West Corporation Reports Third Quarter 2007 Results
OMAHA, NE, October 17, 2007 West Corporation, a leading provider of outsourced communication solutions, today announced its third quarter 2007 results.
"We are pleased with this quarter's results and the ongoing integration of our recent acquisitions," said Thomas B. Barker, Chief Executive Officer of West Corporation.
Consolidated Operating Results
For the third quarter ended September 30, 2007, revenues were $531.1 million compared to $473.2 million for the same quarter last year, an increase of 12.2 percent. Revenue from acquired entities accounted for $33.9 million of the $57.9 million increase during the third quarter and $134.8 million of the $200.2 million year-to-date increase. During the quarter, the Company recorded $8.8 million of goodwill amortization to write-off its investment in Vertical Alliance, a ticketing company. This resulted in a 320 basis point reduction in the Communication Services segment third quarter operating margin and a 170 basis point reduction in consolidated third quarter operating margin. This was offset by a related reduction of income tax valuation reserves and income tax expense of $8.0 million.
Balance Sheet and Liquidity
At September 30, 2007, West Corporation had cash and cash equivalents totaling $112.6 million and working capital of $175.4 million. Third quarter depreciation expense was $25.1 million and amortization expense was $29.2 million. Cash flow from operating activities was $55.3 million and was impacted by interest expense of $88.1 million. Adjusted EBITDA for the third quarter was $149.3 million, or 28.1 percent of revenue. A reconciliation of adjusted EBITDA to cash flow from operating activities is presented in the Reconciliation of Financial Measures below.
"During the quarter, we invested $26.8 million in capital expenditures primarily for equipment and infrastructure," stated Paul Mendlik, Chief Financial Officer of West Corporation. "The Company also settled the pending litigation with Polygon during the quarter by paying Polygon $48.75 per share, the same amount received in the Recapitalization as all other former public shareholders of West, plus interest at 8.25%, for a total of approximately $183.9 million."
The Company will hold a conference call to discuss these topics on Thursday, October 18, 2007 at 11:00 AM Eastern Time (10:00 AM Central Time). Investors may access the call by visiting the Financials section of the West Corporation website at www.west.com and clicking on the Webcast link. A replay of the call will also be available on the website.
About West Corporation
West Corporation is a leading provider of outsourced communication solutions to many of the world's largest companies, organizations and government agencies. West helps its clients communicate effectively, maximize the value of their customer relationships and drive greater profitability from every interaction. The Company's integrated suite of customized solutions includes customer acquisition, customer care, automated voice services, emergency communications, conferencing and accounts receivable management services.
Founded in 1986 and headquartered in Omaha, Nebraska, West has a team of 37,000 employees based in North America, Europe and Asia. For more information, please visit www.west.com.
Forward Looking Statements
This press release contains forward looking statements. Forward-looking statements can be 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 risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties include the ability to integrate or achieve the objectives of our recent acquisitions, West's ability to complete future acquisitions, competition in West's highly competitive industries, extensive regulation in many of West's markets, West's ability to recover on its charged-off consumer receivables, capacity utilization of West's contact centers, the cost and reliability of voice and data services, availability of key personnel and employees, the cost of labor and turnover rates, the political, economic and other conditions in countries where West operates, the loss of any key clients, West's ability to purchase charged-off receivable portfolios on acceptable terms and in sufficient amounts, the nature of West's forward flow contracts, the non-exclusive nature of West's client contracts and the absence of revenue commitments, the possibility of an emergency interruption to West's data and contact centers, acts of terrorism or war, security or privacy breaches of West's systems and databases, West's ability to protect proprietary information or technology, West's ability to continue to keep pace with technological developments, the cost of pending and future litigation and other risk factors described in documents filed by the company with the United States Securities and Exchange Commission including West's annual report on Form 10-K for the year ended December 31, 2006 and quarterly report on Form 10-Q for the quarter ended June 30, 2007. 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.
Reconciliation of Financial Measures
The common definition of EBITDA is "Earnings Before Interest Expense, Taxes, Depreciation and Amortization." In evaluating liquidity, we use Adjusted EBITDA, which we define as earnings before interest expense, taxes, depreciation and amortization, share based compensation, minority interest, recapitalization transaction costs, after acquisition synergies and excluding unrestricted subsidiaries. EBITDA and Adjusted EBITDA are not measures of financial performance or liquidity under generally accepted accounting principles ("GAAP"). EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitution for net income, cash flow from operations 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 as we understand certain investors use it as one measure of our historical ability to service debt. Adjusted EBITDA is also used in our debt covenants. Set forth below is a reconciliation of EBITDA and adjusted EBITDA to cash flow from operations.
AT THE COMPANY: