Financial and operating highlights include:
- Voice revenue of $54.9 million in the second quarter of 2014,
an increase of 10.2% from $49.8 million in the second quarter of
2013.
- Net income of $9.4 million in the second quarter of 2014,
compared with net income of $33.4 million in the second quarter of
2013 (which includes a $24.0 million gain on the sale of the global
data business).
- Adjusted EBITDA (a non-GAAP financial measure) of $19.5 million
in the second quarter of 2014, an increase of 16.1% from $16.8
million in the second quarter of 2013 (see the reconciliation table
at the end of this press release for a reconciliation to net
income).
- Free cash flow (a non-GAAP financial measure) of $16.8 million
in the second quarter of 2014, an increase of 12.0% from $15.0
million in the second quarter of 2013 (see the reconciliation table
at the end of this press release for a reconciliation to net
income).
- Billed minutes of 33.9 billion in the second quarter of 2014,
an increase of 15.3% from 29.4 billion in the second quarter of
2013.
- Company reaffirms 2014 financial estimates.
Inteliquent, Inc. (Nasdaq:IQNT), a leading provider of voice
services, today announced its financial results for the second
quarter of 2014.
"We are very pleased with our strong performance thus far in
2014," said Ed Evans, Chief Executive Officer of Inteliquent.
"During the quarter, we experienced continued growth in billed
minutes, while maintaining a flat cost structure as a result of our
recent cost management efforts. As we look forward to the remainder
of the year, we will continue to focus on managing our costs and
bringing new minutes onto our network, as we face certain headwinds
related to mandated pricing reductions from intercarrier
compensation reform and previously agreed upon rate decreases with
several customers. As a result, we continue to project that our
full year financial results will be in the range of the estimates
we announced on May 1, 2014."
Second Quarter Results
Inteliquent generated voice revenue of $54.9 million in the
second quarter of 2014, an increase of 10.2%, or $5.1 million, from
$49.8 million of voice revenue in the second quarter of 2013. The
foregoing excludes data revenue from the second quarter of 2013.
The increase related primarily to an increase in minute
volumes.
Minutes of use increased 15.3% to 33.9 billion minutes in the
second quarter of 2014, compared to 29.4 billion minutes in the
second quarter of 2013. Average rate per minute for the second
quarter of 2014 was $0.00162, a decrease of 4.1%, compared to
$0.00169 for the second quarter of 2013.
Revenue from continuing operations for the second quarter of
2014 was $54.9 million, an increase of 2.8%, or $1.5 million, from
$53.4 million for the second quarter of 2013. Included in revenue
from continuing operations for the second quarter of 2013 is $3.6
million related to the global data business sold on April 30, 2013.
Data operations for the Americas reporting unit did not meet all
criteria required to receive discontinued operations accounting
treatment. Excluding revenue from data operations in the Americas
reporting unit for the second quarter of 2013, revenue from
continuing operations increased $5.1 million in the second quarter
of 2014. The increase in revenue from continuing operations is
primarily related to an increase in minute volumes.
Network and facilities expense for the second quarter of 2014
was $23.1 million, a decrease of 4.1%, or $1.0 million, from $24.1
million for the second quarter of 2013. Network and facilities
expense for the second quarter of 2013 included $1.6 million
related to the global data business sold on April 30,
2013. Excluding costs from data operations in the Americas
reporting unit for the second quarter of 2013, network and
facilities expense increased $0.6 million in the second quarter of
2014. The increase in network and facilities expense was
primarily due to an increase in minute volumes.
Combined operating expenses consisting of Operations, Sales and
Marketing, and General and Administrative expenses were $13.3
million for the second quarter of 2014, a decrease of 2.2%, or $0.3
million, from $13.6 million for the second quarter of
2013. The second quarter of 2013 amount includes $0.3 million
of data sales related expenses associated with our Americas
reporting unit that did not qualify for discontinued operations
accounting treatment. Excluding expenses from data operations
in the Americas reporting unit for the second quarter of 2013,
combined operating expenses were the same as the second quarter of
2014.
Depreciation and amortization expense was $3.0 million for the
second quarter of 2014, or 5.5% of revenue, compared to $3.7
million for the second quarter of 2013, or 6.9% of
revenue.
