Exhibit 99.1
FOR IMMEDIATE RELEASE
Syniverse Reports First Quarter 2008 Results
TAMPA, Fla. – May 6, 2008 –Syniverse Holdings, Inc. (NYSE: SVR), a leading provider of technology and business solutions for the global telecommunications industry, today reported results for the first quarter 2008.
• | Total revenues were $115.6 million for first quarter 2008, a 37.1% increase compared to first quarter 2007. |
• | Net revenues, which exclude off-network database queries or pass-through revenue, were $114.6 million for first quarter 2008, a 38.5% increase compared to first quarter 2007. |
• | Net income was $15.4 million in first quarter 2008, a 101.3% increase compared to first quarter 2007. |
• | Net income per diluted share was $0.23 in first quarter 2008, a 99.7% increase compared to first quarter 2007. |
• | Cash net income, a non-GAAP financial measure, was $25.0 million for first quarter 2008, a 76.3% increase compared to first quarter 2007. Cash net income reflects the positive cash impact resulting from the significant difference in amortization of goodwill for financial reporting and tax purposes, and is determined by adding the cash savings arising from the tax deductible goodwill amortization to adjusted net income. |
• | Cash net income per diluted share was $0.37 in first quarter 2008, a 74.8% increase compared to first quarter 2007. |
• | Adjusted EBITDA, a non-GAAP financial measure, was $53.0 million for first quarter 2008, a 72.8% increase compared to first quarter 2007. |
“Syniverse reported a strong first quarter driven by continued strength in messaging and mobile data,,” said Tony Holcombe, President and CEO, Syniverse. “The acquisition of BSG Wireless has significantly increased our global focus, while adding a complementary financial clearing service. The integration is successfully underway. And there have been no surprises, and our plan is on schedule. We continue to anticipate $12 million of annualized cost synergies as we integrate the two businesses.”
Chief Financial Officer David Hitchcock added, “Syniverse continues to see a favorable mix shift towards technology interoperability while diversifying our revenue base globally, enabling us to generate $23.3 million of cash from operating activities. In addition, after $7.3 million of capex, we generated $15.9 million of operating free cash flow in the quarter.”
First quarter 2008 Service Line Revenue
Technology Interoperability Services
Technology interoperability services revenues were $68.7 million in first quarter 2008, an 81.8% increase compared to first quarter 2007. The increase included $12.8 million from BSG Wireless, which was included in Syniverse’s income statement beginning on January 1. Excluding revenues from BSG Wireless, technology interoperability grew 47.9% driven by strong increases in data services, such as SMS interoperability and mobile data roaming, growth in clearing house services, and growth in the company’s UniRoam product.
Network Services
Network services revenues were $29.7 million in first quarter 2008, a 2.2% decrease compared to first quarter 2007. First quarter results were impacted by customer migrations offset by increases in data networking and growth in the company’s Visibility product.
Number Portability Services
Number portability services revenues were $7.0 million in first quarter 2008, a 13.8% increase compared to first quarter 2007. Results were primarily due to full quarter revenues from new services provided to Canadian mobile operators in 2008 compared to a partial quarter in first quarter 2007.
Call Processing Services
Call processing services revenues were $8.4 million in first quarter 2008, a 16.4% increase compared to first quarter 2007. Performance was driven by strong increases in Signaling Solutions offset by continued declines in legacy fraud-related services.
Enterprise Solutions
Enterprise solutions revenues were $0.8 million in first quarter 2008.
Off-Network Database Queries (Pass-Through)
Pass-through revenues for first quarter 2008 were $1.1 million.
First quarter 2008 Business Highlights
• | Continued the integration of BSG Wireless, with significant progress in achieving SG&A synergies. |
• | Awarded 2008 “Best Roaming Product or Service” for DataNet anti-fraud product in the GSM Association’s (GSMA) 13th annual Global Mobile Awards at the Mobile World Congress. |
• | Continued gaining market traction from recent product introductions, including DataNet, GSM Visibility, and financial clearing house services. |
• | Appointed Jeff Gordon as Chief Technology Officer in January, succeeding Paul Wilcock, who retired. |
• | Appointed Alfred de Cárdenas as Executive Vice President of North America in March. |
Outlook
The company is revising guidance and providing the following outlook for 2008:
Net Revenues | $ | 455 | - | $ 465 million | |||||||
Net Income | $ | 59 | - | $ 64 million | |||||||
Adjusted EBITDA | $ | 207 | - | $ 214 million | |||||||
Cash Net Income | $ | 97 | - | $ 102 million |
Additionally, the company expects to generate operating free cash flow in excess of $108 million for 2008.
