West Announces Agreement to be Acquired by
Certain Funds Affiliated with Apollo Global Management
West Corporation (Nasdaq:WSTC), a global provider of communication
and network infrastructure services, today announced its first
quarter 2017 results.
Select Financial Information |
|
|
|
|
|
|
|
Unaudited, in millions except per share
amounts |
Three Months Ended
March 31, |
|
|
|
2017 |
|
|
|
2016 |
|
|
% Change |
|
Revenue |
$ |
572.5 |
|
|
$ |
570.8 |
|
|
0.3 |
% |
|
Operating Income |
|
108.2 |
|
|
|
108.9 |
|
|
-0.6 |
% |
|
Net Income |
|
54.1 |
|
|
|
44.6 |
|
|
21.4 |
% |
|
Earnings per Share -
Diluted |
|
0.63 |
|
|
|
0.53 |
|
|
18.9 |
% |
|
Cash Flows from
Operating Activities |
|
52.8 |
|
|
|
60.1 |
|
|
-12.1 |
% |
|
Cash Flows used in
Investing Activities |
|
(31.3 |
) |
|
|
(39.5 |
) |
|
-20.7 |
% |
|
Cash Flows used in
Financing Activities |
|
(34.4 |
) |
|
|
(70.2 |
) |
|
-51.1 |
% |
|
|
|
|
|
|
|
|
Select Non-GAAP Financial Information1 |
|
|
|
|
|
|
|
Unaudited, in millions except per share
amounts |
Three Months Ended
March 31, |
|
|
|
2017 |
|
|
|
2016 |
|
|
% Change |
|
EBITDA |
$ |
157.8 |
|
|
$ |
156.9 |
|
|
0.6 |
% |
|
Adjusted
EBITDA |
|
164.5 |
|
|
|
165.6 |
|
|
-0.7 |
% |
|
Adjusted Operating
Income |
|
129.3 |
|
|
|
134.1 |
|
|
-3.6 |
% |
|
Adjusted Net
Income |
|
68.8 |
|
|
|
63.5 |
|
|
8.2 |
% |
|
Adjusted Earnings per
Share - Diluted |
|
0.81 |
|
|
|
0.75 |
|
|
8.0 |
% |
|
Free Cash Flow2 |
|
26.1 |
|
|
|
23.7 |
|
|
10.2 |
% |
|
The Company also today separately announced that it
entered into a definitive merger agreement with affiliates of
certain funds managed by affiliates of Apollo Global Management,
LLC (NYSE:APO), a leading global alternative investment manager, to
be acquired for $23.50 per share in cash.
DividendDue to the merger
agreement, West Corporation’s Board of Directors has suspended the
payment of dividends.
First Quarter ResultsFor the first
quarter of 2017, revenue was $572.5 million, an increase of 0.3
percent. Adjusted organic revenue growth5 for the first quarter was
0.7 percent.
First quarter operating income was $108.2 million,
a decrease of 0.6 percent. EBITDA1 increased 0.6 percent to $157.8
million. Adjusted operating income1 decreased 3.6 percent to $129.3
million and Adjusted EBITDA[1] decreased 0.7 percent to $164.5
million.
Net income increased 21.4 percent to $54.1 million,
primarily due to lower tax and interest expense. The reduction in
the effective tax rate in the first quarter of 2017 was due
primarily to several tax settlements impacting the balance in the
Company’s uncertain tax position liability. Adjusted net income1
was $68.8 million, an increase of 8.2 percent.
“Our first quarter revenue was slightly below our
expectations, primarily due to changes in product mix and a
decrease in the average rate per minute for automated conferencing
services negatively impacting revenue in the Unified Communications
Services segment,” said Tom Barker, chairman and chief executive
officer. “West Corporation continued to grow its Safety Services,
Interactive Services and Specialized Agent Services segments in the
first quarter, as the Company won new clients, experienced
increased volumes and saw further adoption of new
technologies.”
First quarter results by segment were as
follows:
- Unified Communications Services revenue decreased 3.2 percent;
adjusted organic growth5 was negative 2.0 percent due to lower
revenue in Conferencing, partially offset by low double-digit
growth in UCaaS. Operating income decreased 8.6 percent primarily
due to changes in product mix and a decrease in the average rate
per minute for automated conferencing services. Adjusted operating
income1 decreased 10.5 percent.
- Safety Services revenue increased 7.2 percent; organic revenue
increased 6.0 percent, primarily due to growth from clients
adopting new technologies. Operating income increased $10.3 million
to $19.3 million due to revenue growth and cost savings
initiatives. Adjusted operating income1 increased $9.5 million, or
70.0 percent, to $23.1 million.
