Syniverse Hlgs (NYSE:SVR)
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Syniverse Holdings, Inc. (NYSE:SVR), a leading provider
of mission-critical technology services to wireless telecommunications
companies worldwide, today reported results for first quarter 2006.
-- Total revenues were $75.4 million for the first quarter 2006,
a 5.0% decrease compared to the first quarter 2005.
-- Net revenue, which excludes off-network database queries or
pass-thru revenue, was $73.4 million for the first quarter
2006, a decrease of 4.2% compared to the first quarter 2005.
-- Net income attributable to common stockholders was $3.6
million in the first quarter 2006, compared to a loss of $21.1
million in the first quarter 2005.
-- Cash net income, a non-GAAP measure of profitability, was
$11.4 million for the first quarter 2006, a 12.8% decrease
compared to the first quarter 2005. 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 $0.17 in the first
quarter 2006, compared to $0.19 the first quarter 2005.
-- Adjusted EBITDA, a non-GAAP measure of operating cash flow,
was $26.8 million for the first quarter 2006, a 19.0% decrease
compared to the first quarter 2005.
"During the quarter, we continued our gains in the European
market. We signed Telia Sonera to a group-wide contract which covers
seven operators in different countries across Northern Europe, and we
began migrating Vodafone properties to our platform. We have now
successfully implemented five of the Vodafone properties and have
scheduled the majority of the remaining subsidiaries for migration by
year-end," said Syniverse President and CEO Tony Holcombe.
"Our strategic focus as a company remains to grow our customer
base internationally, maintain our current North American market share
and expand our service offerings to existing and new customers. To
lead our efforts, I am pleased to announce that at quarter-end, Nancy
J. White joined Syniverse as chief marketing officer," said Holcombe.
"Nancy brings significant sales, marketing and business development
experience, as well as dynamic leadership skills gained throughout a
20-year successful career in telecommunications. Nancy will focus on
our global marketing and product development strategy, while also
leading our North American and Central/Latin American sales teams."
Chief Financial Officer Ray Lawless added, "During the first
quarter, we exceeded our revenue guidance, and met our adjusted EBITDA
and cash net income guidance. We expect to see continued improvements
in all significant financial metrics through the year as newly signed
customers come on line."
"We have nearly completed our corporate headquarters move, which
will result in improvements in our technology infrastructure and
business continuity plans," said Lawless. Expenses related to the move
in the first quarter were $4.3 million, with the final costs related
to our move to be recognized in the second quarter of 2006."
First Quarter 2006 Service Line Revenue
Technology Interoperability Services
Technology Interoperability revenue was $25.8 million in the first
quarter 2006, an 11.4% increase compared to first quarter 2005,
primarily driven by increases in GSM clearing, Message Manager and
UniRoam.
Network Services
Network Services revenue was $31.5 million in the first quarter
2006, a 2.3% decrease compared to first quarter 2005, primarily driven
by competitive pricing and previously disclosed migrations, partially
offset by increases in GSM transport and other SS7 services.
Number Portability Services
Number Portability revenue was $6.7 million in the first quarter
2006, a 42.3% decrease compared to the first quarter 2005, primarily
driven by the previously disclosed migration of the Sprint port
center.
Call Processing Services
Call Processing Services revenue was $7.2 million in the first
quarter 2006, a 12.3% increase compared to the first quarter 2005,
primarily driven by increases in international roaming supported by
Signaling Solutions.
Enterprise Solutions
Enterprise Solutions revenue was $2.1 million in the first quarter
2006.
Off-Network Database Queries (Pass-Thru)
Pass-thru revenue for the first quarter 2006 was $2.0 million.
First Quarter 2006 Business Highlights
Key customer contract wins:
-- Secured a contract with Telia Sonera to provide GSM clearing
and settlement services
-- Renewed clearing and settlement contract with Alltel
-- Re-signed SunCom Wireless for clearing and settlement services
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Outlook
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The company provides the following estimates for 2006:
Second Quarter Full Year
Net Revenues $76 million - $78 million $330 million - $340 million
Adjusted
EBITDA $28 million - $30 million $135 million - $145 million
Cash Net
Income $11 million - $13 million $60 million - $70 million
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Non-GAAP Measures
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 Net Income is determined by adding the
following to net income (loss): provision for income taxes,
restructuring costs, amortization of intangibles recorded in purchase
accounting, loss on extinguishment of debt, headquarters facilities
move expenses, transition expenses of integrating the IOS North
America business and less the gain on the sale of securities 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.
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 non-GAAP
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, provision for income
taxes, depreciation, amortization, restructuring charges, loss on
extinguishment of debt, headquarters facilities move expenses, the
transition expenses of integrating the IOS North America business and
less the gain on the sale of marketable securities. A reconciliation
of Adjusted EBITDA, Adjusted Net Income and Cash Net Income 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.
First Quarter 2006 Earnings Call
Syniverse Technologies will release first quarter 2006 results
after the market closes on Thursday, April 27, 2006 and host a
conference call at 4:30 p.m. (ET) to discuss these results. To
participate on this call, please dial 1 (800) 320.2978 (for U.S.
callers) or +1 (617) 614.4923 (international direct dial). The pass
code for this call is 51323592.
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, April
27, 2006 at 6:30 p.m. (ET) through Thursday, May 4, 2006, 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 61160950.
In addition, this earnings call will be archived on the Syniverse
Technologies corporate Web site http://www.syniverse.com under
Investors - Webcasts and Presentations.
About Syniverse
Syniverse Technologies (NYSE:SVR) 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 350 telecommunications carriers in
more than 50 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, China, the United
Kingdom and a global sales force in Brazil, France, India, Italy,
Japan, Luxembourg, Norway, Singapore and Slovakia.
http://www.syniverse.com
Cautions about Forward-Looking Statements
This press release contains forward-looking statements, including
statements about business outlook and strategy, 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 or
consumer and merchant use of our service; any adverse changes in our
agreements with our listings providers; the impact of international
expansion efforts on our business; and changes in our tax status.
These and other risks and uncertainties associated with our business
are described in our filings with the Securities and Exchange
Commission.
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Syniverse Holdings, Inc.
Condensed Consolidated Statements of Operations (unaudited)
(In thousands except per share information)
Three Months Three Months
Ended Ended
March 31, 2005 March 31, 2006
--------------- --------------
Technology Interoperability Services $23,199 $25,837
Network Services 32,232 31,493
Number Portability Services 11,669 6,730
Call Processing Services 6,403 7,191
Enterprise Solution 3,082 2,130
--------------- --------------
Revenues excluding Off Network Database
Queries 76,585 73,381
Off Network Database Queries 2,834 2,036
--------------- --------------
Total Revenues 79,419 75,417
Cost of operations 32,426 31,206
--------------- --------------
Gross Margin 46,993 44,211
Gross Margin % 59.2% 58.6%
Gross Margin % before
Off Network Database Queries 61.4% 60.2%
Sales and marketing 5,662 5,493
General and administrative 10,154 17,311
Depreciation and amortization 11,885 9,981
Restructuring - 338
--------------- --------------
Operating income 19,292 11,088
Other expense, net
Interest expense, net (10,165) (6,108)
Loss on extinguishment of debt (23,788) (924)
Other, net - 119
--------------- --------------
(33,953) (6,913)
--------------- --------------
Income (loss) before provision for
income taxes (14,661) 4,175
Provision for income taxes 2,291 625
--------------- --------------
Net income (loss) (16,952) 3,550
Preferred stock dividends (4,195) -
--------------- --------------
Net income (loss) attributable to
common stockholders $(21,147) $3,550
=============== ==============
Net income (loss) per share
Basic $(0.43) $0.05
Diluted $(0.43) $0.05
IPO pro forma(1) $(0.25) $0.05
Shares used in calculation
Basic 48,784 66,747
Diluted 48,784 67,262
IPO pro forma(2) 67,667 67,667
Notes:
1) Assumes no preferred stock dividends since all of the outstanding
preferred stock was either redeemed or converted to common shares
after our IPO.
2) Assumes shares outstanding immediately after our IPO were
outstanding for the full period above.
Selected Balance Sheet Data (unaudited): As of
(in thousands) March 31, 2006
----------------
Cash $30,129
Senior subordinated notes $175,000
Term note B 177,875
----------------
Total debt $352,875
================
Common stock and additional paid-in capital $457,266
Accumulated deficit and other comprehensive income (131,127)
----------------
Total stockholders' equity $326,139
================
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Syniverse Holdings, Inc.
Reconciliation of Non GAAP Measures to GAAP
(unaudited)
(In thousands except per share information)
Three Months Three Months
Ended Ended
March 31, 2005 March 31, 2006
--------------- --------------
Reconciliation to adjusted EBITDA
Net income (loss) $(16,952) $3,550
Interest expense, net 10,165 6,108
Provision for income taxes 2,291 625
Depreciation and amortization 11,885 9,981
Restructuring - 338
IOS North America transition expenses 1,672 1,053
Facilities move expense 221 4,334
Loss on extinguishment of debt 23,788 924
Gain on sale of marketable securities - (119)
--------------- --------------
Adjusted EBITDA $33,070 $26,794
=============== ==============
Three Months Three Months
Ended Ended
March 31, 2005 March 31, 2006
-------------- --------------
Reconciliation to adjusted net income
(loss) and cash net income
Net income (loss) $(16,952) $3,550
Add provision for income taxes 2,291 625
-------------- --------------
Income (loss) before provision for
income taxes (14,661) 4,175
Restructuring - 338
Purchase accounting amortization 6,432 4,227
IOS North America transition expenses 1,672 1,053
Facilities move expense 434 4,334
Loss on extinguishment of debt 23,788 924
Gain on sale of marketable securities - (119)
-------------- --------------
Adjusted income before provision for
income taxes 17,665 14,932
Less assumed provision for income taxes
at 39% (6,889) (5,823)
-------------- --------------
Adjusted net income 10,776 9,109
Add cash savings of tax deductible
goodwill(1) 2,300 2,300
-------------- --------------
Cash net income $13,076 $11,409
============== ==============
Adjusted net income per share after IPO $0.16 $0.13
Cash net income per share after IPO $0.19 $0.17
Shares outstanding after IPO(2) 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 immediately after our IPO were
outstanding for all periods above.
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