SOURCE: Alteva

Alteva

November 10, 2014 17:16 ET

Alteva Reports Third Quarter 2014 Financial Results

PHILADELPHIA, PA--(Marketwired - Nov 10, 2014) -  Alteva, Inc. ("Alteva" or the "Company") (NYSE MKT: ALTV), a premier provider of hosted Unified-Communications-as-a-Service ("UCaaS"), today announced selected financial results for the third quarter ended September 30, 2014. 

Third Quarter 2014 Financial Results Highlights

  • For the third quarter of 2014, UC revenues increased by 7% to $4.3 million from $4.0 million for the third quarter of 2013, which included the results of the Syracuse, NY operations that were sold in September 2013; excluding the Syracuse operations, UC revenues increased 16% for the third quarter of 2014 as compared to the same period in 2013;
  • Gross profit margin increased to 61% in the third quarter of 2014 from 58% for the same period in 2013;
  • The Company narrowed its operating loss for the third quarter of 2014 to $(1.6) million, as compared to $(2.1) million for the same period in 2013;
  • The Company had net loss of $(1.3) million, or $(0.23) per share, for the third quarter of 2014, as compared to a net income of $0.3 million, or $0.06 per share, for the same period in 2013;
  • For the third quarter of 2014, the Company achieved Adjusted EBITDA* of $0.1 million, a decrease from $3.0 million from the same period in 2013; Adjusted EBITDA* for the third quarter of 2013 included $3.25 million of income from the Company's O-P investment;
  • There were over 49,000 users on Alteva's hosted platform at the end of the third quarter of 2014, which represented an increase of 19% of the installed base compared to the end of the third quarter of 2013.

Third Quarter 2014 Results

Revenues were $7.6 million in the third quarter of 2014, an increase of 1% from $7.5 million for the same period in 2013. Revenues increased 5% year-over-year excluding the revenue from the Syracuse operations that were sold in September 2013. 

UC revenues were $4.3 million in the third quarter of 2014, an increase of 7% from $4.0 million for the same period in 2013. UC revenues in the third quarter of 2014 increased 16% on a year-over-year basis excluding the revenue from the Syracuse operations, which were sold in September 2013. As a percentage of consolidated revenue, the UC segment contributed approximately 57% of revenues in the third quarter of 2014 as compared with 54% for the same period in 2013. The increase in UC revenues was attributable to the addition of new clients and the increase in services to existing clients. Approximately 92% of third quarter UC revenues were from licenses and services which are expected to be recurring in nature, with the balance of revenues derived from equipment sales that were primarily related to new customer implementations.

Telephone revenues were $3.3 million in the third quarter of 2014, as compared with $3.5 million for the same period in 2013. The Telephone segment contributed approximately 43% of revenues in the third quarter 2014 as compared with 46% for the same period of 2013. Telephone revenues were slightly lower year-over-year as a result of continued access line losses and lower revenue from pooling arrangements. These decreases were partially offset by an increase in access line rates earlier in the year and modest growth in broadband Internet services revenues.

Gross profit increased by 6% to $4.6 million in the third quarter of 2014, from $4.4 million for the same period in 2013. Gross profit as a percentage of revenues was 61% in the third quarter of 2014, as compared with 58% for the same period in 2013. The improvement in gross profit primarily reflects the increase in revenues contributed by the UC segment, the Company's ability to leverage its existing infrastructure, and the impact of the cost reduction initiatives. The cost reduction initiatives included the sale of the Syracuse operations and the previously disclosed workforce reduction in the Telephone segment.

Selling, general and administrative ("SG&A") expenses in the third quarter of 2014 were $4.7 million, as compared with $5.1 million for the same period in 2013. The decrease was due to the impact from the restructuring of the Telephone segment in the third quarter of 2013, the sale of the Syracuse operations, and other expense management initiatives implemented throughout the past twelve months.

During the third quarter of 2014 the Company incurred $0.6 million of expense in connection with the settlement with the former Chief Executive Officer. During the third quarter of 2013, the Company incurred $0.4 million loss associated with the disposal of the Syracuse operations. 

Other income for the third quarter of 2013 included $3.25 million from the Company's former equity investment in the O-P partnership, which was sold in April 2014.

For the third quarter of 2014, the Company had income tax benefit of $0.3 million, or 17% of income before income taxes, as compared to an income tax expense of $0.7 million, or 66% of income before income taxes, for the third quarter of 2013. The estimated effective tax rate for each period includes projections of tax expense on the expected change in our valuation allowance for deferred tax assets. 

For the third quarter of 2014, the Company's net loss was $(1.3) million, as compared to a net income of $0.3 million for the same period of 2013.

Basic and diluted net loss per share was $(0.23) for the third quarter of 2014, as compared with basic and diluted net income per share of $0.06 in the same period of 2013.

