West Corporation (Nasdaq:WSTC), a global provider of communication
and network infrastructure services, today announced its second
quarter 2017 results.
Select Financial Information
Unaudited, in millions except per share amounts
|
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
% Change |
|
|
2017 |
|
|
|
2016 |
|
|
% Change |
Revenue |
|
$ |
574.4 |
|
|
$ |
582.4 |
|
|
-1.4 |
% |
|
$ |
1,146.9 |
|
|
$ |
1,153.2 |
|
|
-0.5 |
% |
Operating Income |
|
|
102.6 |
|
|
|
123.1 |
|
|
-16.7 |
% |
|
|
210.8 |
|
|
|
232.0 |
|
|
-9.1 |
% |
Net Income |
|
|
44.8 |
|
|
|
33.0 |
|
|
35.7 |
% |
|
|
98.9 |
|
|
|
77.5 |
|
|
27.5 |
% |
Earnings per Share -
Diluted |
|
|
0.52 |
|
|
|
0.39 |
|
|
33.3 |
% |
|
|
1.16 |
|
|
|
0.92 |
|
|
26.1 |
% |
Cash Flows from
Operating Activities |
|
|
107.3 |
|
|
|
137.4 |
|
|
-21.9 |
% |
|
|
160.0 |
|
|
|
197.5 |
|
|
-19.0 |
% |
Cash Flows used in
Investing Activities |
|
|
(48.7 |
) |
|
|
(3.1 |
) |
|
NM |
|
|
(80.0 |
) |
|
|
(42.6 |
) |
|
87.8 |
% |
Cash Flows used in
Financing Activities |
|
|
(42.3 |
) |
|
|
(42.3 |
) |
|
-0.1 |
% |
|
|
(76.6 |
) |
|
|
(112.5 |
) |
|
-31.9 |
% |
Select Non-GAAP Financial Information1
Unaudited, in millions except per share amounts
|
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
% Change |
|
|
2017 |
|
|
|
2016 |
|
|
% Change |
EBITDA |
|
$ |
150.6 |
|
|
$ |
173.5 |
|
|
-13.2 |
% |
|
$ |
308.3 |
|
|
$ |
330.4 |
|
|
-6.7 |
% |
Adjusted EBITDA |
|
|
162.5 |
|
|
|
168.3 |
|
|
-3.5 |
% |
|
|
327.0 |
|
|
|
333.9 |
|
|
-2.1 |
% |
Covenant Adjusted
EBITDA, before Pro Forma |
|
|
167.8 |
|
|
|
171.1 |
|
|
-1.9 |
% |
|
|
336.4 |
|
|
|
339.3 |
|
|
-0.8 |
% |
Adjusted Operating
Income |
|
|
128.9 |
|
|
|
134.7 |
|
|
-4.3 |
% |
|
|
258.2 |
|
|
|
268.8 |
|
|
-3.9 |
% |
Adjusted Net
Income |
|
|
62.5 |
|
|
|
64.8 |
|
|
-3.6 |
% |
|
|
131.3 |
|
|
|
128.4 |
|
|
2.3 |
% |
Adjusted Earnings per
Share - Diluted |
|
|
0.73 |
|
|
|
0.77 |
|
|
-5.2 |
% |
|
|
1.54 |
|
|
|
1.52 |
|
|
1.3 |
% |
Free Cash Flow2 |
|
|
80.7 |
|
|
|
99.9 |
|
|
-19.2 |
% |
|
|
106.8 |
|
|
|
123.6 |
|
|
-13.6 |
% |
Operating ResultsFor the second quarter of
2017, revenue was $574.4 million, a decrease of 1.4 percent
compared to the second quarter of 2016.
Second quarter 2017 operating income was $102.6 million, a
decrease of 16.7 percent compared to the same quarter last year.
This decrease is primarily due to the sale of Company real estate
in the second quarter of 2016 and lower operating income in the
Company’s Unified Communications Services segment, partially offset
by the results of cost savings initiatives and higher operating
income in the Company’s Safety Services, Interactive Services and
Specialized Agent Services segments. Adjusted operating income
decreased 4.3 percent in the second quarter of 2017 compared to the
second quarter of 2016.
Net income increased 35.7 percent from the second quarter of
2016 to $44.8 million. The increase was driven primarily by $35.2
million of accelerated amortization of deferred financing costs
related to the Company’s debt refinancing in 2016, partially offset
by the $12.8 million gain recognized in 2016 on the sale of Company
real estate. Adjusted net income1 for the second quarter of 2017
was $62.5 million, a decrease of 3.6 percent from the second
quarter of 2016.
EBITDA1 for the second quarter of 2017 decreased 13.2 percent
from the second quarter of 2016 to $150.6 million. Adjusted EBITDA1
decreased 3.5 percent from the second quarter of 2016 to $162.5
million.
Second quarter of 2017 results by segment were as follows, as
compared to the second quarter of 2016:
- Unified Communications Services revenue decreased 5.8 percent;
adjusted organic revenue5 decreased 5.0 percent due to lower
revenue in Conferencing, changes in product mix and a decrease in
the average rate per minute for automated conferencing services,
partially offset by growth in Unified Communications as a Service
(UCaaS). Operating income decreased 18.9 percent primarily due to
lower revenue. Adjusted operating income1 decreased 18.7
percent.
- Safety Services revenue increased 8.1 percent; organic revenue
increased 6.7 percent, primarily due to growth from clients
adopting new technologies. Operating income increased $9.0 million,
or 76.0 percent, to $20.9 million due to revenue growth and cost
savings initiatives. Adjusted operating income1 increased $8.5
million, or 52.0 percent, to $25.0 million.
- Interactive Services revenue increased 8.1 percent; organic
revenue growth was 6.3 percent, primarily due to increased volumes
from new and existing clients. Operating income increased 31.4
percent to $7.8 million and adjusted operating income1 increased
11.4 percent to $14.4 million, primarily due to revenue
growth.
- Specialized Agent Services revenue increased 2.8 percent
primarily due to growth in healthcare advocacy services. Operating
income increased $1.6 million to $4.5 million and adjusted
operating income1 increased $1.3 million to $9.8 million.
Balance Sheet, Cash Flow and Liquidity – Second Quarter
Highlights
- Cash flows from operations were $107.3 million, a decrease of
21.9 percent, primarily due to the timing of accounts receivable
collections and higher cash taxes due to the settlement of some tax
audits.
- Free cash flow1,2 decreased 19.2 percent to $80.7 million due
to lower cash flows from operations, partially offset by a decrease
in capital expenditures. The Company invested $26.6 million, or 4.6
percent of revenue, in capital expenditures during the second
quarter of 2017.
