Alteva Reports Third Quarter 2013 Financial Results

Adjusted EBITDA at Record Level Since Entering Unified Communications; Consolidated Revenue Growth Driven by Increases in UC Segment; Net Income Rises Amid Successful Revenue Growth and Profitability/Expense Management Initiatives; Conference Call Scheduled for Tomorrow, November 13, at 10:00 a.m. Eastern

Marketwired

PHILADELPHIA, PA--(Marketwired - Nov 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 third quarter ended September 30, 2013 and recent corporate developments, including:

  • Adjusted EBITDA* of $2.9 million in the third quarter 2013, an increase of 220% from $0.9 million for the same period in 2012
  • UC revenues increased to $4.0 million in the third quarter of 2013, an increase of 27% excluding the USA Datanet business that was sold 
  • UC contributed a record level of 54% of third quarter consolidated revenues, up from 51% for the same period in 2012
  • 38,787 users on Alteva's hosted platform at the end of third quarter 2013, an increase of 11% of the installed base at the end of second quarter 2013 excluding USA Datanet seats
  • Combined retail and wholesale seats in implementation equivalent to 4% of the installed base at end of third quarter of 2013
  • Gross profit increased to $4.4 million in the third quarter 2013, an increase of 21% from $3.6 million for the same period in 2012
  • Gross profit as a percentage of revenues increased to 58% in the third quarter of 2013 from 51% for the same period in 2012
  • SG&A decreased to $5.2 million in the third quarter of 2013, a decrease of $1.0 million, or 16%, from $6.2 million for the same period in 2012
  • Net income of $563,000 in the third quarter of 2013, or $0.09 per share, as compared to a $(922,000) net loss, or $(0.16) per share, for the same period in 2012
  • 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 third quarter of 2013
  • Reduced bank debt at September 30, 2013 by $2.2 million or 15% from June 30, 2013
  • Completed the sale of substantially all of the assets of the USA Datanet business effective September 1, 2013 for approximately $600,000. Resulted in the elimination of approximately $2 million non-core legacy UC revenue annually and approximately $3 million of expenses annually. Incurred $404,000 of non-recurring charges during the third quarter of 2013 related to the sale.

Management Comments

"Alteva's third quarter results reflect our focus on profitable growth, financial strength, and the delivery of exceptional service to our customers. This focus continued to enhance our position within the most attractive segment of the Unified Communications market," said David Cuthbert, Alteva's President and Chief Executive Officer. "Our leading Unified-Communications-as-a-Service platform continues to demonstrate its value to our target markets, while offering substantial leverage that enables growth in our top and bottom lines.

"For the third quarter we continued to deliver strong UCaaS revenue growth and improved profitability. While we expect our UC revenues to increase at an annual growth rate comparable to that of the overall UC market, we are committed to this growth with an emphasis on profitability and margin enhancements. Our sales and marketing efforts are successfully positioning Alteva as a premium service provider for middle market business customers. This is evidenced by the numerous record performance levels achieved in the third quarter of 2013 since entering the UC market, including new records for UC seats in service and UC revenues. At the same time, we reduced our bank debt by 15% from the end of the second quarter of 2013. Across the board, the third quarter was a success and sets us on a course for further improvement in the future as we continue to grow."

Third Quarter 2013 Results

Revenues were $7.5 million in the third quarter of 2013, an increase of 7% from $7.1 million for the same period in 2012. Revenue increased 13% excluding the revenue from the USA Datanet business that was sold. 

UC revenues were $4.0 million in the third quarter of 2013, an increase of 12% from $3.6 million for the same period in 2012. UC revenues increased 27% excluding the revenue from the USA Datanet business that was sold. As a percentage of consolidated revenue, the UC segment contributed approximately 54% of revenues in the third quarter of 2013 as compared with 51% for the same period in 2012. The increase in UC revenues was attributable to the addition of new clients and the increase in services to existing clients. 

Telephone revenues were $3.5 million in the third quarter of 2013, as compared with $3.4 million for the same period in 2012. The Telephone segment contributed approximately 46% of revenues in the third quarter 2013 as compared with 49% for the same period of 2012. Telephone revenues were slightly higher as a result of an increase in access lines rates and modest growth in broadband Internet services revenues, partially offset by access line losses.

Gross profit increased by 21% to $4.4 million in the third quarter of 2013 from $3.6 million for the same period in 2012. Gross profit as a percentage of revenues was 58% in the third quarter 2013, as compared with 51% for the same period in 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, and impact of the cost reduction initiatives, including the USA Datanet sale and the previously disclosed workforce reduction in the Telephone segment.

