OMAHA, NE, January 30, 2008 - West Corporation, a leading provider of outsourced communication solutions, today announced its fourth quarter and full year 2007 results.
Financial Summary (unaudited)
(Dollars in millions)
"West had another solid year of growth and profitability," said Thomas B. Barker, Chief Executive Officer of West Corporation. "For the first time, the company had revenues in excess of $2 billion. West also had record operating income in 2007. We will continue to focus our growth on those areas of our business that are most profitable."
Consolidated Operating Results
For the fourth quarter ended December 31, 2007, revenues were $539.6 million compared to $496.4 million for the same quarter last year, an increase of 8.7 percent. Revenue from acquired entities accounted for $29.4 million of the $43.2 million increase during the fourth quarter.
During the quarter, the Company recorded a $15.0 million accrual in the Communication Services segment related to a potential settlement of its Sanford and Ritt class actions previously disclosed in its periodic filings with the Securities and Exchange Commission and $3.5 million in impairment and site closure charges in its Receivables Management segment. These two items resulted in a 530 basis point reduction in the Communication Services segment fourth quarter operating margin, a 490 basis point reduction in the Receivables Management fourth quarter operating margin and a 340 basis point reduction in consolidated fourth quarter operating margin.
For the year ended December 31, 2007, revenues were $2,099.5 million compared to $1,856.0 million for 2006, an increase of 13.1 percent. Revenue from acquired entities2 accounted for $164.2 million of the $243.5 million increase. Organic revenue growth for 2007 was $79.3 million, an increase of 4.3 percent over 2006.
Balance Sheet and Liquidity
At December 31, 2007, West Corporation had cash and cash equivalents totaling $141.9 million and working capital of $187.8 million. Fourth quarter depreciation expense was $26.1 million and amortization expense was $19.8 million. Cash flow from operating activities was $68.2 million and was impacted by cash paid for interest expense of $106.9 million. Adjusted EBITDA for the fourth quarter was $142.6 million, or 26.4 percent of revenue.
Cash flow from operating activities for 2007 was $250.7 million, compared to $196.6 million for 2006. Cash paid for interest expense in 2007 was $302.5 million. Adjusted EBITDA for 2007 was $584.1 million ($572.7 million excluding non-recurring interest income), an increase of 16.4 percent, versus $501.9 million in 2006. Adjusted EBITDA as a percent of revenue grew to 27.8 percent in 2007 from 27.0 percent in 2006. A reconciliation of Adjusted EBITDA to cash flow from operating activities is presented below.
"During the quarter, we invested $29.9 million in capital expenditures primarily for equipment and infrastructure," stated Paul Mendlik, Chief Financial Officer of West Corporation. "For the year, our capital expenditures totaled $103.6 million, or 4.9% of revenues."
For 2008, the Company expects the following results. This guidance assumes no acquisitions or additional changes in the current operating environment.
The Company will hold a conference call to discuss these topics on Thursday, January 31, 2008 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 42,000 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 September 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, share based compensation, taxes, depreciation and amortization, minority interest, non-recurring litigation settlement costs, other non-cash reserves, transaction costs and after acquisition synergies and excluding unrestricted subsidiaries, or "Adjusted EBITDA." We also use Adjusted EBITDA Excluding Interest Income, which we define as earnings before interest expense and non-recurring interest income, share based compensation, taxes, depreciation and amortization, minority interest, non-recurring litigation settlement costs, other non-cash reserves, transaction costs and after acquisition synergies and excluding unrestricted subsidiaries, or "Adjusted EBITDA Excluding Interest Income." EBITDA, Adjusted EBITDA and Adjusted EBITDA Excluding Interest Income are not measures of financial performance or liquidity under generally accepted accounting principles ("GAAP"). EBITDA, Adjusted EBITDA and Adjusted EBITDA Excluding Interest Income should not be considered in isolation or as a substitute for net income, cash flow from operations or other income or cash flow data prepared in accordance with GAAP. Adjusted EBITDA and Adjusted EBITDA Excluding Interest Income, as presented, may not be comparable to similarly titled measures of other companies. Adjusted EBITDA and Adjusted EBITDA Excluding Interest Income are presented as we understand certain investors use them 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, Adjusted EBITDA and Adjusted EBITDA Excluding Interest Income to cash flow from operations.
1See Reconciliation of Financial Measures below.
NM - Not meaningful
2Acquired entities include CenterPost Communications, Inc. (acquired in February 2007) and TeleVox Software, Incorporated (acquired in March 2007) in the Communications Services segment and Omnium Worldwide, Inc. (acquired in May 2007) in the Receivables Management segment.
AT THE COMPANY: