Highlights
- Company announces intention to declare and pay a special
one-time cash dividend and approval of discretionary stock
repurchase program
- Company revises downward full year 2012 financial
estimates
- Revenue of $68.3 million during Q2'12 , an increase of 4.9%
from $65.1 million in Q2'11
- Voice billed minutes of 32.8 billion during Q2'12, an increase
of 0.9% from 32.5 billion minutes in Q2'11
- Adjusted EBITDA (a non-GAAP financial measure) of $18.5 million
during Q2'12, a decrease of 18.9% from $22.8 million in Q2'11
Inteliquenttm (Nasdaq:IQNT), a leading provider of global
interconnection and interoperability solutions, today announced its
financial results for the second quarter ended June 30, 2012.
"Our Board of Directors and management team regularly evaluate
our business and operations and review strategic alternatives
available to enhance shareholder value," said Ed Evans, Chief
Executive Officer of Inteliquent. "As a result of that review, we
are announcing today our intention to declare and pay a special
one-time cash dividend and the approval of a discretionary stock
repurchase program. In particular, we believe that a special
one-time cash dividend is a sensible way for our shareholders to
realize the value of our cash flows, while providing us with a new
capital structure that allows us to continue to invest in
developing and diversifying our product and service offerings on
the path to long-term growth and value creation. The payment of a
special one-time cash dividend is subject to the final approval of
our Board of Directors, as well as market and other
conditions."
Evans continued, "During the second quarter, we registered
modest growth across each business segment while maintaining our
focus on diversifying our product offerings and capabilities. We
continue to make investments to support the expansion of our global
network in order to meet the industry's interconnection and
interoperability challenges. Our recently announced strategic
alliances in Southeast Asia are an excellent example of how we have
expanded our service offerings and global footprint to meet the
growing demand for data services in that region."
Second Quarter Results
Revenue increased 4.9% to $68.3 million for the three months
ended June 30, 2012, compared to $65.1 million for the three months
ended June 30, 2011. The increase in second quarter 2012 revenue
was primarily related to an increase in the number of voice minutes
carried over our network as compared to the second quarter of
2011.
Billed minutes increased 0.9% to 32.8 billion minutes for the
three months ended June 30, 2012, compared to 32.5 billion minutes
for the three months ended June 30, 2011.
Network and facilities expenses for the three months ended June
30, 2012 were $30.0 million, compared to $26.3 million for the
three months ended June 30, 2011. This increase was largely due to
an increase in our network capacity expenses to accommodate greater
traffic volumes. Combined operating expenses consisting of
Operations, Sales and Marketing, and General and Administrative
expenses were $22.1 million for the three months ended June 30,
2012, compared to $18.8 million for the three months ended June 30,
2011. The increase primarily resulted from higher employee
expenses, including additional headcount, and professional
fees. The fees associated with the review of strategic
alternatives mentioned above totaled $0.9 million during the second
quarter.
Depreciation and amortization expense was $7.8 million for the
three months ended June 30, 2012, compared to $7.4 million for the
three months ended June 30, 2011. Capital expenditures of $5.7
million for the second quarter 2012 include $0.9 million related to
Hosted Collaboration Services.
Income from operations for the three months ended June 30, 2012
was $8.4 million, or 12.3% of revenue, compared to $12.6 million
for the three months ended June 30, 2011, or 19.4% of revenue.
Pretax income for the three months ended June 30, 2012 was $7.8
million, compared to a pretax income of $12.9 million for the three
months ended June 30, 2011.
Income tax expense for the three months ended June 30, 2012 was
$4.1 million, compared to $5.8 million for the three months ended
June 30, 2011. The effective tax rate for the three months
ended June 30, 2012 was approximately 52.4% compared to an
effective tax rate of approximately 45.3% for the three months
ended June 30, 2011. The increase in our effective income tax
rate primarily resulted from certain foreign entity transaction
taxes and certain non-cash compensation that were both
non-deductible for income tax purposes.