- Interactive Services revenue increased 8.0 percent; organic
revenue growth was 6.3 percent, primarily due to increased volumes
from new and existing clients. Operating income increased 43.9
percent to $8.4 million and adjusted operating income1 increased
15.6 percent to $14.1 million, primarily due to revenue
growth.
- Specialized Agent Services revenue increased 4.9 percent
primarily due to growth in healthcare advocacy services. Operating
income decreased $1.0 million to $3.6 million and adjusted
operating income1 declined $1.6 million, primarily due to severance
expense in the Revenue Generation line of business.
Balance Sheet, Cash Flow and Liquidity –
First Quarter Highlights
- Cash flow from operations were $52.8 million, a decrease of
12.1 percent, primarily due to the timing of payroll and interest
expense payments.
- Free cash flow1,2 increased 10.2 percent to $26.1 million due
to lower capital expenditures. The Company invested $26.7 million,
or 4.7 percent of revenue, in capital expenditures during the first
quarter of 2017.
- 4.45x net leverage (net debt to pro forma adjusted EBITDA
ratio, as calculated pursuant to the Company’s senior secured term
debt facilities4) unchanged from December 31, 2016.
- Repaid $15.7 million in debt; cash balance of $172.6 million at
March 31, 2017.
Cancelling First Quarter Conference
CallIn light of the announced merger agreement with funds
affiliated with Apollo Global Management, West Corporation has
cancelled its previously scheduled conference call.
About West CorporationWest
Corporation (Nasdaq:WSTC) is a global provider of communication and
network infrastructure services. West helps its clients more
effectively communicate, collaborate and connect with their
audiences through a diverse portfolio of solutions that include
unified communications services, safety services, interactive
services such as automated notifications, telecom services and
specialized agent services.
For 30 years, West has provided reliable,
high-quality voice and data services. West has sales and operations
in the United States, Canada, Europe, the Middle East, Asia Pacific
and Latin America. For more information, please call 1-800-841-9000
or visit www.west.com.
Forward-Looking Statements This
press release contains forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995,
including with respect to the proposed transaction and business
combination between Apollo and the Company, including statements
regarding the benefits of the proposed transaction and the
anticipated timing of the proposed transaction. Forward-looking
statements can be generally identified by the use of words such as
"may," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "intends," "continue" or similar
terminology. These statements reflect only West's current
expectations and are not guarantees of future performance or
results. These statements are subject to various risks and
uncertainties that could cause actual results to differ materially
from those contained in the forward-looking statements. These risks
and uncertainties include, but are not limited to, the risk that
the proposed transaction may not be completed in a timely manner,
or at all, which may adversely affect the Company’s business and
the price of the common stock of the Company; the failure to
satisfy the conditions to the consummation of the proposed
transaction, including the adoption of the merger agreement by the
stockholders of the Company and the receipt of certain governmental
and regulatory approvals; the occurrence of any event, change or
other circumstance that could give rise to the termination of the
merger agreement; the effect of the announcement or pendency of the
proposed transaction on the Company’s business relationships,
operating results, and business generally; risks that the proposed
transaction disrupts current plans and operations of the Company
and potential difficulties in the Company’s employee retention as a
result of the proposed transaction; risks related to diverting
management’s attention from the Company’s ongoing business
operations; the outcome of any legal proceedings that may be
instituted against the Company, its officers or directors related
to the merger agreement or the proposed transaction; the
possibility that competing offers or acquisition proposals for the
Company will be made; risks regarding the failure to obtain the
necessary financing to complete the proposed transaction; risks
related to the equity and debt financing and related guarantee
arrangements entered into in connection with the proposed
transaction; competition in West’s highly competitive markets;
increases in the cost of voice and data services or significant
interruptions in these services; West’s ability to keep pace with
its clients’ needs for rapid technological change and systems
availability; the continued deployment and adoption of emerging
technologies; the loss, financial difficulties or bankruptcy of any
key clients; security and privacy breaches of the systems West uses
to protect personal data; the effects of global economic trends on
the businesses of West’s clients; the non-exclusive nature of
West’s client contracts and the absence of revenue commitments; the
cost of pending and future litigation; the cost of defending
against intellectual property infringement claims; the effects of
extensive regulation affecting many of West’s businesses; West’s
ability to protect its proprietary information or technology;
service interruptions to West’s data and operation centers; West’s
ability to retain key personnel and attract a sufficient number of
qualified employees; increases in labor costs and turnover rates;
the political, economic and other conditions in the countries where
West operates; changes in foreign exchange rates; West’s ability to
complete future acquisitions, integrate or achieve the objectives
of its recent and future acquisitions; and future impairments of
our substantial goodwill, intangible assets, or other long-lived
assets. In addition, West is subject to risks related to its level
of indebtedness. Such risks include West’s ability to generate
sufficient cash to service its indebtedness and fund its other
liquidity needs; West’s ability to comply with covenants contained
in its debt instruments; West’s ability to obtain additional
financing; the incurrence of significant additional indebtedness by
West and its subsidiaries; and the ability of West’s lenders to
fulfill their lending commitments. West is also subject to other
risk factors described in documents filed by the Company with the
United States Securities and Exchange Commission.
