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

Wireless Subscriber and Revenue Trends Continue to Improve
As Operating Margins and ARPU Remain Strong;
Software Bookings Increase, Backlog Reaches Record High

SPRINGFIELD, Va.--(BUSINESS WIRE)--Nov. 5, 2013-- USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging, mobile voice and data and unified communications solutions, today announced operating results for the third quarter ended September 30, 2013. In addition, the Company’s Board of Directors declared a regular quarterly dividend of $0.125 per share, payable on December 10, 2013 to stockholders of record on November 20, 2013.

Consolidated revenue for the third quarter was $49.7 million, compared to $52.3 million in the second quarter and $55.1 million in the third quarter of 2012. Revenue from the Company’s Wireless business (USA Mobility Wireless) was $37.1 million in the third quarter, compared to $37.8 million in the second quarter and $41.4 million in the third quarter of 2012. Revenue from the Software business (Amcom Software) was $12.6 million in the third quarter versus $14.5 million in the second quarter and $13.7 million in the third quarter of 2012. The decrease in Software revenue reflects the continuing remediation efforts to address a previously disclosed material weakness in the design of internal control over the timing of Software revenue recognition. Revenue associated with projects completed in the quarter has been deferred and will be recognized in the fourth quarter after a 90 day warranty period has expired.

Third quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $13.4 million, or 27.0 percent of revenue, compared to $17.8 million, or 32.2 percent of revenue, in the third quarter of 2012. Third quarter EBITDA included $13.8 million from Wireless, compared with $14.3 million for the second quarter and $16.3 million for the third quarter of 2012, and negative $0.4 million from Software, compared with $1.4 million for the second quarter and $1.5 million for the third quarter of 2012.

Net income for the third quarter was $5.8 million, or $0.26 per fully diluted share, compared to $8.0 million, or $0.36 per fully diluted share, in the third quarter of 2012.

Highlights for the third quarter included:

Wireless

  • The annual rate of revenue erosion again improved to an all-time low of 10.6 percent, compared to 11.7 percent in the second quarter and 14.6 percent in the third quarter of 2012, while the quarterly rate of revenue erosion improved to a two-year low of 1.9 percent from 2.6 percent in the second quarter and 3.1 percent in the year-earlier quarter.
  • The annual rate of subscriber erosion was 8.9 percent in the third quarter, compared to 8.7 percent in the second quarter and 10.2 percent in the third quarter of 2012, while the quarterly rate of unit erosion was 2.6 percent versus 2.4 percent in the second quarter and 2.3 percent in the third quarter of 2012. Net unit losses totaled 37,000 in the third quarter, equal to the third quarter of 2012. Units in service at September 30, 2013 totaled 1,408,000 compared to 1,546,000 a year earlier.
  • Total ARPU (average revenue per unit) was $8.22 in the third quarter, the same as the second quarter and compared to $8.36 in the third quarter of 2012.
  • Third quarter EBITDA margin for Wireless was 37.3 percent, compared to 38.0 percent in the second quarter and 39.3 percent in the year-earlier quarter.

Software

  • Bookings for the third quarter increased to $17.3 million from $15.6 million in the second quarter and $15.7 million in the third quarter of 2012.
  • Backlog reached a record high of $43.8 million at September 30, compared to $39.6 million at June 30 and $36.2 million a year earlier.
  • Of the $12.6 million in Software revenue for the third quarter, $7.0 million was maintenance revenue and $5.6 million was operations revenue, compared to $6.6 million and $7.1 million, respectively, of $13.7 million in Software revenue for third quarter of 2012.
  • The renewal rate for maintenance in the third quarter was 99.0 percent.

Total Company

  • Consolidated operating expenses (excluding depreciation, amortization and accretion) totaled $36.3 million in the third quarter, with $23.3 million for Wireless and $13.0 million for Software, compared to $37.3 million in the third quarter of 2012, with $25.1 million for Wireless and $12.2 million for Software.
  • Capital expenses were $2.5 million versus $2.7 million in the third quarter of 2012.
  • Dividends paid to stockholders totaled $2.7 million in the third quarter.
  • The Company’s cash balance at September 30, 2013 was $83.0 million.
  • The number of full-time equivalent employees at September 30, 2013 totaled 652, including 355 for Wireless and 297 for Software, compared to a total of 676 at September 30, 2012, including 396 for Wireless and 280 for Software.

