Syniverse Holdings, Inc. (NYSE:SVR), a leading provider of
technology and business solutions for the global telecommunications
industry, today reported results for fourth quarter 2009.
“Our recently acquired messaging business performed well above
our expectations while our roaming business improved,” said Tony
Holcombe, President and CEO. “Stronger volumes across these product
sets enabled us to finish the year better than expected.”
Syniverse cited solid results for the quarter:
- Total revenue for fourth quarter
2009 was $143.9 million, a 14.3% increase compared to fourth
quarter 2008.
- Net revenue, which excludes
off-network database queries, was $143.1 million, a 14.5% increase
compared to fourth quarter 2008.
- Net income was $18.3 million or
$0.27 per diluted share, 6.0% and 6.4% increases, respectively,
compared to fourth quarter 2008.
- Cash net income, a non-GAAP
financial measure described below, was $31.6 million or $0.46 per
diluted share, 18.0% and 16.9% increases respectively compared to
fourth quarter 2008.
- Adjusted EBITDA, a non-GAAP
financial measure described below, was $62.3 million, a 12.5%
increase compared to fourth quarter 2008.
- Net cash provided by operating
activities was $59.3 million in the fourth quarter 2009 compared to
$54.1 million in the fourth quarter 2008.
- Operating free cash flow, a
non-GAAP financial measure described below, was $48.7 million in
the fourth quarter 2009 compared to $42.6 million in the fourth
quarter 2008.
David Hitchcock, Executive Vice President and CFO, said
continued cost management helped Syniverse drive margins and
earnings during the fourth quarter.
“Syniverse continued to post strong margins and cash flow in the
last quarter of 2009,” Hitchcock said. “We delivered strong cash
earnings through disciplined cost controls. Moreover, the BSG
integration is nearly complete, and we have realized our expected
synergies.”
Please refer to the information set forth below under the
headings “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.
Fourth quarter 2009 Service Line Revenue
Technology Interoperability
Services
Technology interoperability services
revenues were $97.7 million in the quarter, a 21.9% increase
compared to fourth quarter 2008. Revenues were higher due primarily
to revenues from the newly acquired messaging business offset by
declines in other services due to the previously disclosed
customer-specific events and weakness in the sales of ITHL products
in Asia Pacific.
Network Services
Network services revenues were $30.1
million in the quarter, a 0.3% decrease compared to fourth quarter
2008, as declines in SS7 and related services were offset by growth
in IP Networking and value added services.
Number Portability Services
Number portability services revenues were
$8.1 million in the quarter, a 3.6% increase compared to fourth
quarter 2008 due to increased porting volumes.
Call Processing Services
Call processing services revenues were
$7.1 million in the quarter, a 9.3% increase compared to fourth
quarter 2008 due to increases in signaling solutions for
international roaming.
Enterprise Solutions
Enterprise solutions revenues were $0.2
million in fourth quarter 2009.
Off-Network Database Queries
(Pass-Through)
Pass-through revenues for fourth quarter
2009 were $0.8 million.
Fourth quarter 2009 Business Highlights
- Syniverse completed the
acquisition of VeriSign’s mobile messaging business for
approximately $175 million in cash, subject to working capital
adjustments. The acquisition closed October 23.
- Syniverse continues to win
contracts globally as the company expands its customer base beyond
traditional mobile operators to new entrants to the mobile space,
including cable operators; Internet, VoIP and applications service
providers; and enterprise verticals.
- The company is completing its
successful integration of BSG Wireless, with $11.9 million of
annualized run-rate cost savings realized through December 31,
2009.
Outlook
Syniverse provides the following outlook for 2010 as set forth
below:
Net Revenues $590 – 620 million Net Income $70.5 -
82.5 million Adjusted EBITDA $239 – 259 million Cash Net Income
$120 – 131 million Operating Free Cash Flow In excess of $110
million
Expected Adjusted EBITDA and cash net income have been adjusted
to exclude the expected one-time costs in 2010 related to the
integration of the messaging businesses. 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, non-cash stock compensation, BSG Wireless
transition expenses, messaging acquisition and transition expenses,
and purchase accounting amortization; (ii) adjusting the resulting
pre-tax sum for a provision for income taxes at an assumed
long-term tax rate of 37.5% (39% 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 $436 million of goodwill on our balance sheet,
which primarily is the result of acquisitions that we made from
Verizon in February 2002, IOS North America in September 2004 and
VeriSign’s mobile messaging business in October 2009. 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,
non-cash stock compensation, BSG Wireless transition expenses, and
messaging acquisition and transition expenses.
