Investor Relations -Press Release

<< Back
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)--Apr. 15, 2013-- USA Mobility, Inc. (Nasdaq: 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:

Wireless

  • 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.

Software

  • 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.

Total Company

  • 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 Mobility Wireless 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,
2012  

2011
(As Restated)

Wireless     Software     Total Wireless     Software     Total
 
Revenue:
Paging service $ 159,739 $ - $ 159,739 $ 184,317 $ - $ 184,317
Cellular 1,152 - 1,152 2,612 - 2,612
Software revenue (c) 6,515 51,291 57,806 10,133 33,992 44,125
Other   999     -     999     2,639     -     2,639  
Total revenue   168,405     51,291     219,696     199,701     33,992     233,693  
 
Operating expenses:
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
Impairment   -     3,382     3,382     -     -     -  
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  
 
 
Reconciliation of operating income (loss) to EBITDA (d):
Operating income (loss) $ 53,349 $ (7,621 ) $ 45,728 $ 60,382 $ (8,553 ) $ 51,829
Add back: depreciation, amortization, accretion and impairment   11,167     10,447     21,614     13,973     5,361     19,334  
EBITDA $ 64,516   $ 2,826   $ 67,342   $ 74,355   $ (3,192 ) $ 71,163  
% of total revenue 38.3 % 5.5 % 30.7 % 37.2 % -9.4 % 30.5 %
 
Key statistics:
Units in service 1,515 - 1,515 1,668 - 1,668
Average revenue per unit (ARPU) $ 8.37 $ - $ 8.37 $ 8.64 $ - $ 8.64
Bookings $ - $ 61,301 $ 61,301 $ - $ 47,886 $ 47,886
Backlog $ - $ 40,626 $ 40,626 $ - $ 32,926 $ 32,926
 

(a) Slight variations in totals are due to rounding.

(b) Includes consolidated results of operations of USA Mobility Wireless, Inc. ("Wireless") and Amcom Software, Inc. ("Software"). Software operations reflect financial results from March 3, 2011, the acquisition date.

(c) Wireless results reflect eliminations for intercompany revenue and expenses.

(d) EBITDA or earnings before interest, taxes, depreciation, amortization, accretion and impairment is a non-GAAP measure and is presented for analytical purposes only.

         
USA MOBILITY, INC.
CONSOLIDATED BALANCE SHEETS (a)
(In thousands)
 

12/31/12

12/31/11
(As Restated)

 
Assets
Current assets:
Cash and cash equivalents $ 61,046 $ 53,655
Accounts receivable, net 21,580 20,523
Prepaid expenses and other 5,836 5,239
Inventory 3,257 2,751
Escrow receivables 275 14,819
Deferred income tax assets, net   3,915   8,505
Total current assets 95,909 105,492
Property and equipment, net 20,809 22,421
Goodwill 133,031 130,968
Other intangible assets, net 30,333 38,757
Deferred income tax assets, net 41,239 54,689
Other assets   1,306   2,094
Total assets $ 322,627 $ 354,421
 
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 12,659 $ 12,394
Accrued compensation and benefits 17,806 12,854
Consideration payable 275 14,819
Customer deposits 2,090 1,806
Deferred revenue   27,896   23,907
Total current liabilities 60,726 65,780
Long-term debt, net of current portion - 28,250
Deferred revenue 693 581
Other long-term liabilities   9,789   12,223
Total liabilities   71,208   106,834
Commitments and contingencies
Stockholders' equity:
Preferred stock - -
Common stock 2 2
Additional paid-in capital 125,212 131,612
Retained earnings   126,205   115,973
Total stockholders' equity   251,419   247,587
Total liabilities and stockholders' equity $ 322,627 $ 354,421
 
(a) Slight variations in totals are due to rounding.
       
