West Corporation
Feb 1, 2016

West Corporation Reports Fourth Quarter and Full Year 2015 Results and Provides 2016 Guidance

Company Declares Quarterly Dividend, Expands Segment Reporting

OMAHA, Neb., Feb. 01, 2016 (GLOBE NEWSWIRE) -- West Corporation (Nasdaq:WSTC), a leading provider of technology-enabled communication services, today announced its fourth quarter and full year 2015 results.

Key Quarterly Highlights:

            
Unaudited, in millions except per share amounts Three Months Ended Dec. 31,   Year Ended Dec. 31, 
  2015   2014  % Change  2015   2014  % Change
Revenue$568.4  $562.9   1.0% $2,280.3  $2,218.6   2.8%
Adjusted EBITDA from Continuing Operations1 165.1   173.4   -4.8%  676.1   668.3   1.2%
EBITDA from Continuing Operations1 158.0   167.0   -5.4%  649.3   649.2   0.0%
Adjusted Operating Income1 131.0   141.2   -7.2%  551.8   541.5   1.9%
Operating Income 105.0   116.7   -10.1%  456.5   461.4   -1.1%
Adjusted Income from Continuing Operations1 63.7   68.1   -6.5%  265.9   247.2   7.5%
Income from Continuing Operations 42.3   34.9   21.4%  190.9   134.6   41.8%
Adjusted Earnings per Share from Continuing Operations - Diluted1 0.75   0.79   -5.1%  3.11   2.89   7.6%
Earnings per Share from Continuing Operations - Diluted 0.50   0.41   22.0%  2.24   1.57   42.7%
Free Cash Flow from Continuing Operating Activities1,2 86.9   75.5   15.2%  274.0   279.2   -1.9%
Cash Flows from Continuing Operating Activities 127.5   106.9   19.3%  410.8   409.5   0.3%
Cash Flows used in Continuing Investing Activities (118.7)  (38.4)  208.7%  (232.4)  (524.4)  -55.7%
Cash Flows used in Continuing Financing Activities (23.5)  (135.9)  -82.7%  (388.2)  (25.0) NM
            

"2015 was an important year for West Corporation. We had strong cash flow generation and continued refining our portfolio of services. We divested several agent-based services businesses, made three acquisitions, refinanced our term loan, paid down debt and repurchased two million shares of stock. We believe these actions will enhance the growth of the Company going forward," said Tom Barker, chairman and chief executive officer.

"The adjusted organic growth5 in our core business was 4.1 percent in the fourth quarter of 2015 and 3.3 percent for the year. With the expected growth in our non-conferencing businesses, we believe we will finish 2016 in a stronger growth position. As we move through the year, we will continue to focus on capital generation and deployment. In addition, in an effort to provide investors with enhanced visibility into how our underlying businesses are performing, we will now report results in four segments," Mr. Barker continued.

Dividend

The Company today also announced a $0.225 per common share dividend. The dividend is payable on March 3, 2016, to shareholders of record as of the close of business on February 22, 2016.

Operating Results Reflect Previous Divestiture

As previously disclosed, on March 3, 2015, the Company completed the sale of several of its agent-based services businesses. The operating results for the businesses that were sold have been reflected as discontinued operations in the Company's consolidated financial statements for all periods presented. Unless otherwise noted, the Company has presented herein its operating results from continuing operations, which excludes discontinued operations.

Change in Segment Reporting

During the fourth quarter of 2015, we implemented a revised organizational structure under which our reportable segments are as follows:

  • Unified Communications, including conferencing and collaboration services, unified communications services and telecom services;
  • Safety Services, including 9-1-1 network services, 9-1-1 telephony systems and services, 9-1-1 solutions for enterprise VoIP and UC and database management;
  • Interactive Services, including proactive notifications and mobility, IVR self-service, cloud contact center and professional services; and
  • Specialized Agent Services, including healthcare advocacy services, revenue generation and cost management services.

Consolidated Operating Results

For the fourth quarter of 2015, revenue was $568.4 million compared to $562.9 million for the same quarter of the previous year, an increase of 1.0 percent. Revenue from acquired entitieswas $5.2 million during the fourth quarter of 2015, contributing 0.9 percent to the Company's revenue growth. The Company's revenue growth rate was negatively impacted by $22.7 million, or 4.0 percent, from the impact of foreign currency exchange rate fluctuations and two previously disclosed client losses. Adjusted organic growth5 for the fourth quarter was 4.1 percent.

For the year ended December 31, 2015, revenue was $2,280.3 million compared to $2,218.6 million for 2014, an increase of 2.8 percent. Revenue from acquired entities3 was $71.9 million during 2015, contributing 3.2 percent to the Company's revenue growth. The Company's revenue growth rate was partially offset by $84.0 million, or 3.8 percent, from the impact of foreign currency exchange rate fluctuations and two previously disclosed client losses. Adjusted organic growth5 for 2015 was 3.3 percent. Details of the Company's revenue growth are presented in the selected financial data table below.

The Unified Communications segment had revenue of $357.8 million in the fourth quarter of 2015, a 0.9 percent decrease compared to the same quarter of 2014. This decrease was partially due to $16.0 million from the two previously disclosed lost telecom services and conferencing clients and was offset by $1.4 million in revenue from Magnetic North, which was acquired on October 31, 2015.

The Safety Services segment had revenue of $72.9 million in the fourth quarter of 2015, a decrease of 1.9 percent from the fourth quarter of 2014.

