Syniverse Reports Record Profitability
-- Total revenues were $86.9 million for the second quarter 2005, a 2.3% increase compared to second quarter 2004.
“Volumes were strong with double digit sequential organic growth in our key products. These strong volume trends led to strong net revenue growth, and when combined with the operating leverage inherent in our business model, allowed us to generate nearly $37 million in cash during the quarter.”
-- Net revenue, which excludes off-network database queries or pass-thru revenue, was $83.5 million for the second quarter 2005, an increase of 8.6% compared to the same period in 2004.
-- Net income attributable to common stockholders was $11.8 million in the second quarter 2005, compared to $2.8 million in the same period in 2004.
-- Adjusted net income, which normalizes results to reflect core business performance, was $13.5 million for the second quarter 2005, a 19.7% increase compared to the same period in 2004. Assuming all post-IPO shares were also outstanding in the second quarter 2004, adjusted net income per share was $0.20, compared to $0.17 during the same period in 2004.
-- Cash net income was $15.8 million for the second quarter 2005, an 18.2% increase compared to the same period in 2004. 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. Assuming all post-IPO shares were outstanding in each of the two quarters, cash net income per share was $0.23, compared to $0.20 during the same period in 2004.
-- Adjusted EBITDA was $36.0 million for the second quarter, a 3.2% increase compared to the same period in 2004.
Additional information reconciling Syniverse's adjusted EBITDA to net income (loss) and a reconciliation of adjusted net income and cash net income is set forth below.
"Syniverse achieved record profitability as an independent company," said Chairman and Chief Executive Officer Ed Evans. "Growth in wireless subscribers, increased roaming activity, and the continued roll-out of 3G wireless data and messaging services have all contributed to the company's strong performance. Today we believe we are well positioned to capitalize on future growth opportunities in the wireless telecom industry. During the quarter, we announced several mobile data initiatives, which position us well in this rapidly growing area of the wireless industry."
"Our scalable business model continues to produce outstanding results," said Chief Financial Officer Ray Lawless. "Volumes were strong with double digit sequential organic growth in our key products. These strong volume trends led to strong net revenue growth, and when combined with the operating leverage inherent in our business model, allowed us to generate nearly $37 million in cash during the quarter."
Second Quarter 2005 Service Line Revenue
Technology Interoperability Services
Technology Interoperability revenue was $27.2 million in the second quarter 2005, a 48.6% year-over-year increase primarily driven by strong organic growth combined with incremental revenue from the acquisition of IOS North America.
Network Services
Network Services revenue was $33.4 million in the second quarter 2005, a 4.1% year-over-year decrease driven by approximately $2.4 million in non-recurring revenue that occurred in the second quarter 2004. Exclusive of this revenue, Network Services revenue increased by approximately 3% year over year.
Number Portability Services
Number Portability revenue was $12.6 million in the second quarter 2005, a 7.1% year-over-year increase primarily due to increases in the number of porting transactions.
Call Processing Services
Call Processing Services revenue was $7.3 million in the second quarter 2005, an 11.2% year-over-year decrease primarily driven by the continued migration of carriers off our call processing platform to implement direct SS7 connections. This decline was offset by a strong increase in revenues supporting international roaming.
Enterprise Solutions
Enterprise Solutions revenue was $2.9 million in the second quarter 2005.
Off-Network Database Queries (Pass-Thru)
Pass-thru revenue for the second quarter 2005 was $3.4 million.
Prior to the third quarter 2004, pass-thru revenue was reported within the network services category, but all periods presented herein have been reclassified for consistency. Pass-thru revenue is generated from charges incurred to access other providers' databases on behalf of Syniverse customers. These charges are passed onto customers with little or no margin.
Second Quarter 2005 Business Highlights
Significant accomplishments for Syniverse in second quarter 2005 include:
-- Securing contracts with 15 wireless operators for 1xRTT/1xEV-DO CRX solution enabling mobile data roaming for more than 75 million CDMA subscribers worldwide.
-- Entering into the joint venture mTLD Top Level Domain, Ltd., formed by a consortium of companies including Hutchison 3, GSM Association, Ericsson, Microsoft, Nokia, Samsung, TIM, Telefonica Moviles, T-Mobile, and Vodafone, to manage the .mobi Internet domain name.
Key international customer and service contract wins:
-- New customer contracts for SCCP gateway services for two leading GSM mobile operators in Hong Kong.
-- New service contracts:
-- Mobile Data Roaming for Australia's leading mobile operator
-- GSM SS7 transport and interstandard SMS for KPN Telecom in The Netherlands
New services launched:
-- Wireless AMBER Alerts Notification Platform for the launch of Wireless AMBER Alerts(TM), an initiative sponsored by CTIA - The Wireless Association and the National Center for Missing & Exploited Children(R) (NCMEC).
-- Mobile Content Delivery in partnership with m-Qube to offer subscribers a wide range of value-added mobile applications and services.
-- Billing Record Conversion Service to convert call detail records to industry standard record formats used for clearing and settling wholesale roaming agreements between roaming partners.
Outlook
The company provides the following estimates for 2005:
Third Quarter Full Year
Net Revenues $86-$88 million $325-$330 million
Adjusted EBITDA $40-$42 million $145-$150 million
Adjusted Net Income $14-$16 million $50-$55 million
Cash Net Income $16-$18 million $59-$64 million
Lock-Up Amendment
On July 28, 2005, Syniverse Holdings, Inc. and Syniverse Technologies, Inc. amended the underwriting agreement that they entered into in connection with the initial public offering of Syniverse Holdings, Inc.'s common stock solely to extend the post-IPO lock-up period until 11:59 PM (Eastern Daylight Time) on August 21, 2005. Syniverse's directors, officers and stockholders who entered into lock-up agreements in connection with the IPO all agreed to the same extension.
Non-GAAP Measures
Syniverse's Adjusted Net Income is determined by adding the following to net income (loss): provision for income taxes, restructuring costs, impairment losses on intangible assets, loss on disposal of assets, amortization of intangibles recorded in purchase accounting, loss on extinguishment of debt, headquarters facilities move expenses, and transition expenses of integrating the EDS Interoperator Services North America business to arrive at Adjusted Net Income (loss) 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.
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 unusual 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. Neither of these measures should be reviewed without consideration of our net income and other GAAP measures.
Syniverse's Adjusted EBITDA is determined by adding the following to net income (loss): net interest expense, income taxes, depreciation, loss on disposal of assets, amortization, impairment losses on intangible assets, restructuring charges, loss on extinguishment of debt, headquarters facilities move expenses and the transition expenses of integrating the EDS Interoperator Services North America business. A reconciliation of Adjusted EBITDA to net income (loss) is presented in the financial tables contained herein.
We present Adjusted EBITDA because we believe that Adjusted EBITDA provides useful information regarding our continuing operating results. We rely on Adjusted EBITDA as a primary measure 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 to compare our current operating results with corresponding periods and with the operating results of other companies in our industry. In addition, we also utilize Adjusted EBITDA as an assessment of our overall liquidity and our ability to meet our debt service obligations.
We believe that Adjusted EBITDA, Adjusted Net Income and Cash Net Income are useful to investors to provide disclosures of our operating results on the same basis as that 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, which do not directly affect our ongoing operating performance or cash flows. Adjusted EBITDA, 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 should not be considered a measure 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, Adjusted Net Income and Cash Net Income as supplemental information.
Second Quarter 2005 Earnings Call
Syniverse Holdings (NYSE:SVR) will release second quarter 2005 results after the market closes on Thursday, July 28, 2005 and host a conference call at 4:30 p.m. (ET) to discuss these results. To participate on this call, please dial 1 (800) 299-8538 (for U.S. callers) or +1 (617) 786-2902 (international direct dial). The pass code for this call is 36307771.
This event 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 Thursday, July 28, 2005 at 7:30 p.m. (ET) through Thursday, August 11, 2005, 8:00 p.m. (ET). To access the replay, please dial 1 (888) 286-8010 (for U.S. callers), or +1 (617) 801-6888 (international direct dial). The replay pass code is 70752877.
In addition, this earnings call will be archived on the Syniverse Technologies Corporate Web site under Investors - Webcasts and Presentations.
About Syniverse
Syniverse is a leading provider of mission-critical technology services to wireless telecommunications companies worldwide. Syniverse solutions simplify technology complexities by integrating disparate carriers' systems and networks in order to provide seamless global voice and data communications to wireless subscribers. Carriers depend on Syniverse's integrated suite of services to solve their most complex technology challenges and to facilitate the rapid deployment of next generation wireless services. Syniverse provides services to over 300 telecommunications carriers in approximately 40 countries, including the ten largest U.S. wireless carriers and six of the ten largest international wireless carriers. Headquartered in Tampa, Fla., U.S.A., Syniverse has offices in major cities throughout North America, The Netherlands and the United Kingdom and a global sales force in the United Kingdom, Luxembourg, Italy, China, Hong Kong, Brazil, Slovakia and India. For more information, visit http://www.syniverse.com
Cautions about Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, but are not limited to, statements regarding the Company's plans, intentions and expectations. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Given these concerns, investors and analysts should not place undue reliance on forward-looking statements.
