USA Mobility Reports Fourth Quarter and 2012 Results; 2011 Financial Restatement Completed
USA Mobility Reports Fourth Quarter and 2012 Results; 2011 Financial Restatement Completed
Wireless Subscriber and Revenue Trends Show Solid Improvement As Operating Margins Remain Strong and Expenses Decline;
Software Bookings and Backlog Reach All-Time High
SPRINGFIELD, Va.--(BUSINESS WIRE)-- USA Mobility, Inc. (NAS: USMO) , a leading provider of wireless messaging,mobile voice and data and unified communications solutions, today announced final operating results for the fourth quarter and year-ended December 31, 2012. The Company had previously reported selected results for the fourth quarter and 2012 pending completion of its year-end financial audit and restatement of its 2011 financial statements due to a material weakness in the design of internal control over financial reporting in its software revenue recognition processes. Results below reflect completion of the 2012 audit and restatement of 2011 financial statements. There was no material impact to the previously reported interim periods of 2012.
For the fourth quarter, consolidated revenue was $51.9 million, compared to $57.8 million in the fourth quarter of 2011 and $55.1 million in the third quarter of 2012. Revenue from the Company's Wireless business (USA Mobility Wireless) was $39.9 million in the fourth quarter, compared to $46.5 million in the fourth quarter of 2011 and $41.4 million in the third quarter of 2012. Revenue from the Software business (Amcom Software) was $12.0 million in the fourth quarter, compared to $11.2 million in the year-earlier quarter and $13.7 million in the third quarter of 2012. USA Mobility acquired Amcom Software on March 3, 2011.
Fourth quarter EBITDA (earnings before interest, taxes, depreciation, amortization, accretion and impairment) was $12.4 million, or 23.9 percent of revenue, compared to $17.4 million, or 30.1 percent or revenue, in the fourth quarter of 2011 and $17.8 million, or 32.2 percent of revenue, in the third quarter of 2012.
Net income for the fourth quarter of 2012 was $2.0 million, or $0.09 per fully diluted share, compared to $17.9 million, or $0.79 per fully diluted share, in the year-earlier quarter and $8.0 million, or $0.36 per fully diluted share, in the third quarter of 2012. The increase in net income in the fourth quarter of 2011 was largely the result of a benefit to income tax expense of $10.7 million due to a decrease in the deferred income tax asset valuation allowance which adjusted the balance of deferred income tax assets to their estimated realizable amounts. Excluding the income tax benefit and purchase accounting adjustments, net income for the fourth quarter of 2011 would have been $7.8 million, or $0.35 per fully diluted share.
For the full-year 2012, consolidated revenue was $219.7 million, compared to $233.7 million in 2011. Of the total, Wireless revenue was $168.4 million and Software revenue was $51.3 million, compared to $199.7 million and $34.0 million, respectively, for 2011.
EBITDA for 2012 was $67.3 million, or 30.7 percent of revenue, compared to $71.2 million, or 30.5 percent of revenue, for 2011. Excluding a fair value write down of software maintenance revenue of $6.1 million, EBITDA for 2011 would have been $77.2 million, or 32.2 percent of revenue.
Net income for 2012 was $27.0 million, or $1.20 per fully diluted share, compared to a net income of $83.8 million, or $3.72 per fully diluted share, for 2011. Excluding purchase accounting adjustments and a tax benefit of $50.2 million due to a decrease in the deferred income tax asset valuation allowance, net income for 2011 would have been $37.2 million, or $1.65 per fully diluted share.
Key results and highlights for the fourth quarter and 2012 included:
- Fourth quarter EBITDA for Wireless was $14.0 million, or 35.0 percent of revenue, compared to $17.1 million, or 36.7 percent of revenue, in the fourth quarter of 2011 and $16.3 million, or 39.3 percent or revenue, in the third quarter of 2012. Excluding severance expenses, fourth quarter EBITDA margin would have been 37.9 percent, compared to 39.3 percent in the year earlier quarter. For 2012, EBITDA margin increased to an all-time high of 38.3 percent, compared to 37.2 percent in 2011.
- Net unit losses were 31,000 in the fourth quarter, compared to 37,000 in the third quarter and 53,000 in the year-earlier quarter, while the quarterly rate of unit erosion improved to a historic low of 2.0 percent from 2.3 percent in the third quarter and 3.1 percent in the fourth quarter of 2011. The annual rate of unit erosion improved to 9.2 percent in the fourth quarter, also a record low, from 11.7 percent in the year-ago quarter. Units in service at December 31, 2012 totaled 1,515,000 compared to 1,668,000 at December 31, 2011.
