UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 24, 2014
INTELIQUENT, INC.
(Exact
name of registrant as specified in its charter)
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Delaware |
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001-33778 |
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31-1786871 |
(State or other jurisdiction of
incorporation) |
|
(Commission File Number) |
|
(IRS Employer Identification No.) |
550 West Adams Street
9th Floor
Chicago,
Illinois 60661
(Address of principal executive offices, including Zip Code)
(312) 384-8000
(Registrants telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 Results of Operations and Financial Condition.
On July 24, 2014, Inteliquent, Inc. issued a press release announcing its financial results for the second quarter ended June 30,
2014. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
The information, including Exhibit
99.1, furnished in this report is not deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Registration statements or other documents
filed with the Securities and Exchange Commission shall not incorporate this information by reference, except as otherwise expressly stated in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
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Exhibit No. |
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Description |
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99.1 |
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Press release issued July 24, 2014. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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INTELIQUENT, INC. |
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By: |
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/s/ Kurt J. Abkemeier |
Name: |
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Kurt J. Abkemeier |
Title: |
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Chief Financial Officer and Executive Vice President |
Date: July 24, 2014
Exhibit 99.1
Analyst Contact:
Kurt
Abkemeier
investorrelations@inteliquent.com
FOR
IMMEDIATE RELEASE
INTELIQUENT REPORTS SECOND QUARTER RESULTS
Fourth Consecutive Quarter of Growth in Billed Minutes and 2014 Financial Estimates Reaffirmed
Financial and operating highlights include:
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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. |
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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).
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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). |
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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). |
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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. |
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Company reaffirms 2014 financial estimates. |
CHICAGO, July 24, 2014 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.
1
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.
2
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 Companys 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
3
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 Companys Audit Committee;
the possibility that the Securities and Exchange Commission may disagree with the Audit Committees 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 Inteliquents 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.
4
INTELIQUENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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(In thousands, except per share amounts) |
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2014 |
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2013 |
|
|
2014 |
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2013 |
|
Revenue |
|
$ |
54,881 |
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|
$ |
53,449 |
|
|
$ |
111,098 |
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|
$ |
112,737 |
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Operating expense: |
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|
|
|
|
|
|
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|
|
|
|
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Network and facilities expense (excluding depreciation and amortization) |
|
|
23,129 |
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|
|
24,053 |
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|
|
48,019 |
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|
|
48,689 |
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Operations |
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|
7,202 |
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|
|
7,508 |
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|
|
14,509 |
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|
|
15,306 |
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Sales and marketing |
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|
818 |
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|
|
1,526 |
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|
|
1,494 |
|
|
|
3,560 |
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General and administrative |
|
|
5,254 |
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|
|
4,535 |
|
|
|
9,054 |
|
|
|
9,034 |
|
Depreciation and amortization |
|
|
3,010 |
|
|
|
3,699 |
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|
|
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 |
|
5
INTELIQUENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
|
|
|
|
|
|
|
(In thousands, except per share amounts) |
|
June 30, 2014 |
|
|
December 31, 2013 |
|
ASSETS |
|
|
|
|
|
|
|
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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 |
|
|
|
|
|
|
|
|
|
|
6
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 |
|
7
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 2013 |
|
|
Sep. 30 2013 |
|
|
Dec. 31 2013 |
|
|
Mar. 31 2014 |
|
|
Jun. 30 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 companys 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
8
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 Companys 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 Companys 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.
9
The following is a reconciliation of net income to EBITDA, Adjusted EBITDA and Free Cash Flow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
|
Three Months Ended |
|
|
|
Jun. 30 2013 |
|
|
Sep. 30 2013 |
|
|
Dec. 31 2013 |
|
|
Mar. 31 2014 |
|
|
Jun. 30 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
Companys condensed consolidated statements of operations. |
10
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