EXHIBIT 99.1
BOSTON COMMUNICATIONS GROUP REPORTS FOURTH QUARTER AND FULL YEAR 2003 RESULTS
Woburn, MA – February 3, 2004 - Boston Communications Group, Inc. (Nasdaq: BCGI) today announced that its consolidated GAAP net income for the fourth quarter ended December 31, 2003 totaled $4.5 million, or $0.24 per share, including $1.0 million, or $0.03 per share after taxes in legal charges for the Freedom Wireless lawsuit. This was the fourth consecutive quarter of record breaking earnings, and represented a 135% increase over net income of $1.9 million, or $0.11 per share, for the fourth quarter of 2002. Total revenues for the fourth quarter increased 24% to $26.2 million from $21.1 million in the fourth quarter of 2002 but decreased by $1.3 million, or 5% sequentially, from the third quarter of 2003.
For the full year ended December 31, 2003,bcgi reported record GAAP net income of $16.1 million, or $0.87 per share, which includes $4.0 million, or $0.13 per share after taxes, in legal charges. This increase is 381% higher than GAAP net income of $3.4 million, or $0.19 per share, for the year ended December 31, 2002, which included $0.15 per share in legal charges after taxes. These results reflect the Company’s continued gains from operating leverage and scale.
The increase in GAAP earnings for the three month period was principally driven by Billing and Transaction Processing Services (BTPS) revenues, which increased 38% over the same quarter in the prior year. The increase in earnings for the full year ended December 31, 2003 resulted principally from an increase of 61% in BTPS revenues to $94.5 million.bcgi’s record results were particularly notable as the Company continued its investment in product development, increasing its annual engineering, research and development expenditures 43% from $9.0 million in 2002 to $12.9 million in 2003, while maintaining this cost at about 12.5% of total revenues. Investments include enhanced features, functionality and new products to strengthen and diversify the Company’s business.
Billing and Transaction Processing Services Drives GAAP Earnings Gains
Billing and Transaction Processing Services, which include the Company’s Prepaid Wireless Services, Voyager Billing and Customer Care, and Payment Services businesses, generated revenues of $24.7 million in the fourth quarter of 2003. This represents a 38% increase over the fourth quarter of 2002 and was consistent with the third quarter of 2003. Gross margins on BTPS revenues improved to 78% compared to 73% in the fourth quarter of 2002 and 77% in the third quarter of 2003. The significant increase in gross margin compared to the 2002 fourth quarter was driven by higher revenues and the Company’s ongoing success in leveraging and managing resources. The increase in margin compared to the third quarter was attributable to a non-recurring reduction of certain expenses. Total prepaid wireless subscribers increased 217,000 from the third quarter to 3.79 million, 31% higher than December 31, 2002.
Total billed minutes of use decreased modestly during the quarter to 110 minutes per month per subscriber, but increased 5% over the same period in 2002.
After capital expenditures of $6.2 million in the fourth quarter, the Company generated free cash flow of $5.0 million, yielding $66.5 million in cash and investments at December 31, 2003. Free cash flow for the year was $11.4 million, driven by strong profits and is after annual capital expenditures of $33 million, which includes the purchase of the Company’s state-of-the-art data center in the first quarter.
“Our continued strong financial results are highlighted by our ongoing success in generating robust profits and free cash flow,” commented E. Y. Snowden, President and CEO. “Our long-term strategic focus and ongoing ability to prudently manage our costs resonate throughout our business. Additionally, strategic investments in research and development and other components of product development have successfully enabled us to leverage our core competencies for product enhancement and diversification opportunities. We expect that we will continue to invest at higher levels in research and development, as well as marketing initiatives as we launch and promote new products, applications and features in 2004. The investments we have made and will continue to make have led to many successes, including our multi-year contract with Nextel Communications Inc. (NASDAQ: NXTL), which we disclosed in an 8K filing today.
While net subscriber additions were ahead of the guidance we provided in October 2003, they were still lower than normal for a holiday period. As we expected, many carrier’s marketing strategies during the fourth quarter were focused on attracting and retaining postpaid subscribers in the wake of Wireless Local Number Portability, as well as next generation data applications. We believe these initiatives will continue to weigh on our seasonal prepaid subscriber additions during the first quarter of 2004. In addition to costs related to the new business we just announced, we also expect to invest in the development and promotion of exciting new products and enhancements, to be commercially launched early this year. Accordingly, we anticipate GAAP earnings will approximate $0.19 to $0.21 per share for the first quarter of 2004, including approximately $0.03 per share in estimated legal costs, primarily to defend the Freedom Wireless lawsuit. We enter 2004 well positioned to achieve our diversification plans while continuing to prove the competitive advantages of our services and platform. We remain focused and committed to executing on the long-term success ofbcgi.”