These forward-looking statements speak only as of
the date on which the statements were made. West undertakes no
obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise, except to the extent required by applicable law.
WEST
CORPORATION |
|
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME |
|
(Unaudited, in thousands except per share data) |
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
Actual |
|
Actual |
|
% Change |
|
Revenue |
$ |
572,542 |
|
|
$ |
570,779 |
|
|
0.3 |
% |
|
Cost of services |
|
242,442 |
|
|
|
241,012 |
|
|
0.6 |
% |
|
Selling, general and
administrative expenses |
|
221,877 |
|
|
|
220,843 |
|
|
0.5 |
% |
|
Operating income |
|
108,223 |
|
|
|
108,924 |
|
|
-0.6 |
% |
|
Interest expense,
net |
|
35,216 |
|
|
|
38,483 |
|
|
-8.5 |
% |
|
Other expense (income),
net |
|
(2,670 |
) |
|
|
1,040 |
|
|
NM |
|
|
Income before tax |
|
75,677 |
|
|
|
69,401 |
|
|
9.0 |
% |
|
Income tax expense |
|
21,581 |
|
|
|
24,846 |
|
|
-13.1 |
% |
|
Net income |
$ |
54,096 |
|
|
$ |
44,555 |
|
|
21.4 |
% |
|
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
Basic |
|
83,361 |
|
|
|
83,149 |
|
|
|
|
Diluted |
|
85,208 |
|
|
|
84,615 |
|
|
|
|
|
|
|
|
|
|
|
Earnings per share -
Basic |
$ |
0.65 |
|
|
$ |
0.54 |
|
|
20.4 |
% |
|
|
|
|
|
|
|
|
Earnings per share -
Diluted |
$ |
0.63 |
|
|
$ |
0.53 |
|
|
18.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
SELECTED
REPORTABLE SEGMENT DATA: |
Actual |
|
Actual |
|
% Change |
|
Revenue: |
|
|
|
|
|
|
Unified
Communications Services |
$ |
351,075 |
|
|
$ |
362,713 |
|
|
-3.2 |
% |
|
Safety
Services |
|
76,255 |
|
|
|
71,164 |
|
|
7.2 |
% |
|
Interactive Services |
|
77,493 |
|
|
|
71,729 |
|
|
8.0 |
% |
|
Specialized Agent Services |
|
71,748 |
|
|
|
68,378 |
|
|
4.9 |
% |
|
Intersegment eliminations |
|
(4,029 |
) |
|
|
(3,205 |
) |
|
NM |
|
|
Total |
$ |
572,542 |
|
|
$ |
570,779 |
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
Depreciation: |
|
|
|
|
|
|
Unified
Communications Services |
$ |
16,330 |
|
|
$ |
17,543 |
|
|
-6.9 |
% |
|
Safety
Services |
|
4,063 |
|
|
|
4,554 |
|
|
-10.8 |
% |
|
Interactive Services |
|
4,893 |
|
|
|
3,920 |
|
|
24.8 |
% |
|
Specialized Agent Services |
|
3,394 |
|
|
|
2,784 |
|
|
21.9 |
% |
|
Total |
$ |
28,680 |
|
|
$ |
28,801 |
|
|
-0.4 |
% |
|
|
|
|
|
|
|
|
Amortization: |
|
|
|
|
|
|
Unified
Communications Services - SG&A |
$ |
2,287 |
|
|
$ |
3,393 |
|
|
-32.6 |
% |
|
Safety
Services - SG&A |
|
2,810 |
|
|
|
3,383 |
|
|
-16.9 |
% |
|
Safety
Services - COS |
|
3,463 |
|
|
|
3,269 |
|
|
5.9 |
% |
|
Interactive Services - SG&A |
|
4,853 |
|
|
|
5,055 |
|
|
-4.0 |
% |
|
Specialized Agent Services - SG&A |
|
4,340 |
|
|
|
4,594 |
|
|
-5.5 |
% |
|
Deferred
financing costs |
|
1,888 |
|
|
|
4,909 |
|
|
-61.5 |
% |
|
Total |
$ |
19,641 |
|
|
$ |
24,603 |
|
|
-20.2 |
% |
|
|
|
|
|
|
|
|
Share-based
compensation: |
|
|
|
|
|
|
Unified
Communications Services |
$ |
3,024 |
|
|
$ |
4,328 |
|
|
-30.1 |
% |
|
Safety
Services |
|
865 |
|
|
|
1,227 |
|
|
-29.5 |
% |
|
Interactive Services |
|
545 |
|
|
|
761 |
|
|
-28.4 |
% |