Syniverse's operating free cash flow is determined by
subtracting capital expenditures from, and adding change in working
capital due to payment of BSG pre-acquisition contractual
obligation, to 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.
Fourth 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 1-800-261-3417; international callers may dial direct +1
(617) 614-3673. The passcode for this call is 75090394. This event
also will be webcast live over the Internet in listen-only mode at
http://www.syniverse.com/investorevents.
A replay of this call will be available beginning at
approximately 7:30 p.m. ET on Feb. 11 and will remain available
through Feb. 25 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
98263593.
About Syniverse
Syniverse Technologies (NYSE:SVR) provides mobile technology for
the global telecommunications industry, making it possible for
disparate data, messaging and voice technologies to interoperate
anywhere, any time. Serving more than 800 communications companies
in over 160 countries, Syniverse offers market-leading solutions
that simplify the complexities of roaming, messaging, network
interoperability and business intelligence for mobile operators,
MSOs, enterprise verticals and emerging mobile providers. For more
information, visit 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, 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; Syniverse’s expectations of growth of its product
portfolio and competitive position; Syniverse’s ability to continue
to report positive results in future periods and/or to continue to
experience global growth; Syniverse’s ability to successfully
integrate its acquired businesses and realize expected synergies;
Syniverse’s belief of the value of Non-GAAP measures to its
investors; Syniverse’s assumptions regarding its long-term
effective tax rate; and Syniverse’s guidance for 2010, 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 2010, 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 and Quarterly Reports for the
quarters ended March 31, 2009, June 30, 2009 and September 30, 2009
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
Year Ended
December 31,
2009
December 31,
2008
December 31,
2009
December 31,
2008
Technology Interoperability Services $ 97,675 $ 80,108 $ 293,782 $
317,685 Network Services 30,066 30,147 122,804 122,529 Number
Portability Services 8,112 7,829 31,654 29,291 Call Processing
Services 7,075 6,472 28,126 29,720 Enterprise Solutions 193
444 1,322 2,387
Revenues excluding Off-Network Database Queries 143,121
125,000 477,688 501,612 Off-Network Database Queries 806
923 5,303 4,744
Total Revenues 143,927
125,923 482,991 506,356 Cost of operations 50,762
42,536 172,950 165,236
Gross Margin 93,165
83,387 310,041 341,120 Gross Margin % 64.7 % 66.2 % 64.2 %
67.4 % Gross Margin % before Off-Network Database Queries 65.1 %
66.7 % 64.9 % 68.0 % Sales and marketing 12,477 11,524
38,789 45,549 General and administrative 24,513 21,447 74,502
79,241 Depreciation and amortization 18,191 14,111 60,397 55,344
Restructuring 2,583 - 2,583
(29 ) Operating income 35,401
36,305 133,770 161,015 Other expense, net Interest expense,
net (6,931 ) (8,451 ) (28,567 ) (35,352 ) Other, net (155 )
(23 ) 939 (402 ) (7,086 )
(8,474 ) (27,628 ) (35,754 ) Income before
provision for income taxes 28,315
27,831 106,142 125,261 Provision for income taxes
10,026 10,579 37,771
46,797 Net income 18,289
17,252 68,371 78,464 Less: Net loss attributable to noncontrolling
interest (365 ) - (590 ) -
Net income attributable to Syniverse Holdings, Inc. $ 18,654
$ 17,252 $ 68,961 $ 78,464
Net income per share Basic $ 0.27 $ 0.25 $ 1.00 $ 1.15
Diluted $ 0.27 $ 0.25 $ 1.00 $ 1.15 Shares used in
calculation Basic 68,227 67,814 68,031 67,675 Diluted 68,443 67,817
68,153 67,731
Other Supplemental Information:
Revenue by region (1) (unaudited): Three Months Ended
Year Ended
December 31,
2009
December 31,
2008
December 31,
2009
December 31,
2008
North America (U.S. and Canada) $ 109,911 $ 89,947 $ 351,378 $
361,438 Asia Pacific 11,075 14,015 39,392 46,445 Caribbean and