USA MOBILITY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (a)
(In thousands)
 
For the twelve months ended

12/31/12

12/31/11
(As Restated)

Cash flows from operating activities:
Net income $ 26,984 $ 83,786

Adjustments to reconcile net income to net cash provided
by operating activities:

Depreciation, amortization and accretion 18,232 19,334
Impairment 3,382 -
Amortization of deferred financing costs 259 608
Deferred income tax expense (benefit) 18,040 (28,044 )
Amortization of stock based compensation 1,224 1,530
Provisions for doubtful accounts, service credits and other 1,962 1,679
(Adjustments)/Settlement of non-cash transaction taxes (480 ) 133
(Gain)/Loss on disposals of property and equipment (160 ) 109
Gain on disposals of narrow band PCS licenses - (7,500 )
Changes in assets and liabilities:
Accounts receivable (3,008 ) (417 )
Prepaid expenses, intangibles and other assets (318 ) 6,758
Accounts payable, accrued liabilities and other 2,375 (7,427 )
Customer deposits and deferred revenue   4,385     11,887  
Net cash provided by operating activities   72,877     82,436  
 
Cash flows from investing activities:
Purchases of property and equipment (9,989 ) (7,952 )
Proceeds from disposals of property and equipment 330 55
Proceeds from disposals of narrow band PCS licenses - 7,500
Acquisitions, net of cash acquired   (3,000 )   (134,250 )
Net cash used in investing activities   (12,659 )   (134,647 )
 
Cash flows from financing activities:
Issuance of debt - 24,044
Repayment of debt (28,250 ) (23,697 )
Deferred financing costs - (1,580 )
Cash dividends to stockholders (16,512 ) (22,121 )
Purchase of common stock   (8,065 )   -  
Net cash used in financing activities   (52,827 )   (23,354 )
 
 
Net increase (decrease) in cash and cash equivalents 7,391 (75,565 )
Cash and cash equivalents, beginning of period   53,655     129,220  
Cash and cash equivalents, end of period $ 61,046   $ 53,655  
 
Supplemental disclosure:
Interest paid $ 288   $ 1,504  
Income taxes paid $ 1,606   $ 1,925  
Non-cash financing activities $ -   $ 27,750  
 
(a) Slight variations in totals are due to rounding.
                       
USA MOBILITY, INC.
CONSOLIDATED STATEMENTS OF INCOME (a), (b)
(Unaudited and in thousands, except share, per share amounts and ARPU)
 
For the three months ended December 31,
2012  

2011
(As Restated)

Wireless     Software     Total Wireless     Software     Total
 
Revenue:
Paging service $ 38,081 $ - $ 38,081 $ 43,249 $ - $ 43,249
Cellular 275 - 275 414 - 414
Software revenue (c) 1,414 11,967 13,381 2,449 11,220 13,669
Other   147     -     147     421     -     421  
Total revenue   39,917     11,967     51,884     46,533     11,220     57,753  
 
Operating expenses:
Cost of products sold 177 5,532 5,709 626 4,721 5,347
Service, rental and maintenance (c) 11,052 2,447 13,499 12,454 2,024 14,478
Selling and marketing 2,727 3,303 6,030 3,275 2,460 5,735
General and administrative 10,820 1,731 12,551 11,888 1,722 13,610
Severance and restructuring 1,188 524 1,712 1,215 - 1,215
Depreciation, amortization and accretion 2,554 1,833 4,387 2,916 1,501 4,417
Impairment   -     3,382     3,382     -     -     -  
Total operating expenses   28,518     18,752     47,270     32,374     12,428     44,802  
% of total revenue 71.4 % 156.7 % 91.1 % 69.6 % 110.8 % 77.6 %
 
Operating income (loss) 11,399 (6,785 ) 4,614 14,159 (1,208 ) 12,951
% of total revenue 28.6 % -56.7 % 8.9 % 30.4 % -10.8 % 22.4 %
 
Interest expense, net (61 ) (1 ) (62 ) (395 ) (9 ) (404 )
Other income (expense), net   164     125     289     122     9     131  
Income (loss) before income tax (expense) benefit 11,502 (6,661 ) 4,841 13,886 (1,208 ) 12,678
Income tax (expense) benefit   (4,972 )   2,158     (2,814 )   5,089     (147 )   5,236  
Net income (loss) $ 6,530   $ (4,503 ) $ 2,027   $ 18,975   $ (1,061 ) $ 17,914  
 
Basic net income per common share $ 0.09   $ 0.81  
Diluted net income per common share $ 0.09   $ 0.79  
 
Basic weighted average common shares outstanding   21,492,792     22,094,197  
Diluted weighted average common shares outstanding   21,991,673     22,576,380  
 