Syniverse expects to realize approximately $12 million of annualized run rate cost savings in connection with its integration of BSG Wireless. Approximately one-third of this total is expected to be realized by year end 2008, with the remainder to be realized in 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.
Non-GAAP Measures
Syniverse’s Adjusted Net Income is determined by adding the following to net income: provision for income taxes, restructuring, SFAS 123R non-cash compensation, purchase accounting amortization and BSG Wireless transition expenses to arrive at Adjusted Net Income before provision for income taxes. This adjusted pre-tax result is then further adjusted for a provision for income taxes at an assumed long-term tax rate of 39%, which excludes the effect of our NOLs.
Syniverse’s Cash Net Income is determined by adding the cash benefit of our tax-deductible goodwill to Adjusted Net Income. This benefit is a result of the differing treatments of approximately $362 million of goodwill on our balance sheet created primarily from our acquisitions from Verizon and of IOS North America. While not amortized for GAAP purposes, goodwill amortization is deductible in calculating our taxable income and, hence, reduces cash tax liabilities.
Syniverse’s Adjusted EBITDA is determined by adding the following to net income: interest expense, net, provision for income taxes, depreciation and amortization, restructuring, SFAS 123R non-cash compensation, and BSG Wireless transition expenses. A reconciliation of Adjusted EBITDA, Adjusted Net Income and Cash Net Income to net income is presented in the financial tables contained herein.
Syniverse’s Operating Free Cash Flow is determined by adding (or subtracting) the following to Net cash provided by operating activities: (capital expenditures), cash paid (received) in legal settlement and accrued but not yet paid acquisition earn-out.
We present Adjusted Net Income and Cash Net Income because we believe that Adjusted Net Income and Cash Net Income 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, and 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 the company’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. None of these non-GAAP measures should be reviewed without consideration of our net income, cash from operations and other GAAP measures.
We believe that Adjusted EBITDA, Operating Free Cash Flow, Adjusted Net Income and Cash Net Income are useful to investors to provide disclosures of our operating results on the same basis as that are used by our management. We also believe that 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 consider them in isolation or as a substitute for net income, cash flows from operating activities, and other consolidated income or cash flows statement data prepared in accordance with accounting principles generally accepted in the United States. 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, and Adjusted Net Income and Cash Net Income should not be considered as a replacement for net income. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA, Operating Free Cash Flow, Adjusted Net Income and Cash Net Income as supplemental information.
First quarter 2008 Earnings Call
Syniverse will host a conference call today at 4:30 p.m. ET to discuss these results and accompanying slides have been posted to the Syniverse website. To participate on this call, U.S. callers may dial toll-free 1-866-770-7129; international callers may dial direct (+1) 617-213-8067. The passcode for this call is 39041124. 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 shortly after the call concludes through May 20 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 61108448.
About Syniverse
Syniverse Technologies (NYSE:SVR) makes it possible for over 500 communications companies in more than 100 countries to address market changes and demands as they deliver everything from voice calls to sophisticated data and video services. By ensuring that disparate technologies and standards interoperate, Syniverse allows operators to provide seamless, interactive mobile services to their subscribers wherever and whenever they need them. 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 atwww.syniverse.com
Cautions about Forward-Looking Statements
This press release contains forward-looking statements, including statements about business outlook, strategy, net revenue, net income, adjusted EBTIDA, cash net income and operating free cash flow outlook for 2008, expected synergies and cost savings related to the integration of BSG Wireless, and statements about historical results that may suggest trends for our business. These statements are based on estimates and information available to us at the time of this press release and are not guarantees of future performance. Actual results could differ materially from our current expectations as a result of many factors, including: unpredictable quarterly fluctuations in our business; the effects of competition; adverse changes in our agreements with our vendors or partners; the impact of international expansion efforts on our business; changes in our tax status; risks or uncertainties inherent in or related to the integration of BSG Wireless (including unanticipated operating costs and business disruptions); and other risks and uncertainties described in our quarterly and annual reports filed with the Securities and Exchange Commission. These and other risks and uncertainties associated with our business are described in our filings with the Securities and Exchange Commission. We assume no obligation to update any forward-looking information contained in this press release as a result of new information, future events or otherwise.
