USA Mobility Reports First Quarter Operating Results; Board Declares Regular Quarterly Dividend

USA Mobility Reports First Quarter Operating Results; Board Declares Regular Quarterly Dividend

Wireless Subscriber and Revenue Trends Continue to Improve;
Software Revenues Increase, Bookings and Backlog Remain Strong;
Operating Cash Flow Higher as Expenses Decline


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 operating results for the first quarter ended March 31, 2013. In addition, the Company's Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on June 25, 2013 to stockholders of record on May 20, 2013.

Consolidated revenue for the first quarter was $53.1 million, compared to $51.9 million in the fourth quarterand $56.7 million in the first quarter of 2012. Revenue from the Company's Wireless business (USA Mobility Wireless) was $38.8 million in the first quarter, compared to $39.9 million in the fourth quarter and $44.3 million in the first quarter of 2012. Revenue from the Software business (Amcom Software) increased to $14.4 million, from $12.0 million in the fourth quarter and $12.5 million in the first quarter of 2012.

First quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $15.5 million, or 29.3 percent of revenue, compared to $18.8 million, or 33.1 percent of revenue, in the year-earlier quarter. First quarter EBITDA included $14.3 million from Wireless and $1.2 million from Software. EBITDA from Wireless of $14.3 million compared to $14.0 million in the prior quarter and $17.5 million in the year-earlier quarter.

Net income for the first quarter was $6.9 million, or $0.32 per fully diluted share, compared to $8.5 million, or $0.37 per fully diluted share, in the first quarter of 2012.

Key results and highlights for the first quarter included:

Wireless

  • Net unit losses improved to 35,000 in the first quarter from 51,000 in the first quarter of 2012, while the quarterly rate of unit erosion was 2.3 percent versus 3.0 percent in the year-earlier quarter. The annual rate of subscriber erosion improved to a record low 8.5 percent in the first quarter, compared to 9.2 percent in the fourth quarter and 11.5 percent in the year-ago quarter. Units in service at March 31, 2013 totaled 1,480,000, compared to 1,617,000 a year earlier.
  • The quarterly rate of revenue erosion improved to 2.9 percent from 4.9 percent in the first quarter of 2012, while the annual rate of revenue erosion improved to 12.4 percent from 15.7 percent in the year-earlier quarter.
  • Total ARPU (average revenue per unit) was $8.25 in the first quarter, compared to $8.29 in the fourth quarter and $8.50 in the first quarter of 2012.
  • First quarter EBITDA margin for Wireless was 36.9 percent, compared to 35.0 percent in the fourth quarter and 39.5 percent in the year-earlier quarter.

Software

  • Bookings for the first quarter increased to $14.3 million from $12.4 million in the first quarter of 2012.
  • The backlog was $40.2 million at March 31, 2013, compared to $32.7 million a year earlier (as restated).
  • Of the $14.4 million in Software revenue for the first quarter, $6.8 million was maintenance revenue and $7.6 million was operations revenue, compared to $6.4 million and $6.1 million, respectively, of the $12.5 million in Software revenue for first quarter of 2012.
  • The renewal rate for maintenance in the first quarter was 98.8 percent.

Total Company

  • Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $37.6 million in the first quarter, with $24.5 million for Wireless and $13.1 million for Software, compared to $38.0 million in the first quarter of 2012, with $26.8 million for Wireless and $11.2 million for Software.
  • Capital expenses were $2.3 million, compared to $1.6 million in the first quarter of 2012.
  • Dividends paid to stockholders totaled $2.7 million in the first quarter.
  • The Company's cash balance at March 31, 2013 was $71.7 million.
  • The number of full-time equivalent employees at March 31, 2013 totaled 656, including 367 for Wireless and 289 for Software, compared to a total of 685 at March 31, 2012, including 420 for Wireless and 265 for Software.

Vincent D. Kelly, president and chief executive officer, said: "USA Mobility continued to make excellent progress in the first quarter. Both our Wireless and Software businesses met or exceeded their performance goals in virtually all operating categories as consolidated revenue increased and expenses declined from the prior quarter. In addition, we continued to maintain strong operating cash flow and operating margins, and generated sufficient cash flow to again return capital to stockholders in the form of dividend distributions."

Kelly added: "Once again our Wireless business exceeded expectations for gross additions, revenue, ARPU, and expenses. We were also pleased to see our annual rates of subscriber and revenue erosion reach record lows."

Kelly said the Company's Wireless sales efforts during the quarter continued to focus on the core market segments of Healthcare, Government and Large Enterprise. "These core segments represented approximately 92 percent of our direct subscriber base and 88 percent of our direct paging revenue at the end of the quarter. Healthcare comprised 72.5 percent of our direct subscriber base at March 31st and continued to be our best performing market segment with the highest percentage of direct gross additions (82.6%) and the lowest rate of direct net unit loss (0.5%). Clearly, Healthcare providers continue to recognize and benefit from the reliability and cost advantages of paging for their most critical messaging needs."