 
Reconciliation of operating income (loss) to EBITDA (d):
Operating income (loss) $ 11,399 $ (6,785 ) $ 4,614 $ 14,159 $ (1,208 ) $ 12,951
Add back: depreciation, amortization, accretion and impairment   2,554     5,215     7,769     2,916     1,501     4,417  
EBITDA $ 13,953   $ (1,570 ) $ 12,383   $ 17,075   $ 293   $ 17,368  
% of total revenue 35.0 % -13.1 % 23.9 % 36.7 % 2.6 % 30.1 %
 
Key statistics:
Units in service 1,515 - 1,515 1,668 - 1,668
Average revenue per unit (ARPU) $ 8.29 $ - $ 8.29 $ 8.51 $ - $ 8.51
Bookings $ - $ 18,129 $ 18,129 $ - $ 15,213 $ 15,213
Backlog $ - $ 40,626 $ 40,626 $ - $ 32,926 $ 32,926
 

(a) Slight variations in totals are due to rounding.

(b) Includes consolidated results of operations of USA Mobility Wireless, Inc. ("Wireless") and Amcom Software, Inc. ("Software"). Software operations reflect financial results from March 3, 2011, the acquisition date.

(c) Wireless results reflect eliminations of intercompany revenue and expenses.

(d) EBITDA or earnings before interest, taxes, depreciation, amortization, accretion and impairment is a non-GAAP measure and is presented for analytical purposes only.

                               
USA MOBILITY, INC.
CONSOLIDATED STATEMENTS OF INCOME (a), (b)
(Unaudited and in thousands, except share, per share amounts and ARPU)
 
For the three months ended

12/31/12

9/30/12

6/30/12

3/31/12

12/31/11

9/30/11

6/30/11

3/31/11

(As Restated) (As Restated) (As Restated) (As Restated)
Revenues:
Paging service $ 38,081 $ 39,235 $ 40,548 $ 41,875 $ 43,249 $ 45,121 $ 47,319 $ 48,628
Cellular 275 314 286 277 414 315 1,199 684
Software revenue 13,381 15,321 14,847 14,257 13,669 13,726 12,240 4,490
Other   147     246     280     326     421     570     768     880  
Total revenues   51,884     55,116     55,961     56,735     57,753     59,732     61,526     54,682  
 
Operating expenses:
Cost of products sold 5,709 5,105 5,216 4,816 5,347 5,877 6,893 2,289
Service, rental and maintenance 13,499 13,731 13,892 14,303 14,478 15,217 16,187 16,465
Selling and marketing 6,030 6,043 5,919 5,653 5,735 5,757 6,232 4,665
General and administrative 12,551 12,466 12,494 13,169 13,610 13,077 13,840 15,568
Severance and restructuring 1,712 - 24 22 1,215 28 17 33
Depreciation, amortization and accretion 4,387 4,724 4,606 4,515 4,417 5,080 5,298 4,539
Impairment   3,382     -     -     -     -     -     -     -  
Total operating expenses   47,270     42,069     42,151     42,478     44,802     45,036     48,467     43,559  
% of total revenues 91.1 % 76.3 % 75.3 % 74.9 % 77.6 % 75.4 % 78.8 % 79.7 %
 
Operating income 4,614 13,047 13,810 14,257 12,951 14,696 13,059 11,123
% of total revenues 8.9 % 23.7 % 24.7 % 25.1 % 22.4 % 24.6 % 21.2 % 20.3 %
 
Interest expense, net (62 ) (64 ) (66 ) (188 ) (404 ) (732 ) (862 ) (256 )
Other income (expense), net   289     52     436     (62 )   131     (1 )   7,666     154  
Income before income tax (expense) benefit 4,841 13,035 14,180 14,007 12,678 13,963 19,863 11,021
Income tax (expense) benefit   (2,814 )   (4,987 )   (5,733 )   (5,545 )   5,236     (5,161 )   (4,181 )   30,367  
Net income $ 2,027   $ 8,048   $ 8,447   $ 8,462   $ 17,914   $ 8,802   $ 15,862   $ 41,388  
 
Basic net income per common share $ 0.09   $ 0.37   $ 0.38   $ 0.38   $ 0.81   $ 0.40   $ 0.71   $ 1.88  
Diluted net income per common share $ 0.09   $ 0.36   $ 0.37   $ 0.37   $ 0.79   $ 0.39   $ 0.70   $ 1.85  
 