On April 30, 2013, we completed the divestiture of our global
data business to GTT. In the second quarter of 2013, we
recorded a $23.2 million gain on the sale of the data business
within continuing operations.
Income from continuing operations in the second quarter of 2014
was $15.5 million, compared to income from continuing operations of
$35.1 million for the second quarter of 2013.
In the second quarter of 2013, net loss from discontinued
operations was $0.9 million.
Adjusted EBITDA (a non-GAAP financial measure) from continuing
operations in the second quarter of 2014 was $19.5 million, an
increase of 16.1%, or $2.7 million, from $16.8 million for the
second quarter of 2013. See "Use of Non-GAAP Financial
Measures" below for a discussion of the presentation of Adjusted
EBITDA and reconciliation to net income.
Free Cash Flow (a non-GAAP financial measure) in the second
quarter of 2014 was $16.8 million, an increase of 12.0%, or $1.8
million, from $15.0 million for the second quarter of
2013. See "Use of Non-GAAP Financial Measures" below for a
discussion of the presentation of Free Cash Flow and a
reconciliation to net income.
Conference Call & Web Cast
The second quarter conference call will be held on Thursday,
July 24, 2014 at 10:00 a.m. (ET). A live web cast of the conference
call as well as a replay will be available online on the Company's
corporate web site at www.inteliquent.com. Participants can also
access the call by dialing 1-888-587-0615 (within the United States
and Canada), or 1-719-325-2484 (international callers) and entering
the conference ID number: 2258657. A replay of the call will be
available approximately two hours after the call has ended and will
be available until 11:59 a.m. (ET) on August 23, 2014. To access
the replay, dial 1-888-203-1112 (within the United States and
Canada), or 1-719-457-0820 (international callers) and enter the
conference ID number: 2258657.
Cautionary Statement Regarding
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
are forward-looking statements. The words "anticipates,"
"believes," "efforts," "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: the effects of
competition, including direct connects, and downward pricing
pressure resulting from such competition; our regular review of
strategic alternatives; the impact of current and future
regulation, including intercarrier compensation reform enacted by
the Federal Communications Commission; the risks associated with
our ability to successfully develop and market new voice 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 ability to develop and provide other new services;
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;
matters arising out of or related to the impairment charge and
financial forecasting practices that were the subject of an
investigation by the Company's Audit Committee; the possibility
that the Securities and Exchange Commission may disagree with the
Audit Committee's findings and may require a restatement of
financial statements or additional or different remediation; the
possibility of litigation or other actions related to the
impairment charge and financial forecasting practices that were
subject to investigation by the Audit Committee and related
matters; 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, 2013, 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
Inteliquent is a leading provider of wholesale voice services
for carriers and service providers. Inteliquent is used by nearly
all national and regional wireless carriers, cable companies and
CLECs in the markets it serves, and its network carries
approximately ten billion minutes of traffic per month. Please
visit Inteliquent's website at www.inteliquent.com and follow us on
Twitter @Inteliquent.
The condensed consolidated statements of income, balance sheets
and statements of cash flows are unaudited and subject to
reclassification.
