Talk America (NASDAQ:TALK): First Quarter Highlights -- Local voice
and data equivalent lines on-net top 463,000; 67% of total lines --
Integration of Network Telephone Corporation on track -- Total
T-1's in service exceed 12,000 -- Total revenue of $120.5 million
-- Adjusted EBITDA of $16.7 million Talk America (NASDAQ:TALK) a
leading provider of integrated voice and data communications
services today announced first quarter results for 2006. Local
voice and data equivalent lines on our network were up sixteenfold
from a year ago and 36% compared to the end of the fourth quarter
of 2005. The increase was driven by the expansion of our on-net
commercial business, which grew from 120,000 total local voice and
data equivalent lines at the end of the fourth quarter 2005 to
255,000 lines at the end of the first quarter 2006, an increase of
over 125%. The growth in on-net commercial customers was driven by
the closing of the Network Telephone Corporation acquisition and
growth in commercial sales to record levels. (Note: See the
schedules accompanying this news release and www.talkamerica.com
for reconciliation to generally accepted accounting principles
(GAAP) for the non-GAAP financial measures mentioned in this
announcement and to download a copy of the presentation to be
reviewed on today's conference call.) With our network investment
largely completed, we are focused on sales and provisioning new
customers on our platform. We have a total of 315 end offices that
serve commercial customers with voice and data service on dedicated
T-1 circuits. We also address over 1 million business lines and 1.2
million consumers with ADSL2+ technology, which is capable of
delivering over 15 Mbps download speeds over traditional telephone
lines. We now deliver a robust product portfolio of integrated
voice and data services to commercial customers and residential
consumers in our expanded networked markets. The reductions in
capital expenditures will contribute to the growth in free cash
flow for the remainder of 2006 and future years. Ed Meyercord, Talk
America's President and Chief Executive Officer commented, "The
successful combination of Talk America, LDMI and NTC has helped
redefine us as a highly capable, network-based, integrated services
provider, well-positioned to excel in the expanding commercial
market. With the investment of our network build behind us, we are
poised for continued growth in customers on our network, and
sequential quarterly growth in cash flow." Mr. Meyercord continued,
"We are entering the next phase in the evolution of our business in
a strong position. Our operations teams have done an excellent job
of building a superior network and migrating our customers on to
our network. Now, we are focused on sales and marketing,
productivity and highly-competitive next generation products." The
core of our current commercial offering is an integrated T-1
product, or SmarT, which provides dynamic allocation of voice and
high-speed data/Internet connectivity. Our integrated T-1 provides
business customers with more bandwidth and up to 30% savings
compared to a typical T-1 service offering. Refinements to the
provisioning process and the deployment of our own service
technicians has significantly reduced installation time to less
than 30 days, improved our quality of service and lowered customer
churn. Development of next generation products to better serve
business and high-end consumers is well underway. ADSL2+ - a
high-performance version of DSL broadband service - is currently
being tested, with plans to launch a ten Mbps product over the
summer in our Michigan and Georgia markets. With faster downloads,
improved reach and increased functionality, ADSL2+ is capable of
delivering voice and high-speed data all on one dedicated line. We
will offer a "broadband only" service and look to layer new
applications on the bandwidth, like voice services. Application
rich and feature friendly, ADSL2+ is an exceptional addition to our
family of cost-effective bundled voice and data solutions for
business and home use. -0- *T Financial Guidance 2006
------------------------- Q2 2006 Previous Current ------------
------------ ------------ Revenue $113-$115 mm $445-$455 mm
$445-$455mm Adjusted EBITDA $13-$15 mm $60-$70 mm $60-$70 mm
Capital Expenditures -- $25-$30 mm $25-$30 mm *T Conference Call
Talk America management will host a conference call to discuss the
first quarter 2006 operating results at 5:00 p.m. ET on May 9,
2006. The call can be accessed by dialing the following: US
800-207-3351, International, 415-908-6239. A replay of the call
will be available through 7:00 p.m. ET on May 16, 2006 by dialing
the following: 800-633-8284, International 402-977-9140. The
reservation number for the replay is 21291614. Additionally, a live
web simulcast of the conference call will be available online at
www.talkamerica.com and www.streetevents.com. About Talk America
Talk America, is a leading competitive, integrated communications
provider that offers phone services and high speed Internet access
to both business and residential customers. Services include local
and long distance phone service, and data services such as
high-speed connectivity, security, web hosting, and network
services. Talk America delivers value in the form of savings,
simplicity and quality service to its customers through its leading
edge network and award-winning back office. Please Note: The
statements contained herein regarding the future results of
operations of Talk America should be, and certain other of the
statements contained herein may be, considered "forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934.