Net income for the three months ended June 30, 2012 was $3.7
million, or $0.12 per diluted share, compared to $7.1 million, or
$0.20 per diluted share, for the three months ended June 30, 2011.
The decrease in net income was primarily due to increased
network expense, employee expenses, professional fees, depreciation
and amortization and tax expenses.
Adjusted EBITDA, a non-GAAP financial measure, for the three
months ended June 30, 2012 was $18.5 million compared to $22.8
million for the three months ended June 30, 2011. Adjusted
EBITDA margin, a non-GAAP financial measure, for the three months
ended June 30, 2012 was 27.1%, down from 35.0% for the three months
ended June 30, 2011. The decrease in Adjusted EBITDA margin
was primarily related to higher network, facilities, employee and
professional fees expenses. See "Use of Non-GAAP Financial
Measures" below for a discussion of the presentation of Adjusted
EBITDA and reconciliation to net income.
Business Outlook for Fiscal Year 2012
Our revised estimates for full year 2012 are based on
management's current belief about business trends, expenses and the
macroeconomic and competitive environment.
We now estimate:
- Revenue for fiscal year 2012 is expected to be between $280
million and $290 million.
- Revenue breakdown by service for fiscal year 2012 is expected
to be approximately:
- 74% Voice
- 21% IP Transit
- 5% Ethernet
- Adjusted EBITDA, a non-GAAP financial measure, for fiscal year
2012 is expected to be between $74 million and $82 million.
- Billed voice minutes for fiscal year 2012 are estimated to be
between 133 billion minutes and 138 billion minutes.
- Capital expenditures for fiscal year 2012 are expected to be
between $25 million and $30 million.
Proposed Special One-Time Cash Dividend
We plan to declare and pay a special one-time cash dividend in
an amount between $4.80 and $5.65 per share, or between
approximately $155 million and $180 million in aggregate, during
the fall of 2012, subject to market and other conditions. We
anticipate funding approximately $80 million of the special cash
dividend from our existing cash balance, and approximately $75
million to $100 million from new debt financing. However, there can
be no assurance that the special cash dividend will in fact be
declared or paid or, if paid, that the amount of the special cash
dividend will be within the aforementioned timeframe or
amounts. Whether we will declare and pay a special dividend
and, if so, the timing, amount and nature of any such dividend, is
subject to the approval of our Board of Directors. Such
approval will depend upon a variety of factors, several of which
are beyond our control, including, but not limited to, our
financial results, our financial condition, the availability and
arrangement of debt financing on terms that are acceptable to us,
our general review of strategic alternatives and general economic
conditions.
"Our proposed special one-time cash dividend will distribute a
substantial portion of our cash balance that is not required for
our day‑to‑day operations to our shareholders," said Rob Junkroski,
Chief Financial Officer of Inteliquent. "We intend to pay the
proposed special dividend while remaining steadfast in our
commitment to maintaining a strong balance sheet. We currently
have no long-term debt outstanding, and we believe the contemplated
amount of new long-term debt represents a judicious level of
leverage for our business."
Please refer to the "Cautions Concerning Forward-Looking
Statements" section below for further information regarding the
proposed special one-time cash dividend.
Stock Repurchase Program
We also announced today that our Board of Directors has
authorized the repurchase of up to $50 million of our outstanding
common stock as part of a stock repurchase program. The program
will expire in three years. We may repurchase shares through
open market, negotiated or block transactions. We do not currently
plan to repurchase any stock under the stock repurchase
program. We intend to conduct any stock repurchase activities
in compliance with the safe harbor provisions of Rule 10b-18 of the
Securities Exchange Act of 1934, as amended. The stock repurchase
program will be subject to market conditions and does not obligate
us to repurchase any dollar amount or number of shares of our
common stock, and the program may be extended, modified, suspended
or discontinued at any time. As of June 30, 2012, we had
approximately 31.8 million shares of our common stock
outstanding.
Conference Call & Web Cast
The second quarter conference call will be held on Tuesday,
August 7, 2012 at 10:00 a.m. (ET). A live webcast of the conference
call as well as a replay will be available online on our corporate
web site at www.inteliquent.com. Participants can also access the
call by dialing 1-877-941-8631 (within the United States and
Canada), or 1-480-629-9644 (international callers). A replay of the
call will be available approximately two hours after the call has
ended and will be available until 11:59 p.m. (ET) on September 7,
2012. To access the replay, dial 1-800-406-7325 (within the United
States and Canada) or 1-303-590-3030 (international callers) and
enter the conference ID number: 4555648#.
Cautions Concerning Forward-Looking
Statements
This press release contains "forward-looking statements" that
involve substantial risks and uncertainties. All statements,
other than statements of historical fact, included in this press
release regarding the amount and timing of the proposed special
one-time cash dividend, if any, discussed above under "Proposed
Special One-Time Cash Dividend," our strategy, future operations,
future financial position, future revenues, projected costs,
prospects, plans and objectives of management are forward-looking
statements. The words "anticipates," "believes," "expects,"
"estimates," "projects," "proposed," "plans," "intends," "may,"
"will," "would," and similar expressions are intended to identify
forward-looking statements, although not all forward-looking
statements contain these identifying words. Actual results or
events could differ materially from the plans, intentions and
expectations disclosed in the forward‑looking statements we
make. Factors that might cause such differences include, but
are not limited to: our regular review of strategic alternatives;
the impact of current and future regulation, including intercarrier
compensation reform enacted by the Federal Communications
Commission; the effects of competition, including direct connects;
the risks associated with our ability to successfully develop and
market new services, many of which are beyond our control and
all of which could delay or negatively affect our ability to offer
or market new services; the risk that our business and the Tinet
business will not be integrated successfully; technological
developments; the ability to obtain and protect intellectual
property rights; the impact of current or future litigation; the
potential impact of any future acquisitions, mergers or
divestitures;natural or man-made disasters; the ability to attract,
develop and retain executives and other qualified employees;
changes in general economic or market conditions, including
currency fluctuations; financing facilities and related
availability and terms; changes in our capital structure, including
but not limited to the reduction of our cash balance and the
substantial incurrence of indebtedness and related interest expense
that will occur if we complete the proposed special one-time cash
dividend transaction discussed above under "Proposed Special
One-Time Cash Dividend;" whether the conditions to the proposed
special one-time cash dividend will be satisfied, including but not
limited to market conditions and whether we will obtain debt
financing under terms and conditions that are acceptable to us;
whether the special one-time cash dividend transaction will occur
on the terms described in this press release or at all, and the
timing of such transaction; and other important factors included in
our reports filed with the Securities and Exchange Commission,
particularly in the "Risk Factors" section of our Annual Report on
Form 10-K for the period ended December 31, 2011, as such Risk
Factors may be updated from time to time in subsequent
reports. Furthermore, such forward-looking statements speak
only as of the date of this press release. We undertake no
obligation to update any forward-looking statements to reflect
events or circumstances after the date of such statements.
About Inteliquent
Headquartered in Chicago, Inteliquent (operating respectively
under the legal names Neutral Tandem, Inc. and Tinet S.p.A. or the
name of the applicable affiliate) provides intelligent networking
to solve challenging interconnection and interoperability issues on
a global scale. With an advanced MPLS network that is highly
interconnected to carriers around the world, Inteliquent provides
voice, IP Transit, Ethernet and hosted service solutions to major
carriers, service providers, and content management firms based in
over 80 countries and six continents. With over 120 Ethernet sites
worldwide, the company is the largest global Ethernet
interconnection provider, a top-five global IP transit provider and
has a leading IPv6 network. Please visit Inteliquent's website at
www.inteliquent.com and follow us on Twitter@Inteliquent.
The Inteliquent logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=3797
The condensed consolidated statements of income, balance sheets
and statements of cash flows are unaudited and subject to
reclassification.
|
NEUTRAL TANDEM, INC.