- 4.31x net leverage at June 30, 2017 (net debt to pro forma
adjusted EBITDA ratio, as calculated pursuant to the Company’s
senior secured term debt facilities4) compared to 4.45x at December
31, 2016.
- Repaid $44.9 million in debt; cash balance of $191.8 million at
June 30, 2017.
Pending Merger with ApolloOn May 9, 2017, the
Company 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. Early termination of the waiting period for the merger
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, was granted on June 6, 2017 and the required foreign
antitrust approvals for the merger were obtained in July 2017. The
Company also received approval from the Federal Communications
Commission for the merger in July 2017. On July 26, 2017, the
Company’s stockholders approved the merger. The merger remains
subject to specified closing conditions (to the extent not already
satisfied) and is expected to close during the second half of
2017.
AcquisitionOn May 2, 2017, the Company
completed the acquisition of Callpointe.com, Inc., a provider of
automated appointment messaging services for healthcare providers.
The acquired business operations will be integrated into the
Company's Interactive Services reportable segment. The purchase
price was approximately $25.9 million and was funded by cash on
hand.
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 affiliates of funds managed by Apollo Global Management,
LLC 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 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 June
30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
% Change |
Revenue |
|
$ |
574,393 |
|
|
$ |
582,397 |
|
|
-1.4 |
% |
Cost of services |
|
|
245,341 |
|
|
|
249,426 |
|
|
-1.6 |
% |
Selling, general and
administrative expenses |
|
|
226,450 |
|
|
|
209,870 |
|
|
7.9 |
% |
Operating income |
|
|
102,602 |
|
|
|
123,101 |
|
|
-16.7 |
% |
Interest expense,
net |
|
|
36,231 |
|
|
|
37,712 |
|
|
-3.9 |
% |
Accelerated
amortization of deferred financing costs |
|
|
- |
|
|
|
35,235 |
|
|
NM |
Other income, net |
|
|
(1,045 |
) |
|
|
(1,214 |
) |
|
NM |
Income before tax |
|
|
67,416 |
|
|
|
51,368 |
|
|
31.2 |
% |
Income tax expense |
|
|
22,652 |
|
|
|
18,389 |
|
|
23.2 |
% |
Net income |
|
$ |
44,764 |
|
|
$ |
32,979 |
|
|
35.7 |
% |
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
Basic |
|
|
83,556 |
|
|
|
82,598 |
|
|
|
Diluted |
|
|
85,527 |
|
|
|
84,281 |
|
|
|
|
|
|
|
|
|
|
Earnings Per Share -
Basic |
|
$ |
0.54 |
|
|
$ |
0.40 |
|
|
35.0 |
% |
|
|
|
|
|
|
|
Earnings Per Share -
Diluted |
|
$ |
0.52 |
|
|
$ |
0.39 |
|
|
33.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED
SEGMENT FINANCIAL DATA: |
|
|
|
|
|
|
|
|
Three Months Ended June
30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
% Change |
Revenue: |
|
|
|
|
|
|
Unified
Communications Services |
|
$ |
348,546 |
|
|
$ |
370,158 |
|
|
-5.8 |
% |
Safety
Services |
|
|
80,419 |
|
|
|
74,423 |
|
|
8.1 |
% |
Interactive Services |
|
|
79,179 |
|
|
|
73,232 |
|
|
8.1 |
% |
Specialized Agent Services |
|
|
69,354 |
|
|
|
67,495 |
|
|
2.8 |
% |
Intersegment eliminations |
|
|
(3,105 |
) |
|
|
(2,911 |
) |
|
NM |
Total |
|
$ |
574,393 |
|
|
$ |
582,397 |
|
|
-1.4 |
% |
|
|
|
|
|
|
|
Depreciation: |
|
|
|
|
|
|
Unified
Communications Services |
|
$ |
16,263 |
|
|
$ |
17,293 |
|
|
-6.0 |
% |
Safety
Services |
|
|
3,980 |
|
|
|
4,495 |
|
|
-11.5 |
% |
Interactive Services |
|
|
4,770 |
|
|
|
4,023 |
|
|
18.6 |
% |
Specialized Agent Services |
|
|
3,524 |
|
|
|
2,846 |
|
|
23.8 |
% |
Total |
|
$ |
28,537 |
|
|
$ |
28,657 |
|
|
-0.4 |
% |
|
|
|
|
|
|
|
Amortization: |
|
|
|
|
|
|
Unified
Communications Services - SG&A |
|
$ |
2,252 |
|
|
$ |
3,378 |
|
|
-33.3 |
% |
Safety
Services - SG&A |
|
|
3,041 |
|
|
|
3,572 |
|
|
-14.9 |
% |
Safety
Services - COS |
|
|
3,392 |
|
|
|
3,379 |
|
|
0.4 |
% |
Interactive Services - SG&A |
|
|
4,975 |
|
|
|
5,327 |
|
|
-6.6 |
% |
Specialized Agent Services - SG&A |
|
|
4,186 |
|
|
|
4,594 |
|
|
-8.9 |
% |
Deferred
financing costs |
|
|
1,863 |
|
|
|
39,144 |
|
|
NM |
Total |
|
$ |
19,709 |
|
|
$ |
59,394 |
|
|
-66.8 |
% |
|
|
|
|
|
|
|
Share-based
compensation: |
|
|
|
|
|
|
Unified
Communications Services |
|
$ |
3,399 |
|
|
$ |
3,493 |
|
|
-2.7 |
% |
Safety
Services |
|
|
989 |
|
|
|
993 |
|
|
-0.4 |
% |
Interactive Services |
|
|
602 |
|
|
|
620 |
|
|
-2.9 |
% |
Specialized Agent Services |
|
|
1,117 |
|
|
|
1,069 |
|
|
4.5 |
% |
Total |
|
$ |
6,107 |
|
|
$ |
6,175 |
|
|
-1.1 |
% |
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
Unified
Communications Services |