Basic weighted average common shares outstanding   21,492,792     21,973,473     22,130,397     22,106,543     22,094,197     22,090,913     22,086,848     22,063,393  
Diluted weighted average common shares outstanding   21,991,673     22,399,934     22,613,517     22,589,483     22,576,380     22,573,064     22,551,862     22,333,399  
 
Reconciliation of operating income to EBITDA (c):
Operating income $ 4,614 $ 13,047 $ 13,810 $ 14,257 $ 12,951 $ 14,696 $ 13,059 $ 11,123
Add back: depreciation, amortization, accretion and impairment   7,769     4,724     4,606     4,515     4,417     5,080     5,298     4,539  
EBITDA $ 12,383   $ 17,771   $ 18,416   $ 18,772   $ 17,368   $ 19,776   $ 18,357   $ 15,662  
% of total revenues 23.9 % 32.2 % 32.9 % 33.1 % 30.1 % 33.1 % 29.8 % 28.6 %
 
Key statistics:
Units in service 1,515 1,546 1,583 1,617 1,668 1,721 1,779 1,828
Average revenue per unit (ARPU) $ 8.29 $ 8.36 $ 8.45 $ 8.50 $ 8.51 $ 8.59 $ 8.74 $ 8.72
Bookings $ 18,129 $ 15,670 $ 15,085 $ 12,417 $ 15,213 $ 14,188 $ 15,158 $ 3,327
Backlog $ 40,626 $ 36,155 $ 34,391 $ 32,688 $ 32,926 $ 29,349 $ 26,776 $ 21,522
 

(a) Slight variations in totals are due to rounding.

(b) Software operations reflect financial results from March 3, 2011, the acquisition date.

(c) EBITDA or earnings before interest, taxes, depreciation, amortization, accretion and impairment is a non-GAAP measure and is presented for analytical purposes only.

                               
USA MOBILITY, INC.
CONSOLIDATED OPERATING EXPENSES
SUPPLEMENTAL INFORMATION (a), (b)
(Unaudited and in thousands)
 
For the three months ended

12/31/12

9/30/12

6/30/12

3/31/12

12/31/11

9/30/11

6/30/11

3/31/11

(As Restated) (As Restated) (As Restated) (As Restated)
Cost of products sold
Payroll and related $ 2,634 $ 2,427 $ 2,324 $ 2,368 $ 2,277 $ 2,537 $ 2,156 $ 677
Cost of sales 2,500 2,195 2,434 2,037 2,641 3,058 4,078 1,395
Other   575   483   458     411   429   282   659     217
Total cost of products sold   5,709   5,105   5,216     4,816   5,347   5,877   6,893     2,289
 
Service, rental and maintenance
Site rent 4,326 4,326 4,421 4,791 5,002 5,438 5,962 6,881
Telecommunications 2,053 2,257 2,346 2,312 2,598 2,732 2,880 3,102
Payroll and related 5,432 5,309 5,360 5,529 5,279 5,578 5,562 4,769
Stock based compensation 7 6 6 6 6 6 6 5
Other   1,681   1,833   1,759     1,665   1,593   1,463   1,777     1,708
Total service, rental and maintenance   13,499   13,731   13,892     14,303   14,478   15,217   16,187     16,465
 
Selling and marketing
Payroll and related 3,519 3,504 3,544 3,559 3,306 3,593 3,567 2,904
Commissions 1,197 1,335 1,343 1,253 1,423 1,273 1,592 1,155
Stock based compensation 19 19 18 16 16 16 16 17
Other   1,295   1,185   1,014     825   990   875   1,057     589
Total selling and marketing   6,030   6,043   5,919     5,653   5,735   5,757   6,232     4,665
 
General and administrative
Payroll and related 6,423 5,851 5,972 6,490 6,268 5,778 6,781 6,072
Stock based compensation 296 435 (19 ) 415 415 392 432 203
Bad debt 300 275 270 234 363 346 (80 ) 416
Facility rent 889 903 868 806 942 1,041 1,035 823
Telecommunications 379 390 443 412 440 494 490 470
Outside services 2,377 2,353 2,458 2,447 2,079 2,496 2,533 5,228
Taxes, licenses and permits 1,312 1,249 1,426 1,501 1,445 1,327 2,190 1,332
Other   575   1,010   1,076     864   1,658   1,203   459     1,024
Total general and administrative   12,551   12,466   12,494     13,169   13,610   13,077   13,840     15,568
 
