EXHIBIT 99.1
BOSTON COMMUNICATIONS GROUP REPORTS
FOURTH QUARTER AND FULL YEAR 2004 RESULTS
Woburn, MA – February 1, 2005 - Boston Communications Group, Inc. (Nasdaq: BCGI) today announced that its consolidated net income for the fourth quarter ended December 31, 2004 totaled $4.0 million, or $0.22 per share. While net income decreased 12% compared to net income of $4.5 million, or $0.24 per share, for the fourth quarter of 2003, earnings exceeded the Company’s guidance provided on October 20, 2004 principally due to lower than expected costs on slightly higher than expected revenues, and a non-recurring tax benefit of approximately $500,000, resulting from a state tax investment credit recognized in the quarter ended December 31, 2004. Total revenues for the fourth quarter ended December 31, 2004 increased 2% to $26.0 million from $25.6 million in the fourth quarter of 2003, but decreased by $1.0 million, or 4% sequentially, from the third quarter of 2004.
For the full year ended December 31, 2004,bcgi reported net income of $17.2 million, or $0.94 per share. These results are 7% higher than net income of $16.1 million, or $0.87 per share, for the year ended December 31, 2003. Total revenues for the year ended December 31, 2004 were $107.9 million or 8% higher than 2003 annual revenues of $99.8 million. Cash and short-term investments increased $6.9 million during the fourth quarter to a record $77.8 million as of December 31, 2004.
The Company continued its investment in product development during 2004 in support of its customer and product diversification efforts, resulting in a 17% increase in annual engineering, research and development expenditures. The gross margin for the three months ended December 31, 2004 was 76%, consistent with the same period in the prior year and 2% greater than the gross margin for the third quarter of 2004.
As of December 31, 2004,bcgi had 3.77 million prepaid wireless subscribers, consistent with December 31, 2003, and a decrease of 135,000 from September 30, 2004. Total average billed minutes of use per subscriber per month was 111 minutes, a 1% increase over the fourth quarter of 2003 and 3% higher than the three months ended September 30, 2004.
Outlook
The Company anticipates GAAP earnings will approximate $0.05 to $0.09 per share for the quarter ending March 31, 2005. Earnings estimates reflect the previously announced expectation that Verizon Wireless will continue to convert subscribers frombcgi’s platform to its internal platform, which is expected to be completed by the third quarter of 2005. In addition, the Company anticipates, as previously announced, that it will
continue to have fewer gross additions from Cingular Wireless. The Company also plans to continue to invest in its customer and product diversification strategy which includes support for its Mobile Guardian product and expansion into new wireless markets, both domestically and internationally, including the developing MVNO market. These strategic initiatives are expected to result in increases in cost of revenues and sales and marketing in the form of additional resources to support product development and marketing investments.
The Freedom Wireless trial is expected to begin on February 28, 2005, later than previously indicated due to a court procedural decision. Legal costs during the first quarter of 2005 are anticipated to be higher than previous quarters due to the commencement of the trial, resulting in estimated legal costs of $0.05 to $0.06 per share.
Comments from Management
“Supported by our focused investment in people and products, we achieved our strategic growth objectives in 2004 by continuing to diversify our customer base,” said E.Y. Snowden, president and chief executive officer. “Even with our continued investment initiatives, we were able to strengthen our financial position and ended the year with record net income and nearly $78 million in cash. In addition, our success in diversifying our revenue sources is evident as overall fourth quarter corporate revenues declined only 4%, while aggregate revenues from Verizon Wireless and Cingular Wireless declined 16% sequentially.”
Mr. Snowden continued, “Looking ahead we remain focused on supporting our customers with applications that help them grow their businesses. We will also continue to prudently invest in areas that strengthen existing customer relationships and extend the appeal and reach of our products and services in the global wireless marketplace. We believe the dedication of our talented employees, strong financial position and our legacy as an industry innovator position us well to deliver long-term profitable growth and increased value to our shareholders.”
Conference Call
The Company will be holding a conference call and webcast at 5:00PM on Tuesday, February 1, 2005 to discuss results for the period ended December 31, 2004 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 3390339) and on the web at www.bcgi.net.
ABOUT THE COMPANY
Boston Communications Group, Inc. (NASDAQ: BCGI) develops products and services that enable wireless operators to fully realize the potential of their networks.bcgi’s access
management, billing, payment and network solutions help operators rapidly deploy and manage innovative voice and data services for subscribers. Available as licensed products and fully managed services,bcgi’s solutions power carriers and enable MVNOs with market-leading implementations of prepaid wireless, postpaid billing, wireless account funding and m-commerce.bcgi was founded in 1988 and is listed on the S&P Small Cap 600 and Russell 2000 indices. For more information, visitwww.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, estimates of future legal expenses and expectations regarding new product offerings and expansion into new markets. 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, Cingular Wireless and Nextel Communications, who represented 43%, 22% and 14%, respectively, of the Company’s consolidated revenues for the year ended December 31, 2004, and 34%, 21% and 22%, respectively, for the three months ended December 31, 2004 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, the ability to market and sell new solutions to wireless carriers, as well as the others factors that may affect future operating results detailed in bcgi’s quarterly report on Form 10-Q for the three months ended September 30, 2004 and annual report on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission.
Contact Information:
Email inquiries—investor_relations@bcgi.net
Financial Relations Board:
Joe Calabrese, Investor Inquiries (212) 827-3772
BOSTON COMMUNICATIONS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
| Three Months Ended | Year Ended | |||||||||||||
| 12/31/04 | 12/31/03 | 12/31/04 | 12/31/03 | |||||||||||
| (Unaudited) | (Audited) | |||||||||||||
Revenues: | ||||||||||||||
Total revenues | $ | 26,013 | $ | 25,557 | $ | 107,928 | $ | 99,787 | ||||||
Expenses: | ||||||||||||||
Total cost of revenues | 6,318 | 6,077 | 26,047 | 25,000 | ||||||||||
Gross margin (1) | 19,695 | 19,480 | 81,881 | 74,787 | ||||||||||
Engineering, research and development | 4,062 | 3,308 | 15,049 | 12,904 | ||||||||||
Sales and marketing | 1,617 | 1,386 | 6,723 | 6,087 | ||||||||||
General and administrative | 2,203 | 1,779 | 8,369 | 7,654 | ||||||||||
General and administrative – legal expense (2) | 941 | 1,000 | 2,991 | 3,990 | ||||||||||
Depreciation and amortization | 5,479 | 4,999 | 22,332 | 19,336 | ||||||||||
Total operating expenses | 14,302 | 12,472 | 55,464 | 49,971 | ||||||||||
Operating income | 5,393 | 7,008 | 26,417 | 24,816 | ||||||||||
Interest income | 303 | 289 | 1,188 | 1,214 | ||||||||||
Income before income taxes | 5,696 | 7,297 | 27,605 | 26,030 | ||||||||||
Provision for income taxes | 1,739 | 2,773 | 10,394 | 9,895 | ||||||||||
Net income from continuing operations | 3,957 | 4,524 | 17,211 | 16,135 | ||||||||||
Discontinued operations (3): | ||||||||||||||
Income (loss) from discontinued operations, before taxes | — | (80 | ) | (19 | ) | 15 | ||||||||
Income tax expense /(benefit) from discontinued operations | — | (31 | ) | (8 | ) | 6 | ||||||||
Net income / (loss) from discontinued operations | — | (49 | ) | (11 | ) | 9 | ||||||||
Net income | $ | 3,957 | $ | 4,475 | $ | 17,200 | $ | 16,144 | ||||||
Basic Net Income Per Share: | ||||||||||||||
Continuing operations | $ | 0.23 | $ | 0.25 | $ | 0.96 | $ | 0.90 | ||||||
Net income | $ | 0.23 | $ | 0.25 | $ | 0.96 | $ | 0.90 | ||||||
Weighted average common shares outstanding | 17,566 | 18,247 | 17,918 | 17,984 | ||||||||||
Diluted Net Income Per Share: | ||||||||||||||
Continuing operations | $ | 0.22 | $ | 0.24 | $ | 0.94 | $ | 0.86 | ||||||
Net income | $ | 0.22 | $ | 0.24 | $ | 0.94 | $ | 0.87 | ||||||
Weighted average common shares outstanding | 17,835 | 18,516 | 18,256 | 18,633 | ||||||||||
Notes to Condensed Consolidated Statements of Operations:
