SVR Syniverse Holdings

Syniverse Holdings, Inc. (NYSE: SVR), a leading provider of mission-critical technology services to wireless telecommunications companies worldwide, today reported continued strong results for third quarter 2005: -- Total revenues were $91.9 million for the third quarter 2005, an 11.4% increase compared to third quarter 2004. -- Net revenue, which excludes off-network database queries or pass-thru revenue, was $88.9 million for the third quarter 2005, an increase of 14.9% compared to the same period in 2004. -- Net loss attributable to common stockholders was $0.3 million in the third quarter 2005, compared to a net loss attributable to common stockholders of $9.0 million in the same period in 2004. -- Adjusted net income, which normalizes results to reflect core business performance, was $16.9 million for the third quarter 2005, a 76.6% increase compared to the same period in 2004. Adjusted net income per share was $0.25 in the third quarter 2005, compared to $0.14 during the same period in 2004. Per share amounts in both periods assume all post-IPO shares were outstanding for the entire period. -- Cash net income was $19.2 million for the third quarter 2005, a 64.6% increase compared to the same period in 2004. 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. Assuming all post-IPO shares were outstanding in each of the two quarters, cash net income per share was $0.28, compared to $0.17 during the same period in 2004. -- Adjusted EBITDA was $41.1 million for the third quarter, a 21.0% increase compared to the same period in 2004. Additional information reconciling Syniverse's adjusted EBITDA to net income (loss), adjusted net income, and cash net income is set forth below. "Syniverse delivered a tremendous quarter," said Chairman and Chief Executive Officer Ed Evans. "We met or exceeded all of our key targets due to strong growth in the wireless industry, driving organic growth in our core products and additional contracts for recently launched services. Our contract with Cingular Wireless, our renewal with Sprint, and our growing list of mobile data roaming contracts with wireless carriers around the world are indicative of the momentum we have built this year." "Syniverse has never been in a better position, both financially and strategically," continued Evans. "As we look ahead into 2006 and beyond, we are excited about our prospects for growth as we continue to expand our reach globally and introduce new products and services." "Syniverse's excellent financial results for the quarter are due to strong volume growth and solid cost controls," said Chief Financial Officer Ray Lawless. "We took advantage of an attractive credit market to refinance our 12 3/4% notes during the quarter, resulting in annual interest savings of nearly $7 million, favorably impacting our profitability." "Combining positive trends in the wireless industry with significant new business wins and contract renewals, we expect volumes to remain strong in the fourth quarter," continued Lawless. "These growing volumes are expected to drive continued positive growth after normalizing for several unusual items contained in last year's comparable quarter." Third Quarter 2005 Service Line Revenue Technology Interoperability Services Technology Interoperability revenue was $30.7 million in the third quarter 2005, a 46.6% year-over-year increase driven by revenues from IOS North America, strong organic growth in our GSM clearing product, and incremental growth in Message Manager and UniRoam services. Network Services Network Services revenue was $35.2 million in the third quarter 2005, a 6.5% year-over-year increase driven by continued volume increases in GSM transport services, calling name database services and products supporting mobile data roaming. Number Portability Services Number Portability revenue was $13.3 million in the third quarter 2005, a 15.0% year-over-year increase primarily due to increases in the number of porting transactions. Call Processing Services Call Processing Services revenue was $7.2 million in the third quarter 2005, a 13.5% year-over-year decrease primarily driven by the continued migration of carriers off our call processing platform to implement direct SS7 connections. This decline was partially offset by a strong year-over-year increase in revenues from Signaling Solutions. Enterprise Solutions Enterprise Solutions revenue was $2.5 million in the third quarter 2005. Off-Network Database Queries (Pass-Thru) Pass-thru