Severance and restructuring 1,712 - 24 22 1,215 28 17 33
Depreciation, amortization and accretion 4,387 4,724 4,606 4,515 4,417 5,080 5,298 4,539
Impairment   3,382              
Operating expenses $ 47,270 $ 42,069 $ 42,151   $ 42,478 $ 44,802 $ 45,036 $ 48,467   $ 43,559
 
Capital expenditures $ 2,854 $ 2,696 $ 2,888 $ 1,551 $ 2,818 $ 1,779 $ 1,854 $ 1,501
 

(a) Slight variations in totals are due to rounding.

(b) Software operations have been included from March 3, 2011, the acquisition date.

                               
USA MOBILITY, INC. (WIRELESS)
UNITS IN SERVICE ACTIVITY (a)
(Unaudited and in thousands)
 
 
For the three months ended

12/31/12

9/30/12

6/30/12

3/31/12

12/31/11

9/30/11

6/30/11

3/31/11

Units in service

 
Beginning units in service
Direct one-way 1,366 1,395 1,423 1,465 1,510 1,559 1,599 1,645
Direct two-way 79   82   85   90   93   97   100   106  
Total direct 1,445   1,477   1,508   1,555   1,603   1,656   1,699   1,751  
Indirect one-way 55 58 60 63 68 71 75 68
Indirect two-way 46   48   49   50   50   52   54   70  
Total indirect 101   106   109   113   118   123   129   138  
Total beginning units in service 1,546   1,583   1,617   1,668   1,721   1,779   1,828   1,889  
 
Gross placements
Direct one-way 46 45 49 41 39 50 56 47
Direct two-way 2   3   4   3   4   5   5   3  
Total direct 48   48   53   44   43   55   61   50  
Indirect one-way 2 1 2 1 2 3 3 1
Indirect two-way -   -   -   -   -   -   2   -  
Total indirect 2   1   2   1   2   3   5   1  
Total gross placements 50   49   55   45   45   58   66   51  
 
Gross disconnects
Direct one-way (66 ) (74 ) (77 ) (83 ) (84 ) (99 ) (94 ) (93 )
Direct two-way (6 ) (6 ) (7 ) (8 ) (7 ) (9 ) (10 ) (9 )
Total direct (72 ) (80 ) (84 ) (91 ) (91 ) (108 ) (104 ) (102 )
Indirect one-way (9 ) (4 ) (4 ) (4 ) (7 ) (6 ) (10 ) 6
Indirect two-way -   (2 ) (1 ) (1 ) -   (2 ) (1 ) (16 )
Total indirect (9 ) (6 ) (5 ) (5 ) (7 ) (8 ) (11 ) (10 )
Total gross disconnects (81 ) (86 ) (89 ) (96 ) (98 ) (116 ) (115 ) (112 )
 
Net (loss)/gain
Direct one-way (20 ) (29 ) (28 ) (42 ) (45 ) (49 ) (38 ) (46 )
Direct two-way (4 ) (3 ) (3 ) (5 ) (3 ) (4 ) (5 ) (6 )
Total direct (24 ) (32 ) (31 ) (47 ) (48 ) (53 ) (43 ) (52 )
Indirect one-way (7 ) (3 ) (2 ) (3 ) (5 ) (3 ) (7 ) 7
Indirect two-way -   (2 ) (1 ) (1 ) -   (1 ) 1   (16 )
Total indirect (7 ) (5 ) (3 ) (4 ) (5 ) (4 ) (6 ) (9 )
Total net change (31 ) (37 ) (34 ) (51 ) (53 ) (58 ) (49 ) (60 )
 
Ending units in service
Direct one-way 1,346 1,366 1,395 1,423 1,465 1,510 1,559 1,599
Direct two-way 75   79   82   85   90   93   97   100  
Total direct 1,421   1,445   1,477   1,508   1,555   1,603   1,656   1,699  
Indirect one-way 48 55 58 60 63 68 71 75
Indirect two-way 46   46   48   49   50   50   52   54  
Total indirect 94   101   106   109   113   118   123   129  
Total ending units in service 1,515   1,546   1,583   1,617   1,668   1,721   1,779   1,828  
 

(a) Slight variations in totals are due to rounding.

