Alteva Reports First Quarter 2013 Financial Results

Unified Communications Revenues in First Quarter 2013 Increased 21% From Prior Year and 16% Sequentially; Conference Call Scheduled for Today at 10:00 a.m. Eastern

Marketwired

WARWICK, NY--(Marketwired - May 13, 2013) - Alteva ("Alteva" or the "Company") (NYSE MKT: ALTV), a leading Unified Communications as a Service ("UCaaS") provider, today announced financial results for its first quarter of 2013, as well as recent corporate developments, including:

  • First quarter 2013 results on target to achieve the goal set forth by David Cuthbert, appointed Alteva's CEO in March 2013, for the Company to attain positive earnings before interest, taxes, depreciation and amortization ("EBITDA"), exclusive of O-P contributions, by the end of first quarter 2014
  • UC revenues net of eliminations were $4.0 million in first quarter 2013, an increase of 20.8% from $3.3 million in the same period last year and sequentially by 15.6% from $3.4 million in fourth quarter 2012; Telephone segment revenue was flat year-over-year and increased 9.0% sequentially
  • UC contributed 51% of first quarter consolidated revenues, up from 46% in first quarter 2012 and 49% in fourth quarter 2012
  • Achievement of the highest level of new UC equipment orders in first quarter of 2013, which will lead to recurring service revenue upon implementation
  • Combined retail and wholesale seats in implementation equivalent to 20% of the installed base at end of first quarter 
  • 33,200 users on Alteva's hosted platform at the end of first quarter 2013, an increase of over 14% of installed base at the end of fourth quarter 2012
  • Adjusted EBITDA of $175,000 in the first quarter 2013, as compared to a $(263,000) in the same period of the prior year
  • A net loss of $(833,000) in the first quarter 2013, as compared to a $(1.2) million loss in the same period of the prior year
  • Alteva received $3.25 million in cash distributions from Orange County-Poughkeepsie Limited Partnership ("O-P") investment, which were recorded as other income in the first quarter of 2013
  • Alteva paid a quarterly cash dividend of $0.27 per common share for the first quarter of 2013
  • Proceeding with process improvements and expense reduction initiatives that are expected to yield $2.0 million in annualized cost savings
  • Refinanced multiple short-term credit facilities into a new single long-term credit facility

Management Comments

"We had an excellent first quarter driven by the demand for our best-in-class cloud-based UC solutions," said David Cuthbert, Alteva's President and Chief Executive Officer. "We continue to take action toward the reduction of expenses in aggregate, while improving efficiencies and benefiting from the leverage in our business. All facets of the Company will be reviewed to determine where we can make enhancements and improve profitability. To this end, in the first quarter we incurred $1.3 million in costs, which are non-recurring in nature for severance and management related changes and staff rationalization. These nonrecurring charges were incurred in connection with an existing program to reduce costs by a total of $2 million annually.

"The results derived from our UC segment continue to set new records, including revenues reaching the highest level in company history, revenues expanding as a percentage of consolidated sales, UC equipment sales, seat sales and seats added to implementation. It is important to note that the sale of lower margin UC equipment will lead to increased recurring services revenue in the future. This visibility for top line growth as well as our progress in continued expense management efforts is very encouraging."

First Quarter 2013 Results

Revenues were $7.7 million in the first quarter of 2013, an increase of 9.3% from $7.1 million for the same period in 2012 and an 11.8% increase from $6.9 million in the fourth quarter of 2012.

UC revenues, net of eliminations, were $4.0 million in the first quarter of 2013, an increase of 20.8% from $3.3 million for the same period in 2012 and a 15.6% increase from $3.4 million in the fourth quarter of 2012. As a percentage of consolidated revenue, the UC segment contributed approximately 51% of revenues in the first quarter of 2013 as compared with 46% for the same period in 2012 and 49% in the fourth quarter 2012. The increase in UC revenues was primarily attributable to organically generated UC services revenue growth as well as a record level of UC equipment sales.

Telephone services revenues, net of eliminations, were $3.8 million in the first quarter of 2013, as compared with $3.8 million for the same period in 2012 and a 9% increase from $3.5 million in the fourth quarter of 2012. The Telephone segment contributed approximately 49% of revenues in the first quarter 2013 as compared with 54% for the same period of 2012 and 51% in the fourth quarter of 2012. The decrease in Telephone services revenues, which resulted from losses of access lines due to wireless substitution and competition for other triple play service providers, was primarily offset by an increase in access lines rates and growth in broadband Internet services revenues.

Gross profit increased by 14% to $4.0 million in the first quarter of 2013 from $3.5 million in the same period of 2012 and 25% from $3.2 million in the fourth quarter 2012. Gross profit as a percentage of revenues was 51.0% in the first quarter 2013, as compared with 49.9% for the same period of 2012 and 46.2% in the fourth quarter 2012. The improvement in gross profit primarily reflects the substantial increase in revenues contributed by the UC segment in the most recently completed quarter and the Company's ability to leverage its infrastructure.