Conference Call

The Company will conduct a conference call to discuss third quarter results on Wednesday, November 12, 2014 at 10:00 a.m. eastern. Investors and other interested parties can listen to the call by dialing the participant number of 412-317-6789 or 877-317-6789 (toll free), no access code required. A simultaneous webcast of the conference call can be accessed through Alteva's website at www.alteva.com in the Investors section.

A replay of this conference call will also be available by dialing 412-317-0088 or 877-344-7529 (toll free), access code: 10055825, at approximately 12:00 p.m. eastern on November 12, 2014 through 9:00 a.m. eastern November 27, 2014, and via the Company's website at www.alteva.com.

About Alteva

Alteva (NYSE MKT: ALTV) is a premier provider of Unified Communications and Collaboration solutions for business. Alteva's Unified-Communications-as-a-Service (UCaaS) solution integrates and optimizes best-in-class cloud-based technologies and business applications to deliver a comprehensive voice, video and collaboration service for the office and mobile workforce. Alteva is committed to delivering meaningful value to our customers through a consistent, high quality and unified user experience across multiple devices, platforms and operating systems. These attributes have positioned Alteva as a leading hosted communications provider and the partner of choice for a growing number of business customers nationwide and internationally. To learn more about Alteva, please visit www.alteva.com. You can also follow Alteva on Twitter @AltevaInc or LinkedIn.

*Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization adjusted to exclude non-cash stock-based compensation, severance related expense, and the loss on disposal, restructuring costs and other special charges. A reconciliation of adjusted EBITDA to net income (loss) can be found at the end of the following tables. Adjusted EBITDA is commonly used by management and investors as an indicator of operating performance and liquidity. Adjusted EBITDA is not considered a measure of financial performance under GAAP and it should not be considered as an alternative to net income (loss), or other financial statement data presented in accordance with GAAP in our consolidated financial statements.

Safe Harbor Statement

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements, without limitation, regarding expectations, beliefs, intentions, growth, profitability, or strategies regarding the future. Alteva intends that such forward-looking statements be subject to the safe-harbor provided by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Alteva's actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: expectations of future profitability; general economic and business conditions, both nationally and in the geographic regions in which Alteva operates; industry capacity; demographic changes; technological changes and changes in consumer demand; the successful integration of Alteva's acquired businesses; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; legislative proposals relating to the businesses in which Alteva operates; competition; or the loss of any significant ability to attract and retain qualified personnel. Given these uncertainties, current and prospective investors should be cautioned in their reliance on such forward-looking statements. Except as required by law, Alteva disclaims any obligation to update any such factors or to publicly announce the results of any revision to any of the forward-looking statements contained herein to reflect future events or developments. A more comprehensive discussion of risks, uncertainties, financial reporting restatements, and forward-looking statements may be seen in Alteva's Annual Report on Form 10-K and other periodic filings with the U.S. Securities and Exchange Commission.

(tables follow)

   
   
ALTEVA, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
(amounts in thousands, except per share amounts)  
                         
             
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2014     2013     2014     2013  
                                 
Net Revenue                                
  Unified Communications   $ 4,308     $ 4,043     $ 12,753     $ 11,919  
  Telephone     3,263       3,487       9,946       10,798  
  Total operating revenues     7,571       7,530       22,699       22,717  
                                 
Operating expenses                                
  Cost of services and products (exclusive of depreciation and amortization expense)     2,924       3,154       8,843       10,158  
  Selling, general and administrative expenses     4,726       5,115       15,686       18,589  
  Loss on disposal, restructuring costs and other special charges     600       404       700       404  
  Depreciation and amortization     931       956       2,753       2,919  
  Total operating expenses     9,181       9,629       27,982       32,070  
  Operating loss     (1,610 )     (2,099 )     (5,283 )     (9,353 )
                                 
Other income (expense)                                
  Interest income (expense), net     20       (179 )     (173 )     (593 )
  Income from investment     -       3,250       52,373       9,750  
  Other income (expense), net     (4 )     25       23       162  
  Total other income     16       3,096       52,223       9,319  
  Income (loss) before income taxes     (1,594 )     997       46,940       (34 )
                                 
Income tax expense (benefit)     (264 )     654       16,982       303  
  Net income (loss)     (1,330 )     343       29,958       (337 )
                                 
Preferred dividends     6       6       19       19  
    Income (loss) applicable to common stock and participating securities   $ (1,336 )   $ 337     $ 29,939     $ (356 )
                                 
Basic earnings (loss) per share   $ (0.23 )   $ 0.06     $ 4.96     $ (0.06 )
                                 
Diluted earnings (loss) per share   $ (0.23 )   $ 0.06     $ 4.96     $ (0.06 )
                                 