|
Specialized Agent Services |
|
991 |
|
|
|
1,350 |
|
|
-26.6 |
% |
|
Total |
$ |
5,425 |
|
|
$ |
7,666 |
|
|
-29.2 |
% |
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
Unified
Communications Services |
$ |
167,147 |
|
|
$ |
166,196 |
|
|
0.6 |
% |
|
Safety
Services |
|
25,525 |
|
|
|
27,315 |
|
|
-6.6 |
% |
|
Interactive Services |
|
17,285 |
|
|
|
16,152 |
|
|
7.0 |
% |
|
Specialized Agent Services |
|
35,269 |
|
|
|
33,151 |
|
|
6.4 |
% |
|
Intersegment eliminations |
|
(2,784 |
) |
|
|
(1,802 |
) |
|
NM |
|
|
Total |
$ |
242,442 |
|
|
$ |
241,012 |
|
|
0.6 |
% |
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses: |
|
|
|
|
|
|
Unified
Communications Services |
$ |
102,538 |
|
|
$ |
107,449 |
|
|
-4.6 |
% |
|
Safety
Services |
|
31,444 |
|
|
|
34,876 |
|
|
-9.8 |
% |
|
Interactive Services |
|
51,853 |
|
|
|
49,769 |
|
|
4.2 |
% |
|
Specialized Agent Services |
|
32,921 |
|
|
|
30,709 |
|
|
7.2 |
% |
|
Corporate
Other |
|
4,366 |
|
|
|
(557 |
) |
|
NM |
|
|
Intersegment eliminations |
|
(1,245 |
) |
|
|
(1,403 |
) |
|
NM |
|
|
Total |
$ |
221,877 |
|
|
$ |
220,843 |
|
|
0.5 |
% |
|
|
|
|
|
|
|
|
Operating income: |
|
|
|
|
|
|
Unified
Communications Services |
$ |
81,390 |
|
|
$ |
89,068 |
|
|
-8.6 |
% |
|
Safety
Services |
|
19,286 |
|
|
|
8,973 |
|
|
114.9 |
% |
|
Interactive Services |
|
8,355 |
|
|
|
5,808 |
|
|
43.9 |
% |
|
Specialized Agent Services |
|
3,558 |
|
|
|
4,518 |
|
|
-21.2 |
% |
|
Corporate
Other |
|
(4,366 |
) |
|
|
557 |
|
|
NM |
|
|
Total |
$ |
108,223 |
|
|
$ |
108,924 |
|
|
-0.6 |
% |
|
|
|
|
|
|
|
|
Operating margin: |
|
|
|
|
|
|
Unified
Communications Services |
|
23.2 |
% |
|
|
24.6 |
% |
|
|
|
Safety
Services |
|
25.3 |
% |
|
|
12.6 |
% |
|
|
|
Interactive Services |
|
10.8 |
% |
|
|
8.1 |
% |
|
|
|
Specialized Agent Services |
|
5.0 |
% |
|
|
6.6 |
% |
|
|
|
Total |
|
18.9 |
% |
|
|
19.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED
FINANCIAL DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
Contribution |
|
Changes in
Revenue - 1Q17 compared to 1Q16: |
Consolidated |
|
to Rev.
Growth |
|
Revenue for the three
months ended Mar. 31, 2016 |
$ |
570,779 |
|
|
|
|
Revenue
from acquired entities3 |
|
2,314 |
|
|
0.4 |
% |
|
Estimated
impact of foreign currency exchange rates6 |
|
(4,511 |
) |
|
-0.8 |
% |
|
Adjusted
organic growth5 |
|
3,960 |
|
|
0.7 |
% |
|
Revenue for the three
months ended Mar. 31, 2017 |
$ |
572,542 |
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Unified |
|
Contribution |
|
Changes in
Revenue - 1Q17 compared to 1Q16: |
Communications |
|
to Rev.
Growth |
|
Revenue for the three
months ended Mar. 31, 2016 |
$ |
362,713 |
|
|
|
|
Revenue
from acquired entities3 |
|
191 |
|
|
0.1 |
% |
|
Estimated
impact of foreign currency exchange rates6 |
|
(4,511 |
) |
|
-1.2 |
% |
|
Adjusted
organic growth5 |
|
(7,318 |
) |
|
-2.0 |
% |
|
Revenue for the three
months ended Mar. 31, 2017 |
$ |
351,075 |
|
|
-3.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Safety |
|
Contribution |
|
Changes in
Revenue - 1Q17 compared to 1Q16: |
Services |
|
to Rev.
