Investor Relations — Press Release
USA Mobility Reports First Quarter Operating Results; Board Declares Regular Quarterly Dividend
Wireless Subscriber and Revenue Trends Continue to Improve; Software Solutions Launched, Application Development Advances; Operating Expenses Reduced; Outstanding Debt Repaid
Amcom Acquires Critical Test Results Management Solution from IMCO Technologies
SPRINGFIELD, Va.—(BUSINESS WIRE)— May. 3, 2012 — USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging, mobile voice and data and unified communications solutions, today announced operating results for the first quarter ended March 31, 2012. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.25 per share, payable on June 22, 2012 to stockholders of record on May 18, 2012.
Consolidated revenue for the first quarter was $56.7 million, compared to $58.9 million in the fourth quarter and $57.3 million in the first quarter of 2011. Revenue from the Company’s Wireless business (USA Mobility Wireless) was $44.3 million in the first quarter, compared to $46.5 million in the fourth quarter and $52.5 million in the first quarter of 2011. Revenue from the Software business (Amcom Software) was $12.5 million, compared to revenue of $4.8 million in the first quarter of 2011. USA Mobility acquired Amcom on March 3, 2011. As a result, reported results for the Software business for the first quarter of 2011 included only the 29-day period from March 3, 2011 to March 31, 2011. In addition, Software maintenance revenue in the prior year’s first quarter was reduced by $0.9 million for purchase accounting adjustments. Accordingly, on a pro forma basis, reflecting Amcom results for the full quarter and excluding purchase accounting adjustments, Software revenue for the first quarter of 2011 was $13.1 million and consolidated revenue was $65.6 million.
First quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $18.8 million, or 33.1 percent of revenue, compared to $17.9 million, or 31.2 percent of revenue, in the year-earlier quarter. On a pro forma basis, excluding purchase accounting adjustments and one-time acquisition related expenses, EBITDA in the year-earlier quarter was $21.7 million, or 33.0 percent of revenue. First quarter EBITDA included $17.5 million from Wireless and $1.3 million from Software. EBITDA from Wireless of $17.5 million compared to $17.1 million in the prior quarter and $17.0 million in the year-earlier quarter.
Net income for the first quarter was $8.5 million, or $0.37 per fully diluted share, compared to $40.7 million, or $1.82 per fully diluted share, in the first quarter of 2011. Net income for the year-earlier quarter reflected 29 days of the Software business as well as the purchase accounting adjustment to Software maintenance revenue and one-time acquisition related expenses. In addition, the acquisition resulted in a $32.4 million reduction in the deferred income tax asset valuation allowance and a corresponding reduction in income tax expense. Excluding the purchase accounting adjustment to software maintenance revenue, the one-time acquisition related expenses and the reduction in the deferred income tax asset valuation allowance, net income for the first quarter of 2011 would have been $10.9 million, or $0.49 per fully diluted share.
First quarter results included:
- Net unit losses improved to 51,000 in the first quarter from 53,000 in the fourth quarter and 60,000 in the first quarter of 2011, while the quarterly rate of unit erosion improved to 3.0 percent from 3.2 percent in the year-earlier quarter. The annual rate of subscriber erosion improved to 11.5 percent in the first quarter, compared to 11.7 percent in the fourth quarter and 12.9 percent in the year-ago quarter, and was the lowest annual unit loss rate in more than seven years. Units in service at March 31, 2012 totaled 1,617,000, compared to 1,828,000 a year earlier.
- The quarterly rate of revenue erosion was 4.9 percent, compared to 4.1 percent in the fourth quarter and 3.9 percent in the first quarter of 2011, while the annual rate of revenue erosion improved to 15.7 percent from 16.3 percent in the year-earlier quarter. In 2012, we transferred most of the Wireless systems sales revenue to our Software business. Excluding systems sales revenue in the first quarter of 2011 of $0.6 million, the quarterly rate of revenue erosion would have improved to 3.6 percent and the annual rate of revenue erosion would have improved to 14.8 percent.
- Total ARPU (average revenue per unit) was $8.50 in the first quarter, compared to $8.51 in the fourth quarter and $8.72 in the first quarter of 2011.
- First quarter EBITDA margin for Wireless was 39.5 percent, compared to 36.7 percent in the fourth quarter and 32.3 percent in the year-earlier quarter. Excluding severance expenses, EBITDA margin would have been 39.3 percent in the fourth quarter of 2011 and excluding the one-time acquisition related expenses EBITDA margin would have been 37.8 percent in the first quarter of 2011.
- Bookings for the first quarter were $12.4 million, compared to $15.2 million in the fourth quarter and pro forma bookings in the first quarter of 2011 of $13.7 million. Historically, the first quarter is the lowest quarter for bookings and revenue.
- The backlog was $23.7 million at March 31, 2012, a slight increase from the fourth quarter, and compared to $18.9 million a year earlier.
- Of the $12.5 million in Software revenue for the first quarter, $6.4 million was maintenance revenue and $6.1 million was operations revenue, compared to $5.1 million and $7.3 million, respectively, of the $12.4 million in Software revenue for the prior quarter (which included $1.0 million of purchase accounting adjustment to software maintenance revenue).
- The renewal rate for maintenance in the first quarter was 99.6 percent.
- Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $38.0 million in the first quarter, with $26.8 million for Wireless and $11.2 million for Software, compared to $40.6 million in the fourth quarter, with $29.5 million for Wireless and $11.1 million for Software.
- Capital expenses were $1.6 million, compared to $1.5 million in the first quarter of 2011.
- Dividends paid to stockholders totaled $5.5 million for the first quarter.
- The Company’s outstanding debt balance at March 31, 2012 was $3.3 million, at an interest rate of 3.63 percent, and the cash balance was $37.5 million. On April 6, 2012, the Company repaid the remaining debt balance of $3.3 million.
- The number of full-time equivalent employees at March 31, 2012 totaled 685, including 420 for Wireless and 265 for Software, compared to a total of 683 at December 31, 2011.
Vincent D. Kelly, president and chief executive officer, said: “USA Mobility continued to make excellent progress during the first quarter, consistent with the financial guidance we provided earlier this year. Our Wireless business met or exceeded all key performance goals for gross additions, churn, and ARPU. Further, our overall Wireless trends continued to improve and our results have come in well ahead of plan. We were especially pleased to see further improvement in the annual rates of subscriber and revenue erosion. Our Software business also made substantial progress in the quarter. Although bookings fell below expectations due to lag-time in the software sales cycle on new customer accounts, we increased our backlog and made significant advances in Amcom’s product and business development initiatives. This includes Amcom’s acquisition on May 2nd of IMCO Technologies’ Critical Test Results Management solution, which allows hospitals to improve patient care and safety by expediting the delivery of critical test results to caregivers. At the same time, for the combined business we continued to reduce expenses, maintain strong operating margins, and generate sufficient cash flow to again return capital to stockholders in the form of dividend distributions.”
Kelly said the Company’s Wireless sales and marketing efforts continued to focus on its core market segments of Healthcare, Government and Large Enterprise during the first quarter. “These core segments represented approximately 90.6 percent of our direct subscriber base and 86.1 percent of our direct paging revenue at the end of the first quarter, compared to 88.9 percent and 83.8 percent, respectively, a year earlier. Healthcare continued to be our best performing market segment with the highest percentage of direct gross additions (77.9%) and the lowest rate of direct net unit loss (1.4%) as healthcare providers continue to benefit from the reliability and cost advantages of paging for their most critical messaging needs.”
Commenting on the Software business, Christopher D. Heim, president of Amcom, said: “Despite slower than expected bookings, we delivered an increase in quarter-over-quarter revenue and a growing backlog and sales pipeline at March 31st. During the quarter our sales team brought in solid orders from multiple business segments, including Healthcare, Government, Large Enterprise and Hospitality, with continued demand for call center management, clinical alerting middleware, critical smartphone communications and emergency notification. While sales activity remained strongest in North America, we also completed sales in Asia and the Middle East. In addition,” Heim noted, “our sales and marketing teams launched two new solutions for the Healthcare market during the quarter, including Amcom Care Connect, which enhances patient care by helping busy doctors coordinate and execute phone conversations, and Amcom Duty Hours Tracking, which helps teaching hospitals stay compliant with accreditation guidelines on how many hours their residents can work.”
Heim said Amcom acquired the Critical Test Results Management solution from IMCO Technologies for approximately $3.0 million in cash, providing USA Mobility’s Software business extensive expertise in the effective communication of critical test results management. “It also gives us another communication software solution to improve and enhance communications in clinical settings. Many of our 900 hospital customers have previously requested this specific type of solution, so we’re very pleased to be able to integrate this capability with their existing infrastructures to enhance patient safety and care.”
Shawn E. Endsley, chief financial officer, said the Company continued to reduce operating expenses in the first quarter. “Recurring operating expenses (excluding depreciation, amortization and accretion) for Wireless decreased 18.0 percent from the year-earlier quarter,” he noted, “and again exceeded the annual rate of Wireless revenue decline. Also, Wireless revenue for the quarter remained strong, driven largely by a stable ARPU and improved unit churn.” Endsley said the Company reduced its outstanding debt balance to $3.3 million at March 31st and repaid the $3.3 million balance on April 6, 2012. “Our acquisition of Amcom on March 3, 2011 was funded in part through a $51.9 million credit facility. With repayment of that debt, USA Mobility is once again a debt-free company.”
Regarding financial guidance for 2012, Endsley said the Company is reiterating its prior guidance for the full year, with total revenues expected 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.
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USA Mobility plans to host a conference call for investors on its first quarter results at 10:00 a.m. Eastern Time on Friday, May 4, 2012. Dial-in numbers for the call are 719-325-2199 or 888-634-7543. The pass code for the call is 3944122. A replay of the call will be available from 1:00 p.m. ET on May 4 until 11:59 p.m. on Friday, May 18. Replay numbers are 719-457-0820 or 888-203-1112. The pass code for the replay is 3944122.
In addition, the Company will host a meeting for financial analysts from 9:30 a.m. to 10:30 a.m. on Wednesday, May 16, 2012 in Alexandria, Virginia immediately following its Annual Meeting of Stockholders. The Annual Meeting of Stockholders is scheduled to begin at 9:00 a.m. The Analysts Meeting and Annual Meeting will be held at The Westin Alexandria, 400 Courthouse Square, Bell Room, Alexandria, Virginia. Financial analysts planning to attend the Analysts Meeting should RSVP to email@example.com or call 703-269-6950.
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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.
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