The Interactive Services segment had revenue of $71.3 million in the fourth quarter of 2015, 13.5 percent higher than the same quarter last year. This increase included $3.8 million from the acquisitions of SchoolReach, SharpSchool and ClientTell.

The Specialized Agent Services segment had revenue of $73.1 million in the fourth quarter of 2015, an increase of 7.3 percent compared to the same quarter of 2014.

Adjusted EBITDA1 for the fourth quarter of 2015 was $165.1 million compared to $173.4 million for the fourth quarter of 2014, a decrease of 4.8 percent. EBITDA1 was $158.0 million in the fourth quarter of 2015 compared to $167.0 million in the fourth quarter of 2014. Adjusted EBITDA for 2015 was $676.1 million, or 29.7 percent of revenue, compared to $668.3 million, or 30.1 percent of revenue, in 2014. EBITDA was $649.3 million in 2015 compared to $649.2 million in 2014. 

Adjusted operating income1 for the fourth quarter of 2015 was $131.0 million, or 23.0 percent of revenue, compared to $141.2 million, or 25.1 percent of revenue, in the same quarter of 2014, a decrease of 7.2 percent. Operating income was $105.0 million in the fourth quarter of 2015 compared to $116.7 million in the fourth quarter of 2014. For the full year 2015, adjusted operating income was $551.8 million compared to $541.5 million in 2014. Operating income for 2015 was $456.5 million compared to 2014 operating income of $461.4 million.

Adjusted income from continuing operations1 was $63.7 million in the fourth quarter of 2015, a decrease of 6.5 percent from the same quarter of 2014. Income from continuing operations increased 21.4 percent to $42.3 million in the fourth quarter of 2015 compared to $34.9 million in the same quarter of 2014. In 2015, adjusted income from continuing operations was $265.9 million, an increase of 7.5 percent compared to 2014. Income from continuing operations in 2015 was $190.9 million compared to $134.6 million in 2014, an increase of 41.8 percent. The growth in 2015 net income was primarily due to decreased interest expense as a result of the Company's debt repayment in 2015 and refinancing activities in 2014.

Balance Sheet, Cash Flow and Liquidity

At December 31, 2015, West Corporation had cash and cash equivalents totaling $182.3 million and working capital of $243.1 million. Interest expense was $38.4 million during the three months ended December 31, 2015 compared to $42.9 million during the comparable period the prior year. Interest expense was $154.3 million in 2015 compared to $188.1 million in 2014.

The Company's net debt to pro forma adjusted EBITDA ratio, as calculated pursuant to the Company's senior secured term debt facilities4, was 4.68x at December 31, 2015.

Cash flows from operations were $410.8 million for the twelve months ended December 31, 2015 compared to $409.5 million in 2014. Free cash flow1,2 decreased 1.9 percent to $274.0 million in 2015 compared to $279.2 million in 2014. 

During the fourth quarter of 2015, the Company closed on a new $250 million term loan due 2021. The loan will bear interest at a rate of LIBOR + 3.50% with a 0.75% LIBOR floor. Proceeds of the new term loan, together with cash on hand, were used to retire in full the $250 million remaining outstanding on the term loan due July 2016.

"We ended 2015 in a strong financial position, with more than $180 million of cash on our balance sheet and no funded debt maturities until mid-2018. During the year we generated more than $400 million of cash from operations and reduced our debt by nearly $260 million while lowering our interest expense by nearly $34 million," said Jan Madsen, chief financial officer.

During the fourth quarter of 2015, the Company invested $40.6 million, or 7.1 percent of revenue, in capital expenditures, primarily for software and computer equipment. For the full year 2015, the Company invested $136.8 million, or 6.0 percent of revenue, in capital expenditures. 

2016 Guidance

For 2016, the Company expects the results presented in the table below. This guidance assumes no acquisitions or changes in the current operating environment, capital structure or exchange rates. The two most significant exchange rates used for 2016 guidance are the British Pound Sterling at 1.43 and the Euro at 1.05. These foreign currency exchange rates, reflected in the guidance below, would negatively impact 2016 revenue by approximately $24 million and 2016 adjusted diluted earnings per share by $0.05 as compared to 2015 actual rates.

  
In millions except per share and leverage ratio 
 2015 Actual 2016 Guidance
Revenue$2,280.3  $2,276 - $2,346
Adjusted EBITDA from Continuing Operations1$676.1  $653 - $679
EBITDA from Continuing Operations1$649.3  $627 - $653
Adjusted Operating Income1$551.8  $524 - $551
Operating Income$456.5  $433 - $458
Adjusted Income from Continuing Operations1$265.9  $249 - $264
Income from Continuing Operations$190.9  $177 - $191
Adjusted Earnings per Share from Continuing Operations - Diluted1$3.11  $2.93 - $3.09
Earnings per Share from Continuing Operations - Diluted$2.24  $2.08 - $2.24
Cash Flows from Continuing Operating Activities$410.8  $390 - $420
Capital Expenditures$136.8  $135 - $160
Free Cash Flow from Continuing Operating Activities1,2$274.0  $235 - $265
Net Debt to pro forma Adjusted EBITDA ratio4.68x 4.48x - 4.68x
Full year average diluted share count 85.4  84.8 - 85.2
    

"We expect the Company to generate significant free cash flow again this year. We plan to use this cash, along with the $180 million in cash on our balance sheet, to make West Corporation more valuable with acquisitions, debt reduction, dividends and buybacks, while continuing to invest in the core business. We currently expect to use $75 million for dividends, $100-$150 million to pay down debt and an equal amount for acquisitions and stock buybacks in 2016. We expect to end the year with an improving growth profile, a more diverse stream of revenue and less debt," said Tom Barker.