                               
USA MOBILITY, INC. (WIRELESS)
AVERAGE REVENUE PER UNIT (ARPU) AND CHURN (a)
(Unaudited)
 
For the three months ended

12/31/12

9/30/12

6/30/12

3/31/12

12/31/11

9/30/11

6/30/11

3/31/11

 

ARPU

Direct one-way $ 7.78 $ 7.84 $ 7.89 $ 7.91 $ 7.90 $ 7.97 $ 8.10 $ 8.05
Direct two-way   20.52     20.55     20.88     21.08     21.27     21.60     22.05     22.23  
Total direct 8.47 8.54 8.62 8.67 8.68 8.77 8.92 8.89
 
Indirect one-way 7.51 7.25 7.48 7.61 7.49 7.28 7.57 8.44
Indirect two-way   3.87     4.08     4.19     4.33     4.43     4.77     4.77     4.31  
Total indirect 5.74 5.77 5.97 6.14 6.16 6.22 6.40 6.49
 
Total one-way 7.77 7.82 7.88 7.90 7.89 7.94 8.08 8.07
Total two-way   14.16     14.36     14.69     15.00     15.29     15.71     16.04     15.41  
Total paging ARPU $ 8.29   $ 8.36   $ 8.45   $ 8.50   $ 8.51   $ 8.59   $ 8.74   $ 8.72  
 
 
 

Gross disconnect rate (b)

Direct one-way -4.8 % -5.3 % -5.4 % -5.7 % -5.6 % -6.4 % -6.0 % -5.7 %
Direct two-way   -7.8 %   -7.7 %   -8.5 %   -8.3 %   -7.7 %   -9.5 %   -9.3 %   -7.5 %
Total direct -5.0 % -5.5 % -5.6 % -5.8 % -5.7 % -6.5 % -6.2 % -5.8 %
 
Indirect one-way -16.1 % -7.6 % -6.6 % -7.0 % -9.8 % -8.1 % -8.1 % 11.9 %
Indirect two-way   -1.6 %   -3.1 %   -1.8 %   -1.7 %   -1.8 %   -3.1 %   -4.5 %   -26.4 %
Total indirect -9.3 % -5.5 % -4.4 % -4.7 % -6.4 % -6.0 % -6.6 % -8.1 %
 
Total one-way -5.3 % -5.4 % -5.4 % -5.8 % -5.8 % -6.4 % -6.1 % -5.0 %
Total two-way   -5.4 %   -6.0 %   -6.0 %   -5.9 %   -5.6 %   -7.3 %   -7.6 %   -15.2 %
Total paging gross disconnect rate   -5.3 %   -5.5 %   -5.5 %   -5.8 %   -5.7 %   -6.5 %   -6.2 %   -6.0 %
 
 
 

Net (loss)/gain rate (c)

Direct one-way -1.5 % -2.1 % -1.9 % -2.9 % -3.0 % -3.2 % -2.5 % -2.9 %
Direct two-way   -4.9 %   -4.0 %   -3.9 %   -4.9 %   -3.3 %   -4.1 %   -3.1 %   -3.6 %
Total direct -1.7 % -2.2 % -2.0 % -3.0 % -3.0 % -3.2 % -2.6 % -3.0 %
 
Indirect one-way -13.2 % -5.6 % -4.9 % -5.4 % -7.4 % -4.5 % -5.3 % 14.6 %
Indirect two-way   -1.3 %   -2.5 %   -1.2 %   -0.9 %   -1.0 %   -2.3 %   -3.0 %   -25.8 %
Total indirect -7.6 % -4.2 % -3.2 % -3.4 % -4.7 % -3.6 % -4.3 % -6.6 %
 
Total one-way -1.9 % -2.2 % -2.0 % -3.0 % -3.2 % -3.2 % -2.6 % -2.2 %
Total two-way   -3.5 %   -3.5 %   -2.9 %   -3.5 %   -2.5 %   -3.5 %   -3.1 %   -12.7 %
Total paging net loss rate   -2.0 %   -2.3 %   -2.1 %   -3.0 %   -3.1 %   -3.3 %   -2.7 %   -3.2 %
 

(a) Slight variations in totals are due to rounding.

(b) Gross disconnect rate is current period disconnected units divided by prior period ending units in service.

(c) Net (loss)/gain rate is net current period placements and disconnected units in service divided by prior period ending units in service.

                               
USA MOBILITY, INC. (WIRELESS)
SUPPLEMENTAL INFORMATION BY MARKET SEGMENT (a)
(Unaudited)
 
For the three months ended

12/31/12

9/30/12

6/30/12

3/31/12

12/31/11

9/30/11

6/30/11

3/31/11

 
Gross placement rate (b)
Healthcare 3.9 % 3.7 % 4.3 % 3.3 % 3.0 % 3.9 % 4.5 % 3.3 %
Government 1.5 % 2.5 % 1.8 % 1.3 % 1.6 % 2.6 % 2.1 % 1.9 %
Large enterprise 2.3 % 2.0 % 1.9 % 2.4 % 2.1 % 2.1 % 2.1 % 2.3 %
Other 1.9 % 2.1 % 2.0 % 2.2 % 2.8 % 1.9 % 2.0 % 2.5 %
Total direct 3.3 % 3.2 % 3.5 % 2.8 % 2.7 % 3.3 % 3.6 % 2.9 %
Total indirect 1.7 % 1.3 % 1.2 % 1.3 % 1.7 % 2.4 % 2.3 % 1.6 %
Total 3.2 % 3.1 % 3.4 % 2.7 % 2.6 % 3.3 % 3.5 % 2.8 %
 
Gross disconnect rate (b)
Healthcare -4.4 % -4.5 % -4.5 % -4.7 % -4.9 % -5.7 % -5.0 % -4.7 %
Government -6.7 % -6.8 % -7.0 % -7.7 % -7.4 % -8.3 % -8.7 % -7.6 %
Large enterprise -5.7 % -7.3 % -8.0 % -7.7 % -5.7 % -7.0 % -7.1 % -6.2 %
Other -7.0 % -8.1 % -8.7 % -9.2 % -8.7 % -8.9 % -9.0 % -9.2 %
Total direct -5.0 % -5.5 % -5.6 % -5.8 % -5.7 % -6.5 % -6.2 % -5.8 %
Total indirect -9.3 % -5.5 % -4.4 % -4.7 % -6.4 % -6.0 % -6.6 % -8.1 %
Total -5.3 % -5.5 % -5.5 % -5.8 % -5.7 % -6.5 % -6.2 % -6.0 %
 
Net loss rate (b)
Healthcare -0.4 % -0.9 % -0.2 % -1.4 % -1.9 % -1.8 % -0.5 % -1.4 %
Government -5.2 % -4.3 % -5.2 % -6.4 % -5.8 % -5.7 % -6.6 % -5.7 %
Large enterprise -3.4 % -5.3 % -6.1 % -5.3 % -3.6 % -4.9 % -5.0 % -3.9 %
Other -5.1 % -5.9 % -6.8 % -7.1 % -5.9 % -7.0 % -6.9 % -6.8 %
Total direct -1.7 % -2.2 % -2.0 % -3.0 % -3.0 % -3.2 % -2.6 % -3.0 %
Total indirect -7.6 % -4.2 % -3.2 % -3.4 % -4.7 % -3.6 % -4.3 % -6.6 %
Total -2.0 % -2.3 % -2.1 % -3.0 % -3.1 % -3.3 % -2.7 % -3.2 %
 
End of period units in service % of total (b)
Healthcare 67.1 % 65.9 % 64.9 % 63.6 % 62.6 % 61.7 % 60.9 % 59.5 %
Government 10.3 % 10.8 % 11.1 % 11.5 % 11.9 % 12.3 % 12.6 % 13.1 %
Large enterprise 8.5 % 8.6 % 8.9 % 9.3 % 9.5 % 9.6 % 9.8 % 10.0 %
Other 7.9 % 8.1 % 8.4 % 8.8 % 9.2 % 9.5 % 9.7 % 10.3 %
Total direct 93.8 % 93.4 % 93.3 % 93.2 % 93.2 % 93.1 % 93.0 % 92.9 %
Total indirect 6.2 % 6.6 % 6.7 % 6.8 % 6.8 % 6.9 % 7.0 % 7.1 %
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
 

(a) Slight variations in totals are due to rounding.