Growth |
|
Revenue for the three
months ended Mar. 31, 2016 |
$ |
71,164 |
|
|
|
|
Revenue
from acquired entities3 |
|
849 |
|
|
1.2 |
% |
|
Adjusted
organic growth5 |
|
4,242 |
|
|
6.0 |
% |
|
Revenue for the three
months ended Mar. 31, 2017 |
$ |
76,255 |
|
|
7.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Interactive |
|
Contribution |
|
Changes in
Revenue - 1Q17 compared to 1Q16: |
Services |
|
to Rev.
Growth |
|
Revenue for the three
months ended Mar. 31, 2016 |
$ |
71,729 |
|
|
|
|
Revenue
from acquired entities3 |
|
1,274 |
|
|
1.8 |
% |
|
Adjusted
organic growth5 |
|
4,490 |
|
|
6.3 |
% |
|
Revenue for the three
months ended Mar. 31, 2017 |
$ |
77,493 |
|
|
8.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
WEST CORPORATION |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(Unaudited, in thousands) |
|
|
|
|
|
|
|
March
31, |
|
December
31, |
|
% |
|
|
2017 |
|
|
|
2016 |
|
|
Change |
Assets: |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and
cash equivalents |
$ |
172,626 |
|
|
$ |
183,059 |
|
|
-5.7 |
% |
Trust and
restricted cash |
|
20,824 |
|
|
|
20,141 |
|
|
3.4 |
% |
Accounts
receivable, net |
|
395,912 |
|
|
|
369,068 |
|
|
7.3 |
% |
Income
taxes receivable |
|
- |
|
|
|
4,366 |
|
|
-100.0 |
% |
Prepaid
assets |
|
55,430 |
|
|
|
40,886 |
|
|
35.6 |
% |
Deferred
expenses |
|
46,548 |
|
|
|
44,886 |
|
|
3.7 |
% |
Other
current assets |
|
29,400 |
|
|
|
31,889 |
|
|
-7.8 |
% |
Total
current assets |
|
720,740 |
|
|
|
694,295 |
|
|
3.8 |
% |
Property and
Equipment: |
|
|
|
|
|
Property
and equipment |
|
1,109,300 |
|
|
|
1,088,205 |
|
|
1.9 |
% |
Accumulated depreciation and amortization |
|
(777,068 |
) |
|
|
(755,754 |
) |
|
2.8 |
% |
Net
property and equipment |
|
332,232 |
|
|
|
332,451 |
|
|
-0.1 |
% |
Goodwill |
|
1,920,195 |
|
|
|
1,916,192 |
|
|
0.2 |
% |
Intangible assets,
net |
|
302,003 |
|
|
|
315,474 |
|
|
-4.3 |
% |
Other assets |
|
180,826 |
|
|
|
182,426 |
|
|
-0.9 |
% |
Total
assets |
$ |
3,455,996 |
|
|
$ |
3,440,838 |
|
|
0.4 |
% |
Liabilities and
Stockholders' Deficit: |
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
Accounts
payable |
$ |
79,547 |
|
|
$ |
78,881 |
|
|
0.8 |
% |
Deferred
revenue |
|
142,153 |
|
|
|
151,148 |
|
|
-6.0 |
% |
Accrued
expenses |
|
211,852 |
|
|
|
224,871 |
|
|
-5.8 |
% |
Current
maturities of long-term debt |
|
43,772 |
|
|
|
39,709 |
|
|
10.2 |
% |
Total
current liabilities |
|
477,324 |
|
|
|
494,609 |
|
|
-3.5 |
% |
Long-term
obligations |
|
3,112,016 |
|
|
|
3,129,963 |
|
|
-0.6 |
% |
Deferred income
taxes |
|
100,457 |
|
|
|
88,864 |
|
|
13.0 |
% |
Other long-term
liabilities |
|
156,834 |
|
|
|
169,251 |
|
|
-7.3 |
% |
Total
liabilities |
|
3,846,631 |
|
|
|
3,882,687 |
|
|
-0.9 |
% |
|
|
|
|
|
|
Stockholders'
Deficit: |
|
|
|
|
|
Common
stock |
|
87 |
|
|
|
86 |
|
|
1.2 |
% |
Additional paid-in capital |
|
2,232,275 |
|
|
|
2,223,379 |
|
|
0.4 |
% |
Retained
deficit |
|
(2,455,496 |
) |
|
|
(2,490,455 |
) |
|
-1.4 |
% |
Accumulated other comprehensive loss |
|
(80,275 |
) |
|
|
(87,633 |
) |
|
-8.4 |
% |
Treasury
stock at cost |
|
(87,226 |
) |
|
|
(87,226 |
) |
|
0.0 |
% |
Total
stockholders' deficit |
|
(390,635 |
) |
|
|
(441,849 |
) |
|
-11.6 |
% |
|
|
|
|
|
|
Total
liabilities and stockholders' deficit |
$ |
3,455,996 |
|
|
$ |
3,440,838 |
|
|
0.4 |
% |
|
|
|
|
|
|
Reconciliation of Non-GAAP Financial
Measures
Adjusted Operating Income ReconciliationAdjusted
operating income is not a measure of financial performance under
generally accepted accounting principles ("GAAP"). The Company
believes adjusted operating income provides a relevant measure of
operating profitability and a useful basis for evaluating the
ongoing operations of the Company. Adjusted operating income is
used by the Company to assess operating income before the impact of
acquisitions and acquisition-related costs and certain non-cash
items. Adjusted operating income is used by the Company as a
benchmark for performance and compensation by certain executives.
