Alteva Reports Second Quarter 2013 Financial Results

21% UC Revenue Growth Drives 54% Increase in Adjusted EBITDA; Company Returns to Profitability Discontinuation of Common Stock Dividend; Focus on Continued Profitable Growth and Improved Financial Position Conference Call Scheduled for Today at 10:00 a.m. Eastern

Marketwired

PHILADELPHIA, PA--(Marketwired - Aug 12, 2013) - Alteva ("Alteva" or the "Company") (NYSE MKT: ALTV), a leading Unified-Communications-as-a-Service ("UCaaS") provider, today announced financial results for the second quarter ended June 30, 2013 and recent corporate developments, including:

  • Significant progress made in achieving positive earnings before interest, taxes, depreciation and amortization ("EBITDA"), exclusive of O-P contributions, by the end of first quarter 2014
  • Adjusted EBITDA* of $2.0 million in the second quarter 2013, an increase of 54% from $1.3 million during the same period of the prior year
  • Discontinuation of quarterly common stock dividend payments to support future growth initiatives and strengthen financial position
  • UC revenues net of eliminations were $3.9 million in second quarter 2013, an increase of 21% from $3.3 million in the same period last year; slight decrease in year-over-year Telephone segment revenue in-line with management expectations
  • UC contributed 53% of second quarter consolidated revenues, up from 47% in second quarter of 2012
  • 38,440 users on Alteva's hosted platform at the end of second quarter 2013, an increase of over 15% of installed base at the end of first quarter 2013
  • Combined retail and wholesale seats in implementation equivalent to 7% of the installed base at end of second quarter of 2013
  • Gross profit increased to $4.2 million in the second quarter 2013, up by 23% from the same period of the prior year
  • Gross profit as a percentage of revenues of 57% in the second quarter 2013 increased from 50% in the same period of the prior year
  • Net income of $40,000 in the second quarter 2013, as compared to a $(228,000) net 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 second quarter of 2013
  • Alteva paid a quarterly cash dividend of $0.27 per common share for the second quarter of 2013
  • Proceeding with process improvements and expense reduction initiatives that are expected to yield $2.0 million in annualized cost savings; approximate 20% workforce reduction in the Warwick location

Management Comments

"We are very pleased with the results for the second quarter as we continued to experience increased momentum, delivering strong UCaaS recurring revenue growth, improved gross margin, positive net income for the first time since the implementation of our business transformation, and substantial growth in adjusted EBITDA," said David Cuthbert, Alteva's President and Chief Executive Officer. "This performance was driven by the successful execution of our strategy to improve our standing in the UCaaS market while solidifying our competitive position.

"As we continue to increase revenues and improve our operating performance, increases in cash flow will be used to strengthen the balance sheet and best position the Company for continued growth. Supporting these objectives, after the end of the quarter, the Company's Board of Directors approved the discontinuation of common stock dividend payments. We believe our operational performance improvements and the difficult corporate decisions we have made affecting our workforce and our shareholders in the near-term will deliver substantial returns for all of our stakeholders in the long-term. We will continue to carefully examine all aspects of our business to ensure maximum performance, profitability and return on our investment. We are proud of the accomplishments of the first half of 2013 and the trajectory that has been set."

Second Quarter 2013 Results

Revenues were $7.4 million in the second quarter of 2013, an increase of 8% from $6.9 million for the same period in 2012.

UC revenues, net of eliminations, were $3.9 million in the second quarter of 2013, an increase of 21% from $3.3 million for the same period in 2012. As a percentage of consolidated revenue, the UC segment contributed approximately 53% of revenues in the second quarter of 2013 as compared with 47% for the same period in 2012. The increase in UC revenues was attributable to organically generated UC services revenue growth.

Telephone services revenues, net of eliminations, were $3.5 million in the second quarter of 2013, as compared with $3.6 million for the same period in 2012. The Telephone segment contributed approximately 47% of revenues in the second quarter 2013 as compared with 53% for the same period of 2012 and 49% in the first quarter of 2013. Telephone services revenues were marginally lower as a result of access line losses which were partially offset by an increase in access lines rates and modest growth in broadband Internet services revenues.

Gross profit increased by 23% to $4.2 million in the second quarter of 2013 from $3.4 million in the same period of 2012. Gross profit as a percentage of revenues was 57% in the second quarter 2013, as compared with 50% for the same period of 2012. The continued improvement in gross profit primarily reflects the substantial increase in revenues contributed by the UC segment and the Company's ability to leverage its existing infrastructure.