(b) Changes in the classification of units in service are reflected in the quarter when such changes are identified. Such changes are then appropriately reflected in calculating the gross placement, gross disconnect and net loss rates.

                               
USA MOBILITY, INC. (WIRELESS)
SUPPLEMENTAL INFORMATION - DIRECT UNITS IN SERVICE AND
CELLULAR ACTIVATIONS (a)

(Unaudited)

 
For the three months ended

12/31/12

9/30/12

6/30/12

3/31/12

12/31/11

9/30/11

6/30/11

3/31/11

 
Account size ending units in service (000's)
1 to 3 units 52 55 58 61 65 69 74 79
4 to 10 units 31 33 35 37 40 42 45 48
11 to 50 units 75 78 82 86 92 99 106 114
51 to 100 units 49 50 52 54 56 61 68 72
101 to 1,000 units 334 343 356 373 380 399 411 424
>1,000 units 880 886 894 897 922 933 952 962
Total 1,421 1,445 1,477 1,508 1,555 1,603 1,656 1,699
 
End of period units in service % of total direct
1 to 3 units 3.6% 3.8% 3.9% 4.1% 4.2% 4.3% 4.4% 4.7%
4 to 10 units 2.2% 2.3% 2.3% 2.3% 2.6% 2.6% 2.7% 2.8%
11 to 50 units 5.3% 5.4% 5.6% 5.7% 5.9% 6.2% 6.4% 6.7%
51 to 100 units 3.5% 3.5% 3.5% 3.6% 3.6% 3.8% 4.1% 4.2%
101 to 1,000 units 23.5% 23.7% 24.1% 24.8% 24.4% 24.9% 24.8% 25.0%
>1,000 units 61.9% 61.3% 60.6% 59.5% 59.3% 58.2% 57.6% 56.6%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
 
Account size net loss rate
1 to 3 units -5.5% -5.3% -5.7% -6.2% -5.7% -5.9% -6.3% -6.2%
4 to 10 units -5.5% -4.8% -6.2% -6.2% -6.6% -6.4% -6.8% -6.2%
11 to 50 units -4.6% -4.8% -4.1% -7.1% -7.3% -6.4% -6.5% -7.7%
51 to 100 units -2.6% -3.9% -2.4% -3.9% -8.4% -10.4% -5.4% -5.7%
101 to 1,000 units -2.6% -3.8% -4.7% -1.7% -4.7% -2.9% -3.3% -2.7%
>1,000 units -0.6% -1.0% -0.3% -2.7% -1.1% -2.1% -1.0% -1.8%
Total -1.7% -2.2% -2.0% -3.0% -3.0% -3.2% -2.6% -3.0%
 
Account size ARPU
1 to 3 units $ 15.29 $ 15.43 $ 15.49 $ 15.49 $ 15.46 $ 15.62 $ 15.74 $ 15.57
4 to 10 units 14.39 14.42 14.40 14.45 14.37 14.52 14.65 14.53
11 to 50 units 12.04 12.11 12.24 12.15 12.12 12.30 12.38 12.19
51 to 100 units 10.47 10.48 10.35 10.52 10.56 10.59 10.68 10.59
101 to 1,000 units 8.94 8.97 9.01 9.04 8.90 8.90 9.10 9.00
>1,000 units 7.24 7.28 7.34 7.35 7.37 7.42 7.49 7.47
Total $ 8.47 $ 8.54 $ 8.62 $ 8.67 $ 8.68 $ 8.77 $ 8.92 $ 8.89
 
 
Cellular:
Number of activations 1,041 948 1,052 1,070 1,476 1,236 4,370 2,191
Revenue from cellular services (000's) $ 275 $ 314 $ 286 $ 277 $ 414 $ 315 $ 1,199 $ 684
 

(a) Slight variations in totals are due to rounding.

Source: USA Mobility, Inc.

USA Mobility, Inc.
Bob Lougee, 800-611-8488
bob.lougee@usamobility.com