Syniverse Holdings, Inc
Condensed Consolidated Statements of Operations (unaudited)
(In thousands except per share information)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2004 2005 2004 2005
-------- -------- -------- ---------
Technology Interoperability
Services $18,309 $27,201 $33,588 $50,400
Network Services 34,857 33,415 64,668 65,648
Number Portability Services 11,772 12,607 22,903 24,276
Call Processing Services 8,242 7,322 17,554 13,725
Enterprise Solution 3,696 2,927 7,421 6,009
-------- -------- -------- ---------
Revenues excluding Off Network
Database Queries 76,876 83,472 146,134 160,058
Off Network Database Queries 8,065 3,403 15,477 6,236
-------- -------- -------- ---------
Total Revenues 84,941 86,875 161,611 166,294
Cost of operations 36,271 34,446 71,426 66,872
-------- -------- -------- ---------
Gross Margin 48,670 52,429 90,185 99,422
Gross Margin % 57.3% 60.3% 55.8% 59.8%
Gross Margin % before
Off Network Database
Queries 63.3% 62.8% 61.7% 62.1%
Sales and marketing 5,169 5,812 10,444 11,474
General and administrative 8,647 12,380 17,516 22,534
Depreciation and amortization 9,891 12,190 20,181 24,075
Restructuring 289 - 289 -
-------- -------- -------- ---------
Operating income 24,674 22,047 41,755 41,339
Other expense, net
Interest expense, net (11,966) (8,192) (25,726) (18,357)
Loss on extinguishment of
debt - - - (23,788)
Other, net - - (6) -
-------- -------- -------- ---------
(11,966) (8,192) (25,732) (42,145)
-------- -------- -------- ---------
Income (loss) before provision
for income taxes 12,708 13,855 16,023 (806)
Provision for income taxes 2,088 2,077 4,192 4,368
-------- -------- -------- ---------
Net income (loss) 10,620 11,778 11,831 (5,174)
Preferred stock dividends (7,791) - (15,392) (4,195)
-------- -------- -------- ---------
Net (loss) attributable to
common
stockholder $2,829 $11,778 $(3,561) $(9,369)
======== ======== ======== =========
Net income per share
Basic $ 0.07 $ 0.18 $ (0.09) $ (0.16)
Diluted $ 0.07 $ 0.18 $ (0.09) $ (0.16)
IPO(1) $ 0.16 $ 0.17 $ 0.17 $ (0.08)
Shares used in calculation
Basic 39,838 66,061 39,838 57,470
Diluted 39,838 66,064 39,838 57,470
IPO(2) 67,667 67,667 67,667 67,667
Notes:
1) Assumes no preferred stock dividends since the outstanding
preferred stock was either redeemed or converted to common shares
after IPO.
2) Assumes shares outstanding after our IPO were outstanding for
the full period above.
As of
June 30, 2005
-------------
Cash $58,007
Senior subordinated notes, net of
discount 157,434
Term note B, net of discount 238,800
-------------
Total Debt 396,234
Class A cumulative redeemable
preferred stock -
Common Stock 457,226
Accumulated deficit and other
comprehensive income (149,127)
-------------
Total owners equity $308,099
Syniverse Holdings, Inc
Reconciliation of Non GAAP Measures to GAAP (unaudited)
(In thousands except per share information)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2004 2005 2004 2005
-------- -------- -------- --------
Reconciliation to adjusted EBITDA
Net income (loss) $10,620 $11,778 $11,831 $(5,174)
Interest expense, net 11,966 8,192 25,726 18,357
Loss on extinguishment of
debt - - - 23,788
Provision for income taxes 2,088 2,077 4,192 4,368
Depreciation and amortization 9,891 12,190 20,181 24,075
Restructuring 289 - 289 -
Loss from disposal of assets - 612 - 612
IOS North America transition
expenses - 834 - 2,506
Facilities move expense - 275 - 496
-------- -------- -------- --------
Adjusted EBITDA $34,854 $35,958 $62,219 $69,028
======== ======== ======== ========
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2004 2005 2004 2005
-------- -------- -------- --------
Reconciliation to adjusted net
income and cash net income
Net income (loss) $10,620 $11,778 $11,831 $(5,174)
Add provision for income taxes 2,088 2,077 4,192 4,368
-------- -------- -------- --------
Income (loss) before provision
for income taxes 12,708 13,855 16,023 (806)
Restructuring 289 - 289 -
Loss from disposal of assets - 612 - 612
Purchase accounting
amortizations 5,460 6,412 10,839 12,842
IOS North America transition
expenses - 834 - 2,506
Facilities move expense - 387 - 823
Loss on extinguishment of
debt - - - 23,788
-------- -------- -------- --------
Adjusted income before provision
for income taxes 18,457 22,100 27,151 39,765
Less assumed provision for
income taxes at 39% (7,198) (8,619) (10,589) (15,508)
-------- -------- -------- --------
Adjusted Net Income 11,259 13,481 16,562 24,257
Add cash savings of tax
deductible goodwill(1) 2,097 2,300 4,195 4,600
-------- -------- -------- --------
Cash net income $13,356 $15,781 $20,757 $28,857
======== ======== ======== ========
Adjusted net income per share
after IPO $ 0.17 $ 0.20 $ 0.24 $ 0.36
Cash net income per share after
IPO $ 0.20 $ 0.23 $ 0.31 $ 0.43
Shares outstanding after IPO(2) 67,667 67,667 67,667 67,667
1) Represents the cash benefit realized currently as a result of
the tax deductibility of goodwill amortization
2) Assumes shares outstanding after our IPO were outstanding for
all periods above.
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