Adjusted operating income should not be considered in isolation or
as a substitute for operating income or other profitability data
prepared in accordance with GAAP. Adjusted operating income, as
presented, may not be comparable to similarly titled measures of
other companies. Set forth below is a reconciliation of adjusted
operating income from operating income.
|
|
|
|
|
|
Reconciliation of
Adjusted Operating Income from Operating
Income |
Unaudited, in
thousands |
|
|
|
|
|
|
Three Months Ended
March 31, |
Consolidated: |
|
2017 |
|
|
|
2016 |
|
|
% Change |
Operating income |
$ |
108,223 |
|
|
$ |
108,924 |
|
|
-0.6 |
% |
Amortization of
acquired intangible assets |
|
14,290 |
|
|
|
16,425 |
|
|
-13.0 |
% |
Share-based
compensation |
|
5,425 |
|
|
|
7,666 |
|
|
-29.2 |
% |
M&A and
acquisition-related costs |
|
1,335 |
|
|
|
1,088 |
|
|
22.7 |
% |
Adjusted operating
income |
$ |
129,273 |
|
|
$ |
134,103 |
|
|
-3.6 |
% |
Adjusted operating
income margin |
|
22.6 |
% |
|
|
23.5 |
% |
|
|
|
|
|
|
|
|
Unified
Communications Services: |
|
|
|
|
|
Operating income |
$ |
81,390 |
|
|
$ |
89,068 |
|
|
-8.6 |
% |
Amortization of
acquired intangible assets |
|
2,287 |
|
|
|
3,393 |
|
|
-32.6 |
% |
Share-based
compensation |
|
3,024 |
|
|
|
4,328 |
|
|
-30.1 |
% |
M&A and
acquisition-related costs |
|
345 |
|
|
|
491 |
|
|
-29.7 |
% |
Adjusted operating
income |
$ |
87,046 |
|
|
$ |
97,280 |
|
|
-10.5 |
% |
Adjusted operating
income margin |
|
24.8 |
% |
|
|
26.8 |
% |
|
|
|
|
|
|
|
|
Safety
Services: |
|
|
|
|
|
Operating income |
$ |
19,286 |
|
|
$ |
8,973 |
|
|
114.9 |
% |
Amortization of
acquired intangible assets |
|
2,810 |
|
|
|
3,383 |
|
|
-16.9 |
% |
Share-based
compensation |
|
865 |
|
|
|
1,227 |
|
|
-29.5 |
% |
M&A and
acquisition-related costs |
|
128 |
|
|
|
- |
|
|
NM |
|
Adjusted operating
income |
$ |
23,089 |
|
|
$ |
13,583 |
|
|
70.0 |
% |
Adjusted operating
income margin |
|
30.3 |
% |
|
|
19.1 |
% |
|
|
|
|
|
|
|
|
Interactive
Services: |
|
|
|
|
|
Operating income |
$ |
8,355 |
|
|
$ |
5,808 |
|
|
43.9 |
% |
Amortization of
acquired intangible assets |
|
4,853 |
|
|
|
5,055 |
|
|
-4.0 |
% |
Share-based
compensation |
|
545 |
|
|
|
761 |
|
|
-28.4 |
% |
M&A and
acquisition-related costs |
|
317 |
|
|
|
552 |
|
|
-42.6 |
% |
Adjusted operating
income |
$ |
14,070 |
|
|
$ |
12,176 |
|
|
15.6 |
% |
Adjusted operating
income margin |
|
18.2 |
% |
|
|
17.0 |
% |
|
|
|
|
|
|
|
|
Specialized
Agent Services: |
|
|
|
|
|
Operating income |
$ |
3,558 |
|
|
$ |
4,518 |
|
|
-21.2 |
% |
Amortization of
acquired intangible assets |
|
4,340 |
|
|
|
4,594 |
|
|
-5.5 |
% |
Share-based
compensation |
|
991 |
|
|
|
1,350 |
|
|
-26.6 |
% |
Adjusted operating
income |
$ |
8,889 |
|
|
$ |
10,462 |
|
|
-15.0 |
% |
Adjusted operating
income margin |
|
12.4 |
% |
|
|
15.3 |
% |
|
|
|
|
|
|
|
|
Corporate
Other: |
|
|
|
|
|
Operating income
(loss) |
$ |
(4,366 |
) |
|
$ |
557 |
|
|
|
M&A and
acquisition-related costs |
|
545 |
|
|
|
45 |
|
|
|
Adjusted operating
income (loss) |
$ |
(3,821 |
) |
|
$ |
602 |
|
|
|
|
|
|
|
|
|
Adjusted Net Income and Adjusted Earnings per Share
ReconciliationAdjusted net income and adjusted earnings per share
(EPS) are non-GAAP measures. The Company believes these measures
provide a useful indication of profitability and basis for
assessing the operations of the Company without the impact of bond
redemption premiums, acquisitions and acquisition-related costs,
significant restructuring costs and certain non-cash items.
