USA Mobility Reports Second Quarter Operating Results; Board Declares Quarterly Cash Distribution; $50 Million Stock Repurchase Program Announced Revenue and Expense Trends Continue to Improve; Operating Cash Flow Margins Reach New Highs
ALEXANDRIA, Va., Jul 31, 2008 (BUSINESS WIRE) — USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging and communications services, today announced operating results for the second quarter ended June 30, 2008. Total revenue for the second quarter was $92.1 million, compared to $94.8 in the first quarter and $107.5 million in the second quarter of 2007. EBITDA (earnings before interest, taxes, depreciation, amortization, accretion and goodwill impairment) in the second quarter totaled $30.6 million, compared to $29.9 million in the first quarter and $33.3 million in the second quarter of 2007. Net income in the second quarter was $10.3 million, or $0.37 per fully diluted share, compared to net income of $13.0 million, or $0.47 per fully diluted share, in the year-earlier quarter. Second quarter results included: - EBITDA margin (or EBITDA as a percentage of revenue) increased to 33.2 percent in the second quarter, compared to 31.6 percent in the first quarter and 31.0 percent in the second quarter of 2007, reaching its highest level since USA Mobility was formed in 2004.
- The quarterly rate of revenue erosion improved to 2.8 percent, compared to 5.4 percent in the first quarter and 3.7 percent in the year-earlier quarter. The annual rate of revenue erosion improved to 14.3 percent from 15.0 percent in the first quarter and 15.5 percent in the second quarter of 2007.
- Total paging ARPU (average revenue per unit) was $8.54 in the second quarter, an increase from $8.49 in the first quarter and equal to $8.54 in the year-earlier quarter.
- Units in service totaled 3,176,000 at June 30, 2008, compared to 3,333,000 at March 31, 2008. Net unit loss in the second quarter was 157,000, compared to 152,000 in the first quarter and 155,000 in the second quarter of 2007.
- The annual rate of subscriber erosion was 15.5 percent, compared to 14.8 percent in the first quarter and 15.2 percent in the year-earlier quarter. The quarterly rate of subscriber loss was 4.7 percent, compared to 4.4 percent in first quarter and 4.0 percent in the second quarter of 2007.
- Operating expenses (excluding depreciation, amortization, accretion and goodwill impairment) totaled $61.5 million in the second quarter, a reduction of 17.1 percent from $74.1 million in the second quarter of 2007. Operating expenses declined $12.7 million since the second quarter of 2007 and, as a percentage of revenue, were at their lowest level since 2004.
- Capital expenses were $3.9 million, compared to $4.0 million in the first quarter.
- The Company's cash balance at June 30, 2008 was $85.8 million.
"We continued to make excellent progress during the second quarter," said Vincent D. Kelly, president and chief executive officer, "as the Company's results met or exceeded the majority of our performance objectives and were largely consistent with the financial guidance we provided earlier this year. Our annual rate of revenue erosion showed further improvement, average revenue per unit (ARPU) increased in the quarter, operating expenses declined and our cash flow margins reached record highs. Although overall subscriber cancellations remained higher than expected," Kelly added, "we continued to see lower net unit loss rates in our core market segment of Healthcare, which now represents 40.0 percent of our customer base." The Company's Board of Directors declared a regular cash distribution of $0.25 per share, payable on September 11, 2008 to stockholders of record on August 14, 2008. The Company expects the September cash distribution, a total of approximately $6.8 million, to be paid as a return of capital. The Company's Board of Directors also adopted a stock repurchase plan to buy back up to $50 million of USA Mobility common stock. The repurchase plan will commence on or about August 5, 2008 and will continue for up to twelve months. Credit Suisse Securities (USA) LLC will administer the stock repurchase program. Commenting on the Company's capital distribution policy going forward, Kelly stated: "While we revised our cash distribution rate in the second quarter to better reflect projected cash flow over the next several years, our commitment to return cash to our stockholders has not changed. We recognize that notwithstanding our excellent current results, continued levels of subscriber erosion will continue to put pressure on our future operating margins and our revised cash distribution rate takes that potential into effect." Kelly said the Company decided to move forward with a stock repurchase program at this time after a ruling on July 8, 2008 by the United States Court of Appeals