Roaming Services Business Discontinued
As industry consolidation and other changes in the fundamentals of inter-carrier roaming have evolved, the environment for our ROAMERplus business has changed significantly over the past few years. As a result, the Company has announced that it is winding down this business with final shutdown anticipated to be completed in the first half of 2004. There are no material costs expected to be recorded for the closure of this business and upon final shutdown it will be reported as a discontinued operation.
Conference Call
The Company will be holding a conference call and webcast at 5:00PM on Tuesday, February 3rd, 2004 to discuss results for the period ended December 31, 2003 and management’s outlook. The Company’s President and CEO, E.Y. Snowden, and Chief Financial Officer, Karen A. Walker, will host the call. Parties interested in listening to the call should dial 1-800-423-5972 at least 10 minutes prior to the start of the call. For those unable to participate at the designated time, a replay will be available for one year following the call via telephone at 1-800-642-1687 (conf id 4951184) and on the web at www.bcgi.net.
ABOUT THE COMPANY
Boston Communications Group, Inc. (NASDAQ: BCGI), an S&P Small Cap 600 Index company and Russell 2000 Index company, is a leader in transaction processing solutions for real-time wireless subscriber management, payment services, billing and customer care. Through these solutions,bcgi delivers prepaid and postpaid billing, wireless account recharge and mobile commerce. Founded in 1988,bcgi provides solutions to carriers through a combination of its industry-leading, proprietary software applications, world-class infrastructure and data centers, expertise in telecommunications platform integration, and flexible implementation models.bcgi provides one or more of its solutions to more than 100 wireless operators worldwide, including five of the top six U.S. carriers. Please visit thebcgi Web site at http://www.bcgi.net.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This press release contains, in addition to historical information, forward-looking statements that involve risks and uncertainties including statements regarding earnings per share estimates and estimates of future legal expenses. Such statements are based on management’s current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Among the important factors that would cause actual results to differ materially from those indicated by such forward looking statements are the loss of a customer or certain of their markets, specifically, Verizon Wireless and Cingular Wireless who represented 51% and 23%, respectively, of the Company’s consolidated revenues for the year ended December 31, 2003, or greater than expected pricing reductions from major carrier customers, network outages that can cause reductions in revenue due to penalty clauses contained in certain of our carrier customer contracts, an unfavorable judgment in the Freedom Wireless suit which could result in substantial damages and could significantly restrict bcgi’s ability to conduct business, as well as the others factors that may affect future operating results detailed in bcgi’s quarterly report on Form 10-Q for the quarter ended September 30, 2003 and annual report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission.
Contact Information:
Email inquiries – investor_relations@bcgi.net
FRB | Weber Shandwick:
Alison Ziegler, General Inquiries (212) 445-8432
Peter Seltzberg, Investor Inquiries (212) 445-8457
BOSTON COMMUNICATIONS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| Three Months Ended | Year Ended | |||||||||||
| 12/31/03 | 12/31/02 | 12/31/03 | 12/31/02 | |||||||||
| (Unaudited) | (Audited) | |||||||||||
Revenues: | ||||||||||||
Billing and transaction processing services | $ | 24,655 | $ | 17,882 | $ | 94,495 | $ | 58,864 | ||||
Roaming services | 629 | 1,207 | 3,404 | 6,224 | ||||||||
Prepaid systems | 902 | 2,031 | 5,292 | 5,772 | ||||||||
| 26,186 | 21,120 | 103,191 | 70,860 | |||||||||
Expenses: | ||||||||||||
Cost of billing and transaction processing services revenues | 5,433 | 4,899 | 22,212 | 16,994 | ||||||||