# # #
Investor Relations Contact:
Jim Huseby, Syniverse Technologies
+1 (813) 637-5000
Syniverse Holdings, Inc
Condensed Consolidated Statements of Income (unaudited)
and Other Supplemental Information
(In thousands, except per share information)
Three Months Ended March 31, 2008 | Three Months Ended March 31, 2007 | |||||||
Technology Interoperability Services | $ | 68,701 | $ | 37,795 | ||||
Network Services | 29,741 | 30,424 | ||||||
Number Portability Services | 6,950 | 6,106 | ||||||
Call Processing Services | 8,389 | 7,208 | ||||||
Enterprise Solution | 786 | 1,191 | ||||||
Revenues excluding Off Network Database Queries | 114,567 | 82,724 | ||||||
Off Network Database Queries | 1,078 | 1,654 | ||||||
Total Revenues | 115,645 | 84,378 | ||||||
Cost of operations | 37,978 | 33,441 | ||||||
Gross Margin | 77,667 | 50,937 | ||||||
Gross Margin % | 67.2 | % | 60.4 | % | ||||
Gross Margin % before | ||||||||
Off Network Database Queries | 67.8 | % | 61.6 | % | ||||
Sales and marketing | 10,754 | 6,812 | ||||||
General and administrative | 18,142 | 13,987 | ||||||
Depreciation and amortization | 13,633 | 10,279 | ||||||
Restructuring | 17 | 1,782 | ||||||
Operating income | 35,121 | 18,077 | ||||||
Other expense, net | ||||||||
Interest expense, net | (9,290 | ) | (5,624 | ) | ||||
Other, net | 57 | 53 | ||||||
(9,233 | ) | (5,571 | ) | |||||
Income before provision for income taxes | 25,888 | 12,506 | ||||||
Provision for income taxes | 10,495 | 4,860 | ||||||
Net income | $ | 15,393 | $ | 7,646 | ||||
Net income per share | ||||||||
Basic | $ | 0.23 | $ | 0.11 | ||||
Diluted | $ | 0.23 | $ | 0.11 | ||||
Shares used in calculation | ||||||||
Basic | 67,509 | 67,221 | ||||||
Diluted | 67,909 | 67,353 | ||||||
Other Supplemental Information: | ||||||||
Revenue by region (1) (unaudited): | Quarter Ended March 31, 2008 | Quarter Ended March 31, 2007 | ||||||
North America | $ | 82,213 | $ | 65,352 | ||||
Asia Pacific | 10,218 | 9,721 | ||||||
Caribbean and Latin America | 7,859 | 5,190 | ||||||
Europe, Middle East and Africa | 14,277 | 2,461 | ||||||
Subtotal non- North American Revenue | 32,354 | 17,372 | ||||||
Revenues excluding Off Network Database Queries | 114,567 | 82,724 | ||||||
Off Network Database Queries | 1,078 | 1,654 | ||||||
Total Revenues | $ | 115,645 | $ | 84,378 | ||||
(1) | Based on "bill to" location on invoice. |
Syniverse Holdings, Inc.