"The previously disclosed lost telecom services client is expected to negatively impact 2016 revenue by approximately $45 million, primarily in the first half of the year," continued Mr. Barker.

Share Repurchase Program

The Company's Board of Directors has approved a share repurchase program under which the Company may repurchase up to an aggregate of $75 million of its outstanding common stock. Purchases under the program may be made from time to time through open market purchases, block transactions or privately negotiated transactions. The Company expects to fund the program using its cash on hand and cash generated from operations. The program may be suspended or discontinued at any time without prior notice.

Conference Call

The Company will hold a conference call to discuss these topics on Tuesday, February 2, 2016 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 be available on the Company's website at www.west.com.

About West Corporation

West Corporation (Nasdaq:WSTC) is a global provider of communication and network infrastructure solutions. West helps manage or support essential enterprise communications with services that include unified communications services, safety services, interactive services such as automated notifications, telecom services and specialty agent services.

For over 25 years, West has provided reliable, high-quality, voice and data services. West serves clients in a variety of industries including telecommunications, retail, financial services, public safety, technology and healthcare. West has a global organization with sales and operations in the United States, Canada, Europe, the Middle East, Asia Pacific and Latin America. For more information on West Corporation, please call 1-800-841-9000 or 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. The statements contained in the 2016 guidance and other statements concerning the Company's prospects and potential uses of cash are forward-looking statements. 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, 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 OPERATIONS  
(Unaudited, in thousands except per share data) 
         
  Three Months Ended December 31,  
   2015     2014       2015   
  Actual   Actual  % Change  Adjusted (1)  
Revenue$568,430  $562,938   1.0% $568,430  
Cost of services 239,389   234,419   2.1%  239,389  
Selling, general and administrative expenses 224,071   211,809   5.8%  198,043  
Operating income 104,970   116,710   -10.1%  130,998  
Interest expense, net 38,411   42,911   -10.5%  33,787  
Debt call premium and accelerated amortization of        
deferred financing costs 2,304   21,574   -89.3%  -  
Other expense (income), net (1,178)  (1,493) NM  (1,178) 
Income from continuing operations before tax 65,433   53,718   21.8%  98,389  
Income tax expense attributed to continuing operations 23,093   18,834   22.6%  34,723  
Income from continuing operations 42,340   34,884   21.4%  63,666  
Income from discontinued operations, net of income taxes 19,935   13,374   49.1%  19,935  
Net income$62,275  $48,258   29.0% $83,601  
         
Weighted average shares outstanding:        
Basic 83,243   84,178     83,243  
Diluted 84,809   86,033     84,809  
         
Earnings per share - Basic:        
Continuing operations$0.51  $0.41   24.4% $0.76  
Discontinued operations 0.24   0.16   50.0%  0.24  
Total Earnings Per Share - Basic$0.75  $0.57   31.6% $1.00  
         
Earnings per share - Diluted:        
Continuing operations$0.50  $0.41   22.0% $0.75  
Discontinued operations 0.24   0.15   60.0%  0.24  
Total Earnings Per Share - Diluted$0.74  $0.56   32.1% $0.99  
         
         
SELECTED FINANCIAL DATA:        
         
    Contribution      
Changes in Revenue - 4Q15 compared to 4Q14:   to Rev. Growth      
Revenue for the three months ended Dec. 31, 2014$562,938        
Revenue from acquired entities3 5,163   0.9%     
Revenue from previously disclosed lost conferencing client (2,400)  -0.4%     
Revenue from previously disclosed lost telecom services client (13,600)  -2.4%     
Estimated impact of foreign currency exchange rates (6,680)  -1.2%     
Adjusted organic growth, net 23,009   4.1%     
Revenue for the three months ended Dec. 31, 2015$568,430   1.0%     
         
         
  Three Months Ended December 31,    
   2015     2014       
SELECTED REPORTABLE SEGMENT DATA: Actual   Actual  % Change   
Revenue:        
Unified Communications$357,780  $361,001   -0.9%   
Safety Services 72,863   74,264   -1.9%   
Interactive Services 71,332   62,839   13.5%   
Specialized Agent Services 73,143   68,146   7.3%   
Intersegment eliminations (6,688)  (3,312) NM   
Total$568,430  $562,938   1.0%   
         
Depreciation:        
Unified Communications$17,713  $18,338   -3.4%   
Safety Services 5,027   5,202   -3.4%   
Interactive Services 3,978   3,303   20.4%   
Specialized Agent Services 2,566   1,343   91.1%   
Total$29,284  $28,186   3.9%   
         
Amortization:        
Unified Communications - SG&A$3,618  $3,968   -8.8%   
Safety Services - SG&A 5,436   4,816   12.9%   
Safety Services - COS 3,088   3,219   -4.1%   
Interactive Services - SG&A 4,512   3,922   15.0%   
Specialized Agent Services - SG&A 5,411   5,336   1.4%   
Deferred financing costs 4,624   5,075   -8.9%   
Accelerated deferred financing costs 2,304   3,853   -40.2%   
Total$28,993  $30,189   -4.0%   
         