Cost of roaming services revenues | 709 | 1,175 | 3,389 | 5,890 | ||||||||
Cost of prepaid system revenues | 644 | 800 | 2,788 | 2,535 | ||||||||
Total cost of revenues | 6,786 | 6,874 | 28,389 | 25,419 | ||||||||
Gross margin | 19,400 | 14,246 | 74,802 | 45,441 | ||||||||
Engineering, research and development | 3,308 | 2,651 | 12,904 | 9,014 | ||||||||
Sales and marketing | 1,386 | 1,365 | 6,087 | 4,447 | ||||||||
General and administrative | 1,779 | 1,704 | 7,654 | 6,078 | ||||||||
General and administrative – legal expense (1) | 1,000 | 998 | 3,990 | 4,295 | ||||||||
Depreciation and amortization | 4,999 | 4,682 | 19,336 | 17,558 | ||||||||
Total operating expenses | 12,472 | 11,400 | 49,971 | 41,392 | ||||||||
Operating income | 6,928 | 2,846 | 24,831 | 4,049 | ||||||||
Interest income | 289 | 338 | 1,214 | 1,552 | ||||||||
Income before income taxes | 7,217 | 3,184 | 26,045 | 5,601 | ||||||||
Provision for income taxes | 2,742 | 1,279 | 9,901 | 2,245 | ||||||||
Net income | $ | 4,475 | $ | 1,905 | $ | 16,144 | $ | 3,356 | ||||
Basic Net Income Per Share: | ||||||||||||
Net income | $ | .25 | $ | .11 | $ | .90 | $ | .20 | ||||
Weighted average common shares outstanding | 18,247 | 17,236 | 17,984 | 17,134 | ||||||||
Diluted Net Income Per Share: | ||||||||||||
Net income | $ | .24 | $ | .11 | $ | .87 | $ | .19 | ||||
Weighted average common shares outstanding | 18,516 | 18,053 | 18,663 | 17,637 | ||||||||
Notes to Condensed Consolidated Statements of Operations:
| (1) | General and administrative – legal expenses consists primarily of legal fees to defend the patent infringement suit brought by Freedom Wireless. |
SEGMENT INFORMATION
($ in thousands)
(Unaudited) Quarter ended December 31, | Billing and Services | Prepaid Systems | Roaming Services | Total | ||||||||||||
2003 | ||||||||||||||||
Revenues | $ | 24,655 | $ | 902 | $ | 629 | $ | 26,186 | ||||||||
Gross margin | 19,222 | 258 | (80 | ) | 19,400 | |||||||||||
Gross margin percentage | 78 | % | 29 | % | (13 | )% | 74 | % | ||||||||
2002 | ||||||||||||||||
Revenues | $ | 17,882 | $ | 2,031 | $ | 1,207 | $ | 21,120 | ||||||||
Gross margin | 12,983 | 1,231 | 32 | 14,246 | ||||||||||||
Gross margin percentage | 73 | % | 61 | % | 3 | % | 67 | % | ||||||||
(Audited) Year ended December 31, | Billing and Services | Prepaid Systems | Roaming Services | Total | ||||||||||||
2003 | ||||||||||||||||
Revenues | $ | 94,495 | $ | 5,292 | $ | 3,404 | $ | 103,191 | ||||||||
Gross margin | 72,283 | 2,504 | 15 | 74,802 | ||||||||||||
Gross margin percentage | 76 | % | 47 | % | 0 | % | 72 | % | ||||||||
2002 | ||||||||||||||||
Revenues | $ | 58,864 | $ | 5,772 | $ | 6,224 | $ | 70,860 | ||||||||
Gross margin | 41,870 | 3,237 | 334 | 45,441 | ||||||||||||
Gross margin percentage | 71 | % | 56 | % | 5 | % | 64 | % | ||||||||
[BCGI LETTERHEAD APPEARS HERE]
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(in thousands and audited)
| ASSETS | December 31, | |||||
| 2003 | 2002 | |||||
Current assets: | ||||||
Cash and short-term investments | $ | 66,513 | $ | 55,075 | ||
Accounts receivable, net of allowance for billing adjustments and doubtful accounts of $878 in 2003 and $966 in 2002 | 18,386 | 15,739 | ||||
Prepaid expenses and other assets | 2,800 | 2,328 | ||||
Deferred income taxes | 1,260 | 1,603 | ||||
Total current assets | 88,959 | 74,745 | ||||
Property and equipment, net | 58,638 | 44,896 | ||||
Goodwill and other assets | 6,994 | 5,114 | ||||
Total assets | $ | 154,591 | $ | 124,755 | ||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable and accrued expenses | $ | 18,755 | $ | 19,564 | ||
Total current liabilities | 18,755 | 19,564 | ||||
Non-current liabilities: | ||||||
Accrued pension liability | 632 | — | ||||
Deferred income taxes | 7,003 | 3,452 | ||||
Total non-current liabilities | 7,635 | 3,452 | ||||
Shareholders’ equity: | ||||||
Common stock and additional paid-in capital | 110,971 | 100,653 | ||||
Retained earnings | 17,230 | 1,086 | ||||
Total shareholders’ equity | 128,201 | 101,739 | ||||
Total liabilities and shareholders’ equity | $ | 154,591 | $ | 124,755 | ||
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