Financial and operating highlights include:
- Company initiated the ramp of traffic related to the new
T-Mobile agreement, and currently has over 50% of the traffic
transitioned onto the Inteliquent network.
- Minutes of use of 40.2 billion for the third quarter of 2015,
an increase of 15.2% compared to the third quarter of 2014.
- Net income of $8.3 million for the third quarter of 2015
compared to $9.8 million in the third quarter of 2014.
- Adjusted EBITDA (a non-GAAP financial measure) of $16.9 million
for the third quarter of 2015 compared to $20.0 million in the
third quarter of 2014.
- Revised financial estimates for 2015 of $245 million to $255
million of revenue and $25 million to $27 million of capital
expenditures.
Inteliquent, Inc. (Nasdaq:IQNT), the carrier for communication
service providers, today announced its financial results for the
third quarter of 2015.
"During the third quarter, we continued to implement
Inteliquent's new growth strategy," said Matt Carter, Chief
Executive Officer of Inteliquent. "As part of that strategy, we
recently announced a breakthrough agreement with T-Mobile.
Primarily due to the ramping of traffic exchanged as a result of
that agreement, total traffic across our network grew by more than
15% during the third quarter, and as of the end of the quarter we
were carrying about 50% of the total traffic anticipated to be
transitioned to us. I am extremely pleased with our teams' efforts
to successfully ramp such a significant amount of traffic in such a
short period of time."
Mr. Carter continued, "our revised guidance reflects the
investment necessary for the increased traffic from T-Mobile. We
are very comfortable with our internal forecast that the overall
contract will produce an attractive return on invested
capital."
Third Quarter Results
Inteliquent generated revenue of $63.7 million in the third
quarter of 2015, an increase of 18.0%, or $9.7 million, from $54.0
million of revenue in the third quarter of 2014. The increase was
primarily driven by an increase in minutes of use, as well as an
increase in the average rate per minute. Minutes of use increased
15.2% to 40.2 billion minutes in the third quarter of 2015,
compared to 34.9 billion minutes in the third quarter of 2014. The
average rate per minute for the third quarter of 2015 was $0.00159,
an increase of 2.6%, compared to $0.00155 for the third quarter of
2014.
Network and facilities expense for the third quarter of 2015 was
$34.9 million, an increase of 51.7%, or $11.9 million, from $23.0
million for the third quarter of 2014. The increase in network and
facilities expense was primarily due to an increase in traffic, and
the costs associated with provisioning transport capacity in
anticipation of traffic volume growth in the coming quarters. The
cost as a percent of revenue increased during the three months
ended September 30, 2015, as a result of an increase in the costs
we pay to third parties to terminate certain long distance
traffic.
Combined operating expenses consisting of Operations, Sales and
Marketing, and General and Administrative expenses were $13.3
million for the third quarter of 2015, an increase of 9.9%, or $1.2
million, from $12.1 million for the third quarter of 2014.
Operating expenses increased primarily due to additional employee
related costs as a result of increased headcount along with certain
non-recurring costs necessary to provision capacity related to
anticipated traffic volume growth.
Depreciation and amortization expense was $2.9 million for the
third quarter of 2015, or 4.6% of revenue, compared to $3.0 million
for the third quarter of 2014, or 5.6% of revenue. Despite the
recent increase in capital expenditures, which occurred primarily
in the later part of the third quarter of 2015, our in-service
asset base for the three months ended September 30, 2015 was still
smaller than the asset base for the same period last year, thereby
resulting in a lower depreciation and amortization expense of $0.1
million.
Income from operations in the third quarter of 2015 was $12.7
million, compared to income from operations of $15.9 million for
the third quarter of 2014.
Adjusted EBITDA (a non-GAAP financial measure) from continuing
operations in the third quarter of 2015 was $16.9 million, a
decrease of 15.5% or $3.1 million, from $20.0 million for the third
quarter of 2014. 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 third
quarter of 2015 was $0.9 million, a decrease of 95.3% or $18.1
million, from $19.0 million for the third quarter of 2014. See "Use
of Non-GAAP Financial Measures" below for a discussion of the
presentation of Free Cash Flow and a reconciliation to net income.