Commenting on the Software business, Kelly said: "First quarter revenue and bookings increased from the year-earlier quarter while our backlog was up 23 percent to $40.2 million from a year ago. In addition, our sales team brought in a record number of large contracts during the quarter from the Healthcare and Government business segments and continued to build a solid pipeline of prospective business. Customer demand remained strong for such software solutions as call center management, clinical alerting middleware, critical smartphone communications and emergency notification. While sales activity remained strongest in North America, we also added new accounts in the Asia-Pacific region and Middle East, including a major medical and research center in Qatar."

During the quarter the Company introduced a software upgrade that significantly improves physician and nurse communications. "The enhancement links two of our most popular software solutions, Amcom Mobile Connect and Amcom Care Connect," said Kelly. "Amcom Mobile Connect supports secure and HIPPA-compliant text-messaging, while Amcom Care Connect helps caregivers connect quickly on their own schedules and preferred devices. The new feature - Amcom Mobile Connect 3.3 - provides a "chat view" screen and updates page that makes it easier for caregivers to connect with one another. The solution gives physicians and nurses the flexibility to talk or text, plus it incorporates critical escalation features when a caregiver is unavailable. Many of our 900 hospital customers had previously requested this specific type of solution, so we're very pleased to be able to integrate this capability to enhance patient safety and care."

Shawn E. Endsley, chief financial officer, said the Company continued its positive momentum from 2012 in both the Wireless and Software businesses. "Lower revenue and subscriber churn along with operating expense management in the Wireless business contributed to strong operating cash flow and EBITDA," he noted. "In addition, higher bookings and backlog in the Software business reflect continuation of the positive trends from the second half of 2012."

Regarding financial guidance for 2013, Endsley said the Company currently projects total revenue to range from $195 million to $213 million, operating expenses (excluding depreciation, amortization and accretion) to range from $150 million to $152 million, and capital expenses to range from $8.1 million to $9.7 million.

USA Mobility's Annual Meeting of Stockholders will be held at 9:00 am EST on Tuesday, July 23, 2013 at The Westin Alexandria, 400 Courthouse Square, Alexandria, Virginia.

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 10, 2013. Dial-in numbers for the call are 719-325-2432 or 888-417-8516. The pass code for the call is 8073557. A replay of the call will be available from 1:00 p.m. ET on May 10 until 1:00 p.m. on Friday, May 24. Replay numbers are 719-457-0820 or 888-203-1112. The pass code for the replay is 8073557.

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.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (a)
(Unaudited and in thousands, except share, per share amounts and ARPU)
 
For the three months ended March 31,
2013   2012  
Wireless     Software     Total Wireless     Software     Total
 
Revenue:
Paging service $ 37,051 $ - $ 37,051 $ 41,875 $ - $ 41,875
Cellular 195 - 195 277 - 277
Software revenue and other (b) 1,372 14,351 15,723 1,787 12,470 14,257
Other   161         -         161     326         -         326  
Total revenue   38,779         14,351         53,130     44,265         12,470         56,735  
 
Operating expenses:
Cost of products sold (b) (5 ) 5,188 5,183 173 4,643 4,816
Service, rental and maintenance (b) 10,829 2,203 13,032 12,034 2,269 14,303
Selling and marketing 2,476 3,740 6,216 3,048 2,605 5,653
General and administrative 11,181 1,971 13,152 11,508 1,661 13,169
Severance and restructuring - - - 9 13 22
Depreciation, amortization and accretion   2,396         1,411         3,807     2,815         1,700         4,515  
Total operating expenses   26,877         14,513         41,390     29,587         12,891         42,478  
% of total revenue 69.3 % 101.1 % 77.9 % 66.8 % 103.4 % 74.9 %
                           
Operating income (loss)   11,902         (162 )       11,740     14,678         (421 )       14,257  
% of total revenue 30.7 % -1.1 % 22.1 % 33.2 % -3.4 % 25.1 %
 
Interest expense, net (64 ) - (64 ) (188 ) - (188 )
Other income (expense), net   89         (8 )       81     (46 )       (16 )       (62 )
Income (loss) before income tax (expense) benefit 11,927 (170 ) 11,757 14,444 (437 ) 14,007
Income tax (expense) benefit   (4,897 )       65         (4,832 )   (5,718 )       173         (5,545 )
Net income (loss) $ 7,030       $ (105 )     $ 6,925   $ 8,726       $ (264 )     $ 8,462  
 
Basic net income per common share $ 0.32   $ 0.38  
Diluted net income per common share $ 0.32   $ 0.37  
 
Basic weighted average common shares outstanding   21,688,153     22,106,543  
Diluted weighted average common shares outstanding   21,904,862     22,589,483  
 
 
Reconciliation of operating income (loss) to EBITDA (c):
Operating income (loss) $ 11,902 $ (162 ) $ 11,740 $ 14,678 $ (421 ) $ 14,257

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