Share-based compensation:        
Unified Communications$3,399  $3,516   -3.3%   
Safety Services 973   982   -0.9%   
Interactive Services 611   606   0.8%   
Specialized Agent Services 1,157   415   178.8%   
Total$6,140  $5,519   11.3%   
         
Cost of services:        
Unified Communications$163,296  $163,629   -0.2%   
Safety Services 27,441   26,790   2.4%   
Interactive Services 15,926   13,097   21.6%   
Specialized Agent Services 37,400   32,216   16.1%   
Intersegment eliminations (4,674)  (1,313) NM   
Total$239,389  $234,419   2.1%   
         
Selling, general and administrative expenses:        
Unified Communications$107,346  $108,951   -1.5%   
Safety Services 39,986   38,005   5.2%   
Interactive Services 48,968   40,292   21.5%   
Specialized Agent Services 29,785   26,560   12.1%   
Intersegment eliminations (2,014)  (1,999)  0.8%   
Total$224,071  $211,809   5.8%   
         
Operating income:        
Unified Communications$87,138  $88,421   -1.5%   
Safety Services 5,436   9,469   -42.6%   
Interactive Services 6,438   9,450   -31.9%   
Specialized Agent Services 5,958   9,370   -36.4%   
Total$104,970  $116,710   -10.1%   
         
Operating margin:        
Unified Communications 24.4%  24.5%     
Safety Services 7.5%  12.8%     
Interactive Services 9.0%  15.0%     
Specialized Agent Services 8.1%  13.7%     
Total 18.5%  20.7%     
         

 

 WEST CORPORATION  
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited, in thousands except per share data) 
         
  Year Ended December 31,  
   2015     2014       2015   
  Actual   Actual  % Change  Adjusted (1)  
Revenue$2,280,259  $2,218,594   2.8% $2,280,259  
Cost of services 970,693   943,331   2.9%  970,693  
Selling, general and administrative expenses 853,116   813,856   4.8%  757,804  
Operating income 456,450   461,407   -1.1%  551,762  
Interest expense, net 154,068   187,834   -18.0%  134,427  
Debt call premium and accelerated amortization of        
deferred financing costs 2,304   73,309  NM  -  
Other expense (income), net 1,405   (7,026) NM  1,405  
Income from continuing operations before tax 298,673   207,290   44.1%  415,930  
Income tax expense attributed to continuing operations 107,757   72,679   48.3%  150,063  
Income from continuing operations 190,916   134,611   41.8%  265,867  
Income from discontinued operations, net of income taxes 50,924   23,794   114.0%  52,942  
Net income$241,840  $158,405   52.7% $318,809  
         
Weighted average shares outstanding:        
Basic 83,420   84,007     83,420  
Diluted 85,394   85,507     85,394  
         
Earnings per share - Basic:        
Continuing operations$2.29  $1.60   43.1% $3.19  
Discontinued operations 0.61   0.29   110.3%  0.62  
Total Earnings Per Share - Basic$2.90  $1.89   53.4% $3.81  
         
Earnings per share - Diluted:        
Continuing operations$2.24  $1.57   42.7% $3.11  
Discontinued operations 0.59   0.28   110.7%  0.62  
Total Earnings Per Share - Diluted$2.83  $1.85   53.0% $3.73  
         
         
SELECTED FINANCIAL DATA:        
         
    Contribution      
Changes in Revenue - 2015 compared to 2014:   to Rev. Growth      
Revenue for the fiscal year 2014$2,218,594        
Revenue from acquired entities3 71,905   3.2%     
Revenue from previously disclosed lost conferencing client (28,600)  -1.3%     
Revenue from previously disclosed lost telecom services client (18,600)  -0.8%     
Estimated impact of foreign currency exchange rates (36,720)  -1.7%     
Adjusted organic growth, net 73,680   3.3%     
Revenue for the fiscal year 2015$2,280,259   2.8%     
         
         
  Year Ended December 31,    
   2015     2014       
SELECTED REPORTABLE SEGMENT DATA: Actual   Actual  % Change   
Revenue:        
Unified Communications$1,467,711  $1,491,639   -1.6%   
Safety Services 281,391   278,317   1.1%   
Interactive Services 265,664   235,481   12.8%   
Specialized Agent Services 276,983   224,621   23.3%   
Intersegment eliminations (11,490)  (11,464) NM   
Total$2,280,259  $2,218,594   2.8%   
         
Depreciation:        
Unified Communications$69,769  $71,677   -2.7%   
Safety Services 18,847   19,217   -1.9%   
Interactive Services 14,385   12,167   18.2%   
Specialized Agent Services 8,213   4,242   93.6%   
Total$111,214  $107,303   3.6%   
         
Amortization:        
Unified Communications - SG&A$13,414  $17,771   -24.5%   
Safety Services - SG&A 19,055   16,682   14.2%   
Safety Services - COS 12,592   12,216   3.1%   
Interactive Services - SG&A 16,210   12,908   25.6%   
Specialized Agent Services - SG&A 19,779   13,657   44.8%   
Deferred financing costs 19,641   20,035   -2.0%   
Accelerated deferred financing costs 2,304   11,601   -80.1%   
Total$102,995  $104,870   -1.8%   
         