Selling, general and administrative ("SG&A") expenses in the first quarter of 2013 increased to $7.3 million from $5.4 million for the same period of 2012. The 35% increase in SG&A expenses reflects investments made into the Company's cloud communications growth strategies. The increase in expenses also includes $1.3 million in costs, which are non-recurring in nature for severance and management related changes and staff rationalization.

Total other income for the first quarter of 2013 was $3.1 million, as compared to $1.4 million for the same period in 2012. This increase is primarily due to the accounting treatment of O-P distributions of $3.3 million as income in the first quarter of 2013, as compared with $1.4 million of income in the same period in 2012, which was recorded based on the amount in excess of the Company's share of the O-P earnings for that period as opposed to being applied to the investment account.

For the first quarter of 2013, the Company had a net loss of $(833,000), or $(0.15) per basic and diluted common share, as compared to a net loss of $(1.2) million, or $(0.22) per basic and diluted common share, for the same period in 2012.

Conference Call

The Company will conduct a conference call to discuss first quarter results today at 10:00 a.m. eastern. Investors and other interested parties can listen to the call by dialing the participant number of 412-317-6789, no access code required, approximately 10 minutes prior to the start of the conference call. The conference call webcast can be accessed through Alteva's website at www.alteva.com in the Investors section.

A replay of this conference call will also be available by dialing 877-344-7529 (toll free) or 412-317-0088, access code: 10028462, beginning 12:00 p.m. eastern on May 13 through June 4, and via the Company's website at www.alteva.com.

About Alteva

Alteva (NYSE MKT: ALTV) (the trade name for Warwick Valley Telephone Company, and previously referred to as WVT Communications Group) is a premier provider of hosted Unified Communications as a Service (UCaaS) that significantly enhances business productivity and efficiency. Alteva's UCaaS solution integrates and optimizes best-in-class cloud-based technologies and business applications to deliver a comprehensive voice, video and collaboration service for the office and mobile workforce. Alteva is committed to delivering meaningful value to its customers through a consistent, high quality and unified user experience across multiple devices, platforms and operating systems. These attributes have positioned Alteva as a leading hosted communications provider and the partner of choice for a growing number of business customers nationwide and internationally. To learn more about Alteva, please visit www.alteva.com. You can also follow Alteva on Twitter @AltevaInc or Linkedin.

Safe Harbor Statement

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements, without limitation, regarding expectations, beliefs, intentions, growth, profitability, or strategies regarding the future. Alteva intends that such forward-looking statements be subject to the safe-harbor provided by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Alteva's actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: expectations of future profitability; general economic and business conditions, both nationally and in the geographic regions in which Alteva operates; industry capacity; demographic changes; technological changes and changes in consumer demand; the successful integration of Alteva's acquired businesses; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; legislative proposals relating to the businesses in which Alteva operates; reduction in cash distributions from the Orange County-Poughkeepsie Limited Partnership; competition; or the loss of any significant ability to attract and retain qualified personnel. Given these uncertainties, current and prospective investors should be cautioned in their reliance on such forward-looking statements. Except as required by law, Alteva disclaims any obligation to update any such factors or to publicly announce the results of any revision to any of the forward-looking statements contained herein to reflect future events or developments. A more comprehensive discussion of risks, uncertainties and forward-looking statements may be seen in Alteva's Annual Report on Form 10-K and other periodic filings with the U.S. Securities and Exchange Commission.

 (tables follow)

   
   
ALTEVA  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
($ in thousands, except share and per share amounts)  
   
                 
                 
      Three Months Ended  
      March 31,  
      2013       2012  
                 
Net revenue                
  Unified Communications   $ 3,956     $ 3,274  
  Telephone     3,784       3,807  
                 
  Total operating revenues     7,740       7,081  
                 
Operating expenses                
  Cost of services and products (exclusive of depreciation and amortization expense)    
3,789
     
3,548
 
  Selling, general and administration expenses     7,352       5,408  
  Depreciation and amortization     1,002       1,279  
                 
  Total operating expenses     12,143       10,235  
                 
  Operating loss     (4,403 )     (3,154 )
                 
Other income (expense)                
  Interest income (expense), net of capitalized interest     (236 )     (57 )
  Income from equity method investment     3,250       1,425  
  Other income (expense), net     108       (5 )
                 
  Total other income     3,122       1,363  
                 
  Loss before income taxes     (1,281 )     (1,791 )
                 
Income taxes benefit     (448 )     (557 )
                 
  Net loss     (833 )     (1,234 )
                 
Preferred dividends     6       6  
                 
  Loss applicable to common stock   $ (839 )   $ (1,240 )
                 
                 
Basic loss per common share   $ (0.15 )   $ (0.22 )
Basic loss per puttable common share   $ -     $ (0.22 )
                 
Diluted loss per common share   $ (0.15 )   $ (0.22 )
Diluted loss per puttable common share   $ -     $ (0.22 )
                 
Weighted average shares of common stockused to calculate earnings (loss) per share:                
  Basic (common)     5,751,338       5,443,541  
  Basic (puttable common)     -       272,479  
  Diluted (common)     5,751,338       5,443,541  
  Diluted (puttable common)     -       272,479  
                 
  Dividends declared per common share   $ 0.27     $ 0.27  
                   
                   
   