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME |
(In thousands, except
per share amounts) |
(Unaudited) |
|
|
Three Months
Ended |
Six Months
Ended |
|
June
30, |
June
30, |
|
2012 |
2011 |
2012 |
2011 |
|
|
|
|
|
Revenue |
$ 68,272 |
$ 65,090 |
$ 138,968 |
$ 131,508 |
|
|
|
|
|
Operating expense: |
|
|
|
|
Network and facilities expense(excluding
depreciation and amortization) |
30,044 |
26,254 |
60,559 |
52,073 |
Operations |
11,428 |
9,354 |
22,979 |
18,773 |
Sales and marketing |
3,978 |
3,109 |
8,012 |
6,468 |
General and administrative |
6,666 |
6,361 |
13,404 |
16,419 |
Depreciation and amortization |
7,795 |
7,414 |
15,095 |
14,520 |
Gain on disposal of fixed assets |
(4) |
(6) |
(109) |
(12) |
Total operating expense |
59,907 |
52,486 |
119,940 |
108,241 |
Income from operations |
8,365 |
12,604 |
19,028 |
23,267 |
|
|
|
|
|
Other (income) expense |
|
|
|
|
Interest income |
(12) |
(17) |
(15) |
(30) |
Other (income) expense |
(18) |
346 |
(31) |
360 |
Foreign exchange (gain) loss |
602 |
(622) |
375 |
(2,835) |
Total other (income) expense |
572 |
(293) |
329 |
(2,055) |
Income before income taxes |
7,793 |
12,897 |
18,699 |
25,322 |
Provision for income taxes |
4,087 |
5,845 |
8,338 |
10,086 |
|
|
|
|
|
Net income |
$ 3,706 |
$ 7,052 |
$ 10,361 |
$ 15,236 |
|
|
|
|
|
Net income per share: |
|
|
|
|
Basic |
$ 0.12 |
$ 0.21 |
$ 0.33 |
$ 0.45 |
Diluted |
$ 0.12 |
$ 0.20 |
$ 0.32 |
$ 0.44 |
|
|
|
|
|
Weighted average number of shares
outstanding: |
|
|
|
|
Basic |
31,791 |
33,987 |
31,728 |
34,119 |
Diluted |
32,178 |
34,415 |
32,118 |
34,555 |
|
|
|
|
|
Total Comprehensive (loss) income |
$ (1,591) |
$ 8,646 |
$ 7,766 |
$ 21,593 |
|
|
NEUTRAL TANDEM, INC.
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(In thousands, except
share and per share amounts) |
(Unaudited) |
|
|
June 30, |
December 31, |
|
2012 |
2011 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 110,199 |
$ 90,279 |
Receivables |
41,832 |
46,991 |
Deferred income taxes-current |
2,968 |
3,227 |
Other current assets |
10,339 |
6,655 |
Total current assets |
165,338 |
147,152 |
Property and equipment—net |
75,599 |
75,045 |
Intangible assets-net |
26,590 |
28,644 |
Goodwill |
47,285 |
48,137 |
Restricted cash |
962 |
962 |
Other assets |
2,454 |
2,870 |
Total assets |
$ 318,228 |
$ 302,810 |
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 12,028 |
$ 13,792 |
Accrued liabilities: |
|
|
Taxes payable |
2,592 |
2,567 |
Circuit cost |
10,666 |
8,743 |
Rent |
1,717 |
1,525 |
Payroll and related items |
5,102 |
4,366 |
Other |
3,858 |
2,640 |
|
|
|
Total current liabilities |
35,963 |
33,633 |
|
|
|
Other liabilities |
1,811 |
1,693 |
Deferred income taxes-noncurrent |
7,691 |
7,806 |
|
|
|
Total liabilities |
45,465 |
43,132 |
Commitments and contingencies |
|
|
Shareholders' equity: |
|
|
Preferred stock—par value of $.001;
50,000,000 authorized shares; no shares issued and outstanding at
June 30, 2012 and December 31, 2011 |
-- |
-- |
Common stock—par value of $.001;
150,000,000 authorized shares; 31,796,487 shares and 31,520,121
shares issued and outstanding at June 30, 2012 and December 31,
2011, respectively |
32 |
32 |
Additional paid-in capital |
190,333 |
185,014 |
Less treasury stock, at
cost; 3,083,446 at June 30, 2012 and at December 31, 2011 |
(50,103) |
(50,103) |
Accumulated other comprehensive loss |
(6,941) |
(4,346) |
Retained earnings |
139,442 |
129,081 |
Total shareholders' equity |
272,763 |
259,678 |
Total liabilities and shareholders'
equity |
$ 318,228 |
$ 302,810 |
|
|
NEUTRAL TANDEM, INC.
