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 second quarter 2006.
-- Total revenues were $82.2 million for the second quarter 2006,
a 5.4% decrease compared to the second quarter 2005.
-- Net revenue, which excludes off-network database queries or
pass-thru revenue, was $78.9 million for the second quarter
2006, a decrease of 5.4% compared to the second quarter 2005.
-- Net income attributable to common stockholders was $9.5
million in the second quarter 2006, a decrease of 19.5%
compared to the second quarter 2005.
-- Cash net income, a non-GAAP measure of profitability, was
$12.9 million for the second quarter 2006, an 18.4% decrease
compared to the second 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.
-- Cash net income per share was $0.19 in the second quarter
2006, compared to $0.23 the second quarter 2005.
-- Adjusted EBITDA, a non-GAAP measure of operating cash flow,
was $29.3 million for the second quarter 2006, an 18.6%
decrease compared to the second quarter 2005.
"We continued to execute our international expansion strategy in
the second quarter," said Syniverse President and CEO Tony Holcombe.
"We have now successfully implemented eight Vodafone plus four
TeliaSonera properties. Additionally, we added two European
properties, one in Turkey and the other in Luxembourg. Late in the
quarter, we expanded our position in Asia when we acquired Hong
Kong-based ITHL."
Chief Financial Officer Ray Lawless added, "During the second
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 we integrate
ITHL and newly signed customers come on line. Because we closed ITHL
late in the second quarter, there is no impact from ITHL on the income
statement this quarter, but we will have a full quarter impact in the
third quarter."
"Our business model continued to generate significant free cash
from operations," said Lawless. "We generated $19.1 million during the
second quarter, and continue to expect that free cash flow will exceed
$75 million for the full year."
Second quarter 2006 Service Line Revenue
Technology Interoperability Services
Technology Interoperability revenue was $30.8 million in the
second quarter 2006, a 13.2% increase compared to second quarter 2005,
primarily driven by increases in GSM clearing, Message Manager,
UniRoam, and Mobile Data Roaming.
Network Services
Network Services revenue was $31.5 million in the second quarter
2006, a 5.6% decrease compared to second quarter 2005, primarily
driven by previously disclosed migrations and competitive pricing,
partially offset by increases in GSM transport and data networking.
Number Portability Services
Number Portability revenue was $7.2 million in the second quarter
2006, a 42.7% decrease compared to the second quarter 2005, primarily
driven by the previously disclosed migration of the Sprint port
center.
Call Processing Services
Call Processing Services revenue was $7.3 million in the second
quarter 2006, nearly flat compared to the second quarter 2005, with
increases in international roaming supported by Signaling Solutions
offset by a decline in fraud services.
Enterprise Solutions
Enterprise Solutions revenue was $2.1 million in the second
quarter 2006.
Off-Network Database Queries (Pass-Thru)
Pass-thru revenue for the second quarter 2006 was $3.3 million.
Second quarter 2006 Business Highlights
-- Acquired Hong Kong-based ITHL for up to $45 million, including
earn-outs of up to $7 million
-- Appointed Nancy J. White as Chief Marketing Officer
-- Continued international progress with new global customer wins
across multiple products, including clearing & settlement and
mobile data roaming.
-- Successful migrations of seven operating companies from
Vodafone and Telia Sonera to Syniverse platforms.
Outlook
The company provides the following estimates for 2006:
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Third Quarter Full Year
Net Revenues $89 million - $91 $330 million - $340
million million
Adjusted EBITDA $39 million - $41 $135 million - $145
million million
Cash Net Income $17 million - $19 $60 million - $70
million 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 non-operating gains 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 non-operating gains. 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.
Second quarter 2006 Earnings Call
Syniverse Technologies will host a conference call at 4:30 p.m.
(ET) to discuss these results. To participate on this call, please
dial 1 (866) 510-0712 (for U.S. callers) or +1 (617) 597-5380 (for
international direct dial). The pass code for this call is 76523750.
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 Tuesday, August
8, 2006, at 7:30 p.m. (ET) through Tuesday, August 22, 2006, 11:59
p.m. (ET). To access the replay, please dial 1 (888) 286-8010 (for
U.S. callers) or +1 (617) 801-6888 (for international direct dial).
The replay pass code is 88346548.
