0.53 � Shares used in calculation Basic
67,757 67,377 67,629 67,298 Diluted 68,204 67,607 68,075 67,467 �
Other Supplemental Information: � Revenue by region (1)
(unaudited): Three Months Ended Nine Months Ended Sept. 30,2008 �
Sept. 30,2007 Sept. 30,2008 � Sept. 30,2007 North America (U.S. and
Canada) $ 98,346 $ 77,274 $ 271,491 $ 213,219 Asia Pacific 10,357
11,279 32,430 30,528 Caribbean and Latin America (includes Mexico)
8,099 6,243 23,413 17,027 Europe, Middle East and Africa � 19,009 �
� 4,394 � � 49,278 � � 10,895 � Subtotal non- North American
Revenue � 37,465 � � 21,916 � � 105,121 � � 58,450 � Revenues
excluding Off Network Database Queries 135,811 99,190 376,612
271,669 Off Network Database Queries � 1,358 � � 1,088 � � 3,821 �
� 4,362 � Total Revenues $ 137,169 � $ 100,278 � $ 380,433 � $
276,031 � � � (1) Based on "bill to" location on invoice. Syniverse
Holdings, Inc. Condensed Consolidated Balance Sheets (In thousands
except share information) � � � � Sept. 30, Dec. 31, 2008 2007
(unaudited) ASSETS Current assets: Cash $ 126,035 $ 49,086 Accounts
receivable, net of allowances of $644 and $762, respectively 98,599
79,378 Prepaid and other current assets � 16,099 � � 12,240 � Total
current assets � 240,733 � � 140,704 � � Property and equipment,
net 47,699 43,856 Capitalized software, net 60,740 62,615 Deferred
costs, net 9,456 10,786 Goodwill 608,952 616,304 Identifiable
intangibles, net 215,791 232,023 Other assets � 2,130 � � 1,262 �
Total assets $ 1,185,501 � $ 1,107,550 � � LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 7,233
$ 5,006 Accrued payroll and related benefits 17,935 12,016 Accrued
interest 1,797 5,910 Deferred revenues 5,422 5,327 Other accrued
liabilities 30,994 34,789 Current portion of Term Note B � 3,463 �
� 3,459 � Total current liabilities � 66,844 � � 66,507 � Long-term
liabilities: Deferred tax liabilities 65,086 43,587 7 3/4% senior
subordinated notes due 2013 175,000 175,000 Term Note B, less
current maturities 339,354 344,476 Other long-term liabilities �
6,457 � � 7,188 � Total long-term liabilities � 585,897 � � 570,251
� � 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; 68,844,182 shares
issued and 68,446,184 shares outstanding and 68,683,075 shares
issued and 68,302,956 shares outstanding at September 30, 2008 and
December 31, 2007, respectively 68 68 Additional paid-in capital
469,198 463,711 Retained earnings 66,063 4,851 Accumulated other
comprehensive income (2,539 ) 2,191 Common stock held in treasury,
at cost; 391,998 and 380,119 at September 30, 2008 and December 31,
2007, respectively � (30 ) � (29 ) Total stockholders' equity �
532,760 � � 470,792 � Total liabilities and stockholders' equity $
1,185,501 � $ 1,107,550 � Syniverse Holdings, Inc. Condensed
Consolidated Statements of Cash Flows (Unaudited) (Amounts in
thousands) � Nine Months Ended September 30, 2008 2007 � � Cash
flows from operating activities Net income $ 61,212 $ 35,793
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization including
amortization of deferred debt issuance costs 42,563 32,661
Provision for (recovery of) uncollectible accounts (129 ) 203
Deferred income tax expense 24,006 19,086 Stock-based compensation
3,738 2,445 Loss on disposition of property 478 1,061 Changes in
operating assets and liabilities, net of acquisitions: Accounts
receivable (19,664 ) (8,314 ) Other current assets (3,518 ) (1,513
) Accounts payable 8,205 618 Other current liabilities (6,949 )
(10,022 ) Other assets and liabilities � (26 ) � (3,982 ) Net cash
provided by operating activities � 109,916 � � 68,036 � � Cash
flows from investing activities Capital expenditures (29,406 )
(21,974 ) Acquisition of BSG Wireless (823 ) - Acquisition of ITHL
� - � � (735 ) Net cash used in investing activities � (30,229 ) �
(22,709 ) � Cash flows from financing activities Debt issuance
costs - (6,428 ) Principal payments on senior credit facility
(2,654 ) (24,561 ) Employee stock purchase plan 388 430 Stock
options exercised 1,951 294 Minimum tax withholding on restricted
stock awards (590 ) (275 ) Purchase of treasury stock � (1 ) � (1 )
Net cash used in financing activities � (906 ) � (30,541 ) � Effect
of exchange rate changes on cash � (1,832 ) � 552 � � Net increase
in cash 76,949 � 15,338 Cash at beginning of period � 49,086 � �
26,704 � � Cash at end of period $ 126,035 � � $ 42,042 � �
Supplemental cash flow information Interest paid $ 30,018 $ 21,421
Income taxes paid 9,059 2,826 Syniverse Holdings, Inc.