Such statements are identified by the use of forward-looking words
or phrases, including, but not limited to, "estimates," "expects,"
"expected," "anticipates," "anticipated," "forecast," "guidance,"
and "targets". These forward-looking statements are based on our
current expectations. Although we believe that the expectations
reflected in such forward-looking statements are reasonable, there
can be no assurance that such expectations will prove to have been
correct. Forward-looking statements involve risks and uncertainties
and our actual results could differ materially from our
expectations. In addition to those factors discussed in the
foregoing, important factors that could cause such actual results
to differ materially include, among others, our inability to
integrate effectively and as anticipated acquired businesses,
dependence on the availability and functionality of local exchange
carriers' networks as they relate to the unbundled network element
platform, failure to operate our own local network in a profitable
manner, increased price competition for long distance, local and
data services, failure of the marketing of the bundle of local and
long distance services, long distance services and data services
under our direct marketing channels to a smaller marketing
footprint, attrition in the number of end users, failure to manage
our collection management systems and credit controls for
customers, interruption in our network and information systems,
failure to provide adequate customer service, and changes in
government policy, regulation and enforcement and/or adverse
judicial or administrative interpretations and rulings relating to
regulations and enforcement. Additional information concerning
these and other important factors can be found within Talk
America's filings with the Securities and Exchange Commission. The
forward-looking statements contained herein are made only as of the
date of this release, and we undertake no obligation to update the
forward-looking statements to reflect subsequent events or
circumstances. For a more detailed discussion of these factors, see
the Risk Factors discussion in Item 1A of our Annual Report on Form
10-K for the year ended December 31, 2005 filed March 16, 2006, as
amended by our Form 10-K/A filed March 28, 2006. -0- *T --
Financial Tables to Follow-- TALK AMERICA HOLDINGS, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In
thousands, except for per share data) (Unaudited) Three Months
Ended March 31, ------------------- 2006 2005 --------- ---------
Revenue $120,516 $119,835 Costs and expenses: Network and line
costs (excluding depreciation and amortization) 61,837 60,996
General and administrative expenses 28,584 18,120 Provision for
doubtful accounts 4,050 5,588 Sales and marketing expenses 10,936
10,268 Depreciation and amortization 11,235 9,501 ---------
--------- Total costs and expenses 116,642 104,473 ---------
--------- Operating income 3,874 15,362 Other income (expense):
Interest income 318 308 Interest expense (227) (25) Other income
(expense), net 113 (20) --------- --------- Income before provision
for income taxes 4,078 15,625 Provision for income taxes 1,697
6,155 --------- --------- Net income $2,381 $9,470 =========
========= Income per share - Basic: --------- --------- Net income
per share $0.08 $0.35 ========= ========= Weighted average common
shares outstanding 30,382 27,086 ========= ========= Income per
share - Diluted: --------- --------- Net income per share $0.08
$0.34 ========= ========= Weighted average common and common
equivalent shares outstanding 30,743 27,813 ========= =========
TALK AMERICA HOLDINGS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS (In thousands, except for share and per share data)
(Unaudited) March 31, December 31, 2006 2005 ------------
------------ Assets Current assets: Cash and cash equivalents
$23,283 $46,288 Restricted cash 1,925 -- Accounts receivable, trade
(net of allowance for uncollectible accounts of $14,618 and $13,838
at March 31, 2006 and December 31, 2005, respectively) 40,358
43,600 Deferred income taxes 18,109 18,096 Prepaid expenses and