Vincent D. Kelly, president and chief executive officer, said: “USA Mobility again made solid progress in the third quarter as both our Wireless and Software operations met or exceeded their performance goals in most key operating categories. During the quarter we continued to see growing demand from our customers for enterprise-wide solutions that integrate both our Wireless and Software product offerings. Overall, Wireless subscriber and revenue trends continue to improve from the prior quarter as operating expenses declined, and Software bookings increased as the backlog reached a record high. In addition, we were able to maintain strong operating margins, operate profitably, and generate sufficient cash flow to again return capital to stockholders in the form of cash dividends.”

Kelly added: “On the Wireless side, we again exceeded expectations for gross additions, revenue, expenses, EBITDA, operating cash flow and ARPU. The annual rate of revenue erosion reached a record low for the second straight quarter, while the quarterly rate of revenue decline improved to its best level in more than two years. Moreover, the annual rate of subscriber erosion continued near record low levels.”

Kelly said third quarter sales efforts in the Wireless business continued to focus primarily on its core market segments of Healthcare, Government and Large Enterprise. “Healthcare comprised 74.8 percent of our direct subscriber base at September 30th and continued to be our most stable market segment with a consistent level of gross placements and low rate of net churn. Once again we were pleased that healthcare providers continue to recognize the cost and reliability benefits of paging for their most critical messaging needs.”

Commenting on the Software business, Kelly said: “Third quarter bookings increased from both the second quarter and year-earlier quarter while the backlog reached an all-time high of $43.8 million. Our Software sales team added new accounts in such core segments as healthcare, public safety, and government agencies and continued to build a solid pipeline of prospective business. One significant new contract, for example, included four military bases that were looking to improve their emergency call handling and response capabilities. Overall, customer demand remained strong for such software solutions as call center management, clinical alerting middleware, secure texting and emergency notification. Sales activity remained strongest in North America; however, we also added accounts in the Asia-Pacific region and EMEA countries (Europe, Middle East and Africa) as we continued to expand our software business in international markets.”

Kelly noted that the process of remediating the previously identified internal control weakness on Software revenue recognition has been underway and is expected to be completed as early as the fourth quarter. “Upon remediation we expect to report higher Software revenue as we will recognize revenue not only on transactions we complete in the fourth quarter but also revenue for those transactions from the prior quarter that were deferred until expiration of the 90-day warranty period.”

Shawn E. Endsley, chief financial officer, said the Company’s balance sheet continued to benefit from strong quarterly performances by both the Wireless and Software businesses. “Improved rates of revenue erosion and subscriber churn, combined with solid operating expense management and stable ARPU, helped drive strong EBITDA in our Wireless business,” he noted, “while our Software bookings and backlog continued to increase. The net result was a consolidated cash balance of $83 million at September 30th. In addition, we continue to operate as a debt-free company and maintain approximately $40 million in borrowing capacity through our credit facility.”

Endsley said the Company is maintaining its previously announced financial guidance for 2013, which 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 plans to host a conference call for investors on its third quarter results at 10:00 a.m. Eastern Time on Wednesday, November 6, 2013. Dial-in numbers for the call are 719-325-2469 or 888-466-4462. The pass code for the call is 1581551. A replay of the call will be available from 1:00 p.m. ET on November 6 until 1:00 p.m. on Wednesday, November 20. Replay numbers are 719-457-0820 or 888-203-1112. The pass code for the replay is 1581551.

* * * * * * * * *

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 they 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 SprintNextel 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 September 30,
2013   2012  
Wireless Software Total Wireless Software Total
Revenue:
Paging service $ 35,141 $ 35,141 $ 39,235 $ 39,235
Cellular 235 $ 235 314 314
Software revenue and other (b) 1,526 12,602 14,128 1,645 13,676 15,321
Other   165         165     246         246  
Total revenue   37,067     12,602     49,669     41,440     13,676     55,116  
Operating expenses:
Cost of revenue (b) 220 5,139 5,359 187 4,918 5,105
Service, rental and maintenance (b) 10,307 2,245 12,552 11,239 2,492 13,731
Selling and marketing 2,350 3,885 6,235 2,774 3,269 6,043
General and administrative 10,371 1,760 12,131 10,935 1,531 12,466
Severance and restructuring
Depreciation, amortization and accretion   2,437     1,421     3,858     2,944     1,780     4,724  
Total operating expenses   25,685     14,450     40,135     28,079     13,990     42,069  
% of total revenue 69.3 % 114.7 % 80.8 % 67.8 % 102.3 % 76.3 %
Operating income (loss) 11,382 (1,848 ) 9,534 13,361 (314 ) 13,047
% of total revenue 30.7 % (14.7 )% 19.2 % 32.2 % (2.3 )% 23.7 %
Interest expense, net (65 ) (3 ) (68 ) (64 ) (64 )
Other income (expense), net   89     (5 )   84     68     (16 )   52  
Income (loss) before income tax (expense) benefit 11,406 (1,856 ) 9,550 13,365 (330 ) 13,035
Income tax (expense) benefit   (4,442 )   654     (3,788 )   (5,093 )   106     (4,987 )
Net income (loss) $ 6,964   $ (1,202 ) $ 5,762   $ 8,272   $ (224 ) $ 8,048  
Basic net income per common share $ 0.27   $ 0.37  
Diluted net income per common share $ 0.26   $ 0.36  
Basic weighted average common shares outstanding   21,629,289     21,973,473  
Diluted weighted average common shares outstanding   21,919,238     22,399,934  
Reconciliation of operating income (loss) to EBITDA (c):
Operating income (loss) $ 11,382 $ (1,848 ) $ 9,534 $ 13,361 $ (314 ) $ 13,047
Add back: depreciation, amortization and accretion   2,437     1,421     3,858     2,944     1,780     4,724  
EBITDA $ 13,819   $ (427 ) $ 13,392   $ 16,305   $ 1,466   $ 17,771  
% of total revenue 37.3 % (3.4 )% 27.0 % 39.3 % 10.7 % 32.2 %
Key statistics:
Units in service 1,408 1,408 1,546 1,546
Average revenue per unit (ARPU) $ 8.22 $ 8.22 $ 8.36 $ 8.36
Bookings $ 17,302 $ 17,302 $ 15,670 $ 15,670
Backlog $ 43,831 $ 43,831 $ 36,155 $ 36,155
 

(a) Slight variations in totals are due to rounding.
(b) Wireless results reflect eliminations for intercompany revenue and expenses.
(c) EBITDA or earnings before interest, taxes, depreciation, amortization and accretion is a non-GAAP measure and is presented for analytical purposes only.

     
USA MOBILITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (a)
(Unaudited and in thousands except share, per share amounts and ARPU)
           
For the nine months ended September 30,
2013   2012  
Wireless Software Total Wireless Software Total
Revenue:
Paging service $ 108,256 $ 108,256 $ 121,658 $ 121,658
Cellular 593 593 877 877
Software revenue and other (b) 4,299 41,450 45,749 5,101 39,324 44,425
Other   469         469     852         852  
Total revenue   113,617     41,450     155,067     128,488     39,324     167,812  
Operating expenses:
Cost of revenue (b) 327 15,700 16,027 516 14,621 15,137
Service, rental and maintenance (b) 31,674 6,732 38,406 34,737 7,189 41,926
Selling and marketing 7,389 11,409 18,798 8,794 8,821 17,615
General and administrative 31,753 5,415 37,168 33,869 4,260 38,129
Severance and restructuring 2 2 9 37 46
Depreciation, amortization and accretion   7,213     4,274     11,487     8,613     5,232     13,845  
Total operating expenses   78,358     43,530     121,888     86,538     40,160     126,698  
% of total revenue 69.0 % 105.0 % 78.6 % 67.4 % 102.1 % 75.5 %
Operating income (loss) 35,259 (2,080 ) 33,179 41,950 (836 ) 41,114
% of total revenue 31.0 % (5.0 )% 21.4 % 32.6 % (2.1 )% 24.5 %
Interest expense, net (192 ) (4 ) (196 ) (318 ) (318 )
Other income (expense), net   96     (6 )   90     461     (35 )   426  
Income (loss) before income tax (expense) benefit 35,163 (2,090 ) 33,073 42,093 (871 ) 41,222
Income tax (expense) benefit   (14,306 )   748     (13,558 )   (16,584 )   319     (16,265 )
Net income (loss) $ 20,857   $ (1,342 ) $ 19,515   $ 25,509   $ (552 ) $ 24,957  
Basic net income per common share $ 0.90   $ 1.13  
Diluted net income per common share $ 0.89   $ 1.11  
Basic weighted average common shares outstanding   21,653,692     22,069,785  
Diluted weighted average common shares outstanding   21,916,063     22,534,127  
Reconciliation of operating income (loss) to EBITDA (c):
Operating income (loss) $ 35,259 $ (2,080 ) $ 33,179 $ 41,950 $ (836 ) $ 41,114
Add back: depreciation, amortization and accretion   7,213     4,274     11,487     8,613     5,232     13,845  
EBITDA $ 42,472   $ 2,194   $ 44,666   $ 50,563   $ 4,396   $ 54,959  
% of total revenue 37.4 % 5.3 % 28.8 % 39.4 % 11.2 % 32.8 %
Key statistics:
Units in service 1,408 1,408 1,546 1,546
Average revenue per unit (ARPU) $ 8.23 $ 8.23 $ 8.41 $ 8.41
Bookings $ 47,181 $ 47,181 $ 43,173 $ 43,173
Backlog $ 43,831 $ 43,831 $ 36,155 $ 36,155
 

(a) Slight variations in totals are due to rounding.
(b) Wireless results reflect eliminations for intercompany revenue and expenses.
(c) EBITDA or earnings before interest, taxes, depreciation, amortization and accretion is a non-GAAP measure and is presented for analytical purposes only.

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

9/30/2013

12/31/2012

(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 82,982 $ 61,046
Accounts receivable, net 17,114 21,580
Prepaid expenses and other 6,156 5,836
Inventory 2,544 3,257
Escrow receivables 275
Deferred income tax assets, net   3,817   3,915
Total current assets 112,613 95,909
Property and equipment, net 21,247 20,809
Goodwill 133,031 133,031
Other intangible assets, net 26,584 30,333
Deferred income tax assets, net 29,765 41,239
Other assets   1,123   1,306
Total assets $ 324,363 $ 322,627
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 10,805 $ 12,659
Accrued compensation and benefits 11,863 17,806
Consideration payable 275
Deferred revenue   27,966   29,986
Total current liabilities 50,634 60,726
Deferred revenue 421 693
Other long-term liabilities   9,469   9,789
Total liabilities   60,524   71,208
Commitments and contingencies
Stockholders' equity:
Preferred stock
Common stock 2 2
Additional paid-in capital 126,432 125,212
Retained earnings   137,405   126,205
Total stockholders' equity   263,839   251,419
Total liabilities and stockholders' equity $ 324,363 $ 322,627
 

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

         
USA MOBILITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (a)
(Unaudited and in thousands)
 
For the nine months ended

9/30/2013

9/30/2012

Cash flows from operating activities:
Net income $ 19,515 $ 24,957
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 11,487 13,845
Amortization of deferred financing costs 194 194
Deferred income tax expense 12,226 15,239
Amortization of stock based compensation 2,200 902
Provisions for doubtful accounts, service credits and other 1,337 1,239
Adjustments of non-cash transaction taxes (354 ) (366 )
Loss/(Gain) on disposals of property and equipment 172 (159 )
Changes in assets and liabilities:
Accounts receivable 3,129 (2,062 )
Prepaid expenses and other assets (285 ) (531 )
Accounts payable, accrued liabilities and accrued compensation and benefits (8,025 ) (1,788 )
Deferred revenue   (2,292 )   1,235  
Net cash provided by operating activities   39,304     52,705  
Cash flows from investing activities:
Purchases of property and equipment (7,772 ) (7,135 )
Proceeds from disposals of property and equipment 10 332
Acquisitions, net of cash acquired       (3,000 )
Net cash used in investing activities   (7,762 )   (9,803 )
Cash flows from financing activities:
Repayment of debt (28,250 )
Cash dividends to stockholders (9,606 ) (13,829 )
Purchase of common stock       (4,933 )
Net cash used in financing activities   (9,606 )   (47,012 )
Net increase/(decrease) in cash and cash equivalents 21,936 (4,110 )
Cash and cash equivalents, beginning of period   61,046     53,655  
Cash and cash equivalents, end of period $ 82,982   $ 49,545  
Supplemental disclosure:
Interest paid $ 9   $ 285  
Income taxes paid $ 926   $ 1,376  
 

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

                 
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  

9/30/2013

6/30/2013

3/31/2013

12/31/2012

9/30/2012

6/30/2012

3/31/2012

Revenues:
Paging service $ 35,141 $ 36,064 $ 37,051 $ 38,081 $ 39,235 $ 40,548 $ 41,875
Cellular 235 163 195 275 314 286 277
Software revenue 14,128 15,898 15,723 13,381 15,321 14,847 14,257
Other   165     143     161     147     246     280     326  
Total revenues   49,669     52,268     53,130     51,884     55,116     55,961     56,735  
Operating expenses:
Cost of revenue 5,359 5,485 5,183 5,709 5,105 5,216 4,816
Service, rental and maintenance 12,552 12,822 13,032 13,499 13,731 13,892 14,303
Selling and marketing 6,235 6,347 6,216 6,030 6,043 5,919 5,653
General and administrative 12,131 11,885 13,152 12,551 12,466 12,494 13,169
Severance and restructuring 2 1,712 24 22
Depreciation, amortization and accretion 3,858 3,822 3,807 4,387 4,724 4,606 4,515
Impairment               3,382              
Total operating expenses   40,135     40,363     41,390     47,270     42,069     42,151     42,478  
% of total revenues 80.8 % 77.2 % 77.9 % 91.1 % 76.3 % 75.3 % 74.9 %
Operating income 9,534 11,905 11,740 4,614 13,047 13,810 14,257
% of total revenues 19.2 % 22.8 % 22.1 % 8.9 % 23.7 % 24.7 % 25.1 %
Interest expense, net (68 ) (64 ) (64 ) (62 ) (64 ) (66 ) (188 )
Other income (expense), net   84     (75 )   81     289     52     436     (62 )
Income before income tax expense 9,550 11,766 11,757 4,841 13,035 14,180 14,007
Income tax expense   (3,788 )   (4,938 )   (4,832 )   (2,814 )   (4,987 )   (5,733 )   (5,545 )
Net income $ 5,762   $ 6,828   $ 6,925   $ 2,027   $ 8,048   $ 8,447   $ 8,462  
Basic net income per common share $ 0.27   $ 0.32   $ 0.32   $ 0.09   $ 0.37   $ 0.38   $ 0.38  
Diluted net income per common share $ 0.26   $ 0.31   $ 0.32   $ 0.09   $ 0.36   $ 0.37   $ 0.37  
Basic weighted average common shares outstanding   21,629,289     21,644,281     21,688,153     21,492,792     21,973,473     22,130,397     22,106,543  
Diluted weighted average common shares outstanding   21,919,238     21,827,149     21,904,862     21,991,673     22,399,934     22,613,517     22,589,483  
Reconciliation of operating income to EBITDA (b):
Operating income $ 9,534 $ 11,905 $ 11,740 $ 4,614 $ 13,047 $ 13,810 $ 14,257
Add back: depreciation, amortization, accretion and impairment   3,858     3,822     3,807     7,769     4,724     4,606     4,515  
EBITDA $ 13,392   $ 15,727   $ 15,547   $ 12,383   $ 17,771   $ 18,416   $ 18,772  
% of total revenues 27.0 % 30.1 % 29.3 % 23.9 % 32.2 % 32.9 % 33.1 %
Key statistics:
Units in service 1,408 1,445 1,480 1,515 1,546 1,583 1,617
Average revenue per unit (ARPU) $ 8.22 $ 8.22 $ 8.25 $ 8.29 $ 8.36 $ 8.45 $ 8.50
Bookings $ 17,302 $ 15,626 $ 14,253 $ 18,129 $ 15,670 $ 15,085 $ 12,417
Backlog $ 43,831 $ 39,576 $ 40,183 $ 40,626 $ 36,155 $ 34,391 $ 32,688
 

(a) Slight variations in totals are due to rounding.
(b) 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)
(Unaudited and in thousands)
                 
For the three months ended

9/30/2013

6/30/2013

3/31/2013

12/31/2012

9/30/2012

6/30/2012

3/31/2012

Cost of revenue
Payroll and related $ 2,898 $ 2,917 $ 2,838 $ 2,634 $ 2,427 $ 2,324 $ 2,368
Cost of sales 1,992 2,133 1,890 2,500 2,195 2,434 2,037
Other   469   435   455   575   483   458     411
Total cost of revenue   5,359   5,485   5,183   5,709   5,105   5,216     4,816
Service, rental and maintenance
Site rent 4,142 4,237 4,235 4,326 4,326 4,421 4,791
Telecommunications 1,832 1,885 1,889 2,053 2,257 2,346 2,312
Payroll and related 5,053 5,074 5,203 5,432 5,309 5,360 5,529
Stock based compensation 34 10 10 7 6 6 6
Other   1,491   1,616   1,695   1,681   1,833   1,759     1,665
Total service, rental and maintenance   12,552   12,822   13,032   13,499   13,731   13,892     14,303
Selling and marketing
Payroll and related 3,702 3,672 3,594 3,519 3,504 3,544 3,559
Commissions 1,310 1,519 1,387 1,197 1,335 1,343 1,253
Stock based compensation 18 17 17 19 19 18 16
Other   1,205   1,139   1,218   1,295   1,185   1,014     825
Total selling and marketing   6,235   6,347   6,216   6,030   6,043   5,919     5,653
General and administrative
Payroll and related 5,281 5,662 6,026 6,423 5,851 5,972 6,490
Stock based compensation 894 601 599 296 435 (19 ) 415
Bad debt 274 265 275 300 275 270 234
Facility rent 883 839 844 889 903 868 806
Telecommunications 388 343 375 379 390 443 412
Outside services 2,409 2,111 3,077 2,377 2,353 2,458 2,447
Taxes, licenses and permits 1,106 1,166 1,233 1,312 1,249 1,426 1,501
Other   896   898   723   575   1,010   1,076     864
Total general and administrative   12,131   11,885   13,152   12,551   12,466   12,494     13,169
Severance and restructuring 2 1,712 24 22
Depreciation, amortization and accretion 3,858 3,822 3,807 4,387 4,724 4,606 4,515
Impairment         3,382        
Operating expenses $ 40,135 $ 40,363 $ 41,390 $ 47,270 $ 42,069 $ 42,151   $ 42,478
Capital expenditures $ 2,504 $ 2,927 $ 2,341 $ 2,854 $ 2,696 $ 2,888 $ 1,551
 

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

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

9/30/2013

6/30/2013

3/31/2013

12/31/2012

9/30/2012

6/30/2012

3/31/2012

Units in service

Beginning units in service
Direct one-way 1,307 1,324 1,346 1,366 1,395 1,423 1,465
Direct two-way 73 73 75 79 82 85 90
Total direct 1,380 1,397 1,421 1,445 1,477 1,508 1,555
Indirect one-way 36 38 48 55 58 60 63
Indirect two-way 29 45 46 46 48 49 50
Total indirect 65 83 94 101 106 109 113
Total beginning units in service 1,445 1,480 1,515 1,546 1,583 1,617 1,668
Gross placements
Direct one-way 40 49 39 46 45 49 41
Direct two-way 3 5 3 2 3 4 3
Total direct 43 54 42 48 48 53 44
Indirect one-way 1 1 1 2 1 2 1
Indirect two-way
Total indirect 1 1 1 2 1 2 1
Total gross placements 44 55 43 50 49 55 45
Gross disconnects
Direct one-way (72) (66) (61) (66) (74) (77) (83)
Direct two-way (6) (5) (5) (6) (6) (7) (8)
Total direct (78) (71) (66) (72) (80) (84) (91)
Indirect one-way (2) (3) (11) (9) (4) (4) (4)
Indirect two-way (1) (16) (1) (2) (1) (1)
Total indirect (3) (19) (12) (9) (6) (5) (5)
Total gross disconnects (81) (90) (78) (81) (86) (89) (96)
Net loss
Direct one-way (32) (17) (22) (20) (29) (28) (42)
Direct two-way (3) (2) (4) (3) (3) (5)
Total direct (35) (17) (24) (24) (32) (31) (47)
Indirect one-way (1) (2) (10) (7) (3) (2) (3)
Indirect two-way (1) (16) (1) (2) (1) (1)
Total indirect (2) (18) (11) (7) (5) (3) (4)
Total net change (37) (35) (35) (31) (37) (34) (51)
Ending units in service
Direct one-way 1,275 1,307 1,324 1,346 1,366 1,395 1,423
Direct two-way 70 73 73 75 79 82 85
Total direct 1,345 1,380 1,397 1,421 1,445 1,477 1,508
Indirect one-way 35 36 38 48 55 58 60
Indirect two-way 28 29 45 46 46 48 49
Total indirect 63 65 83 94 101 106 109
Total ending units in service 1,408 1,445 1,480 1,515 1,546 1,583 1,617
 

(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

9/30/2013

6/30/2013

3/31/2013

12/31/2012

9/30/2012

6/30/2012

3/31/2012

ARPU

Direct one-way $ 7.64 $ 7.67 $ 7.73 $ 7.78 $ 7.84 $ 7.89 $ 7.91
Direct two-way   19.93     19.95     20.41     20.52     20.55     20.88     21.08  
Total direct 8.29 8.33 8.40 8.47 8.54 8.62 8.67
Indirect one-way 8.90 8.97 8.22 7.51 7.25 7.48 7.61
Indirect two-way   3.97     3.89     3.76     3.87     4.08     4.19     4.33  
Total indirect 6.57 6.31 5.85 5.74 5.77 5.97 6.14
Total one-way 7.68 7.71 7.74 7.77 7.82 7.88 7.90
Total two-way   15.20     14.40     13.96     14.16     14.36     14.69     15.00  
Total paging ARPU $ 8.22   $ 8.22   $ 8.25   $ 8.29   $ 8.36   $ 8.45   $ 8.50  

Gross disconnect rate (b)

Direct one-way (5.6 )% (5.0 )% (4.6 )% (4.8 )% (5.3 )% (5.4 )% (5.7 )%
Direct two-way   (7.9 )%   (6.7 )%   (6.6 )%   (7.8 )%   (7.7 )%   (8.5 )%   (8.3 )%
Total direct (5.7 )% (5.1 )% (4.7 )% (5.0 )% (5.5 )% (5.6 )% (5.8 )%
Indirect one-way (6.3 )% (7.4 )% (23.6 )% (16.1 )% (7.6 )% (6.6 )% (7.0 )%
Indirect two-way   (4.8 )%   (34.0 )%   (1.6 )%   (1.6 )%   (3.1 )%   (1.8 )%   (1.7 )%
Total indirect (5.6 )% (22.3 )% (12.5 )% (9.3 )% (5.5 )% (4.4 )% (4.7 )%
Total one-way (5.6 )% (5.1 )% (5.2 )% (5.3 )% (5.4 )% (5.4 )% (5.8 )%
Total two-way   (7.0 )%   (17.3 )%   (4.7 )%   (5.4 )%   (6.0 )%   (6.0 )%   (5.9 )%
Total paging gross disconnect rate   (5.7 )%   (6.1 )%   (5.2 )%   (5.3 )%   (5.5 )%   (5.5 )%   (5.8 )%

Net loss rate (c)

Direct one-way (2.5 )% (1.3 )% (1.7 )% (1.5 )% (2.1 )% (1.9 )% (2.9 )%
Direct two-way   (3.6 )%   (0.4 )%   (1.9 )%   (4.9 )%   (4.0 )%   (3.9 )%   (4.9 )%
Total direct (2.5 )% (1.3 )% (1.7 )% (1.7 )% (2.2 )% (2.0 )% (3.0 )%
Indirect one-way (3.3 )% (4.7 )% (21.8 )% (13.2 )% (5.6 )% (4.9 )% (5.4 )%
Indirect two-way   (4.1 )%   (33.7 )%   (1.3 )%   (1.3 )%   (2.5 )%   (1.2 )%   (0.9 )%
Total indirect (3.6 )% (21.0 )% (11.5 )% (7.6 )% (4.2 )% (3.2 )% (3.4 )%
Total one-way (2.5 )% (1.4 )% (2.4 )% (1.9 )% (2.2 )% (2.0 )% (3.0 )%
Total two-way   (3.8 )%   (13.3 )%   (1.6 )%   (3.5 )%   (3.5 )%   (2.9 )%   (3.5 )%
Total paging net loss rate   (2.6 )%   (2.4 )%   (2.3 )%   (2.0 )%   (2.3 )%   (2.1 )%   (3.0 )%
 

(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 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

9/30/2013

 

6/30/2013

 

3/31/2013

12/31/2012

9/30/2012

6/30/2012

3/31/2012

Gross placement rate (b)
Healthcare 3.3 % 4.5 % 3.4 % 3.9 % 3.7 % 4.3 % 3.3 %
Government 1.7 % 2.3 % 1.6 % 1.5 % 2.5 % 1.8 % 1.3 %
Large enterprise 4.3 % 2.4 % 2.1 % 2.3 % 2.0 % 1.9 % 2.4 %
Other 2.0 % 1.5 % 1.8 % 1.9 % 2.1 % 2.0 % 2.2 %
Total direct 3.1 % 3.8 % 3.0 % 3.3 % 3.2 % 3.5 % 2.8 %
Total indirect 1.9 % 1.4 % 1.0 % 1.7 % 1.3 % 1.2 % 1.3 %
Total 3.1 % 3.7 % 2.9 % 3.2 % 3.1 % 3.4 % 2.7 %
Gross disconnect rate (b)
Healthcare (5.2 )% (4.4 )% (3.9 )% (4.4 )% (4.5 )% (4.5 )% (4.7 )%
Government (7.9 )% (7.1 )% (5.9 )% (6.7 )% (6.8 )% (7.0 )% (7.7 )%
Large enterprise (6.0 )% (6.7 )% (7.0 )% (5.7 )% (7.3 )% (8.0 )% (7.7 )%
Other (6.5 )% (7.4 )% (7.3 )% (7.0 )% (8.1 )% (8.7 )% (9.2 )%
Total direct (5.7 )% (5.1 )% (4.7 )% (5.0 )% (5.5 )% (5.6 )% (5.8 )%
Total indirect (5.6 )% (22.3 )% (12.5 )% (9.3 )% (5.5 )% (4.4 )% (4.7 )%
Total (5.7 )% (6.1 )% (5.2 )% (5.3 )% (5.5 )% (5.5 )% (5.8 )%
Net loss rate (b)
Healthcare (1.9 )% % (0.5 )% (0.4 )% (0.9 )% (0.2 )% (1.4 )%
Government (6.3 )% (4.6 )% (4.3 )% (5.2 )% (4.3 )% (5.2 )% (6.4 )%
Large enterprise (1.6 )% (4.2 )% (4.9 )% (3.4 )% (5.3 )% (6.1 )% (5.3 )%
Other (4.5 )% (5.9 )% (5.5 )% (5.1 )% (5.9 )% (6.8 )% (7.1 )%
Total direct (2.5 )% (1.3 )% (1.7 )% (1.7 )% (2.2 )% (2.0 )% (3.0 )%
Total indirect (3.6 )% (21.0 )% (11.5 )% (7.6 )% (4.2 )% (3.2 )% (3.4 )%
Total (2.6 )% (2.4 )% (2.3 )% (2.0 )% (2.3 )% (2.1 )% (3.0 )%
End of period units in service % of total (b)
Healthcare 71.4 % 70.9 % 68.4 % 67.1 % 65.9 % 64.9 % 63.6 %
Government 8.8 % 9.1 % 10.1 % 10.3 % 10.8 % 11.1 % 11.5 %
Large enterprise 8.2 % 8.1 % 8.3 % 8.5 % 8.6 % 8.9 % 9.3 %
Other 7.1 % 7.3 % 7.6 % 7.9 % 8.1 % 8.4 % 8.8 %
Total direct 95.5 % 95.4 % 94.4 % 93.8 % 93.4 % 93.3 % 93.2 %
Total indirect 4.5 % 4.6 % 5.6 % 6.2 % 6.6 % 6.7 % 6.8 %
Total 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