Latin America (includes Mexico) 8,768 7,253 32,817 30,666 Europe,
Middle East and Africa 13,367 13,785
54,101 63,063 Subtotal non- North
American Revenue 33,210 35,053
126,310 140,174 Revenues excluding Off-Network
Database Queries 143,121 125,000 477,688 501,612 Off-Network
Database Queries 806 923 5,303
4,744 Total Revenues $ 143,927 $
125,923 $ 482,991 $ 506,356 (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 Year Ended
December 31,
2009
December 31,
2008
December 31,
2009
December 31,
2008
Reconciliation to adjusted EBITDA Net income $ 18,289
$ 17,252 $ 68,371 $ 78,464 Interest expense, net 6,931 8,451 28,567
35,352 Provision for income taxes 10,026 10,579 37,771 46,797
Depreciation and amortization 18,191 14,111 60,397 55,344
Restructuring 2,583 - 2,583 (29 ) Non-cash stock compensation 2,651
1,467 7,939 5,205 BSG Wireless transition expenses 683 3,482 6,819
13,159 Messaging acquisition and transition expenses 2,910
- 4,666 - Adjusted
EBITDA $ 62,264
$ 55,342 $ 217,113 $ 234,292
Three
Months Ended Year Ended
December 31,
2009
December 31,
2008
December 31,
2009
December 31,
2008
Reconciliation to adjusted net income and cash net income
Net income $ 18,289 $ 17,252 $ 68,371 $ 78,464 Add provision for
income taxes 10,026 10,579
37,771 46,797 Income before provision for
income taxes 28,315
27,831 106,142 125,261 Restructuring 2,583 - 2,583 (29 )
Non-cash stock compensation 2,651 1,467 7,939 5,205 BSG Wireless
transition expenses 683 3,482 6,819 13,159 Messaging acquisition
and transition expenses 2,910 - 4,666 - Purchase accounting
amortization 9,041 7,293 29,769
28,650 Adjusted income before provision for
income taxes 46,183
40,073 157,918 172,246 Less assumed provision for income
taxes at 37.5% for 2009 and 39% for 2008 (17,319 )
(15,628 ) (59,219 ) (67,176 ) Adjusted net
income 28,864 24,445 98,699
105,070 Add cash savings of tax deductible goodwill(1)
2,689 2,301 9,592
9,204 Cash net income $ 31,553 $ 26,746
$ 108,291
$ 114,274 Adjusted net income per share $ 0.42 $ 0.36
$ 1.45 $ 1.55 Cash net income per share $ 0.46 $ 0.39 $ 1.59 $ 1.69
Diluted shares outstanding 68,443 67,817 68,153 67,731 (1)
Represents the cash benefit realized currently as a result of the
tax deductibility of goodwill amortization.
Three
Months Ended Year Ended
December 31,
2009
December 31,
2008
December 31,
2009
December 31,
2008
Reconciliation to operating free cash flow Net cash provided
by operating activities $ 59,297 $ 54,056 $ 142,373 $ 163,972
Capital expenditures (10,627 ) (11,413 ) (37,654 ) (40,819 ) Change
in working capital due to payment of BSG pre-acquisition
contractual obligation - - -
5,440 Operating Free Cash Flow $ 48,670
$ 42,643 $ 104,719 $ 128,593
Supplemental cash flow information: Cash interest paid $ 3,429 $
5,036 $ 26,790 $ 36,054 Cash income taxes paid 5,738 2,051 29,182
11,110
Syniverse Holdings, Inc. Consolidated
Balance Sheets (In thousands except per share
information) Year Ended
December 31,
2009
December 31,
2008
ASSETS Current assets: Cash $ 91,934 $ 165,605 Accounts
receivable, net of allowances of $7,290 and $2,347, respectively
126,127 88,782 Prepaid and other current assets 34,622
20,971 Total current assets 252,683
275,358 Property and equipment, net
64,315 50,251 Capitalized software, net 75,249 60,184 Deferred
costs, net 7,388 7,288 Goodwill 685,710 596,662 Identifiable
intangibles, net 234,938 208,518 Other assets 3,250
1,573 Total assets $ 1,323,533 $ 1,199,834
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 15,785 $ 7,311 Accrued payroll and
related benefits 9,832 20,111 Accrued interest 5,150 5,160 Accrued
income taxes 1,468 9,891 Deferred revenues 6,197 4,260 Other
accrued liabilities 40,886 28,975 Current portion of Term Note B
3,452 3,431 Total current liabilities
82,770 79,139 Long-term liabilities:
Deferred tax liabilities 98,368 65,546 7 3/4% senior subordinated
notes due 2013 175,000 175,000 Term Note B, less current maturities
334,012 335,382 Other long-term liabilities 9,534
8,925 Total liabilities 699,684
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; 69,574,505