Condensed Consolidated Balance Sheets
(In thousands except share amounts)
March 31, 2008 | December 31, 2007 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 64,525 | $ | 49,086 | ||||
Accounts receivable, net of allowances of $927 and $762, respectively | 84,244 | 79,378 | ||||||
Prepaid and other current assets | 16,091 | 12,240 | ||||||
Total current assets | 164,860 | 140,704 | ||||||
Property and equipment, net | 43,084 | 43,856 | ||||||
Capitalized software, net | 62,833 | 62,615 | ||||||
Deferred costs, net | 10,343 | 10,786 | ||||||
Goodwill | 630,249 | 616,304 | ||||||
Identifiable intangibles, net | 231,104 | 232,023 | ||||||
Other assets | 2,507 | 1,262 | ||||||
Total assets | $ | 1,144,980 | $ | 1,107,550 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 5,077 | $ | 5,006 | ||||
Accrued payroll and related benefits | 11,968 | 12,016 | ||||||
Accrued interest | 1,792 | 5,910 | ||||||
Deferred revenues | 4,511 | 5,327 | ||||||
Other accrued liabilities | 31,889 | 34,789 | ||||||
Current portion of Term Note B | 3,585 | 3,459 | ||||||
Total current liabilities | 58,822 | 66,507 | ||||||
Long-term liabilities: | ||||||||
Deferred tax liabilities | 57,579 | 43,587 | ||||||
7 3/4% senior subordinated notes due 2013 | 175,000 | 175,000 | ||||||
Term Note B, less current maturities | 353,097 | 344,476 | ||||||
Other long-term liabilities | 7,241 | 7,188 | ||||||
Total long-term liabilities | 592,917 | 570,251 | ||||||
Commitments and contingencies | ||||||||
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; 68,711,605 shares issued and 68,319,607 shares outstanding and 68,683,075 shares issued and 68,302,956 shares outstanding at March 31, 2008 and December 31, 2007, respectively | 68 | 68 | ||||||
Additional paid-in capital | 464,804 | 463,711 | ||||||
Retained earnings | 20,240 | 4,851 | ||||||
Accumulated other comprehensive income | 8,159 | 2,191 | ||||||
Common stock held in treasury, at cost; 391,998 and 380,119 at March 31, 2008 and December 31, 2007, respectively | (30 | ) | (29 | ) | ||||
Total stockholders’ equity | 493,241 | 470,792 | ||||||
Total liabilities and stockholders’ equity | $ | 1,144,980 | $ | 1,107,550 | ||||
Syniverse Holdings, Inc.
Condensed Consolidated Statement of Cash Flows (unaudited)
(In thousands)
Three Months Ended March 31, | ||||||||
2008 | 2007 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 15,393 | $ | 7,646 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization including amortization of deferred debt issuance costs | 14,076 | 10,496 | ||||||
Provision for uncollectible accounts | 169 | 78 | ||||||
Deferred income tax expense | 8,760 | 3,432 | ||||||
Stock-based compensation | 1,077 | 486 | ||||||
Loss on disposition of property | — | 294 | ||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||
Accounts receivable | (4,535 | ) | 1,207 | |||||
Other current assets | (3,546 | ) | (2,578 | ) | ||||
Accounts payable | 9 | (1,690 | ) | |||||
Other current liabilities | (8,178 | ) | 2,055 | |||||
Other assets and liabilities | 37 | (396 | ) | |||||
Net cash provided by operating activities | 23,262 | 21,030 | ||||||
Cash flows from investing activities | ||||||||
Capital expenditures | (7,341 | ) | (9,589 | ) | ||||
Acquisition of BSG Wireless | (767 | ) | — | |||||
Acquisition of ITHL | — | (735 | ) | |||||
Net cash used in investing activities | (8,108 | ) | (10,324 | ) | ||||
Cash flows from financing activities | ||||||||
Principal payments on senior credit facility | (891 | ) | (348 | ) | ||||
Employee stock purchase plan | 3 | — | ||||||
Stock options exercised | 194 | 16 | ||||||
Minimum tax withholding on restricted stock awards | (181 | ) | (80 | ) | ||||
Purchase of treasury stock | (1 | ) | (1 | ) | ||||
Net cash used in financing activities | (876 | ) | (413 | ) | ||||
Effect of exchange rate changes on cash | 1,161 | 54 | ||||||
Net increase in cash | 15,439 | 10,347 | ||||||
Cash at beginning of period | 49,086 | 26,704 | ||||||
Cash at end of period | $ | 64,525 | $ | 37,051 | ||||
Syniverse Holdings, Inc
Reconciliation of Non GAAP Measures to GAAP (unaudited)
(In thousands except per share information)
Three Months Ended March 31, 2008 | Three Months Ended March 31, 2007 | |||||||
Reconciliation to adjusted EBITDA | ||||||||
Net income | $ | 15,393 | $ | 7,646 | ||||
Interest expense, net | 9,290 | 5,624 | ||||||
Provision for income taxes | 10,495 | 4,860 | ||||||
Depreciation and amortization | 13,633 | 10,279 | ||||||
Restructuring | 17 | 1,782 | ||||||
SFAS 123R non-cash compensation | 1,077 | 486 | ||||||
BSG Wireless transition expenses | 3,107 | — | ||||||
Adjusted EBITDA | $ | 53,012 | $ | 30,677 | ||||
Three Months Ended March 31, 2008 | Three Months Ended March 31, 2007 | |||||||
Reconciliation to adjusted net income and cash net income | ||||||||
Net income | $ | 15,393 | $ | 7,646 | ||||
Add provision for income taxes | 10,495 | 4,860 | ||||||
Income before provision for income taxes | 25,888 | 12,506 | ||||||
Restructuring | 17 | 1,782 | ||||||
SFAS 123R non-cash compensation | 1,077 | 486 | ||||||
Purchase accounting amortization | 7,119 | 4,703 | ||||||
BSG Wireless transition expenses | 3,107 | — | ||||||
Adjusted income before provision for income taxes | 37,208 | 19,477 | ||||||
Less assumed provision for income taxes at 39% | (14,511 | ) | (7,596 | ) | ||||
Adjusted net income | 22,697 | 11,881 | ||||||
Add cash savings of tax deductible goodwill(1) | 2,301 | 2,301 | ||||||
Cash net income | $ | 24,998 | $ | 14,182 | ||||
Adjusted net income per share | $ | 0.33 | $ | 0.18 | ||||
Cash net income per share | $ | 0.37 | $ | 0.21 | ||||
Diluted shares outstanding | 67,909 | 67,353 |
1) | Represents the cash benefit realized currently as a result of the tax deductibility of goodwill amortization. |
Three Months Ended March 31, 2008 | Three Months Ended March 31, 2007 | |||||||
Reconciliation to operating free cash flow | ||||||||
Net cash provided by operating activities | $ | 23,262 | $ | 21,030 | ||||
Capital expenditures | (7,341 | ) | (9,589 | ) | ||||
Cash received in legal settlement | — | (2,500 | ) | |||||
Change in working capital due to ITHL contingent payment | — | (735 | ) | |||||
Operating Free Cash Flow | $ | 15,921 | $ | 8,206 | ||||
Supplemental cash flow information: | ||||||||
Cash interest paid | $ | 13,351 | $ | 9,252 | ||||
Cash income taxes paid | 1,510 | — |
Syniverse Holdings Inc.
Reconciliation of Non GAAP Measure Estimates to GAAP (unaudited)
(in millions) | 2008E Low | 2008E High | ||||||
Reconciliation to adjusted EBITDA | ||||||||
Net income | $ | 59.0 | $ | 64.0 | ||||
Interest expense, net | 34.5 | 34.5 | ||||||
Provision for income taxes | 40.0 | 42.0 | ||||||
Depreciation and amortization(1) | 55.5 | 55.5 | ||||||
SFAS 123R non-cash compensation | 4.5 | 4.5 | ||||||
BSGW transition expenses(2) | 13.5 | 13.5 | ||||||
Adjusted EBITDA | $ | 207.0 | $ | 214.0 | ||||
Reconciliation to adjusted net income and cash net income | ||||||||
Net income | $ | 59.0 | $ | 64.0 | ||||
Add provision for income taxes | 40.0 | 42.0 | ||||||
Income (loss) before provision for income taxes | 99.0 | 106.0 | ||||||
Adjustments income (loss) before provision for income taxes | ||||||||
Purchase accounting amortizations | 28.5 | 28.5 | ||||||
SFAS 123R non-cash compensation | 4.5 | 4.5 | ||||||
BSGW transition expenses(2) | 13.5 | 13.5 | ||||||
Adjusted income (loss) before provision for income taxes | 145.5 | 152.5 | ||||||
Less assumed provision for income taxes | (57.7 | ) | (59.7 | ) | ||||
Adjusted net income | 87.8 | 92.8 | ||||||
Add cash savings of tax deductible goodwill(3) | 9.2 | 9.2 | ||||||
Cash net income | $ | 97.0 | $ | 102.0 | ||||
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. |