|
$ |
168,102 |
|
|
$ |
173,651 |
|
|
-3.2 |
% |
Safety
Services |
|
|
28,206 |
|
|
|
26,689 |
|
|
5.7 |
% |
Interactive Services |
|
|
17,035 |
|
|
|
16,918 |
|
|
0.7 |
% |
Specialized Agent Services |
|
|
33,528 |
|
|
|
33,760 |
|
|
-0.7 |
% |
Intersegment eliminations |
|
|
(1,530 |
) |
|
|
(1,592 |
) |
|
NM |
Total |
|
$ |
245,341 |
|
|
$ |
249,426 |
|
|
-1.6 |
% |
|
|
|
|
|
|
|
Selling, general and
administrative expenses: |
|
|
|
|
|
|
Unified
Communications Services |
|
$ |
108,424 |
|
|
$ |
107,745 |
|
|
0.6 |
% |
Safety
Services |
|
|
31,316 |
|
|
|
35,863 |
|
|
-12.7 |
% |
Interactive Services |
|
|
54,316 |
|
|
|
50,356 |
|
|
7.9 |
% |
Specialized Agent Services |
|
|
31,295 |
|
|
|
30,829 |
|
|
1.5 |
% |
Corporate
Other |
|
|
2,674 |
|
|
|
(13,604 |
) |
|
NM |
Intersegment eliminations |
|
|
(1,575 |
) |
|
|
(1,319 |
) |
|
NM |
Total |
|
$ |
226,450 |
|
|
$ |
209,870 |
|
|
7.9 |
% |
|
|
|
|
|
|
|
Operating income: |
|
|
|
|
|
|
Unified
Communications Services |
|
$ |
72,020 |
|
|
$ |
88,762 |
|
|
-18.9 |
% |
Safety
Services |
|
|
20,897 |
|
|
|
11,871 |
|
|
76.0 |
% |
Interactive Services |
|
|
7,828 |
|
|
|
5,958 |
|
|
31.4 |
% |
Specialized Agent Services |
|
|
4,531 |
|
|
|
2,906 |
|
|
55.9 |
% |
Corporate
Other |
|
|
(2,674 |
) |
|
|
13,604 |
|
|
NM |
Total |
|
$ |
102,602 |
|
|
$ |
123,101 |
|
|
-16.7 |
% |
|
|
|
|
|
|
|
Operating margin: |
|
|
|
|
|
|
Unified
Communications Services |
|
|
20.7 |
% |
|
|
24.0 |
% |
|
|
Safety
Services |
|
|
26.0 |
% |
|
|
16.0 |
% |
|
|
Interactive Services |
|
|
9.9 |
% |
|
|
8.1 |
% |
|
|
Specialized Agent Services |
|
|
6.5 |
% |
|
|
4.3 |
% |
|
|
Total |
|
|
17.9 |
% |
|
|
21.1 |
% |
|
|
SELECTED
FINANCIAL DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution |
Changes in
Revenue - 2Q17 compared to 2Q16: |
|
Consolidated |
|
to Rev.
Growth |
Revenue for the three
months ended June 30, 2016 |
|
$ |
582,397 |
|
|
|
Revenue
from acquired entities3 |
|
|
3,302 |
|
|
0.6 |
% |
Estimated
impact of foreign currency exchange rates6 |
|
|
(3,956 |
) |
|
-0.7 |
% |
Adjusted
organic growth5 |
|
|
(7,350 |
) |
|
-1.3 |
% |
Revenue for the three
months ended June 30, 2017 |
|
$ |
574,393 |
|
|
-1.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Unified |
|
|
|
|
Communications |
|
Contribution |
Changes in
Revenue - 2Q17 compared to 2Q16: |
|
Services |
|
to Rev.
Growth |
Revenue for the three
months ended June 30, 2016 |
|
$ |
370,158 |
|
|
|
Revenue
from acquired entities3 |
|
|
962 |
|
|
0.3 |
% |
Estimated
impact of foreign currency exchange rates6 |
|
|
(3,956 |
) |
|
-1.1 |
% |
Adjusted
organic growth5 |
|
|
(18,618 |
) |
|
-5.0 |
% |
Revenue for the three
months ended June 30, 2017 |
|
$ |
348,546 |
|
|
-5.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Safety |
|
Contribution |
Changes in
Revenue - 2Q17 compared to 2Q16: |
|
Services |
|
to Rev.
Growth |
Revenue for the three
months ended June 30, 2016 |
|
$ |
74,423 |
|
|
|
Revenue
from acquired entities3 |
|
|
1,008 |
|
|
1.4 |
% |
Organic
growth |
|
|
4,988 |
|
|
6.7 |
% |
Revenue for the three
months ended June 30, 2017 |
|
$ |
80,419 |
|
|
8.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Interactive |
|
Contribution |
Changes in
Revenue - 2Q17 compared to 2Q16: |
|
Services |
|
to Rev.
Growth |
Revenue for the three
months ended June 30, 2016 |
|
$ |
73,232 |
|
|
|
Revenue
from acquired entities3 |
|
|
1,332 |
|
|
1.8 |
% |
Organic
growth |
|
|
4,615 |
|
|
6.3 |
% |
Revenue for the three
months ended June 30, 2017 |
|
$ |
79,179 |
|
|
8.1 |
% |
WEST
CORPORATION |
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME |
(Unaudited, in thousands except per share data) |
|
|
|
|
|
|
|
|
|
Six Months Ended June
30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
% Change |
Revenue |
|
$ |
1,146,935 |
|
|
$ |
1,153,176 |
|
|
-0.5 |
% |
Cost of services |
|
|
487,783 |
|
|
|
490,438 |
|
|
-0.5 |
% |
Selling, general and
administrative expenses |
|
|
448,327 |
|
|
|
430,713 |
|
|
4.1 |
% |
Operating income |
|
|
210,825 |
|
|
|
232,025 |
|
|
-9.1 |
% |
Interest expense,
net |
|
|
71,423 |
|
|
|
76,195 |
|
|
-6.3 |
% |
Accelerated
amortization of deferred financing costs |
|
|
24 |
|
|
|
35,235 |
|
|
NM |
Other income, net |
|
|
(3,715 |
) |
|
|
(174 |
) |
|
NM |
Income before tax |
|
|
143,093 |
|
|
|
120,769 |
|
|
18.5 |
% |
Income tax expense |
|
|
44,233 |
|
|
|
43,235 |
|
|
2.3 |
% |
Net income |
|
$ |
98,860 |
|
|
$ |
77,534 |
|
|
27.5 |
% |
|
|
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
Basic |
|
|
83,459 |
|
|
|
82,874 |
|
|
|