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(In
thousands) |
(Unaudited) |
|
|
Six Months
Ended |
|
June
30, |
|
2012 |
2011 |
|
|
|
Cash Flows From Operating Activities: |
|
|
Net income |
$ 10,361 |
$ 15,236 |
Adjustments to reconcile net cash flows
from operating activities: |
|
|
Depreciation and amortization |
15,095 |
14,520 |
Deferred income taxes |
(13) |
(815) |
Gain on disposal of fixed assets |
(109) |
(12) |
Non-cash share-based compensation |
6,027 |
9,427 |
Loss on intercompany foreign exchange
transactions |
297 |
-- |
Excess tax deficiency associated with
share-based payments |
120 |
43 |
Changes in assets and liabilities: |
|
|
Receivables |
4,568 |
(4,612) |
Other current assets |
(3,927) |
(410) |
Other noncurrent assets |
120 |
(2,784) |
Accounts payable |
(1,366) |
(3,086) |
Accrued liabilities |
4,295 |
3,099 |
Noncurrent liabilities |
178 |
272 |
|
|
|
Net cash flows from operating
activities |
35,646 |
30,878 |
|
|
|
Cash Flows From Investing
Activities: |
|
|
Purchase of equipment |
(14,869) |
(12,805) |
Proceeds from sale of equipment |
107 |
12 |
Purchase of other investment |
-- |
(500) |
|
|
|
Net cash flows from investing
activities |
(14,762) |
(13,293) |
|
|
|
Cash Flows From Financing Activities: |
|
|
Proceeds from the exercise of stock
options |
69 |
160 |
Restricted shares withheld to cover
employee taxes paid |
(657) |
(668) |
Excess tax deficiency associated with
share-based payments |
(120) |
(43) |
Payments made for repurchase of common
stock |
-- |
(50,106) |
Net cash flows from financing
activities |
(708) |
(50,657) |
|
|
|
Effect of exchange rate changes on cash |
(256) |
200 |
|
|
|
|
|
|
Net Increase (Decrease) In Cash And Cash
Equivalents |
19,920 |
(32,872) |
Cash And Cash Equivalents—Beginning |
90,279 |
106,674 |
Cash And Cash Equivalents—End |
$ 110,199 |
$ 73,802 |
Supplemental Disclosure of Cash Flow
Information: |
|
|
Cash paid for taxes |
$ 9,536 |
$ 9,891 |
Supplemental Disclosure of Noncash Flow
Items: |
|
|
Investing Activity-Accrued purchased of
equipment |
$ 6,514 |
$ 4,090 |
Use of Non-GAAP Financial
Measures
In this press release we disclose "Adjusted EBITDA", which
is a non-GAAP financial measure. For purposes of SEC rules, a
non-GAAP financial measure is a numerical measure of a company's
performance, financial position, or cash flows that either excludes
or includes amounts that are not normally excluded or included in
the most directly comparable measure, calculated and prepared in
accordance with generally accepted accounting principles in the
United Sates (GAAP).