Selling, general and administrative ("SG&A") expenses in the third quarter of 2013 were $5.2 million, as compared with $6.2 million for the same period in 2012. The $1 million, or 16%, decrease in SG&A expenses was primarily associated with a reduction in wages, including the impact from the restructuring of the Telephone segment in the second quarter of 2013, other expense management initiatives implemented throughout the year, and higher severance charges incurred in the third quarter of 2012.

The Company incurred a $404,000 charge during the three months ended September 30, 2013 due to the disposal the USA Datanet operations.

Total other income for the third quarters of 2013 and 2012 was $3.1 million and $2.7 million, respectively. Other income included the income from the Company's O-P investment of $3.25 million in the third quarters of 2013 and 2012.

For the third quarter of 2013, the Company had net income of $563,000, or $0.09 per basic and diluted common share, as compared to a net loss of $(922,000), or $(0.16) per basic and diluted common share, for the same period in 2012.

Conference Call

The Company will conduct a conference call to discuss second quarter results on November 13 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: 10036080, beginning 12:00 p.m. eastern on November 13, 2013 through December 6, 2013, and via the Company's website at www.alteva.com.

About Alteva
Alteva (NYSE MKT: ALTV) 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 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, severance related expense, and nonrecurring charges associated with the disposal of USA Datanet. A reconciliation of adjusted EBITDA to net income (loss) 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 September 30,     Nine Months Ended September 30,  
    2013     2012     2013     2012  
                                 
Net Revenue                                
  Unified Communications   $ 4,043     $ 3,621     $ 11,919     $ 10,147  
  Telephone     3,487       3,429       10,798       10,870  
  Total operating revenues     7,530       7,050       22,717       21,017  
                                 
Operating expenses                                
  Cost of services and products (exclusive of depreciation and amortization expense)     3,154       3,428       10,158       10,410  
  Selling, general and administrative expenses     5,218       6,230       18,899       17,241  
  Loss on disposal and restructuring costs     404       -       404       -  
  Depreciation and amortization     956       1,411       2,919       3,986  
  Total operating expenses     9,732       11,069       32,380       31,637  
Operating loss     (2,202 )     (4,019 )     (9,663 )     (10,620 )
                                 
Other income (expense)                                
  Interest expense, net     (179 )     (123 )     (593 )     (292 )
  Income from equity method investment     3,250       3,250       9,750       7,771  
  Other income (expense), net     25       (468 )     162       (337 )
  Total other income     3,096       2,659       9,319       7,142  
Income (loss) before income taxes     894       (1,360 )     (344 )     (3,478 )
                                 
Income taxes expense (benefit)     331       (438 )     (114 )     (1,094 )
Net income (loss)     563       (922 )     (230 )     (2,384 )
                                 
Preferred dividends     6       6       19       19  
Income (loss) applicable to common stock   $ 557     $ (928 )   $ (249 )   $ (2,403 )
                                 
Basic earnings per common share:                                
  Basic earnings (loss) per share   $ 0.09     $ (0.16 )   $ (0.04 )   $ (0.42 )
  Basic earning (loss) per puttable common share   $ -     $ (0.16 )   $ -     $ (0.42 )
                                 
Diluted earnings per common share:                                
  Diluted earning (loss) per share   $ 0.09     $ (0.16 )   $ (0.04 )   $ (0.42 )
  Diluted earnings (loss) per puttable common share   $ -     $ (0.16 )   $ -     $ (0.42 )
                                 
Weighted average shares of common stock used to calculate loss per share:                                
Basic     5,776       5,744       5,765       5,732  
Basic (puttable common)     -       251       -       265  
Diluted     5,776       5,744       5,765       5,732  
Diluted (puttable common)     -       251       -       265  
Dividends declared per common share   $ -     $ 0.27     $ 0.54     $ 0.81  
                                 
                                 
   
ALTEVA, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(amounts in thousands except per share amounts)  
   
    September 30,     December 31,  
    2013     2012  
Assets   (Unaudited)        
Current assets                
  Cash and cash equivalents   $ 719     $ 1,799  
  Accounts receivable - net of allowance for uncollectibles - $451 and $638, respectively     3,043       3,320  
  Prepaid income taxes     1,272       1,222  
  Deferred Income taxes     268       268  
  Other current assets     2,110       1,844  
Total current assets     7,412       8,453  
                 
