SOURCE: West Corporation

October 17, 2007 16:05 ET

West Corporation Reports Third Quarter 2007 Results

OMAHA, NE--(Marketwire - October 17, 2007) - West Corporation, a leading provider of outsourced communication solutions, today announced its third quarter 2007 results.

Financial Summary (unaudited)
(Dollars in millions)


                      Three Months Ended           Nine Months Ended
                        September 30,                September 30,
                  -------------------------  -----------------------------
                                    Percent                        Percent
                    2007     2006   Change     2007       2006     Change
                  -------  -------  -------  ---------  ---------  -------
Revenue           $ 531.1  $ 473.2     12.2% $ 1,559.9  $ 1,359.7     14.7%
                  -------  -------  -------  ---------  ---------  -------
Adjusted
 EBITDA(1)        $ 149.3  $ 127.4     17.2% $   441.6  $   360.4     22.5%
                  -------  -------  -------  ---------  ---------  -------
Adjusted EBITDA
 Margin              28.1%    26.9%               28.3%      26.5%
                  -------  -------  -------  ---------  ---------  -------
Cash Flow from
 Operations       $  55.3  $  70.2    -21.2% $   182.5  $   225.5    -19.1%
                  -------  -------  -------  ---------  ---------  -------


(1) See Reconciliation of Financial Measures below.

"We are pleased with this quarter's results and the ongoing integration of our recent acquisitions," said Thomas B. Barker, Chief Executive Officer of West Corporation.

Consolidated Operating Results

For the third quarter ended September 30, 2007, revenues were $531.1 million compared to $473.2 million for the same quarter last year, an increase of 12.2 percent. Revenue from acquired entities(2) accounted for $33.9 million of the $57.9 million increase during the third quarter and $134.8 million of the $200.2 million year-to-date increase. During the quarter, the Company recorded $8.8 million of goodwill amortization to write-off its investment in Vertical Alliance, a ticketing company. This resulted in a 320 basis point reduction in the Communication Services segment third quarter operating margin and a 170 basis point reduction in consolidated third quarter operating margin. This was offset by a related reduction of income tax valuation reserves and income tax expense of $8.0 million.

Balance Sheet and Liquidity

At September 30, 2007, West Corporation had cash and cash equivalents totaling $112.6 million and working capital of $175.4 million. Third quarter depreciation expense was $25.1 million and amortization expense was $29.2 million. Cash flow from operating activities was $55.3 million and was impacted by interest expense of $88.1 million. Adjusted EBITDA for the third quarter was $149.3 million, or 28.1 percent of revenue. A reconciliation of adjusted EBITDA to cash flow from operating activities is presented in the Reconciliation of Financial Measures below.

"During the quarter, we invested $26.8 million in capital expenditures primarily for equipment and infrastructure," stated Paul Mendlik, Chief Financial Officer of West Corporation. "The Company also settled the pending litigation with Polygon during the quarter by paying Polygon $48.75 per share, the same amount received in the Recapitalization as all other former public shareholders of West, plus interest at 8.25%, for a total of approximately $183.9 million."

Conference Call

The Company will hold a conference call to discuss these topics on Thursday, October 18, 2007 at 11:00 AM Eastern Time (10:00 AM Central Time). Investors may access the call by visiting the Financials section of the West Corporation website at www.west.com and clicking on the Webcast link. A replay of the call will also be available on the website.

About West Corporation

West Corporation is a leading provider of outsourced communication solutions to many of the world's largest companies, organizations and government agencies. West helps its clients communicate effectively, maximize the value of their customer relationships and drive greater profitability from every interaction. The Company's integrated suite of customized solutions includes customer acquisition, customer care, automated voice services, emergency communications, conferencing and accounts receivable management services.

Founded in 1986 and headquartered in Omaha, Nebraska, West has a team of 37,000 employees based in North America, Europe and Asia. For more information, please visit www.west.com.

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements can be identified by the use of words such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "continue" or similar terminology. These statements reflect only West's current expectations and are not guarantees of future performance or results. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties include the ability to integrate or achieve the objectives of our recent acquisitions, West's ability to complete future acquisitions, competition in West's highly competitive industries, extensive regulation in many of West's markets, West's ability to recover on its charged-off consumer receivables, capacity utilization of West's contact centers, the cost and reliability of voice and data services, availability of key personnel and employees, the cost of labor and turnover rates, the political, economic and other conditions in countries where West operates, the loss of any key clients, West's ability to purchase charged-off receivable portfolios on acceptable terms and in sufficient amounts, the nature of West's forward flow contracts, the non-exclusive nature of West's client contracts and the absence of revenue commitments, the possibility of an emergency interruption to West's data and contact centers, acts of terrorism or war, security or privacy breaches of West's systems and databases, West's ability to protect proprietary information or technology, West's ability to continue to keep pace with technological developments, the cost of pending and future litigation and other risk factors described in documents filed by the company with the United States Securities and Exchange Commission including West's annual report on Form 10-K for the year ended December 31, 2006 and quarterly report on Form 10-Q for the quarter ended June 30, 2007. These forward-looking statements speak only as of the date on which the statements were made. West undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

(2) Acquired entities include InPulse (acquired in October 2006), CenterPost (acquired in February 2007) and TeleVox (acquired in March 2007) in the Communications Services segment and Omnium (acquired May 2007) in the Receivables Management segment.

                            WEST CORPORATION
                    CONDENSED STATEMENTS OF OPERATIONS
         (Unaudited, in thousands except selected operating data)


                     Three Months Ended            Nine Months Ended
                        September 30,                September 30,
                                       %                              %
                2007        2006     Change     2007        2006    Change
             ----------  ----------  ------  ----------  ----------  -----

Revenue      $  531,098  $  473,245    12.2% $1,559,917  $1,359,661   14.7%
Cost of
 services       228,309     206,733    10.4%    671,600     604,147   11.2%
Selling,
 general and
 administra-
 tive
 expenses       217,213     183,315    18.5%    616,581     524,425   17.6%
             ----------  ----------  ------  ----------  ----------  -----
Operating
 income          85,576      83,197     2.9%    271,736     231,089   17.6%
Interest
 expense         88,135      12,646   596.9%    251,790      29,072  766.1%
Other
 expense
 (income),
 net             (4,820)     (1,185)  306.8%    (12,928)     (3,162) 308.9%
             ----------  ----------  ------  ----------  ----------  -----
Income
 before tax       2,261      71,736   -96.8%     32,874     205,179  -84.0%
Income tax
 expense
 (benefit)       (3,780)     25,105  -115.1%      7,147      73,110  -90.2%
Minority
 Interest         4,120       3,710    11.1%     12,275      10,334   18.8%
             ----------  ----------  ------  ----------  ----------  -----
Net income   $    1,921  $   42,921   -95.5% $   13,452  $  121,735  -88.9%
             ==========  ==========  ======  ==========  ==========  =====

SELECTED SEGMENT
 DATA:
Revenue:
 Communic-
  ation
  Services   $  273,945  $  259,106     5.7% $  810,915  $  736,833   10.1%
 Conferencing   182,420     156,099    16.9%    542,237     448,816   20.8%
 Receivables
  Management     76,453      59,465    28.6%    211,234     178,641   18.2%
 Inter
  segment
  eliminations   (1,720)     (1,425)   20.7%     (4,469)     (4,629)  -3.5%
             ----------  ----------  ------  ----------  ----------  -----

   Total     $  531,098  $  473,245    12.2% $1,559,917  $1,359,661   14.7%
             ==========  ==========  ======  ==========  ==========  =====

Operating
 Income:
 Communic-
  ation
  Services   $   26,556  $   29,149    -8.9% $   91,856  $   85,321    7.7%
 Conferencing    45,402      43,428     4.5%    138,996     113,959   22.0%
  Receivables
  Management     13,618      10,620    28.2%     40,884      31,809   28.5%
             ----------  ----------  ------  ----------  ----------  -----
    Total    $   85,576  $   83,197     2.9% $  271,736  $  231,089   17.6%
             ==========  ==========  ======  ==========  ==========  =====

Operating
 Margin:
 Communic-
  ation
  Services          9.7%       11.2%  -13.4%       11.3%       11.6%  -2.6%
 Conferencing      24.9%       27.8%  -10.4%       25.6%       25.4%   0.8%
  Receivables
  Management       17.8%       17.9%   -0.6%       19.4%       17.8%   9.0%
             ----------  ----------  ------  ----------  ----------  -----
   Total           16.1%       17.6%   -8.5%       17.4%       17.0%   2.4%
             ==========  ==========  ======  ==========  ==========  =====

Operating
 Income
 Excluding
 the VA
 Write-off:
 Communic-
 ation
 Services        35,399      29,149    21.4% $  100,699  $   85,321   18.0%
 Conferencing    45,402      43,428     4.5%    138,996     113,959   22.0%
  Receivables
  Management     13,618      10,620    28.2%     40,884      31,809   28.5%
             ----------  ----------  ------  ----------  ----------  -----
   Total         94,419      83,197    13.5% $  280,579  $  231,089   21.4%
             ==========  ==========  ======  ==========  ==========  =====

Operating
 Margin
 Excluding
 the VA
 Write-off:
 Communic-
  ation
  Services         12.9%       11.2%   14.9%       12.4%       11.6%   7.2%
 Conferencing      24.9%       27.8%  -10.5%       25.6%       25.4%   1.0%
  Receivables
  Management       17.8%       17.9%   -0.3%       19.4%       17.8%   8.7%
             ----------  ----------  ------  ----------  ----------  -----
   Total           17.8%       17.6%    1.1%       18.0%       17.0%   5.8%
             ==========  ==========  ======  ==========  ==========  =====

SELECTED
 OPERATING
 DATA ($M):
Share-based
 compensation
 expense
 recognized         0.3         3.8
Cash flow
 from
 operations        55.3        70.2
Revolving
 Line of
 Credit
 ending
 balance              -       665.0
Term loan
 facility       2,376.4           -
Senior notes      650.0           -
Senior
 subordinated
 notes            450.0           -



                 Condensed Balance Sheets
             September 30, December 31,   %
                2007        2006      Change
             ----------  ----------  --------
Current
 assets:
 Cash and
  cash
  equival-
  ents       $  112,595  $  214,932   -47.6%
  Trust
   cash          22,802       7,104   221.0%
Accounts
 receivable,
 net            309,391     285,087     8.5%
 Portfolio
  receivables,
  current        64,955      64,651     0.5%
 Other
  current
  assets         46,470      54,382   -14.5%
             ----------  ----------  ------
 Total
  current
  assets        556,213     626,156   -11.2%
Net property
 and
 equipment      297,218     294,707     0.9%
Portfolio
 receivables,
 net            126,625      85,006    49.0%
Goodwill      1,282,434   1,186,375     8.1%
Other assets    510,875     343,612    48.7%
             ----------  ----------  ------
  Total
   assets    $2,773,365  $2,535,856     9.4%
             ==========  ==========  ======
Current
 liabilities $  380,810  $  497,586   -23.5%
Long Term
 Obligations  3,497,116   3,206,590     9.1%
Other
 liabilities     84,893      45,279    87.5%
             ----------  ----------  ------
 Total
  liabilities 3,962,819   3,749,455     5.7%

Minority
 interest        11,998      10,299    16.5%
Class L
 common
 stock          997,891     903,656    10.4%

Stockholders'
 deficit     (2,199,343) (2,127,554)    3.4%
             ----------  ----------  ------
 Total
  liabilities
  and
  stockhold-
  ers'
  deficit    $2,773,365  $2,535,856     9.4%
             ==========  ==========  ======


Reconciliation of Financial Measures

The common definition of EBITDA is "Earnings Before Interest Expense, Taxes, Depreciation and Amortization." In evaluating liquidity, we use Adjusted EBITDA, which we define as earnings before interest expense, taxes, depreciation and amortization, share based compensation, minority interest, recapitalization transaction costs, after acquisition synergies and excluding unrestricted subsidiaries. EBITDA and Adjusted EBITDA are not measures of financial performance or liquidity under generally accepted accounting principles ("GAAP"). EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitution for net income, cash flow from operations or other income or cash flow data prepared in accordance with GAAP. Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. Adjusted EBITDA is presented as we understand certain investors use it as one measure of our historical ability to service debt. Adjusted EBITDA is also used in our debt covenants. Set forth below is a reconciliation of EBITDA and adjusted EBITDA to cash flow from operations.

                                 Three Months Ended     Nine Months Ended
Amounts in thousands                  Sept 30,              Sept 30,
                                  2007       2006       2007       2006
                                ---------  ---------  ---------  ---------
Cash flow from operating
 activities                     $  55,314  $  70,157  $ 182,497  $ 225,501
Income tax expense                 (3,781)    25,105      7,147     73,110
Deferred income tax (expense)
 benefit                            3,752      1,593      1,069    (15,887)
Interest expense                   88,135     12,646    251,790     29,072
Minority interest in earnings,
 net of distributions              (1,010)     1,078     (1,295)     4,216
Provision for share based
 compensation                        (322)    (3,808)      (952)   (11,095)
Debt amortization                  (3,637)      (218)   (11,045)      (651)
Other                                 (95)      (223)       336       (359)
Changes in operating assets and
 liabilities, net of business
 acquisitions                       2,176     10,117    (20,309)    19,782
                                ---------  ---------  ---------  ---------
EBITDA                            140,532    116,447    409,238    323,689
Minority interest                   4,120      3,710     12,275     10,334
Provision for share based
 compensation                         322      3,808        952     11,095
Recapitalization costs              2,517        625     11,092      5,625
Synthetic lease interest                -        409          -      1,305
Acquisition synergies                 810      1,300      5,047      5,200
Vertical Alliance Adjustment        1,009      1,118      2,958      3,175
                                ---------  ---------  ---------  ---------
Adjusted EBITDA                 $ 149,310  $ 127,417  $ 441,562  $ 360,423
                                =========  =========  =========  =========

(2) Acquired entities include InPulse (acquired in October 2006), CenterPost (acquired in February 2007) and TeleVox (acquired in March 2007) in the Communications Services segment and Omnium (acquired May 2007) in the Receivables Management segment.

Contact Information

  • AT THE COMPANY:
    David Pleiss
    Investor Relations
    (402) 963-1500
    Email Contact

    West Corporation
    11808 Miracle Hills Drive
    Omaha, NE 68154