Reconciliation of Non GAAP Measures to GAAP (unaudited) (In
thousands except per share information) � � � � Three Months Ended
Nine Months Ended Sept. 30,2008 � Sept. 30, 2007 � � Sept. 30,2008
� Sept. 30,2007 � Reconciliation to adjusted EBITDA Net income $
25,467 $ 16,479 $ 61,212 $ 35,793 Interest expense, net 8,686 6,201
26,901 17,397 Provision for income taxes 15,101 10,582 36,218
22,812 Depreciation and amortization 13,809 10,861 41,233 31,864
Restructuring (46 ) (319 ) (29 ) 2,236 SFAS 123R non-cash
compensation 1,314 976 3,738 2,445 BSG Wireless transition expenses
� 3,276 � � - � � 9,677 � � - � Adjusted EBITDA $ 67,607 � � $
44,780 � $ 178,950 � $ 112,547 � � � � Three Months Ended Nine
Months Ended Sept. 30,2008 � Sept. 30,2007 � � Sept. 30,2008 �
Sept. 30,2007 Reconciliation to adjusted net income and cash net
income Net income $ 25,467 $ 16,479 $ 61,212 $ 35,793 Add provision
for income taxes � 15,101 � � 10,582 � � 36,218 � � 22,812 � Income
before provision for income taxes 40,568 � 27,061 97,430 58,605 �
Restructuring (46 ) (319 ) (29 ) 2,236 SFAS 123R non-cash
compensation 1,314 976 3,738 2,445 Purchase accounting amortization
7,119 4,703 21,357 14,109 BSG Wireless transition expenses � 3,276
� � - � � 9,677 � � - � Adjusted income before provision for income
taxes 52,231 � 32,421 132,173 77,395 � Less assumed provision for
income taxes at 39% � (20,370 ) � (12,644 ) � (51,548 ) � (30,184 )
� Adjusted net income 31,861 � 19,777 80,625 47,211 � Add cash
savings of tax deductible goodwill(1) � 2,301 � � 2,301 � � 6,903 �
� 6,903 � � Cash net income $ 34,162 � $ 22,078 � $ 87,528 � # $
54,114 � � Adjusted net income per share $ 0.47 $ 0.29 $ 1.18 $
0.70 Cash net income per share $ 0.50 $ 0.33 $ 1.29 $ 0.80 Diluted
shares outstanding 68,204 67,607 68,075 67,467 � � � (1) Represents
the cash benefit realized currently as a result of the tax
deductibility of goodwill amortization. � � Three Months Ended Nine
Months Ended Sept. 30,2008 � Sept. 30,2007 � � Sept. 30,2008 �
Sept. 30,2007 Reconciliation to operating free cash flow Net cash
provided by operating activities $ 45,790 $ 29,301 $ 109,916 $
68,036 Capital expenditures (9,045 ) (5,921 ) (29,406 ) (21,974 )
Cash received in legal settlement - - - (2,500 ) Change in working
capital due to ITHL contingent payment - - - 6,160 Change in
working capital due to payment of BSG pre-acquisition contractual
obligation � - � � - � � 5,440 � � - � Operating Free Cash Flow $
36,745 � $ 23,380 � $ 85,950 � $ 49,722 � � Supplemental cash flow
information: Cash interest paid $ 15,838 $ 9,658 $ 31,018 $ 21,421
Cash income taxes paid 2,692 1,176 9,059 2,826 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 before
provision for income taxes 111.0 118.0 � Adjustments income before
provision for income taxes � Purchase accounting amortization 28.5
28.5 SFAS 123R non-cash compensation 5.5 5.5 BSGW transition
expenses(2) � 13.5 � � 13.5 � Adjusted income 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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