   
ALTEVA  
CONDENSED CONSOLIDATED BALANCE SHEETS  
($ in thousands, except share and per share amounts)  
                 
                 
   
      March 31,      December 31, 
      2013       2012  
     (Unaudited)         
Assets                
               
Current assets                
  Cash and cash equivalents   $ 1,932     $ 1,799  
  Trade accounts receivable - net of allowance for uncollectibles - $391 and $638 at March 31, 2013 and December 31, 2012, respectively     2,956       3,320  
  Other accounts receivable     171       187  
  Materials and supplies     408       512  
  Prepaid expenses     1,180       1,145  
  Prepaid income taxes     1,670       1,222  
  Deferred income taxes     268       268  
Total current assets     8,585       8,453  
                 
Property, plant and equipment, net     15,933       16,446  
Seat licenses     1,605       1,514  
Other intangibles, net     6,465       6,617  
Goodwill     9,121       9,121  
Deferred income taxes     823       874  
Other assets     522       420  
                 
  Total assets   $ 43,054     $ 43,445  
                 
Liabilities and Shareholders' Equity                
                 
Current liabilities                
  Accounts payable   $ 1,030     $ 886  
  Advance billing and payments     282       367  
  Accrued taxes     617       619  
  Pension and post retirement benefit obligations     1,089       1,089  
  Accrued wages     2,224       1,005  
  Other accrued expenses     3,077       2,754  
Total current liabilities     8,319       6,720  
                 
                 
Long-term debt     14,523       14,095  
Pension and post retirement benefit obligations     7,931       8,095  
                 
Total liabilities     30,773       28,910  
                 
Commitments and contingencies                
                 
Shareholders' equity                
  Preferred shares - $100 par value, authorized and issued shares of 5,000; $0.01 par value authorized and unissued shares of 10,000,000;    
500
     
500
 
  Common stock - $0.01 par value, authorized shares of 10,000,000 6,976,942 and 6,576,542 shares issued at March 31, 2013 and December 31, 2012, respectively     70
      66
 
  Treasury stock - at cost, 823,482 and 817,700 common shares at March 31, 2013 and December 31, 2012, respectively     (7,548 )     (7,486 )
  Additional paid in capital     12,040       11,826  
  Accumulated other comprehensive loss     (3,906 )     (3,999 )
  Retained earnings     11,125       13,628  
                 
Total shareholders' equity     12,281       14,535  
                 
    Total liabilities and shareholders' equity   $ 43,054     $ 43,445  
                 
   
   
   
ALTEVA  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
($ in thousands)  
   
   
   
    Three Months Ended March 31,  
      2013       2012  
CASH FLOW FROM OPERATING ACTIVITIES            (as restated) 
                 
Net loss   $ (833 )   $ (1,234 )
  Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
  Depreciation and amortization     1,002       1,279  
  Write off of deferred financing fees     61       -  
  Allowance (recoveries) for uncollectibles     (246 )     177  
  Write off obsolete inventory     92       -  
  Stock based compensation expense     218       192  
  Distribution in excess of income from equity investments included in net loss     (1,424 )     -  
  Change in fair value of derivative liability     -       14  
Changes in assets and liabilities                
  Trade accounts receivable     610       (707 )
  Other current assets     (499 )     (652 )
  Accounts payable     144       (404 )
  Other accruals and liabilitites     1,435       (142 )
                 
Net cash provided by operating activities     560       (1,477 )
                 
CASH FLOW FROM INVESTING ACTIVITIES                
  Capital expenditures     (176 )     (329 )
  Acquired intangibles     (58 )     -  
  Purchase of seat licenses     (194 )     (147 )
  Distribution in excess of income from equity investments     1,424       1,826  
                 
Net cash used in investing activities     996       1,350  
                 
                 
CASH FLOW FROM FINANCING ACTIVITIES                
  Proceeds from issuance of long-term debt     16,273       -  
  Repayment of long-term debt     (15,845 )     (380 )
  Payment of fees for acquisition of debt     (119 )     -  
  Repayment of amount due in connection with business acquisition     -       (170 )
  Purchase of treasury stock     (62 )     (50 )
  Dividends (Common and Preferred)     (1,670 )     (1,573 )
                 
Net cash used in financing activities     (1,423 )     (2,173 )
                 
Net change in cash and cash equivalents     133       (2,300 )
                 
Cash and cash equivalents at beginning of period     1,799       4,575  
                 
Cash and cash equivalents at end of period   $ 1,932     $ 2,275  
                 
Supplemental disclosure of non-cash financing activities:                
  Treasury stock acquired in connection with cashless exercise of stock options   $ -     $ 677  
                   
                   
   
   
ALTEVA  
RECONCILIATION OF ADJUSTED EBITDA TO NET LOSS AS IT IS PRESENTED ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
($ in thousands)  
   
    Three Months Ended  
    March 31,  
    2013     2012  
Net loss   $ (833 )   $ (1,234 )
Depreciation and amortization     1,002       1,279  
Stock-based compensation     218       192  
Interest expense, net     236       57  
Income tax benefit     (448 )     (557 )
Adjusted EBITDA   $ 175     $ (263 )
                 
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