The decrease resulted from a significant increase in our capital
expenditures necessary to purchase equipment to carry increased
traffic volumes.
2015 Business Outlook
As a result of Inteliquent's year-to-date results and the
updated forecast for the remainder of the year, Inteliquent is
increasing certain of its financial estimates for 2015 as
follows:
|
Current Estimates |
Prior Estimates |
Revenue |
$245 to $255 million |
$240 to $250 million |
Adjusted EBITDA |
$77 to $81 million |
$77 to $81 million |
Capital Expenditures |
$25 to $27 million |
$22 to $27 million |
Conference Call & Web Cast
The third quarter conference call will be held on Thursday,
October 29, 2015 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 1-888-632-3382 (within the
United States and Canada), or 1-785-424-1677 (international
callers) and entering the conference ID number: 715475. A replay of
the call will be available approximately two hours after the call
has ended and will be available until 12:00 p.m. (ET) on November
28, 2015. 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: 715475.
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; our ability to perform under
the agreement we announced with T-Mobile USA. Inc. on August 17,
2015 (the "PSTN Agreement"), including the risk that the traffic we
carry under the PSTN Agreement will not meet our targets for
profitability, including EBITDA and Adjusted EBITDA, that we incur
damages or similar costs if we fail to meet certain terms in the
PSTN Agreement, or that T-Mobile terminates the PSTN Agreement; the
risk that our costs to perform under the PSTN Agreement will be
higher than we expect;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 voice 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; 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,
2014 and our Quarterly Report on Form 10-Q for the period ended
March 31, 2015, 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 connectivity among
communications service providers of all types. 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 fifteen 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 |
Nine Months
Ended |
|
September 30, |
September 30, |
(In thousands, except per share
amounts) |
2015 |
2014 |
2015 |
2014 |
Revenue |
$63,716 |
$54,045 |
$171,656 |
$165,143 |
Operating expense: |
|
|
|
|
Network and facilities expense
(excluding depreciation and amortization) |
34,858 |
23,016 |
78,918 |
71,035 |
Operations |
7,955 |
7,432 |
22,966 |
21,941 |
Sales and marketing |
690 |
1,048 |
2,098 |
2,542 |
General and administrative |
4,648 |
3,645 |
14,145 |
12,699 |
Depreciation and
amortization |
2,894 |
2,985 |
8,137 |
9,136 |
(Gain) loss on sale of property
and equipment |
(4) |
2 |
(120) |
(29) |
Loss on sale of Americas data
assets |
— |
— |
— |
1,081 |
Total operating expense |
51,041 |
38,128 |
126,144 |
118,405 |
Income from operations |
12,675 |
15,917 |
45,512 |
46,738 |
Other expense (income): |
|
|
|
|
Interest expense |
9 |
18 |
36 |
37 |
Other income |
— |
— |
(1,290) |
(2) |
Total other expense
(income) |
9 |
18 |
(1,254) |
35 |
Income before provision for income taxes |
12,666 |
15,899 |
46,766 |
46,703 |
Provision for income taxes |
4,399 |
6,123 |
17,317 |
18,286 |
Net income |
$8,267 |
$9,776 |
$29,449 |
$28,417 |
Earnings per share: |
|
|
|
|
Basic |
$0.25 |
$0.30 |
$0.88 |
$0.87 |
Diluted |
$0.24 |
$0.29 |
$0.86 |
$0.86 |
Weighted average number of shares
outstanding: |
|
|
|
|
Basic |
33,620 |
33,115 |
33,562 |
32,743 |
Diluted |
34,138 |
33,343 |
34,057 |
33,033 |
Dividends paid per share: |
$0.15 |
$0.15 |
$0.45 |
$0.30 |
|
INTELIQUENT, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(Unaudited) |
|
|
September 30, |
December 31, |
(In thousands, except per share