Share-based compensation:        
Unified Communications$13,119  $9,649   36.0%   
Safety Services 3,697   3,002   23.2%   
Interactive Services 2,328   1,822   27.8%   
Specialized Agent Services 3,781   1,101   243.4%   
Total$22,925  $15,574   47.2%   
         
Cost of services:        
Unified Communications$673,475  $685,593   -1.8%   
Safety Services 108,742   103,752   4.8%   
Interactive Services 59,125   49,118   20.4%   
Specialized Agent Services 135,672   109,584   23.8%   
Intersegment eliminations (6,321)  (4,716) NM   
Total$970,693  $943,331   2.9%   
         
Selling, general and administrative expenses:        
Unified Communications$415,815  $441,912   -5.9%   
Safety Services 150,064   144,092   4.1%   
Interactive Services 181,384   151,132   20.0%   
Specialized Agent Services 111,022   83,468   33.0%   
Intersegment eliminations (5,169)  (6,748)  -23.4%   
Total$853,116  $813,856   4.8%   
         
Operating income:        
Unified Communications$378,421  $364,134   3.9%   
Safety Services 22,585   30,473   -25.9%   
Interactive Services 25,155   35,231   -28.6%   
Specialized Agent Services 30,289   31,569   -4.1%   
Total$456,450  $461,407   -1.1%   
         
Operating margin:        
Unified Communications 25.8%  24.4%     
Safety Services 8.0%  10.9%     
Interactive Services 9.5%  15.0%     
Specialized Agent Services 10.9%  14.1%     
Total 20.0%  20.8%     
         

 

WEST CORPORATION
 CONDENSED CONSOLIDATED BALANCE SHEETS 
(Unaudited, in thousands)
      
  December 31,   December 31,  %
   2015     2014   Change
Assets:     
Current assets:     
Cash and cash equivalents$182,338  $115,061   58.5%
Trust and restricted cash 19,829   18,573   6.8%
Accounts receivable, net 373,087   355,625   4.9%
Income taxes receivable 19,332   -  NM
Prepaid assets 43,093   45,242   -4.8%
Deferred expenses 65,781   65,317   0.7%
Other current assets 22,040   30,575   -27.9%
Assets held for sale 17,672   304,605   -94.2%
Total current assets 743,172   934,998   -20.5%
Property and Equipment:     
Property and equipment 1,053,678   1,045,769   0.8%
Accumulated depreciation and amortization (718,834)  (695,739)  3.3%
Net property and equipment 334,844   350,030   -4.3%
Goodwill 1,915,690   1,884,920   1.6%
Intangible assets 370,021   388,166   -4.7%
Other assets 248,552   259,961   -4.4%
Total assets$3,612,279  $3,818,075   -5.4%
Liabilities and Stockholders' Deficit:     
Current Liabilities:     
Accounts payable$92,935  $91,353   1.7%
Deferred revenue 161,828   144,413   12.1%
Accrued expenses 220,926   228,424   -3.3%
Current maturities of long-term debt 24,375   16,246   50.0%
Liabilities held for sale -   84,788  NM
Total current liabilities 500,064   565,224   -11.5%
Long-term obligations 3,375,750   3,642,540   -7.3%
Deferred income taxes 102,530   96,632   6.1%
Other long-term liabilities 186,073   173,320   7.4%
Total liabilities 4,164,417   4,477,716   -7.0%
      
Stockholders' Deficit:     
Common stock 85   84   1.2%
Additional paid-in capital 2,193,193   2,155,864   1.7%
Retained deficit (2,607,415)  (2,772,775)  -6.0%
Accumulated other comprehensive loss (72,736)  (37,506)  93.9%
Treasury stock at cost (65,265)  (5,308) NM
Total stockholders' deficit (552,138)  (659,641)  -16.3%
      
Total liabilities and stockholders' deficit$3,612,279  $3,818,075   -5.4%
      

Supplemental Financial Information

The following is a summary of the unaudited quarterly results by reportable segment for the year ended December 31, 2015 and annual results for the previous three years.

  Year Ended   Year Ended   Three Months Ended   Year Ended  
  Dec. 31,   Dec. 31,  March 31,  June 30,   Sept. 30,   Dec. 31,   Dec. 31,  
SELECTED SEGMENT DATA:  2013     2014     2015     2015     2015     2015     2015   
Revenue:              
Unified Communications$1,475,016  $1,491,639  $369,458  $374,651  $365,822  $357,780  $1,467,711  
Safety Services 259,120   278,317   68,578   66,138   73,812   72,863   281,391  
Interactive Services 224,440   235,481   62,467   63,628   68,237   71,332   265,664  
Specialized Agent Services 170,345   224,621   67,078   68,566   68,196   73,143   276,983  
Intersegment eliminations (7,949)  (11,464)  (2,091)  (1,092)  (1,619)  (6,688)  (11,490) 
Total$2,120,972  $2,218,594  $565,490  $571,891  $574,448  $568,430  $2,280,259  
               
Cost of services:              
Unified Communications$672,407  $685,593  $168,315  $173,127  $168,737  $163,296  $673,475  
Safety Services 94,464   103,752   26,505   26,678   28,118   27,441   108,742  
Interactive Services 46,465   49,118   13,662   13,569   15,968   15,926   59,125  
Specialized Agent Services 84,551   109,584   31,571   32,462   34,239   37,400   135,672  
Intersegment eliminations (3,259)  (4,716)  (352)  (570)  (725)  (4,674)  (6,321) 
Total$894,628  $943,331  $239,701  $245,266  $246,337  $239,389  $970,693  
               
