Feb. 22, 2012, 4:30 p.m. EST
USA Mobility Reports Fourth Quarter and 2011 Operating Results; Board Declares Regular Quarterly Dividend
Wireless and Software Businesses Record Solid Results; Operating Margins Remain High as Expenses Decline; Cash Balance Exceeds Bank Debt at Year End
SPRINGFIELD, Va., Feb 22, 2012 (BUSINESS WIRE) — USA Mobility, Inc. USMO -0.75% , a leading provider of wireless messaging, mobile voice and data and unified communications solutions, today announced operating results for the fourth quarter and year ended December 31, 2011. In addition, the Company's Board of Directors declared a regular quarterly dividend of $0.25 per share, payable on March 30, 2012 to stockholders of record on March 16, 2012.
For the fourth quarter, consolidated revenue was $58.9 million, an increase compared to $54.6 million in the fourth quarter of 2010 and compared to $61.5 million in the third quarter of 2011. Revenue from the Company's Wireless business (USA Mobility Wireless) was $46.5 million in the fourth quarter, compared to $48.6 million in the third quarter and $54.6 million in the fourth quarter of 2010. Revenue from the Software business (Amcom Software) was $12.4 million, compared to revenue of $12.9 million in the third quarter. USA Mobility acquired Amcom Software on March 3, 2011. Software revenue in the fourth quarter included a fair value write down to maintenance revenue of $1.0 million for purchase accounting adjustments, compared to a write down of $1.5 million in the third quarter. Excluding the write down, Software revenue for the fourth quarter would have been $13.4 million.
Fourth quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) was $18.3 million, an increase compared to $16.9 million in the fourth quarter of 2010 and compared to $21.3 million in the third quarter. Fourth quarter of 2011 results were negatively impacted by the purchase accounting adjustments of $1.0 million and by $1.2 million in severance expenses for planned 2012 headcount reductions in the Wireless business. Excluding these adjustments, fourth quarter consolidated EBITDA would have been $20.6 million, or 34.3 percent of revenue.
Net income for the fourth quarter of 2011 was $18.9 million, or $0.84 per fully diluted share, compared to $10.4 million, or $0.46 per fully diluted share, in the third quarter of 2011. The increase in net income in the fourth quarter was largely the result of a benefit to income tax expense as a result of a decrease in the deferred income tax asset valuation allowance of $10.7 million, which adjusted the balance of deferred income tax assets to their estimated realizable amounts. Excluding the income tax benefit, the purchase accounting adjustments and severance expenses, net income for the fourth quarter of 2011 would have been $9.6 million, or $0.43 per fully diluted share. Results for the fourth quarter of 2010 were impacted by the benefit to income tax expense (due to the reduction of $32.9 million in the deferred income tax asset valuation allowance), a one-time litigation settlement expense of $2.1 million and by $1.7 million in severance expenses. Excluding these adjustments, net income in the fourth quarter of 2010 would have been $10.0 million, or $0.45 per fully diluted share.
For the full-year 2011, consolidated revenue totaled $242.9 million, compared to $233.3 million in 2010. In 2011, Wireless revenue was $199.7 million and Software revenue was $43.2 million. EBITDA for 2011 was $79.0 million, or 32.5 percent of revenue, compared to $81.3 million, or 34.9 percent of revenue, in 2010. Excluding the fair value write down of software maintenance revenue of $6.1 million and transaction costs related to the Amcom acquisition of $2.7 million, EBITDA for 2011 would have been $87.8 million, or 35.3 percent of revenue, and net income would have been $94.3 million, or $4.19 per fully diluted share. Net income for 2011 was $88.6 million, or $3.94 per fully diluted share, compared to a net income of $77.9 million, or $3.45 per fully diluted share, for 2010.
Key results and highlights for the fourth quarter and 2011 included:
- Net unit losses were 53,000 in the fourth quarter, compared to 58,000 in the third quarter and 61,000 in the year-earlier quarter, while the quarterly rate of unit erosion improved to 3.1 percent from 3.3 percent in the third quarter versus 3.2 percent in the fourth quarter of 2010. The annual rate of unit erosion improved to 11.7 percent in the fourth quarter, the lowest churn rate in the Company's history, from 13.4 percent in the year-ago quarter. Units in service at December 31, 2011 totaled 1,668,000, compared to 1,889,000 at December 31, 2010.
- The rate of revenue erosion in the fourth quarter was 4.1 percent, compared to 6.8 percent in the third quarter and 3.6 percent in the year-earlier quarter. The annual rate of revenue erosion was 14.8 percent in the fourth quarter, compared to 14.4 percent in the third quarter and 16.4 percent in the year-earlier quarter. The year-over-year rate of revenue decline was 14.4 percent in 2011 compared to 19.5 percent in 2010.