- The rate of Wireless revenue erosion in the fourth quarter was 3.7 percent, compared to 3.1 percent in the third quarter and 4.1 percent in the year-earlier quarter. The annual rate of total revenue erosion was 14.2 percent in the fourth quarter, compared to 14.6 percent in the third quarter and 14.8 percent in the year-earlier quarter. The year-over-year rate of paging revenue erosion improved to a record low 13.3 percent in 2012 from 14.6 percent in 2011.
- Total ARPU (average revenue per unit) was $8.29 in the fourth quarter, compared to $8.36 in the third quarter and $8.51 in the fourth quarter of 2011. For the year, ARPU totaled $8.37, compared to $8.64 in 2011.
- Bookings for the fourth quarter increased to a record $18.1 million, compared to $15.7 million in the third quarter and $15.2 million in the year-earlier quarter. Bookings for the second half of the year increased to $33.8 million, compared to $27.5 million for the first half of 2012 representing an increase of 22.9%.
- Backlog increased to an all-time high of $40.6 million at December 31, 2012, compared to $36.2 million at September 30, 2012, and $32.9 million at year-end 2011.
- The renewal rate for maintenance in the fourth quarter was 99.7 percent.
- Operating expenses (excluding depreciation, amortization, accretion and impairment) totaled $39.5 million in the fourth quarter, with $26.0 million for Wireless and $13.5 million for Software, compared to operating expenses of $40.4 million in the year-earlier quarter, with $29.5 million for Wireless and $10.9 million for Software. For 2012, operating expenses were $152.4 million, including $103.9 million for Wireless and $48.5 million for Software, compared to $162.5 million in 2011, including $125.3 million for Wireless and $37.2 million for Software.
- Capital expenses were $2.9 million in the fourth quarter, compared to $2.8 million in the year-earlier quarter. For 2012, capital expenses totaled $10 million, compared to $8 million in 2011.
- Dividends paid to stockholders totaled $16.5 million in 2012.
- The Company's cash balance was $61 million at December 31, 2012.
- The number of full-time equivalent employees at December 31, 2012 totaled 665, including 378 for Wireless and 287 for Software, compared to a total of 683 at year-end 2011, including 434 for Wireless and 249 for Software.
"Despite the unfortunate delay in finalizing results, we were very pleased with our operating performance for the fourth quarter and full-year 2012," said Vincent D. Kelly, president and chief executive officer. "Once again we either met or exceeded our key performance targets as both our Wireless and Software businesses achieved record results for the fourth quarter in several key operating categories. Overall, we continued to operate the Company profitably, maintain high operating margins in our Wireless business, reduce expenses, enhance our products and services, and expand our Software business into new markets. We also generated sufficient cash to again return capital to stockholders in the form of dividends and share repurchases."
Kelly added: "Wireless subscriber and revenue trends improved substantially in the fourth quarter as the rates of unit and revenue erosion reached their best levels since USA Mobility was formed in 2004. Net subscriber churn declined to 9.2 percent from 11.7 percent in the year-earlier quarter while the year-over-year rate of paging revenue erosion fell to 13.3 percent from 14.6 percent in 2011. In addition, the EBITDA margin for Wireless increased to a record high of 38.3 percent in 2012 versus 37.2 percent in 2011 as the reduction of Wireless costs continued to outpace the decline of revenue. Our Wireless business expanded operating margins for the seventh consecutive year."
Healthcare continued to be the largest sector for the Company's Wireless business, representing 67.1 percent of the total Wireless customer base, compared to 62.6 percent a year ago. Healthcare also continued to be the best performing market segment with the highest rate of gross placements and lowest unit churn.
Kelly said the Company's Software subsidiary also recorded an excellent performance in 2012, especially over the second half of the year. "Software bookings (operations and maintenance) for the last six months of 2012 increased 22.9 percent over bookings in the first half of the year." The up-tick in second half results was due in part to several factors, Kelly noted, including a new senior management team, a restructured approach to sales and marketing, continued growth of Amcom Software's product development pipeline, and expansion into new geographic markets.
Kelly added: "Software bookings rose to a record high for the quarter and the backlog reached an all-time high at year end. Demand continued to be strongest in North American hospitals where we sold software solutions for call center management, emergency notification, clinical alerting, middleware and mobile communication solutions. In addition, we expanded our sales focus internationally, specifically in the Middle East where we opened an office in Dubai. We also experienced growing demand among public safety organizations with a number of military and municipal 911 emergency response centers choosing Amcom Software's dispatch solution. As a result, we ended the year with a solid pipeline of new business opportunities and believe our Software business established positive momentum entering 2013."