revenue for the third quarter 2005 was $3.0 million. Prior to the third quarter 2004, pass-thru revenue was reported within the network services category, but all periods presented herein have been reclassified for consistency. Pass-thru revenue is generated from charges incurred to access other providers' databases on behalf of Syniverse customers. These charges are passed onto customers with little or no margin. -0- *T Third Quarter 2005 Business Highlights -- Refinanced 12 3/4% notes, resulting in approximately $6.7 million in annual interest savings -- Key customer and service contract wins: -- Cingular Wireless, the largest wireless service provider in the United States, for clearing and settlement services -- Sprint, the third largest wireless service provider in the United States, for multiple wireless roaming services -- KDDI, Japan's leading CDMA operator, for UniRoam(SM) interstandard, international roaming -- Three additional CDMA carriers for CRX mobile data roaming *T Outlook The company provides the following estimates for 2005: -0- *T Fourth Quarter Full Year Net Revenues $82-$84 million $331-$333 million Adjusted EBITDA $36-$38 million $146-$148 million Adjusted Net Income $14-$16 million $55-$57 million Cash Net Income $16-$18 million $64-$66 million *T Non-GAAP Measures Syniverse's Adjusted Net Income is determined by adding the following to net income (loss): provision for income taxes, restructuring costs, impairment losses on intangible assets, loss on disposal of assets, amortization of intangibles recorded in purchase accounting, loss on extinguishment of debt, headquarters facilities move expenses, and transition expenses of integrating the IOS North America business 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. 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. 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 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, loss on disposal of assets, amortization, impairment losses on intangible assets, restructuring charges, loss on extinguishment of debt, headquarters facilities move expenses and the transition expenses of integrating the IOS North America business. A reconciliation of Adjusted EBITDA 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. Third Quarter 2005 Earnings Call Syniverse Technologies (NYSE: SVR) will host a conference call on Thursday, October 27, 2005 at 4:30 p.m. (ET) to discuss third quarter results. To participate on this call, please dial 1 (800) 299-6183 (for U.S. callers) or +1 (617) 801-9713 (international direct dial). The pass code for this call is 29489411. This event will be Webcast live over the Internet in listen-only mode at www.syniverse.com/investorevents. A replay of this call will be available beginning Thursday, October 27, 2005 at 7:30 p.m. (ET) through Thursday, November 10, 2005, 8:00 p.m. (ET). To access the replay, please dial 1 (888) 286-8010 (for U.S. callers), or +1 (617) 801-6888 (international direct dial). The replay pass code is 99439302. In addition, this earnings call will be archived on the Syniverse Technologies Corporate Web site under Investors - Webcasts and Presentations. About Syniverse Syniverse 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 330 telecommunications carriers in approximately 44 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 and the United Kingdom and a global sales force in the United Kingdom, Luxembourg, Italy, China, Hong Kong, Brazil, Slovakia and India. For more information, visit www.syniverse.com Cautions about Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, but are not limited to, statements regarding the Company's plans, intentions and expectations. Such statements are inherently subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Given these concerns, investors and analysts should not place undue reliance on forward-looking statements. -0- *T Syniverse Holdings, Inc Condensed Consolidated Statements of Operations (unaudited) (In thousands except per share information) Three Three Nine Nine Months Months Months Months Ended Ended Ended Ended September September September September 30, 2004 30, 2005 30, 2004 30, 2005 --------------------------------------- Technology Interoperability Services $20,919 $30,662 $54,507 $81,062 Network Services 33,086 35,227 97,754 100,874 Number Portability Services 11,560 13,300 34,464 37,576 Call Processing Services 8,278 7,158 25,831 20,883 Enterprise Solution 3,508 2,517 10,929 8,526 --------- --------- --------- --------- Revenues excluding Off Network Database Queries 77,351 88,864 223,485 248,921 Off Network Database Queries 5,129 3,015 20,606 9,252 --------- --------- --------- --------- Total Revenues 82,480 91,879 244,091 258,173 Cost of operations 33,557 31,603 104,983 98,475 --------- --------- --------- --------- Gross Margin 48,923 60,276 139,108 159,698 Gross Margin % 59.3% 65.6% 57.0% 61.9% Gross Margin % before Off Network Database Queries 63.2% 67.8% 62.2% 64.2% Sales and marketing 4,615 6,227 15,059 17,701 General and administrative 10,372 13,649 27,888 36,183 Depreciation and amortization 10,142 11,246 30,323 35,321 Restructuring - 143 289 143 Impairment losses on intangible assets 8,982 - 8,982 - --------- --------- --------- --------- Operating income 14,812 29,011 56,567 70,350 Other expense, net Interest expense, net (13,512) (7,905) (39,238) (26,262) Loss on extinguishment of debt - (19,016) - (42,804) Other, net (6) (6) (12) (6) --------- --------- --------- --------- (13,518) (26,927) (39,250) (69,072) --------- --------- --------- --------- Income before provision for income taxes 1,294 2,084 17,317 1,278 Provision for income taxes 2,316 2,379 6,508 6,747 --------- --------- --------- --------- Net income (loss) (1,022) (295) 10,809 (5,469) Preferred stock dividends (7,986) - (23,379) (4,195) --------- --------- --------- --------- Net loss attributable to common stockholder $(9,008) $(295) $(12,570) $(9,664) ========= ========= ========= ========= Net income per share Basic $(0.23) $(0.00) $(0.32) $(0.16) Diluted $(0.23) $(0.00) $(0.32) $(0.16) IPO pro forma(1) $(0.02) $(0.00) $0.16 $(0.08) Shares used in calculation Basic 39,838 66,289 39,838 60,442 Diluted 39,838 66,289 39,838 60,442 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) September 30, 2005 ------------------ Cash $23,004 Senior subordinated notes, net of discount $189,374 Term note B 178,775 --------- Total debt $368,149 ========= Common stock and additional paid-in capital $457,203 Accumulated deficit and other comprehensive income (147,970) --------- Total stockholders' equity $309,233 ========= Syniverse Holdings, Inc Reconciliation of Non GAAP Measures to GAAP (unaudited) (In thousands except per share information) Three Three Nine Nine Months Months Months Months Ended Ended Ended Ended September September September September 30, 2004 30, 2005 30, 2004 30, 2005 --------------------------------------- Reconciliation to adjusted EBITDA Net income (loss) $(1,022) $(295) $10,809 $(5,469) Interest expense, net 13,512 7,905 39,238 26,262 Loss on extinguishment of debt - 19,016 - 42,804 Provision for income taxes 2,316 2,379 6,508 6,747 Depreciation and amortization 10,142 11,246 30,323 35,321 Restructuring - 143 289 143 Impairment losses on intangible assets 8,982 - 8,982 - Loss from disposal of assets - - - 612 IOS North America transition expenses - 567 - 3,073 Facilities move expense - 110 - 605 --------- --------- --------- --------- Adjusted EBITDA $33,930 $41,071 $96,149 $110,098 ========= ========= ========= ========= Three Three Nine Nine Months Months Months Months Ended Ended Ended Ended September September September September 30, 2004 30, 2005 30, 2004 30, 2005 --------------------------------------- Reconciliation to adjusted net income and cash net income Net income (loss) $(1,022) $(295) $10,809 $(5,469) Add provision for income taxes 2,316 2,379 6,508 6,747 --------- --------- --------- --------- Income before provision for income taxes 1,294 2,084 17,317 1,278 Restructuring - 143 289 143 Impairment losses on intangible assets 8,982 - 8,982 - Loss from disposal of assets - - - 612 Purchase accounting amortization 5,434 5,742 16,273 18,585 IOS North America transition expenses - 567 - 3,073 Facilities move expense - 194 - 1,016 Loss on extinguishment of debt - 19,016 - 42,804 --------- --------- --------- --------- Adjusted income before provision for income taxes 15,710 27,746 42,861 67,511 Less assumed provision for income taxes at 39% (6,127) (10,821) (16,716) (26,329) --------- --------- --------- --------- Adjusted Net Income 9,583 16,925 26,145 41,182 Add cash savings of tax deductible goodwill(1) 2,097 2,300 6,291 6,900 --------- --------- --------- --------- Cash net income $11,680 $19,225 $32,436 $48,082 ========= ========= ========= ========= Adjusted net income per share after IPO $0.14 $0.25 $0.39 $0.61 Cash net income per share after IPO $0.17 $0.28 $0.48 $0.71 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. *T