Adjusted net income should not be considered in isolation or as a
substitute for net income or other profitability metrics prepared
in accordance with GAAP. Adjusted net income, as presented, may not
be comparable to similarly titled measures of other companies. The
Company utilizes these non-GAAP measures to make decisions about
the use of resources, analyze performance, measure management’s
performance with stated objectives and compensate management
relative to the achievement of such objectives. Set forth below is
a reconciliation of adjusted net income from net income.
|
|
|
|
|
|
Reconciliation of
Adjusted Net Income from Net
Income |
Unaudited, in thousands except per share data |
|
|
|
|
|
CONTINUING OPERATIONS |
Three Months Ended March
31, |
|
|
2017 |
|
|
2016 |
|
% Change |
Net Income |
$ |
54,096 |
|
$ |
44,555 |
|
21.4 |
% |
|
|
|
|
|
|
Amortization of
acquired intangible assets |
|
14,290 |
|
|
16,425 |
|
|
Amortization of
deferred financing costs |
|
1,888 |
|
|
4,909 |
|
|
Interest rate swap
ineffectiveness |
|
62 |
|
|
- |
|
|
Share-based
compensation |
|
5,425 |
|
|
7,666 |
|
|
M&A and
acquisition-related costs |
|
1,335 |
|
|
1,088 |
|
|
Pre-tax total |
|
23,000 |
|
|
30,088 |
|
|
Income tax expense on
adjustments |
|
8,323 |
|
|
11,096 |
|
|
Adjusted net
income |
$ |
68,773 |
|
$ |
63,547 |
|
8.2 |
% |
|
|
|
|
|
|
Diluted shares
outstanding |
|
85,208 |
|
|
84,615 |
|
|
Adjusted EPS -
diluted |
$ |
0.81 |
|
$ |
0.75 |
|
8.0 |
% |
|
|
|
|
|
|
Free Cash Flow ReconciliationThe Company believes free cash flow
provides a relevant measure of liquidity and a useful basis for
assessing the Company’s ability to fund its activities, including
the financing of acquisitions, debt service, stock repurchases and
distribution of earnings to shareholders. Free cash flow is
calculated as cash flows from operating activities less cash
capital expenditures. Free cash flow is not a measure of financial
performance under GAAP. Free cash flow should not be considered in
isolation or as a substitute for cash flows from operating
activities or other liquidity measures prepared in accordance with
GAAP. Free cash flow, as presented, may not be comparable to
similarly titled measures of other companies. Set forth below is a
reconciliation of free cash flow from cash flows from operating
activities.
|
|
|
|
|
|
Reconciliation of Free
Cash Flow from Operating Cash
Flow |
Unaudited, in thousands |
|
|
|
|
|
|
Three Months Ended March
31, |
|
|
2017 |
|
|
2016 |
|
% Change |
Cash flows from
operating activities |
$ |
52,773 |
|
$ |
60,052 |
|
-12.1 |
% |
Cash capital
expenditures |
|
26,672 |
|
|
36,357 |
|
-26.6 |
% |
Free cash flow |
$ |
26,101 |
|
$ |
23,695 |
|
10.2 |
% |
|
|
|
|
|
|
EBITDA and Adjusted EBITDA ReconciliationThe common definition
of EBITDA is “Earnings Before Interest Expense, Taxes, Depreciation
and Amortization.” In evaluating liquidity and performance, the
Company uses “Adjusted EBITDA.” The Company defines Adjusted EBITDA
as earnings before interest expense, share-based compensation,
taxes, depreciation and amortization, gain on assets held for sale
and transaction costs. EBITDA and Adjusted EBITDA are not measures
of financial performance or liquidity under GAAP. Although the
Company uses Adjusted EBITDA as a measure of its liquidity and
performance, the use of Adjusted EBITDA is limited because it does
not include certain material costs, such as depreciation,
amortization and interest, necessary to operate the business.
EBITDA and Adjusted EBITDA should not be considered in isolation or
as a substitute for net income, cash flow from operating activities
or other income or cash flow data prepared in accordance with GAAP.