Selling, general and administrative expenses:                
Unified Communications$444,018  $441,912  $107,230  $103,324  $97,915  $107,346  $415,815  
Safety Services 140,750   144,092   39,122   36,411   34,545   39,986   150,064  
Interactive Services 134,421   151,132   43,405   43,552   45,459   48,968   181,384  
Specialized Agent Services 60,551   83,468   27,078   27,427   26,732   29,785   111,022  
Intersegment eliminations (4,690)  (6,748)  (1,739)  (522)  (894)  (2,014)  (5,169) 
Total$775,050  $813,856  $215,096  $210,192  $203,757  $224,071  $853,116  
               
Operating income:              
Unified Communications$358,590  $364,134  $93,913  $98,200  $99,170  $87,138  $378,421  
Safety Services 23,907   30,473   2,951   3,049   11,149   5,436   22,585  
Interactive Services 43,554   35,231   5,400   6,507   6,810   6,438   25,155  
Specialized Agent Services 25,243   31,569   8,429   8,677   7,225   5,958   30,289  
Total$451,294  $461,407  $110,693  $116,433  $124,354  $104,970  $456,450  
               
Operating margin:              
Unified Communications 24.3%  24.4%  25.4%  26.2%  27.1%  24.4%  25.8% 
Safety Services 9.2%  10.9%  4.3%  4.6%  15.1%  7.5%  8.0% 
Interactive Services 19.4%  15.0%  8.6%  10.2%  10.0%  9.0%  9.5% 
Specialized Agent Services 14.8%  14.1%  12.6%  12.7%  10.6%  8.1%  10.9% 
Total 21.3%  20.8%  19.6%  20.4%  21.6%  18.5%  20.0% 
               

Reconciliation of Non-GAAP Financial Measures

Adjusted Operating Income Reconciliation

Adjusted 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 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 December 31, 
  2015   2014  % Change
Operating income$104,970  $116,710   -10.1%
Amortization of acquired intangible assets 18,977   18,040   
Share-based compensation 6,140   5,519   
Secondary equity offering expense (186)  -   
M&A and acquisition-related costs 1,097   909   
Adjusted operating income$130,998  $141,178   -7.2%
      
  Year Ended December 31, 
  2015   2014  % Change
Operating income$456,450  $461,407   -1.1%
Amortization of acquired intangible assets 68,458   61,018   
Share-based compensation 22,925   15,574   
Secondary equity offering expense 855   -   
M&A and acquisition-related costs 3,074   3,467   
Adjusted operating income$551,762  $541,466   1.9%
      

Adjusted Net Income and Adjusted Earnings per Share Reconciliation

Adjusted 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 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. 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 December 31, 
  2015   2014  % Change
Income from continuing operations$42,340  $34,884   21.4%
      
Amortization of acquired intangible assets 18,977   18,040   
Amortization of deferred financing costs 4,624   5,075   
Accelerated amortization of deferred financing costs 2,304   3,853   
Share-based compensation 6,140   5,519   
Debt call premiums -   17,721   
Secondary equity offering expense (186)  -   
M&A and acquisition-related costs 1,097   909   
Pre-tax total 32,956   51,117   
Income tax expense on adjustments 11,630   17,921   
Adjusted income from continuing operations$63,666  $68,080   -6.5%
      
Diluted shares outstanding 84,809   86,033   
Adjusted EPS from continuing operations - diluted$0.75  $0.79   -5.1%
      
      
DISCONTINUED OPERATIONS Three Months Ended December 31, 
  2015   2014  % Change
Income from discontinued operations$19,935  $13,374   49.1%
      
Amortization of acquired intangible assets -   6,191   
Share-based compensation -   30   
M&A and acquisition-related costs -   1,268   
Pre-tax total -   7,489   
Income tax benefit on adjustments -   (10,314)  
Adjusted income from discontinued operations$19,935  $31,177   -36.1%
      
Diluted shares outstanding 84,809   86,033   
Adjusted EPS from discontinued operations - diluted$0.24  $0.36   -33.3%
      
      
CONSOLIDATED Three Months Ended December 31, 
  2015   2014  % Change
Net income$62,275  $48,258   29.0%
      
Amortization of acquired intangible assets 18,977   24,231   
Amortization of deferred financing costs 4,624   5,075   
Accelerated amortization of deferred financing costs 2,304   3,853   
Share-based compensation 6,140   5,549   
Debt call premiums -   17,721   
Secondary equity offering expense (186)  -   
M&A and acquisition-related costs 1,097   2,177   
Pre-tax total 32,956   58,606   
Income tax expense on adjustments 11,630   7,607   
Adjusted net income$83,601  $99,257   -15.8%
      
Diluted shares outstanding 84,809   86,033   
Adjusted EPS - diluted$0.98  $1.15   -14.8%
            

 

      
 Reconciliation of Adjusted Net Income from Net Income 
Unaudited, in thousands except per share data     
CONTINUING OPERATIONS Year Ended December 31, 
  2015   2014  % Change
Income from continuing operations$190,916  $134,611   41.8%
      