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 Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2005 2006 2005 2006
-------- -------- --------- ---------
Technology Interoperability
Services $27,201 $30,798 $ 50,400 $ 56,634
Network Services 33,415 31,549 65,648 63,043
Number Portability Services 12,607 7,220 24,276 13,950
Call Processing Services 7,322 7,288 13,725 14,479
Enterprise Solution 2,927 2,084 6,009 4,214
-------- -------- --------- ---------
Revenues excluding Off Network
Database Queries 83,472 78,939 160,058 152,320
Off Network Database Queries 3,403 3,255 6,236 5,291
-------- -------- --------- ---------
Total Revenues 86,875 82,194 166,294 157,611
Cost of operations 34,446 33,545 66,872 64,751
-------- -------- --------- ---------
Gross Margin 52,429 48,649 99,422 92,860
Gross Margin % 60.3% 59.2% 59.8% 58.9%
Gross Margin % before
Off Network Database
Queries 62.8% 61.6% 62.1% 61.0%
Sales and marketing 5,812 6,871 11,474 12,364
General and administrative 12,380 13,673 22,534 30,984
Depreciation and
amortization 12,190 9,868 24,075 19,849
Restructuring - - - 338
-------- -------- --------- ---------
Operating income 22,047 18,237 41,339 29,325
Other expense, net
Interest expense, net (8,192) (6,262) (18,357) (12,370)
Loss on extinguishment of
debt - - (23,788) (924)
Other, net - 211 - 330
-------- -------- --------- ---------
(8,192) (6,051) (42,145) (12,964)
-------- -------- --------- ---------
Income (loss) before provision
for income taxes 13,855 12,186 (806) 16,361
Provision for income taxes 2,077 2,699 4,368 3,324
-------- -------- --------- ---------
Net income (loss) 11,778 9,487 (5,174) 13,037
Preferred stock dividends - - (4,195) -
-------- -------- --------- --------
Net income (loss) attributable
to common stockholders $11,778 $ 9,487 $ (9,369) $ 13,037
======== ======== ========= =========
Net income (loss) per share
Basic $ 0.18 $ 0.14 $ (0.16) $ 0.20
Diluted $ 0.18 $ 0.14 $ (0.16) $ 0.19
IPO pro forma(1) $ 0.17 $ 0.14 $ (0.08) $ 0.19
Shares used in calculation
Basic 66,061 66,909 57,470 66,828
Diluted 66,064 67,873 57,470 67,568
IPO pro forma(2) 67,667 67,667 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 after our IPO were outstanding for the
full period above.
Selected Balance Sheet Data (unaudited): As of
(in thousands) June 30, 2006
-------------
Cash $ 11,069
Senior subordinated notes $ 175,000
Term note B 177,424
-----------
Total debt $ 352,424
===========
Common stock and additional paid-in capital $ 457,597
Accumulated deficit and other comprehensive income (121,458)
-----------
Total stockholders' equity $ 336,139
===========
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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,
2005 2006 2005 2006
-------- -------- -------- --------
Reconciliation to adjusted
EBITDA
Net income (loss) $11,778 $ 9,487 $(5,174) $13,037
Interest expense, net 8,192 6,262 18,357 12,370
Provision for income taxes 2,077 2,699 4,368 3,324
Depreciation and amortization 12,190 9,868 24,075 19,849
Restructuring - - - 338
Loss from disposal of assets 612 - 612 -
SFAS 123R non-cash
compensation - 329 - 329
IOS North America transition
expenses 834 (258) 2,506 794
Facilities move expense 275 1,104 496 5,438
Loss on extinguishment of debt - - 23,788 924
Non-operating gains - (211) - (330)
------- ------- ------- -------
Adjusted EBITDA $35,958 $29,280 $69,028 $56,073
======= ======= ======= =======
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2005 2006 2005 2006
-------- -------- -------- --------
Reconciliation to adjusted
net income (loss) and cash
net income
Net income (loss) $11,778 $ 9,487 $(5,174) $13,037
Add provision for income
taxes 2,077 2,699 4,368 3,324
------- ------- -------- --------
Income (loss) before
provision for income taxes 13,855 12,186 (806) 16,361
Restructuring - - - 338
Loss from disposal of assets 612 - 612 -
SFAS 123R non-cash
compensation - 329 - 329
Purchase accounting
amortization 6,412 4,188 12,842 8,414
IOS North America transition
expenses 834 (258) 2,506 794
Facilities move expense 387 1,104 823 5,438
Loss on extinguishment of
debt - - 23,788 924
Non-operating gains - (211) - (330)
------- ------- -------- --------
Adjusted income before
provision for income taxes 22,100 17,338 39,765 32,268
Less assumed provision for
income taxes at 39% (8,619) (6,762) (15,508) (12,585)
------- ------- -------- --------
Adjusted Net Income 13,481 10,576 24,257 19,683
Add cash savings of tax
deductible goodwill(1) 2,300 2,300 4,600 4,600
------- ------- -------- --------
Cash net income $15,781 $12,876 $28,857 $24,283
======= ======= ======== ========
Adjusted net income per share
after IPO $ 0.20 $ 0.16 $ 0.36 $ 0.29
Cash net income per share
after IPO $ 0.23 $ 0.19 $ 0.43 $ 0.36
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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