Adjusted EBITDA, as presented, may not be comparable to similarly
titled measures of other companies. Adjusted EBITDA is presented
here as the Company understands investors use it as a measure of
its historical ability to service debt and compliance with
covenants in its senior credit facilities. Further, Adjusted EBITDA
is presented here as the Company uses it to measure its performance
and to conduct and evaluate its business during its regular review
of operating results for the periods presented. Set forth below is
a reconciliation of EBITDA and Adjusted EBITDA from cash flow from
operating activities and net income.
|
|
|
|
Reconciliation of EBITDA
and Adj. EBITDA from Operating Cash
Flow |
Unaudited, in thousands |
|
|
|
|
Three Months Ended Mar.
31, |
|
|
2017 |
|
|
|
2016 |
|
Cash flows from
operating activities |
$ |
52,773 |
|
|
$ |
60,052 |
|
Income tax expense |
|
21,581 |
|
|
|
24,846 |
|
Deferred income tax
expense |
|
(9,898 |
) |
|
|
(2,377 |
) |
Interest expense and
other financing charges |
|
35,651 |
|
|
|
38,985 |
|
Provision for
share-based compensation |
|
(5,425 |
) |
|
|
(7,666 |
) |
Amortization of
deferred financing costs |
|
(1,888 |
) |
|
|
(4,909 |
) |
Other |
|
(380 |
) |
|
|
(434 |
) |
Changes in operating
assets and liabilities, |
|
|
|
net of
business acquisitions |
|
65,347 |
|
|
|
48,384 |
|
EBITDA |
|
157,761 |
|
|
|
156,881 |
|
Provision for
share-based compensation |
|
5,425 |
|
|
|
7,666 |
|
M&A and
acquisition-related costs |
|
1,335 |
|
|
|
1,088 |
|
Adjusted
EBITDA |
$ |
164,521 |
|
|
$ |
165,635 |
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities |
$ |
52,773 |
|
|
$ |
60,052 |
|
Cash flows used in
investing activities |
$ |
(31,306 |
) |
|
$ |
(39,460 |
) |
Cash flows used in
financing activities |
$ |
(34,381 |
) |
|
$ |
(70,245 |
) |
|
|
|
|
|
|
|
|
Reconciliation of EBITDA
and Adjusted EBITDA from Net
Income |
Unaudited, in
thousands |
|
|
|
|
Three Months Ended Mar.
31, |
|
|
2017 |
|
|
|
2016 |
|
Net income |
$ |
54,096 |
|
|
$ |
44,555 |
|
Interest expense and
other financing charges |
|
35,651 |
|
|
|
38,985 |
|
Depreciation and
amortization |
|
46,433 |
|
|
|
48,495 |
|
Income tax expense |
|
21,581 |
|
|
|
24,846 |
|
EBITDA |
|
157,761 |
|
|
|
156,881 |
|
Provision for
share-based compensation |
|
5,425 |
|
|
|
7,666 |
|
M&A and
acquisition-related costs |
|
1,335 |
|
|
|
1,088 |
|
Adjusted
EBITDA |
$ |
164,521 |
|
|
$ |
165,635 |
|
|
|
|
|
|
|
|
|
|
1 See
Reconciliation of Non-GAAP Financial Measures below. |
2 Free cash
flow is calculated as cash flows from operating activities less
cash capital expenditures. |
3 Revenue
growth attributable to acquired entities for the first quarter of
2017 includes Synrevoice, 911 ETC and Vocus. |
4 Based on
loan covenants. Covenant loan ratio is debt net of cash and
excludes accounts receivable securitization debt. |
5 Adjusted
organic revenue growth, a non-GAAP metric, excludes revenue from
acquired entities and the estimated impact of foreign currency
exchange rates. The Company believes adjusted organic growth
provides a useful measure of growth in its ongoing business. A
reconciliation to GAAP revenue is presented in the Selected
Financial Data table. |
6 Our
consolidated revenues and expenses are subject to variations caused
by the net effect of foreign currency translation due to our
international operations. It is difficult to predict the future
fluctuations of foreign currency exchange rates and how those
fluctuations will impact our consolidated operations. Our revenues
and expenses from our international operations are generally
denominated in local currencies, therefore, the impact of currency
fluctuations on our operating income and operating margin is
partially mitigated. In order to provide a framework for assessing
how our underlying businesses performed excluding the effect of
foreign currency fluctuations, we compare the percentage change in
the results from one period to another period using constant
currency presentation. The constant currency growth rates are
calculated by translating the 2017 results at the 2016 average
exchange rates. Constant currency growth rates are a non-GAAP
measure. |
NM: Not
Meaningful |
AT THE COMPANY:
Dave Pleiss
Investor Relations
West Corporation
(402) 963-1500
DMPleiss@west.com
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