Selling, general and administrative ("SG&A") expenses in the second quarter of 2013 were $6.3 million, as compared with $5.6 million for the same period of 2012. The increase in SG&A expenses was primarily attributable to $324,000 of nonrecurring severance charges related to the Company's Telephone workforce reduction and a $264,000 increase in non-cash stock-based compensation related to management changes.

Total other income for the second quarters of 2013 and 2012 was $3.1 million. Other income includes the income from the Company's O-P investment of $3.25 million and $3.1 million in the second quarters of 2013 and 2012, respectively.

For the second quarter of 2013, the Company had net income of $40,000, or $0.01 per basic and diluted common share, as compared to a net loss of $(228,000), or $(0.04) per basic and diluted common share, for the same period in 2012.

The Company also announced today that it has decided to discontinue future dividends. On an annual basis, this will result in cash savings of approximately $6 million, which will be used to support future growth initiatives and strengthen the Company's financial position.

Conference Call

The Company will conduct a conference call to discuss second 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. A simultaneous webcast of the conference call 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: 10032066, beginning 12:00 p.m. eastern on August 12, 2013 through September 2, 2013, and via the Company's website at www.alteva.com.

About Alteva

Alteva, Inc. (NYSE MKT: ALTV) is a premier provider of hosted 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 our 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.

*Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization adjusted to exclude non-cash stock-based compensation and severance related expense. A reconciliation of adjusted EBITDA to the most comparable GAAP measure can be found at the end of the following tables.

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, dividends, 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, as amended, and other periodic filings with the U.S. Securities and Exchange Commission.

(tables follow)

   
   
ALTEVA, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
(amounts in thousands, except per share amounts)  
   
             
    Three Months Ended June 30,     Six Months Ended June 30,  
    2013     2012     2013     2012  
                                 
Net Revenue                                
  Unified Communications   $ 3,920     $ 3,252     $ 7,876     $ 6,526  
  Telephone     3,527       3,634       7,311       7,441  
  Total operating revenues     7,447       6,886       15,187       13,967  
                                 
Operating expenses                                
  Cost of services and products (exclusive of depreciation and amortization expense)    
3,215
     
3,434
     
7,004
     
6,982
 
  Selling, general and administrative expenses     6,329       5,603       13,681       11,011  
  Depreciation and amortization     961       1,296       1,963       2,575  
  Total operating expenses     10,505       10,333       22,648       20,568  
  Operating loss     (3,058 )     (3,447 )     (7,461 )     (6,601 )
                                 
Other income (expense)                                
  Interest income (expense)     (178 )     (112 )     (414 )     (169 )
  Income from equity method investment     3,250       3,096       6,500       4,521  
  Other income (expense), net     29       136       137       131  
  Total other income     3,101       3,120       6,223       4,483  
  Income (loss) before income taxes     43       (327 )     (1,238 )     (2,118 )
                                 
Income tax expense (benefit)     3       (99 )     (445 )     (656 )
  Net income (loss)     40       (228 )     (793 )     (1,462 )
                                 
Preferred dividends     7       7       13       13  
  Income (loss) applicable to common stock   $ 33     $ (235 )   $ (806 )   $ (1,475 )
                                 
Basic earnings (loss) per share   $ 0.01     $ (0.04 )   $ (0.14 )   $ (0.26 )
Basic earnings (loss) per puttable common share   $ -     $ (0.04 )   $ -     $ (0.26 )
                                 
Diluted earnings (loss) per share   $ 0.01     $ (0.04 )   $ (0.14 )   $ (0.26 )
Diluted earnings (loss) per puttable common share   $ -     $ (0.04 )   $ -     $ (0.26 )
                                 
Weighted average shares of common stock used to calculate earnings per share                                
  Basic     5,775       5,731       5,760       5,723  
  Basic (puttable common)     -       272       -       272  
  Diluted     6,205       5,731       5,760       5,723  
  Diluted (puttable common)     -       272       -       272  
                                 
  Dividends declared per common share   $ 0.27     $ 0.27     $ 0.54     $ 0.54  
                                   
                                   
   
   
ALTEVA  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(amounts in thousands, except per share amounts)  
   
   
   
    June 30,     December 31,  
    2013     2012  
Assets   (Unaudited)        
Current assets                
  Cash and cash equivalents   $ 790     $ 1,799  
  Accounts receivable, net of allowance for uncollectibles - $463 and $638, respectively     2,892       3,320  
  Prepaid income taxes     1,667       1,222  
  Deferred income taxes     268       268  
  Other current assets     1,682       1,844  
Total current assets     7,299       8,453  
                 