| (1) | Gross margin does not include depreciation and amortization, which is shown separately. |
| (2) | General and administrative – legal expenses consists primarily of legal fees to defend the patent infringement suit brought by Freedom Wireless. |
| (3) | The Company’s Roaming Service business was discontinued in the quarter ended March 31, 2004. 2003 amounts have been restated to reflect Roaming Services as discontinued operations. |
| (4) | The Company no longer classifies its Prepaid Systems segment separately as it no longer qualifies for separate disclosure under SFAS No. 131 “Segment Reporting.” |
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(in thousands and audited)
| ASSETS | December 31, | |||||
| 2004 | 2003 | |||||
Current assets: | ||||||
Cash and short-term investments | $ | 77,752 | $ | 66,513 | ||
Accounts receivable, net of allowance for billing adjustments and doubtful accounts of $474 in 2004 and $878 in 2003 | 17,358 | 18,386 | ||||
Prepaid expenses and other assets | 2,907 | 2,800 | ||||
Deferred income taxes | 319 | 1,260 | ||||
Total current assets | 98,336 | 88,959 | ||||
Property and equipment, net | 55,559 | 58,638 | ||||
Intangible assets | 2,450 | 920 | ||||
Goodwill | 4,753 | 4,177 | ||||
Other assets | 6,913 | 1,897 | ||||
Total assets | $ | 168,011 | $ | 154,591 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable and accrued expenses | $ | 15,289 | $ | 14,967 | ||
Deferred/unearned revenue | 3,753 | 3,788 | ||||
Total current liabilities | 19,042 | 18,755 | ||||
Non-current liabilities: | ||||||
Accrued pension liability | 3,476 | 632 | ||||
Deferred income taxes | 7,046 | 7,003 | ||||
Total non-current liabilities | 10,522 | 7,635 | ||||
Shareholders’ equity: | ||||||
Common stock and additional paid-in capital | 104,246 | 110,971 | ||||
Retained earnings | 34,201 | 17,230 | ||||
Total shareholders’ equity | 138,447 | 128,201 | ||||
Total liabilities and shareholders’ equity | $ | 168,011 | $ | 154,591 | ||
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands and audited)
| Year ended December 31, | ||||||||
| 2004 | 2003 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income from continuing operations | $ | 17,211 | $ | 16,135 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 22,332 | 19,336 | ||||||
Deferred income taxes | 1,044 | 3,894 | ||||||
Income tax benefit from exercise of stock options | 129 | 3,455 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 931 | (3,257 | ) | |||||
Prepaid expenses and other assets | (588 | ) | (511 | ) | ||||
Accounts payable, accrued expenses and deferred revenue | 60 | (849 | ) | |||||
Other non-current liabilities | 895 | 632 | ||||||
Net cash provided by operating activities of continuing operations | 42,014 | 38,835 | ||||||
Income (loss) from discontinued operations | (11 | ) | 9 | |||||
Net change in operating assets and liabilities of discontinued operations | (279 | ) | 226 | |||||
Net cash provided by (used in) operating activities of discontinued operations | (290 | ) | 235 | |||||
Net cash provided by operations | 41,724 | 39,070 | ||||||
INVESTING ACTIVITIES | ||||||||
Acquisition of business and payment of earnout | (1,773 | ) | — | |||||
Purchases of long-term investments | (2,740 | ) | (1,657 | ) | ||||
Purchases of short-term investments, net of sales | (4,823 | ) | (22,869 | ) | ||||
Purchase of property and equipment | (18,983 | ) | (32,838 | ) | ||||
Net cash used in investing activities | (28,319 | ) | (57,364 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Proceeds from exercise of stock options and employee stock purchase plan | 1,283 | 6,908 | ||||||
Repurchase of common stock | (8,181 | ) | — | |||||
Net cash provided by (used in) financing activities | (6,898 | ) | 6,908 | |||||
Increase (decrease) in cash and cash equivalents | 6,507 | (11,386 | ) | |||||
Cash and cash equivalents at beginning of period | 2,960 | 14,346 | ||||||
Cash and cash equivalents at end of period | $ | 9,467 | $ | 2,960 | ||||