INTELIQUENT, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME |
(Unaudited) |
|
|
Three Months
Ended June 30, |
Six Months Ended
June 30, |
(In thousands, except per share
amounts) |
2014 |
2013 |
2014 |
2013 |
|
|
|
|
|
Revenue |
$ 54,881 |
$ 53,449 |
$ 111,098 |
$ 112,737 |
Operating expense: |
|
|
|
|
Network and facilities expense (excluding
depreciation and amortization) |
23,129 |
24,053 |
48,019 |
48,689 |
Operations |
7,202 |
7,508 |
14,509 |
15,306 |
Sales and marketing |
818 |
1,526 |
1,494 |
3,560 |
General and administrative |
5,254 |
4,535 |
9,054 |
9,034 |
Depreciation and amortization |
3,010 |
3,699 |
6,151 |
8,212 |
(Gain) loss gain on disposal of fixed
assets |
(31) |
223 |
(31) |
223 |
Loss (gain) on sale of Americas data
assets |
-- |
(23,171) |
1,081 |
(23,171) |
|
|
|
|
|
Total operating expense |
39,382 |
18,373 |
80,277 |
61,853 |
|
|
|
|
|
Income from operations |
15,499 |
35,076 |
30,821 |
50,884 |
|
|
|
|
|
Other expense (income): |
|
|
|
|
Interest expense (income) |
17 |
(13) |
19 |
(52) |
Other (income) expense |
(2) |
(4) |
(2) |
1 |
|
|
|
|
|
Total other expense (income) |
15 |
(17) |
17 |
(51) |
|
|
|
|
|
Income from continuing operations before
provision for income taxes |
15,484 |
35,093 |
30,804 |
50,935 |
Provision for income taxes |
6,036 |
741 |
12,163 |
4,347 |
|
|
|
|
|
Income from continuing operations |
9,448 |
34,352 |
18,641 |
46,588 |
Loss from discontinued operations, net of
income tax provision |
-- |
1,698 |
-- |
7,034 |
Gain on disposal of discontinued
operations |
-- |
(794) |
-- |
(794) |
|
|
|
|
|
Net income |
$ 9,448 |
$ 33,448 |
$ 18,641 |
$ 40,348 |
|
|
|
|
|
Earnings per share – continuing
operations: |
|
|
|
|
Basic |
$ 0.29 |
$ 1.05 |
$ 0.57 |
$ 1.44 |
Diluted |
$ 0.28 |
$ 1.05 |
$ 0.57 |
$ 1.44 |
Loss per share – discontinued
operations: |
|
|
|
|
Basic |
$ -- |
$ (0.03) |
$ -- |
$ (0.20) |
Diluted |
$ -- |
$ (0.03) |
$ -- |
$ (0.20) |
Earnings per share – net income: |
|
|
|
|
Basic |
$ 0.29 |
$ 1.02 |
$ 0.57 |
$ 1.24 |
Diluted |
$ 0.28 |
$ 1.02 |
$ 0.57 |
$ 1.24 |
Weighted average number of shares
outstanding: |
|
|
|
|
Basic |
32,832 |
31,629 |
32,554 |
31,585 |
Diluted |
33,369 |
31,629 |
32,892 |
31,585 |
Dividends paid per share: |
$ 0.0750 |
$ 1.3125 |
$ 0.1500 |
$ 1.3125 |
|
|
|
|
|
|
|
|
|
|
INTELIQUENT, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(Unaudited) |
(In thousands, except per share
amounts) |
June 30, 2014 |
December 31, 2013 |
|
|
|
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$ 89,535 |
$ 77,004 |
Receivables — net of allowance of $2,072
and $900, respectively |
32,280 |
22,200 |
Deferred income taxes – current |
957 |
720 |
Prepaid expenses |
3,238 |
2,375 |
Other current assets |
882 |
1,977 |
|
|
|
Total current assets |
126,892 |
104,276 |
Property and equipment — net |
23,810 |
25,815 |
Restricted cash |
345 |
125 |
Deferred income taxes – noncurrent |
3,924 |
5,495 |
Other assets |
1,550 |
1,534 |
|
|
|
Total assets |
$ 156,521 |
$ 137,245 |
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$ 951 |
$ 2,176 |
Accrued liabilities: |
|
|
Taxes payable |
1,438 |
2,437 |
Circuit cost |
9,377 |
8,987 |
Rent |
2,060 |
2,071 |
Payroll and related items |
3,639 |
3,079 |
Other |
923 |
1,674 |