Kelly said USA Mobility returned $24.5 million in capital to stockholders during 2012 in the form of dividends and share repurchases. The Company paid quarterly cash dividends to stockholders totaling $16.5 million, or $0.75 per share, during 2012, and repurchased 712,173 shares of its common stock for approximately $8.0 million (excluding commissions) after renewal of the Company's stock repurchase program in July. "Over the past eight years we have now returned $405.3 million to our stockholders in the form of cash distributions and $59.8 million in common stock repurchases."
Shawn E. Endsley, chief financial officer, said: "Operating and EBITDA margins remained strong in 2012 as we continued to reduce operating expenses in our Wireless business. Consolidated operating expenses (excluding depreciation, amortization, accretion and impairment) for Wireless declined 17.1 percent to $103.9 million in 2012 from $125.3 million in 2011 and marked the seventh consecutive year in which Wireless expense reduction outpaced the annual rate of Wireless revenue erosion." Endsley added: "Expense reduction in the Wireless business was largely due to continued progress in our network rationalization program, including lower site rents and various other company-wide initiatives. As a result of these efforts, combined with solid cash flow from our Wireless and Software businesses, the Company was able to repay its bank debt during the second quarter of 2012 and end the year debt-free with a consolidated cash balance of $61 million."
Commenting on the Company's financial guidance for 2012, Endsley said: "We are pleased that once again results were consistent with our adjusted guidance. For 2012, total reported revenue of $219.7 million was within our guidance range of $215 million to $227 million, operating expenses (excluding depreciation, amortization, accretion and impairment) of $152.4 million were better than our guidance range of $154 million to $162 million, and capital expenses of $10.0 million were slightly above our guidance range of $7.1 million to $9.5 million." Endsley said the Company expects to provide financial guidance for 2013 when it releases its first quarter results next month.
The Company believes that the filing of its Form 10-K today cures the NASDAQ filing deficiency notice reported on April 5th and brings the Company back into compliance with the NASDAQ reporting requirements. The Company plans to host a conference call for investors after reporting first quarter results.
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 through its wireless subsidiary, USA Mobility Wireless. In addition, through its software subsidiary, Amcom Software, it provides mission critical unified communications solutions nationally and internationally to leading organizations in such industries as healthcare, hospitality, education, business and government. Amcom connects people to each other and the data the need. Its software solutions include critical smartphone communications, contact center optimization, emergency management and clinical workflow improvement. As a single-source provider, USA MobilityWireless focuses on the business-to-business marketplace and supplies 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 Wireless also offers mobile voice and data services through Sprint Nextel and T-Mobile, including BlackBerry® smartphones and GPS location applications. Its product offerings include customized wireless connectivity systems for the healthcare, government and other campus environments. 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, continued growth of our Software business and demand for our Software products and services, our ability to develop additional software solutions for our customers, 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, competition from other software providers, 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.
|USA MOBILITY, INC.|
|CONSOLIDATED STATEMENTS OF INCOME (a), (b)|
|(In thousands, except share, per share amounts and ARPU)|
|For the twelve months ended December 31,|
|Software revenue (c)||6,515||51,291||57,806||10,133||33,992||44,125|
|Cost of products sold (c)||693||20,153||20,846||2,883||17,523||20,406|
|Service, rental and maintenance (c)||45,789||9,636||55,425||55,675||6,672||62,347|
|Selling and marketing||11,521||12,124||23,645||14,466||7,923||22,389|
|General and administrative||44,689||5,991||50,680||51,029||5,066||56,095|
|Severance and restructuring||1,197||561||1,758||1,293||-||1,293|
|Depreciation, amortization and accretion||11,167||7,065||18,232||13,973||5,361||19,334|
|Total operating expenses||115,056||58,912||173,968||139,319||42,545||181,864|
|% of total revenue||68.3||%||114.9||%||79.2||%||69.8||%||125.2||%||77.8||%|
|Operating income (loss)||53,349||(7,621||)||45,728||60,382||(8,553||)||51,829|
|% of total revenue||31.7||%||-14.9||%||20.8||%||30.2||%||-25.2||%||22.2||%|
|Interest expense, net||(379||)||(1||)||(380||)||(2,236||)||(18||)||(2,254||)|
|Other income (expense), net||625||90||715||8,026||(76||)||7,950|
|Income (loss) before income tax (expense) benefit||53,595||(7,532||)||46,063||66,172||(8,647||)||57,525|
|Income tax (expense) benefit||(21,555||)||2,476||(19,079||)||22,994||3,267||26,261|
|Net income (loss)||$||32,040||$||(5,056||)||$||26,984||$||89,166||$||(5,380||)||$||83,786|
|Basic net income per common share||$||1.23||$||3.79|
|Diluted net income per common share||$||1.20||$||3.72|
|Basic weighted average common shares outstanding||21,924,748||22,083,942|
|Diluted weighted average common shares outstanding||22,397,587||22,509,008|