- Total ARPU (average revenue per unit) was $8.51 in the fourth quarter, compared to $8.59 in the third quarter and $8.74 in the fourth quarter of 2010. For the year, ARPU totaled $8.64, compared to $8.84 in 2010.
- Fourth quarter EBITDA margin for Wireless was 36.7 percent (or 39.3 percent excluding severance expenses), compared to 41.1 percent in the third quarter and 30.9 percent in the year-earlier quarter (or 37.8 percent excluding severance and one-time expenses).
- On a pro forma full year comparable basis (excluding purchase accounting adjustments and assuming full year ownership) Software revenue would have been $56.7 million in 2011, an increase of 11.2 percent over 2010 revenue of $51.0 million.
- Bookings for the fourth quarter were $15.2 million, compared to $14.2 million in the third quarter and $15.2 million in the second quarter.
- Backlog was $23.7 million at December 31st, compared to $21.3 million at September 30th and $20.5 million at June 30th.
- Of the $12.4 million in Software revenue for the fourth quarter, $5.1 million was maintenance revenue and $7.3 million was operations revenue, compared to $4.6 million and $8.3 million, respectively, of the $12.9 million in Software revenue for the prior quarter.
- The renewal rate for maintenance in the fourth quarter was 99.4 percent.
- Fourth quarter EBITDA margin for Software was 10.3 percent, equal to the third quarter.
- Operating expenses (excluding depreciation, amortization and accretion) totaled $40.6 million in the fourth quarter, with $29.5 million for Wireless and $11.1 million for Software, compared to operating expenses of $40.2 million in the third quarter, with $28.6 million for Wireless and $11.6 million for Software. For 2011, operating expenses were $163.9 million, including $125.3 million for Wireless and $38.6 million for Software, compared to $151.9 million in 2010.
- Capital expenses were $2.8 million in the fourth quarter, compared to $4.7 million in the year-earlier quarter. For 2011, capital expenses totaled $8.0 million, compared to $8.7 million in 2010.
- Dividends paid to stockholders totaled $22.1 million in 2011.
- At December 31, 2011, the Company's cash balance was $53.7 million and the outstanding debt was $28.3 million. The interest rate on the debt is 3.68 percent.
- The Company incurred $51.9 million in bank debt relating to the Amcom acquisition in 2011, and repaid a total of $23.7 million during the year.
- The number of full-time equivalent employees at December 31, 2011 totaled 683, including 434 for Wireless and 249 for Software, compared to a total of 540 at year-end 2010 for Wireless.
"USA Mobility continued to make excellent progress in the fourth quarter and throughout 2011," said Vincent D. Kelly, president and chief executive officer. "In addition to an outstanding operating performance, our acquisition of Amcom Software in March expanded the Company's presence in the Healthcare, Government and Large Enterprise market segments beyond our traditional wireless offerings and into software and integrated communications. The acquisition not only underscored our long-term commitment to these growing market segments, but, more importantly, enabled us to begin repositioning the Company for long-term growth." Kelly added: "Operating results for the quarter once again either met or exceeded our key performance targets and financial guidance. We continue to operate the Company profitably, maintaining high operating margins, reducing expenses, improving rates of subscriber and revenue erosion for Wireless. We also generated sufficient cash flow to repay enough debt to become net debt free on a cash basis at year end, while we continued to again return capital to stockholders in the form of dividends."
Kelly said both Wireless and Software businesses recorded solid results. "On the Wireless side, EBITDA margin increased to 38.6 percent for 2011 (excluding one-time transaction costs), as Wireless costs declined faster than revenues for the sixth straight year. It was also the seventh consecutive year our Wireless business expanded cash flow margins. In addition, we were pleased to see further improvement in the annual rate of Wireless subscriber and revenue erosion, as the rate of revenue decline fell to 14.4 percent in 2011 from 19.5 percent in 2010 and subscriber churn improved to 11.7 percent, the lowest rate in the Company's history."
During the fourth quarter, Kelly noted the Company continued to focus sales and marketing efforts around its core market segments of Healthcare, Government and Large Enterprise. "These three segments represented 90.1 percent of our direct paging subscriber base and 85.6 percent of direct paging revenue in the fourth quarter," he added. "Healthcare now represents 67.2 percent of paging's direct customer base and continues to be our best performing market segment with the highest rate of gross placements and lowest rate of net unit loss."
Kelly said the Software subsidiary also recorded a strong performance in 2011 with solid bookings and a growing backlog. "Excluding the fair value write down of maintenance revenue, Amcom realized record full-year pro forma revenue of $56.7 million. It also expanded its product offerings during the year, along with its customer base and product development pipeline."