9/30/2013

6/30/2013

3/31/2013

12/31/2012

9/30/2012

6/30/2012

3/31/2012

Account size ending units in service (000's)
1 to 3 units 45 47 49 52 55 58 61
4 to 10 units 26 28 29 31 33 35 37
11 to 50 units 64 67 71 75 78 82 86
51 to 100 units 43 45 47 49 50 52 54
101 to 1,000 units 293 305 321 334 343 356 373
>1,000 units   874     888     880     880     886     894     897  
Total   1,345     1,380     1,397     1,421     1,445     1,477     1,508  
End of period units in service % of total direct
1 to 3 units 3.3 % 3.4 % 3.5 % 3.6 % 3.8 % 3.9 % 4.1 %
4 to 10 units 2.0 % 2.0 % 2.1 % 2.2 % 2.3 % 2.3 % 2.3 %
11 to 50 units 4.8 % 4.8 % 5.1 % 5.3 % 5.4 % 5.6 % 5.7 %
51 to 100 units 3.2 % 3.2 % 3.4 % 3.5 % 3.5 % 3.5 % 3.6 %
101 to 1,000 units 21.8 % 22.1 % 23 % 23.5 % 23.7 % 24.1 % 24.8 %
>1,000 units   64.9 %   64.5 %   62.9 %   61.9 %   61.3 %   60.6 %   59.5 %
Total   100 %   100 %   100 %   100 %   100 %   100 %   100 %
Account size net loss rate
1 to 3 units (4.6 )% (5.1 )% (4.8 )% (5.5 )% (5.3 )% (5.7 )% (6.2 )%
4 to 10 units (5.3 )% (5.3 )% (6.0 )% (5.5 )% (4.8 )% (6.2 )% (6.2 )%
11 to 50 units (3.9 )% (6.4 )% (4.8 )% (4.6 )% (4.8 )% (4.1 )% (7.1 )%
51 to 100 units (2.8 )% (5.3 )% (4.0 )% (2.6 )% (3.9 )% (2.4 )% (3.9 )%
101 to 1,000 units (4.0 )% (5.0 )% (3.9 )% (2.6 )% (3.8 )% (4.7 )% (1.7 )%
>1,000 units   (1.7 )%   1.1 %   (0.2 )%   (0.6 )%   (1.0 )%   (0.3 )%   (2.7 )%
Total   (2.5 )%   (1.3 )%   (1.7 )%   (1.7 )%   (2.2 )%   (2.0 )%   (3.0 )%
Account size ARPU
1 to 3 units $ 15.13 $ 15.12 $ 15.22 $ 15.29 $ 15.43 $ 15.49 $ 15.49
4 to 10 units 14.38 14.29 14.33 14.39 14.42 14.40 14.45
11 to 50 units 12.06 11.96 12.06 12.04 12.11 12.24 12.15
51 to 100 units 10.66 10.42 10.47 10.47 10.48 10.35 10.52
101 to 1,000 units 8.85 8.84 8.84 8.94 8.97 9.01 9.04
>1,000 units   7.17     7.19     7.23     7.24     7.28     7.34     7.35  
Total $ 8.29   $ 8.33   $ 8.40   $ 8.47   $ 8.54   $ 8.62   $ 8.67  
Cellular:
Number of activations   970     799     925     1,041     948     1,052     1,070  
Revenue from cellular services (000's) $ 235   $ 163   $ 195   $ 275   $ 314   $ 286   $ 277  
 

(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