shares issued and 69,382,507 shares outstanding and 68,847,632
shares issued and 68,455,634 shares outstanding at December 31,
2009 and December 31, 2008, respectively 69 68 Additional paid-in
capital 483,227 471,524 Retained earnings 152,276 83,315
Accumulated other comprehensive loss (12,204 ) (19,035 ) Common
stock held in treasury, at cost; 191,998 and 391,998 at December
31, 2009 and December 31, 2008, respectively (15 )
(30 ) Total Syniverse Holdings Inc. stockholders' equity 623,353
535,842 Noncontrolling interest 496 -
Total equity 623,849 535,842 Total
liabilities and stockholders' equity $ 1,323,533 $ 1,199,834
Syniverse Holdings, Inc Consolidated
Statement of Cash Flows (In thousands except per share
information) Year Ended
December 31,
2009
December 31,
2008
December 31,
2007
Cash flows from operating activities Net income $
68,371 $ 78,464 $ 52,419 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation and
amortization including amortization of deferred debt issuance costs
62,125 57,115 44,104 Provision for (recovery of) uncollectible
accounts 644 24 (169 ) Deferred income tax expense 27,446 25,751
26,127 Stock-based compensation 7,939 5,205 3,564 Other, net 82
3,198 1,075 Changes in operating assets and liabilities, net of
acquisitions: Accounts receivable (7,205 ) (10,999 ) 211 Other
current assets (11,509 ) (1,317 ) (733 ) Accounts payable (9,917 )
10,499 2,469 Other current liabilities 4,027 (3,875 ) (9,126 )
Other assets and liabilities 370 (93 )
1,321 Net cash provided by operating activities
142,373 163,972 121,262
Cash flows from investing activities Capital expenditures
(37,654 ) (40,819 ) (27,665 ) Acquisition of VM3 (174,503 ) - -
Acquisition of WSI, net of acquired cash (3,099 ) - - Acquisition
of BSG Wireless, net of acquired cash - (823 ) (273,553 )
Acquisition of ITHL, net of acquired cash - -
(735 ) Net cash used in investing activities
(215,256 ) (41,642 ) (301,953 )
Cash flows
from financing activities Debt issuance costs paid - - (7,180 )
Borrowings under Term Note B - - 290,000 Principal payments on
senior credit facility (3,444 ) (3,510 ) (81,566 ) Issuances of
stock under employee stock purchase plan 932 823 730 Issuances of
stock for stock options exercised 2,662 1,987 670 Minimum tax
withholding on restricted stock awards (498 ) (681 ) (378 ) Excess
tax benefit from stock-based compensation 684 479 - Purchase of
treasury stock - (1 ) (1 ) Capital contribution from noncontrolling
interest in a joint venture 981 -
- Net cash provided by (used in) financing activities
1,317 (903 ) 202,275
Effect of exchange rate changes on cash (2,105 )
(4,908 ) 798 Net (decrease) increase in cash
(73,671 ) 116,519 22,382 Cash at beginning of period 165,605
49,086 26,704 Cash at end
of period $ 91,934 $ 165,605 $ 49,086
Supplemental cash flow information Interest paid $ 26,790 $
36,054 $ 24,477 Income taxes paid 29,182 11,110 6,042
Syniverse Holdings, Inc. Reconciliation of Non GAAP
Measures to GAAP (unaudited) (In millions)
2010E 2010E Low High Reconciliation
to adjusted EBITDA Net income $ 70.5 $ 82.5 Interest expense,
net 27.0 27.0 Provision for income taxes 47.0 55.0 Depreciation and
amortization 76.5 76.5 Non-cash stock compensation 13.0 13.0
Messaging transition expenses 5.0 5.0
Adjusted EBITDA $ 239.0 $ 259.0
Reconciliation to adjusted net income and cash net income
Net income $ 70.5 $ 82.5 Add provision for income taxes 47.0
55.0 Income before provision for income taxes
117.5 137.5 Adjustments to income before provision for
income taxes Purchase accounting amortizations 37.0 37.0
Non-cash stock compensation 13.0 13.0 Messaging transition expenses
5.0 5.0 Adjusted income before
provision for income taxes 55.0 55.0 Less assumed provision
for income taxes (63.6 ) (72.6 )
Adjusted net income
108.9 119.9 Add cash savings of tax deductible goodwill(1)
11.1 11.1
Cash net income $ 120.0 $
131.0 (1) Represents the cash benefit realized
currently as a result of the tax deductibility of goodwill
amortization.
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