other current assets 12,962 10,297 ------------ ------------ Total
current assets 96,637 118,281 Property and equipment, net 102,898
98,492 Goodwill 36,479 36,479 Intangible assets, net 4,712 4,934
Deferred income taxes 33,584 21,033 Capitalized software and other
assets 10,321 9,470 ------------ ------------ $284,631 $288,689
============ ============ Liabilities and Stockholders' Equity
Current liabilities: Accounts payable $33,255 $40,025 Sales, use
and excise taxes 7,725 7,316 Deferred revenue 15,004 13,824 Current
portion of long-term debt and capitalized lease obligations 3,609
3,988 Accrued compensation 5,020 9,405 Other current liabilities
12,840 12,933 ------------ ------------ Total current liabilities
$77,453 $87,491 ------------ ------------ Long-term debt and
capitalized lease obligations 1,045 1,289 Deferred income taxes
4,036 4,853 Other non-current liabilities 5,934 3,269 Commitments
and contingencies Stockholders' equity: Preferred stock - $.01 par
value, 5,000,000 shares authorized; no shares outstanding -- --
Common stock - $.01 par value, 100,000,000 shares authorized;
30,417,368 and 30,368,267 shares issued and outstanding at March
31, 2006 and December 31, 2005, respectively 317 317 Additional
paid-in capital 382,476 380,481 Accumulated deficit (181,630)
(184,011) Treasury stock - at cost, 1,315,789 shares at March 31,
2006 and December 31, 2005 (5,000) (5,000) ------------
------------ Total stockholders' equity 196,163 191,787
------------ ------------ $284,631 $288,689 ============
============ TALK AMERICA HOLDINGS, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended March 31, ---------------------- 2006 2005
---------- ---------- Cash flows from operating activities: Net
income $2,381 $9,470 Adjustments to reconcile net income to net
cash provided by operating activities: Provision for doubtful
accounts 4,050 5,588 Depreciation and amortization 11,235 9,501
Stock-based compensation 1,608 -- Other non cash charges (benefits)
- net (40) 20 Deferred income taxes 1,071 4,484 Changes in assets
and liabilities, net of businesses acquired: Restricted cash 1,370
-- Accounts receivable, trade 3,635 202 Prepaid expenses and other
current assets (456) 652 Other assets (158) 9 Accounts payable
(9,707) 707 Sales, use and excise taxes (228) (1,591) Deferred
revenue (841) (1,049) Accrued compensation (8,944) (5,068) Other
liabilities (1,724) (83) ---------- ---------- Net cash provided by
operating activities 3,252 22,842 ---------- ---------- Cash flows
from investing activities: Acquisition of NTC, net of cash acquired
(16,485) -- Capital expenditures (7,449) (12,221) Capitalized
software development costs (1,278) (1,010) Proceeds from sale of
property and equipment -- 42 ---------- ---------- Net cash used in
investing activities (25,212) (13,189) ---------- ---------- Cash
flows from financing activities: Payments of capital lease
obligations (1,397) (629) Proceeds from exercise of options 352 667
---------- ---------- Net cash provided by (used in) financing
activities (1,045) 38 ---------- ---------- Net increase (decrease)
in cash and cash equivalents (23,005) 9,691 Cash and cash
equivalents, beginning of period 46,288 47,492 ----------
---------- Cash and cash equivalents, end of period $23,283 $57,183
========== ========== TALK AMERICA HOLDINGS, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATION Non-GAAP Financial Measure: The non-GAAP
financial measure that we use in this news release is listed below.
We have included reconciliation of this non-GAAP financial measure
to the most directly comparable GAAP measures in our financial
statements. Adjusted Earnings Before Interest, Taxes, Depreciation
and Amortization (Adjusted EBITDA) is defined as operating income
plus depreciation, amortization and stock-based compensation
expense. Adjusted EBITDA ($ in thousands) First Quarter
---------------------- 2006 2005 ---------------------- Operating
Income $3,874 $15,362 Depreciation and Amortization 11,235 9,501
Stock-based Compensation 1,608 -- ---------- ---------- Adjusted
EBITDA $16,717 $24,863 ========== ========== *T
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