Amortization of acquired intangible assets 68,458   61,018   
Amortization of deferred financing costs 19,641   20,035   
Accelerated amortization of deferred financing costs 2,304   11,601   
Share-based compensation 22,925   15,574   
Debt call premiums -   61,708   
Secondary equity offering expense 855   -   
M&A and acquisition-related costs 3,074   3,467   
Pre-tax total 117,257   173,403   
Income tax expense on adjustments 42,306   60,792   
Adjusted income from continuing operations$265,867  $247,222   7.5%
      
Diluted shares outstanding 85,394   85,507   
Adjusted EPS from continuing operations - diluted$3.11  $2.89   7.6%
      
      
DISCONTINUED OPERATIONS Year Ended December 31, 
  2015   2014  % Change
Income from discontinued operations$50,924  $23,794   114.0%
      
Amortization of acquired intangible assets 41   7,700   
Share-based compensation 1,576   154   
M&A and acquisition-related costs 386   1,916   
Pre-tax total 2,003   9,770   
Income tax benefit on adjustments (15)  (4,375)  
Adjusted income from discontinued operations$52,942  $37,939   39.5%
      
Diluted shares outstanding 85,394   85,507   
Adjusted EPS from discontinued operations - diluted$0.62  $0.44   40.9%
      
      
CONSOLIDATED Year Ended December 31, 
  2015   2014  % Change
Net income$241,840  $158,405   52.7%
      
Amortization of acquired intangible assets 68,499   68,718   
Amortization of deferred financing costs 19,641   20,035   
Accelerated amortization of deferred financing costs 2,304   11,601   
Share-based compensation 24,501   15,728   
Debt call premiums -   61,708   
Secondary equity offering expense 855   -   
M&A and acquisition-related costs 3,460   5,383   
Pre-tax total 119,260   183,173   
Income tax expense on adjustments 42,291   56,417   
Adjusted net income$318,809  $285,161   11.8%
      
Diluted shares outstanding 85,394   85,507   
Adjusted EPS - diluted$3.73  $3.33   12.0%
            

Free Cash Flow Reconciliation

The 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           
CONTINUING OPERATIONS Three Months Ended December 31,   Year Ended December 31, 
  2015   2014  % Change  2015   2014  % Change
Cash flows from operating activities$127,547  $106,899   19.3% $410,768  $409,491   0.3%
Cash capital expenditures 40,628   31,432   29.3%  136,810   130,318   5.0%
Free cash flow$86,919  $75,467   15.2% $273,958  $279,173   -1.9%
            
            
DISCONTINUED OPERATIONS Three Months Ended December 31,   Year Ended December 31, 
  2015   2014     2015   2014   
Cash flows from operating activities$15,419  $25,574    $7,222  $53,232   
Cash capital expenditures -   5,602     1,930   20,398   
Free cash flow$15,419  $19,972    $5,292  $32,834   
            
            
CONSOLIDATED Three Months Ended December 31,   Year Ended December 31, 
  2015   2014  % Change  2015   2014  % Change
Cash flows from operating activities$142,966  $132,473   7.9% $417,990  $462,723   -9.7%
Cash capital expenditures 40,628   37,034   9.7%  138,740   150,716   -7.9%
Free cash flow$102,338  $95,439   7.2% $279,250  $312,007   -10.5%
            

EBITDA and Adjusted EBITDA Reconciliation

The 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 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, 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. The Company utilizes this non-GAAP measure to make decisions about the use of resources, analyze performance and measure management's performance with stated objectives. Set forth below is a reconciliation of EBITDA and Adjusted EBITDA from cash flow from operating activities and net income.

        
 Reconciliation of EBITDA and Adjusted EBITDA from Operating Cash Flow 
Unaudited, in thousands       
CONTINUING OPERATIONS Three Months Ended Dec. 31,   Year Ended Dec. 31, 
  2015   2014   2015   2014 
Cash flows from operating activities$127,547  $106,899  $410,768  $409,491 
Income tax expense 23,093   18,834   107,757   72,679 
Deferred income tax benefit (expense) (14,888)  (1,052)  (8,930)  26,632 
Interest expense and other financing charges 41,236   63,825   158,356   261,404 
Provision for share-based compensation (6,140)  (5,519)  (22,925)  (15,574)
Amortization of deferred financing costs (4,624)  (5,075)  (19,641)  (20,035)
Accelerated amortization of deferred financing costs (2,304)  (3,853)  (2,304)  (11,601)
Other (448)  323   (672)  316 
Changes in operating assets and liabilities,       
net of business acquisitions (5,454)  (7,392)  26,884   (74,081)
EBITDA 158,018   166,990   649,293   649,231 
Provision for share-based compensation 6,140   5,519   22,925   15,574 
Secondary equity offering expense (186)  -   855   - 
M&A and acquisition-related costs 1,097   909   3,074   3,467 
Adjusted EBITDA$165,069  $173,418  $676,147  $668,272 
        
        
Cash flows from operating activities$127,547  $106,899  $410,768  $409,491 
Cash flows used in investing activities$(118,651) $(38,438) $(232,433) $(524,376)
Cash flows used in financing activities$(23,453) $(135,882) $(388,243) $(25,027)
        
        
DISCONTINUED OPERATIONS Three Months Ended Dec. 31,   Year Ended Dec. 31, 
  2015   2014   2015   2014 
Cash flows from operating activities$15,419  $25,574  $7,222  $53,232 
Income tax expense (19,717)  (11,637)  (372)  (2,169)
Deferred income tax expense 4,516   5,571   2,223   2,514 
Provision for share-based compensation -   (30)  (1,576)  (154)
Other -   (2)  29,596   (4)
Changes in operating assets and liabilities,       
net of business acquisitions -   (7,238)  13,500   (8,409)
EBITDA 218   12,238   50,593   45,010 
Provision for share-based compensation -   30   1,576   154 
M&A and acquisition-related costs -   1,268   386   1,916 
Gain on sale of business (182)  -   (46,838)  - 
Adjusted EBITDA$36  $13,536  $5,717  $47,080 
        