amounts) |
2015 |
2014 |
ASSETS |
|
|
Current assets: |
|
|
Cash and cash equivalents |
$112,077 |
$104,737 |
Receivables — net of allowance
of $2,526 and $2,336, respectively |
38,763 |
32,766 |
Deferred income
taxes-current |
— |
836 |
Prepaid expenses |
5,414 |
2,198 |
Other current assets |
705 |
1,320 |
Total current assets |
156,959 |
141,857 |
Property and equipment—net |
36,097 |
23,678 |
Restricted cash |
345 |
345 |
Deferred income taxes-noncurrent |
5,644 |
3,284 |
Other assets |
1,147 |
1,007 |
Total assets |
$200,192 |
$170,171 |
LIABILITIES AND
SHAREHOLDERS'
EQUITY |
|
|
Current liabilities: |
|
|
Accounts payable |
$1,592 |
$1,607 |
Accrued liabilities: |
|
|
Taxes payable |
883 |
1,263 |
Network and facilities |
15,219 |
7,266 |
Rent |
1,941 |
2,015 |
Payroll and related items |
5,351 |
3,079 |
Other |
1,442 |
897 |
Deferred income
taxes-current |
175 |
— |
Total current liabilities |
26,603 |
16,127 |
Shareholders' equity: |
|
|
Preferred stock—par value of
$.001; 50,000 authorized shares; no shares issued and outstanding
at September 30, 2015 and December 31, 2014 |
— |
— |
Common stock—par value of
$.001; 150,000 authorized shares; 33,736 shares and 33,458 shares
issued and outstanding at September 30, 2015 and December 31, 2014,
respectively |
34 |
33 |
Less treasury stock, at cost;
3,351 shares at September 30, 2015 and December 31, 2014 |
(51,668) |
(51,668) |
Additional paid-in capital |
222,828 |
217,628 |
Retained earnings (Accumulated
deficit) |
2,395 |
(11,949) |
Total shareholders' equity |
173,589 |
154,044 |
Total liabilities and shareholders'
equity |
$200,192 |
$170,171 |
|
INTELIQUENT, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(Unaudited) |
|
|
Nine Months
Ended |
|
September 30, |
(In thousands) |
2015 |
2014 |
Operating |
|
|
Net income |
$29,449 |
$28,417 |
Adjustments to reconcile net
income to net cash flows provided by operating activities: |
|
|
Depreciation and
amortization |
8,137 |
9,136 |
Deferred income taxes |
(1,349) |
345 |
Gain on sale of property and
equipment |
(120) |
(29) |
Loss on sale of Americas data
assets |
— |
1,081 |
Gain on settlement of Tinet
escrow |
(1,290) |
— |
Non-cash share-based
compensation |
4,049 |
3,268 |
Provision for uncollectible
accounts |
211 |
1,826 |
Excess tax benefit associated
with share-based payments |
(1,299) |
(896) |
Changes in assets and
liabilities: |
|
|
Receivables |
(6,203) |
(10,926) |
Other current assets |
(2,619) |
(1,340) |
Other noncurrent assets |
(140) |
210 |
Accounts payable |
331 |
(162) |
Accrued liabilities |
12,924 |
(138) |
Net cash provided by operating
activities |
42,081 |
30,792 |
Investing |
|
|
Purchase of property and
equipment |
(20,943) |
(6,279) |
Proceeds from sale of property
and equipment |
173 |
41 |
Increase in restricted
cash |
— |
(220) |
Net cash used for investing
activities |
(20,770) |
(6,458) |
Financing |
|
|
Proceeds from the exercise of
stock options |
869 |
7,728 |
Restricted shares withheld to
cover employee taxes paid |
(1,034) |
(686) |
Dividends paid |
(15,105) |
(9,900) |
Excess tax benefit associated
with share-based payments |
1,299 |
896 |
Net cash used for financing
activities |
(13,971) |
(1,962) |
Net increase in cash and cash
equivalents |
7,340 |
22,372 |
Cash and cash equivalents — Beginning |
104,737 |
77,004 |
Cash and cash equivalents — Ending |
$112,077 |
$99,376 |
Supplemental disclosure of cash flow
information: |
|
|
Cash paid for taxes |
$20,058 |
$20,053 |
Cash paid for interest |
$— |
$— |
Supplemental disclosure of noncash flow
items: |
|
|
Investing activity — Accrued
purchases of property and equipment |
$1,002 |
$1,410 |
The following table includes selected financial and operational
metrics, sequentially, for the last five quarters.