EBITDA is defined as net income before (a) interest
expense, net (b) income tax expense and (c) depreciation
and amortization. Adjusted EBITDA is defined as EBITDA as further
adjusted to eliminate non-cash share-based compensation, foreign
exchange gain on intercompany loans and the other expense related
to stock buyback. We believe that the presentation of Adjusted
EBITDA included in this press release provides useful information
to investors regarding our results of operations because it assists
in analyzing and benchmarking the performance and value of our
business. We believe that presenting Adjusted EBITDA facilitates
company-to-company operating performance comparisons of companies
within the same or similar industries by backing out differences
caused by variations in capital structure, taxation and
depreciation of facilities and equipment (affecting relative
depreciation expense), which may vary for different companies for
reasons unrelated to operating performance. These measures provide
an assessment of controllable operating expenses and afford
management the ability to make decisions which are expected to
facilitate meeting current financial goals as well as achieve
optimal financial performance. They provide an indicator for
management to determine if adjustments to current spending
decisions are needed. Furthermore, we believe that the presentation
of Adjusted EBITDA has economic substance because it provides
important insight into our profitability trends, as a component of
net income, and allows management and investors to analyze
operating results with and without the impact of depreciation and
amortization, interest and income tax expense, non-cash share-based
compensation, foreign exchange gain on intercompany loans and other
expense related to stock buyback. Accordingly, these metrics
measure our financial performance based on operational factors that
management can impact in the short-term, namely the operational
cost structure and expenses of our business. In addition, we
believe Adjusted EBITDA is used by securities analysts, investors
and other interested parties in evaluating companies, many of which
present an EBITDA measure when reporting their results. Although we
use Adjusted EBITDA as a financial measure to assess the
performance of our business, the use of Adjusted EBITDA is limited
because it does not include certain material costs, such as
depreciation, amortization and interest and taxes, necessary to
operate our business. We disclose the reconciliation between EBITDA
and Adjusted EBITDA and net income below to compensate for this
limitation. While we use net income as a significant measure of
profitability, we also believe that Adjusted EBITDA, when presented
along with net income, provides balanced disclosure which, for the
reasons set forth above, is useful to investors in evaluating our
operating performance and profitability. Adjusted EBITDA included
in this press release should be considered in addition to, and not
as a substitute for, net income as calculated in accordance with
generally accepted accounting principles as a measure of
performance.
The following is a reconciliation of net income to EBITDA and
Adjusted EBITDA:
NEUTRAL TANDEM, INC.
AND SUBSIDIARIES |
Reconciliation of
Non-GAAP Financial Measures to GAAP Financial
Measures |
(Unaudited) |
(Dollars in
thousands) |
|
|
|
|
|
Three Months
Ended |
Six Months
Ended |
Twelve Months Ended |
|
June
30, |
June
30, |
December 31, |
|
2012 |
2011 |
2012 |
2011 |
2012 (1) |
|
|
|
|
|
|
Net income |
$ 3,706 |
$ 7,052 |
$ 10,361 |
$ 15,236 |
$ 20,000 |
Interest expense(income), net |
(12) |
(17) |
(15) |
(30) |
-- |
Provision for income taxes |
4,087 |
5,845 |
8,338 |
10,086 |
15,000 |
Depreciation and amortization |
7,795 |
7,414 |
15,095 |
14,520 |
31,000 |
EBITDA |
$ 15,576 |
$ 20,294 |
$ 33,779 |
$ 39,812 |
$ 66,000 |
|
|
|
|
|
|
Other expenses - stock buyback |
-- |
330 |
-- |
330 |
-- |
Foreign exchange gain on intercompany
loan |
-- |
(677) |
-- |
(2,622) |
-- |
Non-cash share-based compensation |
2,911 |
2,845 |
6,027 |
9,427 |
12,000 |
Adjusted EBITDA |
$ 18,487 |
$ 22,792 |
$ 39,806 |
$ 46,947 |
$ 78,000 |
|
(1) The amounts expressed
in this column are based on current estimates as of the date of
this press release. |
This reconciliation is based
on the midpoint of the guidance range announced by the
Company. |
CONTACT: Media Contact:
Jaymie Scotto & Associates
1-866-695-3629
pr@jaymiescotto.com
Investor Contact:
Inteliquent
Jim Polson
1-866-268-4744
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