|
|
|
Total current liabilities |
18,388 |
20,424 |
|
|
|
Shareholders' equity: |
|
|
Preferred stock — par value of $.001;
50,000 authorized shares; no shares issued and outstanding at June
30, 2014 and December 31, 2013 |
-- |
-- |
Common stock — par value of $.001;
150,000 authorized shares; 33,109 shares and 32,215 shares issued
and outstanding at June 30, 2014 and December 31, 2013,
respectively |
33 |
32 |
Less treasury stock, at cost; 3,351
shares at June 30, 2014 and December 31, 2013 |
(51,668) |
(51,668) |
Additional paid-in capital |
211,584 |
203,989 |
Accumulated deficit |
(21,816) |
(35,532) |
|
|
|
Total shareholders' equity |
138,133 |
116,821 |
|
|
|
Total liabilities and shareholders'
equity |
$ 156,521 |
$ 137,245 |
|
|
INTELIQUENT, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(Unaudited) |
|
|
Six Months Ended June
30, |
(In thousands) |
2014 |
2013 |
|
|
|
Operating |
|
|
Net income |
$ 18,641 |
$ 40,348 |
Adjustments to reconcile net income to
net cash flows (used for) provided by operating activities: |
|
|
Depreciation and amortization |
6,151 |
9,455 |
Deferred income taxes |
1,334 |
(1,884) |
Loss (gain) on disposal of fixed
assets |
(31) |
490 |
(Gain) loss on sale of Americas data
assets |
1,081 |
(23,171) |
Gain on disposal of discontinued
operations |
-- |
(794) |
Non-cash share-based compensation |
2,110 |
3,930 |
Loss on intercompany foreign exchange
transactions |
-- |
56 |
Excess tax (benefit) deficiency
associated with share-based payments |
(753) |
504 |
Changes in assets and liabilities: |
|
|
Receivables |
(10,080) |
(3,860) |
Other current assets |
(849) |
1,933 |
Other noncurrent assets |
(16) |
(44) |
Accounts payable |
(104) |
198 |
Accrued liabilities |
(2,570) |
3,252 |
|
|
|
Net cash provided by operating
activities |
14,914 |
30,413 |
|
|
|
Investing |
|
|
Purchase of equipment |
(5,267) |
(7,982) |
Proceeds from sale of equipment |
33 |
28 |
Proceeds from disposition of discontinued
operations, net of transaction costs |
-- |
9,709 |
Proceeds from disposition of Americas
data assets, net of transaction costs |
-- |
37,092 |
(Increase) decrease in restricted
cash |
(220) |
837 |
|
|
|
Net cash (used for) provided by for
investing activities |
(5,454) |
39,684 |
|
|
|
Financing |
|
|
Proceeds from the exercise of stock
options |
7,720 |
220 |
Restricted shares withheld to cover
employee taxes paid |
(477) |
(365) |
Dividends paid |
(4,925) |
(42,650) |
Payments made for repurchase of common
stock |
-- |
(1,565) |
Excess tax benefit (deficiency)
associated with share-based payments |
753 |
(504) |
|
|
|
Net cash provided by (used for) financing
activities |
3,071 |
(44,864) |
|
|
|
Effect of exchange rate changes on cash |
-- |
6 |
Net increase in cash and cash
equivalents |
12,531 |
25,239 |
Cash and cash equivalents — Beginning |
77,004 |
31,479 |
|
|
|
Cash and cash equivalents — End |
$ 89,535 |
$ 56,718 |
Supplemental disclosure of cash flow
information: |
|
|
Cash paid for taxes |
$ 14,261 |
$ 1,187 |
Supplemental disclosure of noncash flow
items: |
|
|
Investing activity — accrued purchases of
equipment |
$ 621 |
$ 1,122 |
The following table includes selected financial and operational
metrics, sequentially, for the last five quarters.