  Property, plant and equipment, net     15,535       16,446  
  Seat licenses, net     1,727       1,514  
  Intangible assets, net     6,256       6,617  
  Goodwill     9,121       9,121  
  Deferred income taxes     771       874  
  Other assets     613       420  
                 
  Total assets   $ 41,322     $ 43,445  
Liabilities and Shareholders' Equity                
Current liabilities                
  Short-term debt   $ 14,764     $ -  
  Accounts payable     1,139       886  
  Advance billing and payments     390       367  
  Accrued taxes     625       619  
  Pension and postretirement benefit obligations, current portion     1,089       1,089  
  Accrued wages     1,454       1,005  
  Other accrued expenses     2,629       2,754  
Total current liabilities     22,090       6,720  
                 
  Long-term debt     147       14,095  
  Pension and postretirement benefit obligations     7,929       8,095  
                 
  Total liabilities     30,166       28,910  
                 
Commitments and contingencies                
                 
Shareholders' equity                
  Preferred shares - $100 par value; authorized and issued shares of 5; $0.01 par value authorized and unissued shares of 10,000     500       500  
  Common stock - $0.01 par value; authorized shares of 10,000 issued 6,977 and 6,577 shares, respectively     70       66  
  Treasury stock - at cost, 830 and 818 shares, respectively of common stock      (7,612 )      (7,486 )
  Additional paid-in capital     12,509       11,826  
  Accumulated other comprehensive loss     (3,813 )     (3,999 )
  Retained earnings     9,502       13,628  
                 
  Total shareholders' equity     11,156       14,535  
                 
  Total liabilities and shareholders' equity   $ 41,322     $ 43,445  
                 
                 
   
   
ALTEVA, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
(amounts in thousands)  
   
   
    Six Months Ended June 30,  
    2013     2012  
CASH FLOW FROM OPERATING ACTIVITIES                
                 
Net loss   $ (793 )   $ (1,462 )
  Adjustments to reconcile net loss to net cash provided (used) by operating activities:                
    Depreciation and amortization     1,963       2,575  
    Write off of deferred financing fees     61       -  
    Allowance (recoveries) for uncollectibles     (175 )     160  
    Write off obsolete inventory     92       -  
    Stock based compensation expense     687       398  
    Distribution in excess of income from equity investment included in net loss     (2,839 )     (1,384 )
    Change in fair value of derivative liability     -       (65 )
Changes in assets and liabilities:                
    Trade accounts receivable     603       (970 )
    Other current assets     (510 )     (841 )
    Accounts payable     253       (121 )
    Other accruals and liabilitites     477       (487 )
                 
  Net cash used in operating activities     (181 )     (2,197 )
                 
CASH FLOW FROM INVESTING ACTIVITIES                
    Capital expenditures     (414 )     (1,499 )
    Acquired intangibles     (57 )     -  
    Purchase of seat licenses     (333 )     (405 )
    Distribution in excess of income from equity investment     2,839       3,363  
                 
  Net cash provided by investing activities     2,035       1,459  
                 
                 
CASH FLOW FROM FINANCING ACTIVITIES                
    Proceeds from borrowings     17,593       1,725  
    Repayment of borrowings     (16,878 )     (759 )
    Payment of fees for acquisition of debt     (119 )     -  
    Payment of amount due in connection with business acquisition     -       (118 )
    Purchase of treasury stock     (126 )     (111 )
    Dividends (Common and Preferred)     (3,333 )     (3,144 )
                 
  Net cash used in financing activities     (2,863 )     (2,407 )
                 
  Net change in cash and cash equivalents     (1,009 )     (3,145 )
                 
  Cash and cash equivalents at beginning of period     1,799       4,575  
                 
  Cash and cash equivalents at end of period   $ 790     $ 1,430  
                 
Supplemental disclosure of non-cash financing activities:                
  Capital lease obligations incurred for the acuisition of seat licenses   $ 101     $ -  
  Treasury stock acquired in connection with cashless exercise of stock options   $ -     $ 677  
                 
                 
                 
   
   
   
ALTEVA  
RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME (LOSS)  
AS IT IS PRESENTED ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
(amounts in thousands)  
   
    Three Months Ended  
    March 31,  
    2013   2012  
Net Income (loss)   $ 40   $ (228 )
Depreciation and amortization     961     1,296  
Stock-based compensation     469     205  
Severance related charges     324     -  
Interest expense, net     178     112  
Income tax expense (benefit)     3     (99 )
Adjusted EBITDA   $ 1,975   $ 1,286  
               
               
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