  Property, plant and equipment, net     14,392       16,446  
  Seat licenses, net     1,876       1,514  
  Intangible assets, net     6,046       6,617  
  Goodwill     9,006       9,121  
  Deferred income taxes     797       874  
  Other assets     691       420  
                   
  Total assets   $ 40,220     $ 43,445  
Liabilities and Shareholders' Equity                
Current liabilities                
  Short-term debt   $ 12,613     $ -  
  Accounts payable     1,472       886  
  Advance billing and payments     385       367  
  Accrued taxes     653       619  
  Pension and postretirement benefit obligations, current portion     1,089       1,089  
  Accrued wages     1,237       1,005  
  Other accrued expenses     2,720       2,754  
Total current liabilities     20,169       6,720  
                 
  Long-term debt     245       14,095  
  Pension and postretirement benefit obligations     7,661       8,095  
                   
  Total liabilities     28,075       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 6,971 and 6,577 shares, respectively     70       66  
  Treasury stock - at cost, 830 and 818 shares of common stock, respectively     (7,612 )     (7,486 )
  Additional paid-in capital     12,842       11,826  
  Accumulated other comprehensive loss     (3,720 )     (3,999 )
  Retained earnings     10,065       13,628  
                   
  Total shareholders' equity     12,145       14,535  
                   
  Total liabilities and shareholders' equity   $ 40,220     $ 43,445  
                   
                   
   
ALTEVA, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
($ in thousands)  
   
    Nine Months Ended  
    September 30,  
    2013     2012  
CASH FLOW FROM OPERATING ACTIVITIES                
                 
Net loss   $ (230 )   $ (2,384 )
  Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
  Depreciation and amortization     2,919       3,986  
  Write off of deferred financing fees     61       -  
  Allowance (recoveries) for uncollectibles     (187 )     368  
  Write off obsolete inventory     108       -  
  Stock-based compensation expense     1,020       688  
  Distribution in excess of income from equity investment included in net loss     (4,209 )     (2,989 )
  Loss on disposal and restructuring cots     404       -  
  Other     (78 )     (40 )
Changes in assets and liabilities                
  Trade accounts receivable     304       (1,199 )
  Other assets     (289 )     (41 )
  Accounts payable     586       (423 )
  Other accruals and liabilities     248       825  
Net cash provided by (used in) operating activities     657       (1,209 )
                 
CASH FLOW FROM INVESTING ACTIVITIES                
  Capital expenditures     (499 )     (3,509 )
  Proceeds from sale of assets     175       -  
  Acquired intangibles     (58 )     -  
  Purchase of seat licenses     (501 )     (544 )
  Sale of short-term investments     -       259  
  Distribution in excess of income from equity investment     4,209       4,968  
Net cash provided by investing activities     3,326       1,174  
                 
CASH FLOW FROM FINANCING ACTIVITIES                
  Proceeds from borrowings     18,896       6,400  
  Repayment of borrowings     (20,381 )     (1,139 )
  Payment of fees for acquisition of debt     (119 )     -  
  Amounts due in connection with business acquisition, net     -       (2,420 )
  Treasury stock purchases     (126 )     (107 )
  Dividends (Common and Preferred)     (3,333 )     (4,715 )
Net cash used in financing activities     (5,063 )     (1,981 )
                 
Net change in cash and cash equivalents     (1,080 )     (2,016 )
                 
Cash and cash equivalents at beginning of period     1,799       4,575  
                 
Cash and cash equivalents at end of period   $ 719     $ 2,559  
                 
Supplemental disclosure of non-cash investing and financing activities:                
  Capital lease obligations incurred for the acquisition of seat licenses & capital equipment   $ 248     $ -  
  Receivables from sale of assets   $ 408     $ -  
  Treasury stock acquired in connection with cashless exercise of stock options   $ -     $ 677  
  Capitalization of loan financing costs   $ -     $ 63  
  Reclassification of puttable common stock to equity   $ -     $ 3,756  
                   
                   
   
ALTEVA, INC.  
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 September 30,  
    2013   2012  
Net income (loss)   $ 563   $ (922 )
Depreciation and amortization     956     1,411  
Stock-based compensation     333     291  
Severance related charges     129     439  
Loss on disposal and restructuring costs     404     -  
Interest expense, net     179     123  
Income tax expense (benefit)     331     (438 )
Adjusted EBITDA   $ 2,895   $ 904  
               
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