Selected Financial and Operational Metrics
($ in millions, except per minute
figures) |
Three Months
Ended |
|
Jun. 30 |
Sep. 30 |
Dec. 31 |
Mar. 31 |
Jun. 30 |
|
2013 |
2013 |
2013 |
2014 |
2014 |
Total Revenue |
$53.4 |
$50.4 |
$48.5 |
$56.2 |
$54.9 |
Adjusted EBITDA |
$16.8 |
$17.0 |
$18.0 |
$20.2 |
$19.5 |
Total Capital Expenditures |
$1.8 |
$1.9 |
$2.6 |
$2.6 |
$2.7 |
Free Cash Flow |
$15.0 |
$15.0 |
$15.4 |
$17.6 |
$16.8 |
Voice Revenue |
$49.8 |
$50.1 |
$50.2 |
$56.2 |
$54.9 |
Average Revenue per Minute |
$0.00169 |
$0.00165 |
$0.00165 |
$0.00170 |
$0.00162 |
Minutes of Use (in millions): |
|
|
|
|
|
Local |
|
|
|
|
|
Local Transit Services |
13,921 |
14,211 |
14,330 |
15,178 |
15,513 |
|
|
|
|
|
|
Switch Access (Long
Distance) |
|
|
|
|
|
Termination Services |
11,569 |
11,662 |
11,306 |
12,539 |
13,161 |
Origination Services |
3,946 |
4,545 |
4,790 |
5,418 |
5,222 |
|
|
|
|
|
|
Total Minutes of Use |
29,436 |
30,418 |
30,426 |
33,135 |
33,896 |
|
|
|
|
|
|
# of Employees |
143 |
140 |
143 |
149 |
154 |
|
Use of Non-GAAP Financial
Measures
In this press release we disclose "Adjusted EBITDA" and "Free
Cash Flow", which are non-GAAP financial measures. 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; as
well as non-recurring amounts incurred in connection with the
discontinuation of our hosted service offering, severance payments,
professional and legal fees incurred in connection with the
internal investigation conducted by our Audit Committee; a payment
received under our insurance policy related to Hurricane Sandy; and
the gain on sale of the global data business. 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, amounts
incurred in connection with the discontinuation of our hosted
service offering, severance payments, professional and legal fees
incurred in connection with the internal investigation conducted by
our Audit Committee, a payment received under our insurance policy
related to Hurricane Sandy, and the gain on sale of the global data
business. 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.
Free Cash Flow is defined as Adjusted EBITDA less capital
expenditures as disclosed in the Consolidated Statement of Cash
Flows. Free Cash Flow represents the cash that a company is
able to generate after cash expenses and capital expenditures
necessary to maintain or expand its asset base. Management
believes that Free Cash Flow is a relevant metric to provide
investors, as it is an indicator of the Company's ability to
generate cash that can potentially be used by the Company for
capital investments, acquisitions, payment of dividends or share
repurchases. There are material limitations to using Free Cash
Flow to measure the Company's performance as it excludes certain
material items such as cash used to pay income taxes and
dividends. Free Cash Flow should not be used as a substitute
for net change in cash and cash equivalents on the Consolidated
Statements of Cash Flows.
The following is a reconciliation of net income to EBITDA,
Adjusted EBITDA and Free Cash Flow:
($ in thousands) |
Three Months
Ended |
|
Jun. 30 |
Sep. 30 |
Dec. 31 |
Mar. 31 |
Jun. 30 |
|
2013 |
2013 |
2013 |
2014 |
2014 |
Net income (loss) |
$33,448 |
$6,471 |
$8,834 |
$9,193 |
$9,448 |
Interest expense (income) * |
(2) |
(1) |
(1) |
2 |
17 |
Provision (benefit) for income taxes * |
740 |
4,177 |
5,000 |
6,127 |
6,036 |
Depreciation and amortization * |
4,011 |
3,293 |
3,146 |
3,141 |
3,010 |
EBITDA |
$38,197 |
$13,940 |
$16,979 |
$18,463 |
$18,511 |
Non-cash share-based compensation |
2,060 |
1,239 |
994 |
1,024 |
1,085 |
Hosted services |
-- |
(450) |
(8) |
(358) |
(117) |
Severance |
278 |
505 |
15 |
-- |
-- |
Internal investigation |
276 |
2,148 |
3 |
-- |
-- |
Insurance recovery |
-- |
(423) |
-- |
-- |
-- |
Loss (gain) on sale of global data business
* |
(23,964) |
11 |
(1) |
1,081 |
-- |
Adjusted EBITDA |
$16,847 |
$16,970 |
$17,982 |
$20,210 |
$19,479 |
|
|
|
|
|
|
Capital Expenditures |
$1,828 |
$1,924 |
$2,564 |
$2,582 |
$2,685 |
|
|
|
|
|
|
Free Cash Flow |
$15,019 |
$15,046 |
$15,418 |
$17,628 |
$16,794 |
|
* For comparison
purposes, amounts include results from the global data business for
the respective periods, prior to divestiture on April 30, 2013,
which are reported as discontinued operations in the Company's
condensed consolidated statements of operations. |
CONTACT: Analyst Contact:
Kurt Abkemeier
investorrelations@inteliquent.com
Inteliquent, Inc. (NASDAQ:IQNT)
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