for the DC Circuit delayed a final decision on its appeal of the Federal Communications Commission's Back-Up Power Order (Order). The Court held the appeal in abeyance pending approval by the Office of Management and Budget (OMB) of new paperwork requirements associated with the Order, a process that is expected to postpone a final ruling in the case for at least several months. "Although we were disappointed the Court did not vacate the Order at this time," Kelly said, "we believe it ultimately will do so based on the merits of our appeal. In the meantime, the delay serves to reduce the potential cost of compliance as we continue to eliminate transmitters in connection with our long-term network rationalization program." Thomas L. Schilling, chief operating officer and chief financial officer, said the Company reported solid financial and operating results for the quarter. "The improved rate of revenue erosion was largely the result of retail price adjustments we made during the quarter," he said, "while a continued emphasis on cost reduction contributed to our higher EBITDA and cash flow margins. Operating expenses (excluding depreciation, amortization, accretion and goodwill impairment) continued to decline due to numerous cost savings programs," Schilling noted, "and are down 17.1 percent from the second quarter of 2007 and well ahead of the 14.3 percent annual rate of revenue erosion." The Company also revised upward its previously announced financial guidance for 2008 as follows: revenues are now expected to be between $355 million to $360 million, up from the previous guidance of $345 million to $355 million; operating expenses (excluding depreciation, amortization, accretion and goodwill impairment) are now expected to be between $245 million to $250 million, a decrease from the previous range of $250 million to $255 million; while guidance for capital expenses for 2008 remains unchanged at $18 million to $20 million. USA Mobility plans to host a conference call for investors on its second quarter results at 10:00 a.m. Eastern Time on Friday, August 1, 2008. The dial-in number for the call is 888-600-4885 (toll-free) or 913-312-6685 (toll). The pass code for the call is 9967444. A replay of the call will be available from 2:00 p.m. ET on August 1 until 11:59 p.m. on Friday, August 15. The replay number is 888-203-1112 (toll-free) or 719-457-0820 (toll). The pass code for the replay is 9967444. About USA Mobility USA Mobility, Inc., headquartered in Alexandria, Virginia, is a comprehensive provider of reliable and affordable wireless communications solutions to the healthcare, government, large enterprise and emergency response sectors. As a single-source provider, USA Mobility's focus is on the business-to-business marketplace and supplying wireless connectivity solutions to a majority of the Fortune 1000 companies. The Company operates nationwide networks for both one-way paging and advanced two-way messaging services. In addition, USA Mobility offers mobile voice and data services through Sprint Nextel, including BlackBerry® smartphones and GPS location applications. The Company's product offerings include customized wireless connectivity systems for the healthcare, government and other campus environments. USA Mobility also offers M2M (machine-to-machine) telemetry solutions for numerous applications that include asset tracking, utility meter reading and other remote device monitoring applications on a national scale. For further information visit www.usamobility.com. Safe Harbor Statement under the Private Securities Litigation Reform Act: Statements contained herein or in prior press releases which are not historical fact, such as statements regarding USA Mobility's expectations for future operating and financial performance, are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that may cause USA Mobility's actual results to be materially different from the future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expectations include, but are not limited to, declining demand for paging products and services, our ability to continue to reduce operating expenses and to generate cash from operations, our future capital needs, competitive pricing pressures, competition from both traditional paging services and other wireless communications services, technological improvements in hand-held devices and transmission services offered by our competitors, government regulation, reliance upon third-party providers for certain equipment and services, as well as other risks described from time to time in periodic reports and registration statements filed with the Securities and Exchange Commission. Although USA Mobility believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. USA Mobility disclaims any intent or obligation to update any forward-looking statements. |