        
Cash flows from operating activities$15,395  $25,574  $7,222  $53,232 
Cash flows from (used in) investing activities$-  $(5,336) $275,815  $(20,530)
Cash flows used in financing activities$-  $-  $-  $- 
        
 Reconciliation of EBITDA and Adjusted EBITDA from Operating Cash Flow, continued 
CONSOLIDATED Three Months Ended Dec. 31,   Year Ended Dec. 31, 
  2015   2014   2015   2014 
Cash flows from operating activities$142,966  $132,473  $417,990  $462,723 
Income tax expense 3,376   7,197   107,385   70,510 
Deferred income tax benefit (expense) (10,372)  4,519   (6,707)  29,146 
Interest expense and other financing charges 41,236   63,825   158,356   261,404 
Provision for share-based compensation (6,140)  (5,549)  (24,501)  (15,728)
Amortization of deferred financing costs (4,624)  (5,075)  (19,641)  (20,035)
Accelerated amortization of deferred financing costs (2,304)  (3,853)  (2,304)  (11,601)
Other (448)  321   28,924   312 
Changes in operating assets and liabilities,       
net of business acquisitions (5,454)  (14,630)  40,384   (82,490)
EBITDA 158,236   179,228   699,886   694,241 
Provision for share-based compensation 6,140   5,549   24,501   15,728 
Secondary equity offering expense (186)  -   855   - 
M&A and acquisition-related costs 1,097   2,177   3,460   5,383 
Gain on sale of business (182)  -   (46,838)  - 
Adjusted EBITDA$165,105  $186,954  $681,864  $715,352 
        
CONSOLIDATED       
Cash flows from operating activities$142,966  $132,473  $417,990  $462,723 
Cash flows from (used in) investing activities$(118,651) $(43,774) $43,382  $(544,906)
Cash flows used in financing activities$(23,453) $(135,882) $(388,243) $(25,027)
        

 

        
 Reconciliation of EBITDA and Adjusted EBITDA from Net Income 
Unaudited, in thousands        
CONTINUING OPERATIONS Three Months Ended Dec. 31,   Year Ended Dec. 31, 
  2015   2014   2015   2014 
Income from continuing operations$42,340  $34,884  $190,916  $134,611 
Interest expense and other financing charges 41,236   63,825   158,356   261,404 
Depreciation and amortization 51,349   49,447   192,264   180,537 
Income tax expense 23,093   18,834   107,757   72,679 
EBITDA 158,018   166,990   649,293   649,231 
Provision for share-based compensation 6,140   5,519   22,925   15,574 
Secondary equity offering expense (186)  -   855   - 
M&A and acquisition-related costs 1,097   909   3,074   3,467 
Adjusted EBITDA$165,069  $173,418  $676,147  $668,272 
        
        
DISCONTINUED OPERATIONS Three Months Ended Dec. 31,   Year Ended Dec. 31, 
  2015   2014   2015   2014 
Income from discontinued operations$19,935  $13,374  $50,924  $23,794 
Depreciation and amortization -   10,501   41   23,385 
Income tax expense (19,717)  (11,637)  (372)  (2,169)
EBITDA 218   12,238   50,593   45,010 
Provision for share-based compensation -   30   1,576   154 
M&A and acquisition-related costs -   1,268   386   1,916 
Gain on sale of business (182)  -   (46,838)  - 
Adjusted EBITDA$36  $13,536  $5,717  $47,080 
        
        
CONSOLIDATED Three Months Ended Dec. 31,   Year Ended Dec. 31, 
  2015   2014   2015   2014 
Net income$62,275  $48,258  $241,840  $158,405 
Interest expense and other financing charges 41,236   63,825   158,356   261,404 
Depreciation and amortization 51,349   59,948   192,305   203,922 
Income tax expense 3,376   7,197   107,385   70,510 
EBITDA 158,236   179,228   699,886   694,241 
Provision for share-based compensation 6,140   5,549   24,501   15,728 
Secondary equity offering expense (186)  -   855   - 
M&A and acquisition-related costs 1,097   2,177   3,460   5,383 
Gain on sale of business (182)  -   (46,838)  - 
Adjusted EBITDA$165,105  $186,954  $681,864  $715,352 
        

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 fourth quarter of 2015 includes SchoolReach, SharpSchool, Magnetic North and ClientTell. Revenue growth attributable to acquired entities for the full year 2015 includes SchoolMessenger, Health Advocate, 911 Enable, SchoolReach, SharpSchool, Magnetic North and ClientTell.
4 Based on loan covenants. Covenant loan ratio is debt net of cash and excludes accounts receivable securitization debt.
5 Adjusted organic growth is provided on the Selected Financial Data tables and excludes revenue from acquired entities, revenue from previously disclosed lost clients and the estimated impact of foreign currency exchange rates.
NM: Not Meaningful

AT THE COMPANY:       
Dave Pleiss
Investor Relations
West Corporation
(402) 963-1500
DMPleiss@west.com