Diluted |
|
|
85,369 |
|
|
|
84,425 |
|
|
|
|
|
|
|
|
|
|
Earnings Per Share -
Basic |
|
$ |
1.18 |
|
|
$ |
0.94 |
|
|
25.5 |
% |
|
|
|
|
|
|
|
Earnings Per Share -
Diluted |
|
$ |
1.16 |
|
|
$ |
0.92 |
|
|
26.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED
SEGMENT FINANCIAL DATA: |
|
|
|
|
|
|
|
|
Six Months Ended June
30, |
|
|
|
2017 |
|
|
|
2016 |
|
|
% Change |
Revenue: |
|
|
|
|
|
|
Unified
Communications Services |
|
$ |
699,621 |
|
|
$ |
732,871 |
|
|
-4.5 |
% |
Safety
Services |
|
|
156,674 |
|
|
|
145,587 |
|
|
7.6 |
% |
Interactive Services |
|
|
156,672 |
|
|
|
144,961 |
|
|
8.1 |
% |
Specialized Agent Services |
|
|
141,102 |
|
|
|
135,873 |
|
|
3.8 |
% |
Intersegment eliminations |
|
|
(7,134 |
) |
|
|
(6,116 |
) |
|
NM |
Total |
|
$ |
1,146,935 |
|
|
$ |
1,153,176 |
|
|
-0.5 |
% |
|
|
|
|
|
|
|
Depreciation: |
|
|
|
|
|
|
Unified
Communications Services |
|
$ |
32,593 |
|
|
$ |
34,836 |
|
|
-6.4 |
% |
Safety
Services |
|
|
8,043 |
|
|
|
9,049 |
|
|
-11.1 |
% |
Interactive Services |
|
|
9,663 |
|
|
|
7,943 |
|
|
21.7 |
% |
Specialized Agent Services |
|
|
6,918 |
|
|
|
5,630 |
|
|
22.9 |
% |
Total |
|
$ |
57,217 |
|
|
$ |
57,458 |
|
|
-0.4 |
% |
|
|
|
|
|
|
|
Amortization: |
|
|
|
|
|
|
Unified
Communications Services - SG&A |
|
$ |
4,539 |
|
|
$ |
6,771 |
|
|
-33.0 |
% |
Safety
Services - SG&A |
|
|
5,851 |
|
|
|
6,955 |
|
|
-15.9 |
% |
Safety
Services - COS |
|
|
6,855 |
|
|
|
6,648 |
|
|
3.1 |
% |
Interactive Services - SG&A |
|
|
9,828 |
|
|
|
10,382 |
|
|
-5.3 |
% |
Specialized Agent Services - SG&A |
|
|
8,526 |
|
|
|
9,188 |
|
|
-7.2 |
% |
Deferred
financing costs |
|
|
3,751 |
|
|
|
44,053 |
|
|
NM |
Total |
|
$ |
39,350 |
|
|
$ |
83,997 |
|
|
-53.2 |
% |
|
|
|
|
|
|
|
Share-based
compensation: |
|
|
|
|
|
|
Unified
Communications Services |
|
$ |
6,423 |
|
|
$ |
7,821 |
|
|
-17.9 |
% |
Safety
Services |
|
|
1,854 |
|
|
|
2,220 |
|
|
-16.5 |
% |
Interactive Services |
|
|
1,147 |
|
|
|
1,381 |
|
|
-16.9 |
% |
Specialized Agent Services |
|
|
2,108 |
|
|
|
2,419 |
|
|
-12.9 |
% |
Total |
|
$ |
11,532 |
|
|
$ |
13,841 |
|
|
-16.7 |
% |
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
Unified
Communications Services |
|
$ |
335,249 |
|
|
$ |
339,847 |
|
|
-1.4 |
% |
Safety
Services |
|
|
53,731 |
|
|
|
54,004 |
|
|
-0.5 |
% |
Interactive Services |
|
|
34,320 |
|
|
|
33,070 |
|
|
3.8 |
% |
Specialized Agent Services |
|
|
68,797 |
|
|
|
66,911 |
|
|
2.8 |
% |
Intersegment eliminations |
|
|
(4,314 |
) |
|
|
(3,394 |
) |
|
NM |
Total |
|
$ |
487,783 |
|
|
$ |
490,438 |
|
|
-0.5 |
% |
|
|
|
|
|
|
|
Selling, general and
administrative expenses: |
|
|
|
|
|
|
Unified
Communications Services |
|
$ |
210,962 |
|
|
$ |
215,194 |
|
|
-2.0 |
% |
Safety
Services |
|
|
62,760 |
|
|
|
70,739 |
|
|
-11.3 |
% |
Interactive Services |
|
|
106,169 |
|
|
|
100,125 |
|
|
6.0 |
% |
Specialized Agent Services |
|
|
64,216 |
|
|
|
61,538 |
|
|
4.4 |
% |
Corporate
Other |
|
|
7,040 |
|
|
|
(14,161 |
) |
|
NM |
Intersegment eliminations |
|
|
(2,820 |
) |
|
|
(2,722 |
) |
|
NM |
Total |
|
$ |
448,327 |
|
|
$ |
430,713 |
|
|
4.1 |
% |
|
|
|
|
|
|
|
Operating income: |
|
|
|
|
|
|
Unified
Communications Services |
|
$ |
153,410 |
|
|
$ |
177,830 |
|
|
-13.7 |
% |
Safety
Services |
|
|
40,183 |
|
|
|
20,844 |
|
|
92.8 |
% |
Interactive Services |
|
|
16,183 |
|
|
|
11,766 |
|
|
37.5 |
% |
Specialized Agent Services |
|
|
8,089 |
|
|
|
7,424 |
|
|
9.0 |
% |
Corporate
Other |
|
|
(7,040 |
) |
|
|
14,161 |
|
|
NM |
Total |
|
$ |
210,825 |
|
|
$ |
232,025 |
|
|
-9.1 |
% |
|
|
|
|
|
|
|
Operating margin: |
|
|
|
|
|
|
Unified
Communications Services |
|
|
21.9 |
% |
|
|
24.3 |
% |
|
|
Safety
Services |
|
|
25.6 |
% |
|
|
14.3 |
% |
|
|
Interactive Services |
|
|
10.3 |
% |
|
|
8.1 |
% |
|
|
Specialized Agent Services |
|
|
5.7 |
% |
|
|
5.5 |
% |
|
|
Total |
|
|
18.4 |
% |
|
|
20.1 |
% |
|
|
SELECTED
FINANCIAL DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution |
Changes in
Revenue - 2Q17 YTD compared to 2Q16 YTD: |
|
Consolidated |
|
to Rev.
Growth |
Revenue for the six
months ended June 30, 2016 |
|
$ |
1,153,176 |
|
|
|
Revenue
from acquired entities3 |
|
|
5,616 |
|
|
0.5 |
% |
Estimated
impact of foreign currency exchange rates6 |
|
|
(8,467 |
) |
|
-0.7 |
% |
Adjusted
organic growth5 |
|
|
(3,390 |
) |
|
-0.3 |
% |
Revenue for the six
months ended June 30, 2017 |
|
$ |
1,146,935 |
|
|
-0.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Unified |
|
|
|
|
Communications |
|
Contribution |
Changes in
Revenue - 2Q17 YTD compared to 2Q16 YTD: |
|
Services |
|
to Rev.
Growth |
Revenue for the six
months ended June 30, 2016 |
|
$ |
732,871 |
|
|
|
Revenue
from acquired entities3 |
|
|
1,153 |
|
|
0.2 |
% |
Estimated
impact of foreign currency exchange rates6 |
|
|
(8,467 |
) |
|
-1.2 |
% |
Adjusted
organic growth5 |
|
|
(25,936 |
) |
|
-3.5 |
% |
Revenue for the six
months ended June 30, 2017 |
|
$ |
699,621 |
|
|
-4.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Safety |
|
Contribution |
Changes in
Revenue - 2Q17 YTD compared to 2Q16 YTD: |
|
Services |
|
to Rev.
Growth |
Revenue for the six
months ended June 30, 2016 |
|
$ |
145,587 |
|
|
|
Revenue
from acquired entities3 |
|
|
1,857 |
|
|
1.3 |
% |
Organic
growth |
|
|
9,230 |
|
|
6.3 |
% |
Revenue for the six
months ended June 30, 2017 |
|
$ |
156,674 |
|
|
7.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Interactive |
|
Contribution |
Changes in
Revenue - 2Q17 YTD compared to 2Q16 YTD: |
|
Services |
|
to Rev.
Growth |
Revenue for the six
months ended June 30, 2016 |
|
$ |
144,961 |
|
|
|
Revenue
from acquired entities3 |
|
|
2,606 |
|
|
1.8 |
% |
Organic
growth |
|
|
9,105 |
|
|
6.3 |
% |
Revenue for the six
months ended June 30, 2017 |
|
$ |
156,672 |
|
|
8.1 |
% |
WEST CORPORATION |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(Unaudited, in thousands) |
|
|
|
|
|
|
|
|
|
June
30, |
|
December
31, |
|
% |
|
|
|
2017 |
|
|
|
2016 |
|
|
Change |
Assets: |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
191,835 |
|
|
$ |
183,059 |
|
|
4.8 |
% |
Trust and
restricted cash |
|
|
17,414 |
|
|
|
20,141 |
|
|
-13.5 |
% |
Accounts
receivable, net |
|
|
399,998 |
|
|
|
369,068 |
|
|
8.4 |
% |
Income
taxes receivable |
|
|
- |
|
|
|
4,366 |
|
|
NM |
Prepaid
assets |
|
|
53,395 |
|
|
|
40,886 |
|
|
30.6 |
% |
Deferred
expenses |
|
|
41,022 |
|
|
|
44,886 |
|
|
-8.6 |
% |
Other
current assets |
|
|
29,267 |
|
|
|
31,889 |
|
|
-8.2 |
% |
Total
current assets |
|
|
732,931 |
|
|
|
694,295 |
|
|
5.6 |
% |
Property and
Equipment: |
|
|
|
|
|
|
Property
and equipment |
|
|
1,131,873 |
|
|
|
1,088,205 |
|
|
4.0 |
% |
Accumulated depreciation and amortization
|
|
|
(805,200 |
) |
|
|
(755,754 |
) |
|
6.5 |
% |
Net
property and equipment |
|
|
326,673 |
|
|
|
332,451 |
|
|
-1.7 |
% |
Goodwill |
|
|
1,947,832 |
|
|
|
1,916,192 |
|
|
1.7 |
% |
Intangible assets,
net |
|
|
300,991 |
|
|
|
315,474 |
|
|
-4.6 |
% |
Other assets |
|
|
172,518 |
|
|
|
182,426 |
|
|
-5.4 |
% |
Total
assets |
|
$ |
3,480,945 |
|
|
$ |
3,440,838 |
|
|
1.2 |
% |
Liabilities and
Stockholders' Deficit: |
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
Accounts
payable |
|
$ |
69,730 |
|
|
$ |
78,881 |
|
|
-11.6 |
% |
Deferred
revenue |
|
|
133,087 |
|
|
|
151,148 |
|
|
-11.9 |
% |
Accrued
expenses |
|
|
233,789 |
|
|
|
224,871 |
|
|
4.0 |
% |
Current
maturities of long-term debt |
|
|
47,834 |
|
|
|
39,709 |
|
|
20.5 |
% |
Total
current liabilities |
|
|
484,440 |
|
|
|
494,609 |
|
|
-2.1 |
% |
Long-term
obligations |
|
|
3,064,850 |
|
|
|
3,129,963 |
|
|
-2.1 |
% |
Deferred income
taxes |
|
|
103,059 |
|
|
|
88,864 |
|
|
16.0 |
% |
Other long-term
liabilities |
|
|
153,099 |
|
|
|
169,251 |
|
|
-9.5 |
% |
Total
liabilities |
|
|
3,805,448 |
|
|
|
3,882,687 |
|
|
-2.0 |
% |
|
|
|
|
|
|
|
Stockholders'
Deficit: |
|
|
|
|
|
|
Common
stock |
|
|
87 |
|
|
|
86 |
|
|
1.2 |
% |
Additional paid-in capital |
|
|
2,240,801 |
|
|
|
2,223,379 |
|
|
0.8 |
% |
Retained
deficit |
|
|
(2,410,711 |
) |
|
|
(2,490,455 |
) |
|
-3.2 |
% |
Accumulated other comprehensive loss |
|
|
(67,454 |
) |
|
|
(87,633 |
) |
|
-23.0 |
% |
Treasury
stock at cost |
|
|
(87,226 |
) |
|
|
(87,226 |
) |
|
0.0 |
% |
Total
stockholders' deficit |
|
|
(324,503 |
) |
|
|
(441,849 |
) |
|
-26.6 |
% |
|
|
|
|
|
|
|
Total
liabilities and stockholders' deficit |
|
$ |
3,480,945 |
|
|
$ |
3,440,838 |
|
|
1.2 |
% |
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 June
30, |
Consolidated: |
|
|
2017 |
|
|
|
2016 |
|
|
% Change |
Operating income |
|
$ |
102,602 |
|
|
$ |
123,101 |
|
|
-16.7 |
% |
Amortization of
acquired intangible assets
|
|
|
14,454 |
|
|
|
16,871 |
|
|
-14.3 |
% |
Share-based
compensation |
|
|
6,107 |
|
|
|
6,175 |
|
|
-1.1 |
% |
Gain on sale of real
estate |
|
|
- |
|
|
|
(12,848 |
) |
|
NM |
M&A and
acquisition-related costs |
|
|
5,765 |
|
|
|
1,401 |
|
|
311.5 |
% |
Adjusted operating
income |
|
$ |
128,928 |
|
|
$ |
134,700 |
|
|
-4.3 |
% |
Adjusted operating
income margin |
|
|
22.4 |
% |
|
|
23.1 |
% |
|
|
|
|
|
|
|
|
|
Unified
Communications Services: |
|
|
|
|
|
|
Operating income |
|
$ |
72,020 |
|
|
$ |
88,762 |
|
|
-18.9 |
% |
Amortization of
acquired intangible assets |
|
|
2,252 |
|
|
|
3,378 |
|
|
-33.3 |
% |
Share-based
compensation |
|
|
3,399 |
|
|
|
3,493 |
|
|
-2.7 |
% |
M&A and
acquisition-related costs |
|
|
349 |
|
|
|
387 |
|
|
-9.8 |
% |
Adjusted operating
income |
|
$ |
78,020 |
|
|
$ |
96,020 |
|
|
-18.7 |
% |
Adjusted operating
income margin |
|
|
22.4 |
% |
|
|
25.9 |
% |
|
|
|
|
|
|
|
|
|
Safety
Services: |
|
|
|
|
|
|
Operating income |
|
$ |
20,897 |
|
|
$ |
11,871 |
|
|
76.0 |
% |
Amortization of
acquired intangible assets |
|
|
3,041 |
|
|
|
3,572 |
|
|
-14.9 |
% |
Share-based
compensation |
|
|
989 |
|
|
|
993 |
|
|
-0.4 |
% |
M&A and
acquisition-related costs |
|
|
55 |
|
|
|
- |
|
|
NM |
Adjusted operating
income |
|
$ |
24,982 |
|
|
$ |
16,436 |
|
|
52.0 |
% |
Adjusted operating
income margin |
|
|
31.1 |
% |
|
|
22.1 |
% |
|
|
|
|
|
|
|
|
|
Interactive
Services: |
|
|
|
|
|
|
Operating income |
|
$ |
7,828 |
|
|
$ |
5,958 |
|
|
31.4 |
% |
Amortization of
acquired intangible assets |
|
|
4,975 |
|
|
|
5,327 |
|
|
-6.6 |
% |
Share-based
compensation |
|
|
602 |
|
|
|
620 |
|
|
-2.9 |
% |
M&A and
acquisition-related costs |
|
|
1,036 |
|
|
|
1,059 |
|
|
-2.2 |
% |
Adjusted operating
income |
|
$ |
14,441 |
|
|
$ |
12,964 |
|
|
11.4 |
% |
Adjusted operating
income margin |
|
|
18.2 |
% |
|
|
17.7 |
% |
|
|
|
|
|
|
|
|
|
Specialized
Agent Services: |
|
|
|
|
|
|
Operating income |
|
$ |
4,531 |
|
|
$ |
2,906 |
|
|
55.9 |
% |
Amortization of
acquired intangible assets |
|
|
4,186 |
|
|
|
4,594 |
|
|
-8.9 |
% |
Share-based
compensation |
|
|
1,117 |
|
|
|
1,069 |
|
|
4.5 |
% |
Adjusted operating
income |
|
$ |
9,834 |
|
|
$ |
8,569 |
|
|
14.8 |
% |
Adjusted operating
income margin |
|
|
14.2 |
% |
|
|
12.7 |
% |
|
|
|
|
|
|
|
|
|
Corporate
Other: |
|
|
|
|
|
|
Operating income
(loss) |
|
$ |
(2,674 |
) |
|
$ |
13,604 |
|
|
|
Gain on sale of real
estate |
|
|
- |
|
|
|
(12,848 |
) |
|
|
M&A and
acquisition-related costs |
|
|
4,325 |
|
|
|
(45 |
) |
|
|
Adjusted operating
income |
|
$ |
1,651 |
|
|
$ |
711 |
|
|
|
Reconciliation of
Adjusted Operating Income from Operating
Income |
Unaudited, in
thousands |
|
|
|
|
|
|
|
|
Six Months Ended June
30, |
Consolidated: |
|
|
2017 |
|
|
|
2016 |
|
|
% Change |
Operating income |
|
$ |
210,825 |
|
|
$ |
232,025 |
|
|
-9.1 |
% |
Amortization of
acquired intangible assets
|
|
|
28,744 |
|
|
|
33,296 |
|
|
-13.7 |
% |
Share-based
compensation |
|
|
11,532 |
|
|
|
13,841 |
|
|
-16.7 |
% |
Gain on sale of real
estate |
|
|
- |
|
|
|
(12,848 |
) |
|
NM |
M&A and
acquisition-related costs |
|
|
7,100 |
|
|
|
2,489 |
|
|
185.3 |
% |
Adjusted operating
income |
|
$ |
258,201 |
|
|
$ |
268,803 |
|
|
-3.9 |
% |
Adjusted operating
income margin |
|
|
22.5 |
% |
|
|
23.3 |
% |
|
|
|
|
|
|
|
|
|
Unified
Communications Services: |
|
|
|
|
|
|
Operating income |
|
$ |
153,410 |
|
|
$ |
177,830 |
|
|
-13.7 |
% |
Amortization of
acquired intangible assets |
|
|
4,539 |
|
|
|
6,771 |
|
|
-33.0 |
% |
Share-based
compensation |
|
|
6,423 |
|
|
|
7,821 |
|
|
-17.9 |
% |
M&A and
acquisition-related costs |
|
|
694 |
|
|
|
878 |
|
|
NM |
Adjusted operating
income |
|
$ |
165,066 |
|
|
$ |
193,300 |
|
|
-14.6 |
% |
Adjusted operating
income margin |
|
|
23.6 |
% |
|
|
26.4 |
% |
|
|
|
|
|
|
|
|
|
Safety
Services: |
|
|
|
|
|
|
Operating income |
|
$ |
40,183 |
|
|
$ |
20,844 |
|
|
92.8 |
% |
Amortization of
acquired intangible assets |
|
|
5,851 |
|
|
|
6,955 |
|
|
-15.9 |
% |
Share-based
compensation |
|
|
1,854 |
|
|
|
2,220 |
|
|
-16.5 |
% |
M&A and
acquisition-related costs |
|
|
183 |
|
|
|
- |
|
|
NM |
Adjusted operating
income |
|
$ |
48,071 |
|
|
$ |
30,019 |
|
|
60.1 |
% |
Adjusted operating
income margin |
|
|
30.7 |
% |
|
|
20.6 |
% |
|
|
|
|
|
|
|
|
|
Interactive
Services: |
|
|
|
|
|
|
Operating income |
|
$ |
16,183 |
|
|
$ |
11,766 |
|
|
37.5 |
% |
Amortization of
acquired intangible assets |
|
|
9,828 |
|
|
|
10,382 |
|
|
-5.3 |
% |
Share-based
compensation |
|
|
1,147 |
|
|
|
1,381 |
|
|
-16.9 |
% |
M&A and
acquisition-related costs |
|
|
1,353 |
|
|
|
1,611 |
|
|
-16.0 |
% |
Adjusted operating
income |
|
$ |
28,511 |
|
|
$ |
25,140 |
|
|
13.4 |
% |
Adjusted operating
income margin |
|
|
18.2 |
% |
|
|
17.3 |
% |
|
|
|
|
|
|
|
|
|
Specialized
Agent Services: |
|
|
|
|
|
|
Operating income |
|
$ |
8,089 |
|
|
$ |
7,424 |
|
|
9.0 |
% |
Amortization of
acquired intangible assets |
|
|
8,526 |
|
|
|
9,188 |
|
|
-7.2 |
% |
Share-based
compensation |
|
|
2,108 |
|
|
|
2,419 |
|
|
-12.9 |
% |
Adjusted operating
income |
|
$ |
18,723 |
|
|
$ |
19,031 |
|
|
-1.6 |
% |
Adjusted operating
income margin |
|
|
13.3 |
% |
|
|
14.0 |
% |
|
|
|
|
|
|
|
|
|
Corporate
Other: |
|
|
|
|
|
|
Operating income
(loss) |
|
$ |
(7,040 |
) |
|
$ |
14,161 |
|
|
|
Gain on sale of real
estate |
|
|
- |
|
|
|
(12,848 |
) |
|
|
M&A and
acquisition-related costs |
|
|
4,870 |
|
|
|
- |
|
|
|
Adjusted operating
income (loss) |
|
$ |
(2,170 |
) |
|
$ |
1,313 |
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
|
2017 |
|
|
2016 |
|
|
% Change |
|
|
2017 |
|
|
2016 |
|
|
% Change |
Net income |
$ |
44,764 |
|
$ |
32,979 |
|
|
35.7 |
% |
|
$ |
98,860 |
|
$ |
77,534 |
|
|
27.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of
acquired intangible assets |
|
14,454 |
|
|
16,871 |
|
|
|
|
|
28,744 |
|
|
33,296 |
|
|
|
Amortization of
deferred financing costs |
|
1,863 |
|
|
39,144 |
|
|
|
|
|
3,751 |
|
|
44,053 |
|
|
|
Interest rate swap
ineffectiveness |
|
15 |
|
|
- |
|
|
|
|
|
77 |
|
|
- |
|
|
|
Share-based
compensation |
|
6,107 |
|
|
6,175 |
|
|
|
|
|
11,532 |
|
|
13,841 |
|
|
|
Gain on sale of real
estate |
|
- |
|
|
(12,848 |
) |
|
|
|
|
- |
|
|
(12,848 |
) |
|
|
M&A and
acquisition-related costs |
|
5,765 |
|
|
1,401 |
|
|
|
|
|
7,100 |
|
|
2,489 |
|
|
|
Pre-tax total |
|
28,204 |
|
|
50,743 |
|
|
|
|
|
51,204 |
|
|
80,831 |
|
|
|
Income tax expense on
adjustments |
|
10,478 |
|
|
18,911 |
|
|
|
|
|
18,801 |
|
|
30,007 |
|
|
|
Adjusted net
income |
$ |
62,490 |
|
$ |
64,811 |
|
|
-3.6 |
% |
|
$ |
131,263 |
|
$ |
128,358 |
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares
outstanding |
|
85,527 |
|
|
84,281 |
|
|
|
|
|
85,369 |
|
|
84,425 |
|
|
|
Adjusted EPS -
diluted |
$ |
0.73 |
|
$ |
0.77 |
|
|
-5.2 |
% |
|
$ |
1.54 |
|
$ |
1.52 |
|
|
1.3 |
% |
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 June
30, |
|
Six Months Ended June
30, |
|
|
2017 |
|
|
2016 |
|
% Change |
|
|
2017 |
|
|
2016 |
|
% Change |
Cash flows from
operating activities |
$ |
107,273 |
|
$ |
137,433 |
|
-21.9 |
% |
|
$ |
160,046 |
|
$ |
197,485 |
|
-19.0 |
% |
Cash capital
expenditures |
|
26,576 |
|
|
37,507 |
|
-29.1 |
% |
|
|
53,248 |
|
|
73,864 |
|
-27.9 |
% |
Free cash flow |
$ |
80,697 |
|
$ |
99,926 |
|
-19.2 |
% |
|
$ |
106,798 |
|
$ |
123,621 |
|
-13.6 |
% |
EBITDA, Adjusted EBITDA and Covenant 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” and “Covenant Adjusted EBITDA.” The Company defines
Adjusted EBITDA as earnings before interest expense, share-based
compensation, taxes, depreciation and amortization, gain on sale of
buildings, significant restructuring costs and transaction costs.
The Company defines Covenant Adjusted EBITDA as Adjusted EBITDA
plus post-acquisition synergies, site closures and other
impairments, other non-cash reserves and certain litigation
settlement costs and excluding unrestricted subsidiaries. EBITDA,
Adjusted EBITDA and Covenant Adjusted EBITDA are not measures of
financial performance or liquidity under GAAP. Although the Company
uses Adjusted EBITDA and Covenant Adjusted EBITDA as measures of
its liquidity and performance, the use of Adjusted EBITDA and
Covenant Adjusted EBITDA is limited because it does not include
certain material costs, such as depreciation, amortization and
interest, necessary to operate the business and for Covenant
Adjusted EBITDA, includes adjustments for synergies that have not
been realized. In addition, certain adjustments included in the
calculation of Covenant Adjusted EBITDA are based on management’s
estimates and do not reflect actual results. For example,
post-acquisition synergies included in Covenant Adjusted EBITDA are
determined in accordance with the Company’s senior credit
facilities and indenture governing the Company’s outstanding notes,
which provide for an adjustment to EBITDA, subject to certain
specified limitations, for reasonably identifiable and factually
supportable cost savings projected by the Company in good faith to
be realized as a result of actions taken following an acquisition.
EBITDA, Adjusted EBITDA and Covenant 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 and Covenant
Adjusted EBITDA, as presented, may not be comparable to similarly
titled measures of other companies. Adjusted EBITDA and Covenant
Adjusted EBITDA are presented here as the Company understands
investors use them 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. The Company uses this non-GAAP
measure to make decisions about the use of resources, analyze
performance and measure management’s performance with stated
objectives. Pro forma adjustments are based on loan covenants. Set
forth below is a reconciliation of EBITDA, Adjusted EBITDA and
Covenant Adjusted EBITDA from cash flow from operating activities
and net income.
Reconciliation of
EBITDA and Adjusted EBITDA from Operating Cash
Flow |
Unaudited, in thousands |
|
|
|
|
|
|
|
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
Last Twelve Months |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Ended 6/30/17 |
Cash flows from
operating activities |
$ |
107,273 |
|
|
$ |
137,433 |
|
|
$ |
160,046 |
|
|
$ |
197,485 |
|
|
$ |
389,755 |
|
Income tax expense |
|
22,652 |
|
|
|
18,389 |
|
|
|
44,233 |
|
|
|
43,235 |
|
|
|
67,421 |
|
Deferred income tax
benefit (expense) |
|
1,888 |
|
|
|
6,132 |
|
|
|
(8,010 |
) |
|
|
3,755 |
|
|
|
18,446 |
|
Interest expense and
other financing charges |
|
36,786 |
|
|
|
73,267 |
|
|
|
72,437 |
|
|
|
112,252 |
|
|
|
146,345 |
|
Provision for
share-based compensation |
|
(6,107 |
) |
|
|
(6,175 |
) |
|
|
(11,532 |
) |
|
|
(13,841 |
) |
|
|
(23,079 |
) |
Amortization of
deferred financing costs |
|
(1,863 |
) |
|
|
(39,144 |
) |
|
|
(3,751 |
) |
|
|
(44,053 |
) |
|
|
(8,040 |
) |
Gain on sale of real
estate |
|
- |
|
|
|
12,848 |
|
|
|
- |
|
|
|
12,848 |
|
|
|
1,216 |
|
Other |
|
(209 |
) |
|
|
(712 |
) |
|
|
(588 |
) |
|
|
(886 |
) |
|
|
(1,214 |
) |
Changes in operating
assets and liabilities, |
|
|
|
|
|
|
|
|
|
net of business
acquisitions |
|
(9,835 |
) |
|
|
(28,496 |
) |
|
|
55,511 |
|
|
|
19,628 |
|
|
|
27,727 |
|
EBITDA |
|
150,585 |
|
|
|
173,542 |
|
|
|
308,346 |
|
|
|
330,423 |
|
|
|
618,577 |
|
Provision for
share-based compensation |
|
6,107 |
|
|
|
6,175 |
|
|
|
11,532 |
|
|
|
13,841 |
|
|
|
23,079 |
|
M&A and
acquisition-related costs |
|
5,765 |
|
|
|
1,401 |
|
|
|
7,100 |
|
|
|
2,489 |
|
|
|
8,356 |
|
Gain on sale of real
estate |
|
- |
|
|
|
(12,848 |
) |
|
|
- |
|
|
|
(12,848 |
) |
|
|
(1,216 |
) |
Significant
restructuring |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,423 |
|
Adjusted
EBITDA |
$ |
162,457 |
|
|
$ |
168,270 |
|
|
$ |
326,978 |
|
|
$ |
333,905 |
|
|
$ |
657,219 |
|
|
|
|
|
|
|
|
|
|
|
Site closures,
severance and asset impairments |
|
4,067 |
|
|
|
1,789 |
|
|
|
5,966 |
|
|
|
2,657 |
|
|
|
6,158 |
|
Non-cash foreign
currency loss |
|
1,178 |
|
|
|
695 |
|
|
|
1,869 |
|
|
|
3,329 |
|
|
|
3,407 |
|
Other, net |
|
78 |
|
|
|
349 |
|
|
|
1,627 |
|
|
|
(603 |
) |
|
|
857 |
|
Covenant
Adjusted EBITDA, before Pro Forma |
$ |
167,780 |
|
|
$ |
171,103 |
|
|
$ |
336,440 |
|
|
$ |
339,288 |
|
|
$ |
667,641 |
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
adjustments |
|
|
|
|
|
|
|
|
|
18,239 |
|
Covenant
Adjusted EBITDA, after Pro Forma |
|
|
|
|
|
|
|
|
$ |
685,880 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
operating activities |
$ |
107,273 |
|
|
$ |
137,433 |
|
|
$ |
160,046 |
|
|
$ |
197,485 |
|
|
|
Cash flows used in
investing activities |
$ |
(48,687 |
) |
|
$ |
(3,124 |
) |
|
$ |
(79,993 |
) |
|
$ |
(42,584 |
) |
|
|
Cash flows used in
financing activities |
$ |
(42,266 |
) |
|
$ |
(42,301 |
) |
|
$ |
(76,647 |
) |
|
$ |
(112,546 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
EBITDA and Adjusted EBITDA from Net
Income |
|
|
Unaudited, in thousands |
|
|
|
|
|
|
|
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June
30, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
Net income |
|
44,764 |
|
|
|
32,979 |
|
|
|
98,860 |
|
|
|
77,534 |
|
|
|
Interest expense and
other financing charges |
|
36,786 |
|
|
|
73,267 |
|
|
|
72,437 |
|
|
|
112,252 |
|
|
|
Depreciation and
amortization |
|
46,383 |
|
|
|
48,907 |
|
|
|
92,816 |
|
|
|
97,402 |
|
|
|
Income tax expense |
|
22,652 |
|
|
|
18,389 |
|
|
|
44,233 |
|
|
|
43,235 |
|
|
|
EBITDA |
|
150,585 |
|
|
|
173,542 |
|
|
|
308,346 |
|
|
|
330,423 |
|
|
|
Provision for
share-based compensation |
|
6,107 |
|
|
|
6,175 |
|
|
|
11,532 |
|
|
|
13,841 |
|
|
|
M&A and
acquisition-related costs |
|
5,765 |
|
|
|
1,401 |
|
|
|
7,100 |
|
|
|
2,489 |
|
|
|
Gain on sale of real
estate |
|
- |
|
|
|
(12,848 |
) |
|
|
- |
|
|
|
(12,848 |
) |
|
|
Adjusted
EBITDA |
|
162,457 |
|
|
|
168,270 |
|
|
|
326,978 |
|
|
|
333,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Site closures,
severance and asset impairments |
|
4,067 |
|
|
|
1,789 |
|
|
|
5,966 |
|
|
|
2,657 |
|
|
|
Non-cash foreign
currency loss |
|
1,178 |
|
|
|
695 |
|
|
|
1,869 |
|
|
|
3,329 |
|
|
|
Other, net |
|
78 |
|
|
|
349 |
|
|
|
1,627 |
|
|
|
(603 |
) |
|
|
Covenant
Adjusted EBITDA, before Pro Forma |
$ |
167,780 |
|
|
$ |
171,103 |
|
|
$ |
336,440 |
|
|
$ |
339,288 |
|
|
|
________________________________________________________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 second quarter of 2017 includes 911 ETC, Vocus and
Callpointe. 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
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 below.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 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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