Christopher D. Heim, president of Amcom, said: "Software bookings increased in the fourth quarter from the prior quarter, with December marking our biggest month ever for bookings and giving us positive momentum as we enter 2012. During the quarter our sales team delivered an increase in systems sold to new customers in addition to sales of new modules and upgrades for existing customers. Demand continued to be strongest in North American hospitals where we sold software solutions for call center management, emergency notification, critical smartphone messaging, and clinical middleware. As a result, we ended the quarter with a solid backlog and pipeline of new business opportunities. Finally, as a result of the acquisition by USA Mobility, we continue to identify cross-selling opportunities for both Software and Wireless sales teams with the goal of enhancing sales prospects for each line of business."
Kelly noted that USA Mobility returned $22.1 million in capital to stockholders during 2011 in the form of dividends. The Company paid quarterly cash dividends to stockholders totaling $1.00 per share during 2011. "Over the past seven years we have now returned $388.8 million to our stockholders in the form of dividends and distributions and $51.7 million in common stock repurchases."
Commenting on USA Mobility's capital allocation strategy Kelly stated, "We have maintained our quarterly dividend at $0.25 per share but are continuing to evaluate the amount of the dividend to ensure adequate capital retention within our business to meet our long-term strategic and operating needs. As we indicated in 2008 when we established the current dividend rate we are focused on maintaining a dividend policy that can be supported by the business and yields an attractive return on our stock price. Absent any acquisitions, we expect to use excess cash to pay off the balance of our existing revolving credit facility in the first half of this year. As for how the Company may choose to allocate capital going forward beyond cash dividends, share repurchases, and debt repayments, we will continue to weigh all options against other opportunities for creating long-term stockholder value. Such options may include additional acquisitions or other strategic investments that might provide enhanced revenue and cash flow stability and allow further use of our sizable deferred income tax assets."
Shawn E. Endsley, chief financial officer, said: "Overall, we were pleased with our 2011 operating results, which met or exceeded our expectations. We were again able to reduce operating expenses for our Wireless business at a faster pace than the Wireless revenue decline and thus maintain strong EBITDA margins. Consolidated operating expenses (excluding depreciation, amortization and accretion) of $163.9 million included $125.3 million for Wireless and $38.6 million for Software. In 2011 the expenses for Wireless declined 17.5 percent from 2010, outpacing the 14.4 percent decrease in Wireless revenue. Expense savings were largely the result of continued progress in our network rationalization program, including lower site rents, along with various other cost savings initiatives made throughout the Company. As a result of these cost reduction efforts, combined with solid cash flow from our Wireless and Software businesses," Endsley added, "the Company was net debt free at year end with an outstanding debt balance of $28.3 million and a consolidated cash balance of $53.7 million."
Commenting on the Company's previously provided financial guidance, Endsley said: "We are pleased that once again our results were either within or better than the provided guidance. For 2011, total reported revenue of $242.9 million was within our adjusted guidance range of $235 million to $248 million, operating expenses (excluding depreciation, amortization and accretion) of $163.9 million were within the range of $162 million to $174 million, and capital expenses of $8.0 million were within the range of $6.5 million to $9 million."
Regarding financial guidance for 2012, Endsley said the Company expects total revenue to range from $214 million to $232 million, operating expenses (excluding depreciation, amortization and accretion) to range from $156.5 million to $163.5 million, and capital expenses to range from $7.5 million to $10 million.
USA Mobility plans to host a conference call for investors on its fourth quarter and 2011 operating results at 10:00 a.m. Eastern Time on Thursday, February 23, 2012. Dial-in numbers for the call are 719-457-2702 or 888-500-6973. The pass code for the call is 5683242. A replay of the call will be available from 1:00 p.m. ET on February 23 until 11:59 p.m. on Thursday, March 8. Replay numbers are 719-457-0820 or 888-203-1112. The pass code for the replay is 5683242.
About USA Mobility
USA Mobility, Inc., headquartered in Springfield, Virginia, is a comprehensive provider of reliable and affordable wireless communications solutions to the healthcare, government, large enterprise and emergency response sectors. In addition, through its Amcom Software subsidiary, it provides mission critical unified communications solutions for hospitals, contact centers, emergency management, mobile event notification and messaging. As a single-source provider, USA Mobility's focus is on the business-to-business marketplace and supplying wireless connectivity solutions to organizations nationwide. The Company operates the largest one-way paging and advanced two-way paging networks in the United States. USA Mobility also offers mobile voice and data services through Sprint Nextel and T-Mobile, 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 and www.amcomsoftware.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 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, the ability to continue to reduce operating expenses, future capital needs, competitive pricing pressures, competition from both traditional paging services and other wireless communications services, 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.