Selected Financial and Operational Metrics:
|
Three Months
Ended |
(In millions, except per minute amounts) |
Sep. 30 |
Dec. 31 |
Mar. 31 |
Jun. 30 |
Sept. 30 |
|
2014 |
2014 |
2015 |
2015 |
2015 |
|
|
|
|
|
|
Total Revenue |
$54.0 |
$55.4 |
$55.1 |
$52.9 |
$63.7 |
Adjusted EBITDA |
$20.0 |
$20.1 |
$21.2 |
$21.0 |
$16.9 |
Total Capital Expenditures |
$1.0 |
$3.8 |
$2.1 |
$2.8 |
$16.0 |
Free Cash Flow |
$19.0 |
$16.3 |
$19.1 |
$18.2 |
$0.9 |
Average Revenue per Minute* |
$0.00155 |
$0.00157 |
$0.00157 |
$0.00153 |
$0.00159 |
|
|
|
|
|
|
Minutes of Use (in millions)*: |
34,862 |
35,221 |
34,983 |
34,591 |
40,157 |
|
|
|
|
|
|
# of Employees |
155 |
160 |
160 |
160 |
171 |
* Historical Minutes of use and Average Rate per Minute figures
have been adjusted to include all minutes that were carried on our
network for each respective quarter.
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; non-recurring amounts
incurred in connection with the discontinuation of our hosted
service offering; amounts paid in connection with the resolution of
employee related matters; and amounts received by the Company from
an escrow fund related to the purchase of Tinet as a result of a
settlement with the sellers of Tinet. 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, amounts paid in connection with the resolution of
employee related matters, and amounts received by the Company from
an escrow fund related to the purchase of Tinet as a result of a
settlement with the sellers of Tinet. 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 Condensed Consolidated Statements
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 Condensed
Consolidated Statements of Cash Flows.
The following is a reconciliation of net income to EBITDA,
Adjusted EBITDA and Free Cash Flow:
|
Three Months
Ended |
(In thousands) |
Sep. 30 |
Dec. 31 |
Mar. 31 |
Jun. 30 |
Sept. 30 |
|
2014 |
2014 |
2015 |
2015 |
2015 |
|
|
|
|
|
|
Net income |
$9,776 |
$10,106 |
$11,182 |
$10,000 |
$8,267 |
Interest expense |
18 |
14 |
16 |
11 |
9 |
Provision for income taxes |
6,123 |
6,417 |
6,887 |
6,031 |
4,399 |
Depreciation and amortization |
2,985 |
2,681 |
2,643 |
2,600 |
2,894 |
EBITDA |
$18,902 |
$19,218 |
$20,728 |
$18,642 |
$15,569 |
Non-cash share-based compensation |
1,159 |
1,001 |
1,778 |
933 |
1,338 |
Hosted services |
(28) |
(75) |
— |
— |
— |
Amounts paid in connection with the
resolution of employee related matters |
— |
— |
— |
1,440 |
— |
Gain on receipt resulting from Tinet escrow
settlement |
— |
— |
(1,290) |
— |
— |
Adjusted EBITDA |
$20,033 |
$20,144 |
$21,216 |
$21,015 |
$16,907 |
|
|
|
|
|
|
Capital Expenditures |
1,012 |
3,811 |
2,089 |
2,841 |
16,013 |
|
|
|
|
|
|
Free Cash Flow |
$19,021 |
$16,333 |
$19,127 |
$18,174 |
$894 |
CONTACT: Analyst Contact:
Kurt Abkemeier
investorrelations@inteliquent.com
Inteliquent, Inc. (NASDAQ:IQNT)
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