Weighted average shares of common stock used to calculate earnings per share                                
  Basic     5,826       5,776       5,802       5,765  
  Diluted     5,826       5,776       5,802       5,765  
                                 
Dividends declared per common share   $ -     $ -     $ -     $ 0.54  
                                 
   
   
ALTEVA, INC.  
CONDENSED CONSOLIDATED BALANCE SHEETS  
(in thousands, except per share amounts)  
   
    September 30,     December 31,  
    2014     2013  
    (Unaudited)        
Assets                
                 
Current assets                
  Cash and cash equivalents   $ 28,949     $ 1,636  
  Trade accounts receivable - net of allowance for uncollectibles - $390 and $378 at September 30, 2014 and December 31, 2013, respectively     3,105       2,836  
  Other accounts receivable     579       480  
  Materials and supplies     197       237  
  Prepaid expenses     612       774  
  Deferred income taxes     108       108  
Total current assets     33,550       6,071  
                 
  Property, plant and equipment, net     12,687       13,837  
  Intangibles, net     5,233       5,856  
  Seat licenses     1,684       1,749  
  Goodwill     9,006       9,006  
  Other assets     991       744  
Total assets   $ 63,151     $ 37,263  
                 
Liabilities and Shareholders' Equity                
                 
Current liabilities                
  Short-term debt   $ 328     $ 10,126  
  Accounts payable     1,009       944  
  Advance billing and payments     342       341  
  Accrued taxes     5,721       1,692  
  Pension and post retirement benefit obligations     267       267  
  Accrued wages     1,613       1,007  
  Other accrued expenses     3,365       2,927  
Total current liabilities     12,645       17,304  
                 
Long-term debt     363       297  
Deferred income taxes     773       649  
Pension and post retirement benefit obligations     5,737       6,007  
Total liabilities     19,518       24,257  
                 
Commitments and contingencies                
                 
Shareholders' equity                
  Preferred shares - $100 par value, authorized and issued shares of 5; $0.01 par value, authorized and unissued shares of 10,000     500       500  
  Common stock - $0.01 par value, authorized shares of 10,000; 6,851 and 6,971 shares issued at September 30, 2014 and December 31, 2013, respectively     69       70  
  Treasury stock - at cost, 875 and 830 common shares at September 30, 2014 and December 31, 2013, respectively     (8,011 )     (7,612 )
  Additional paid in capital     13,958       13,279  
  Accumulated other comprehensive loss     (1,027 )     (1,436 )
  Retained earnings     38,144       8,205  
Total shareholders' equity     43,633       13,006  
Total liabilities and shareholders' equity   $ 63,151     $ 37,263  
                 
   
   
ALTEVA, INC.  
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
(in thousands)  
             
       
    Nine Months Ended September 30,  
    2014     2013  
CASH FLOW FROM OPERATING ACTIVITIES                
                 
Net income (loss)   $ 29,958     $ (337 )
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:                
  Depreciation and amortization     2,753       2,919  
  Stock based compensation expense     677       1,020  
  Distributions in excess of equity in earnings and gain on sale from equity investment     (49,776 )     (4,209 )
  Other non-cash operating activities     230       880  
Changes in assets and liabilities                
  Trade accounts receivable     (269 )     117  
  Other assets     (272 )     (257 )
  Accrued taxes     4,029       34  
  Accounts payable     65       586  
  Other accruals and liabilities     996       (96 )
                 
Net cash (used in) provided by operating activities     (11,609 )     657  
                 
CASH FLOW FROM INVESTING ACTIVITIES                
  Capital expenditures     (222 )     (499 )
  Proceeds from sale of assets     33       175  
  Acquired intangibles     (16 )     (58 )
  Purchase of seat licenses     (99 )     (501 )
  Proceeds received in excess of income from equity investments     49,776       4,209  
Net cash provided by investing activities     49,472       3,326  
                 
                 
CASH FLOW FROM FINANCING ACTIVITIES                
  Proceeds from debt     2,443       18,896  
  Repayment of debt and capital leases     (12,575 )     (20,381 )
  Payment of fees for acquisition of debt     -       (119 )
  Purchase of treasury stock     (399 )     (126 )
  Dividends (Common and Preferred)     (19 )     (3,333 )
                 
Net cash used in financing activities     (10,550 )     (5,063 )
                 
Net change in cash and cash equivalents     27,313       (1,080 )
                 
Cash and cash equivalents at beginning of period     1,636       1,799  
                 
Cash and cash equivalents at end of period   $ 28,949     $ 719  
                 
Supplemental disclosure of non-cash investing activities:                
  Acquisition of seat licenses and equipment under capital leases   $ 390     $ 248  
  Seat licenses acquired, but not paid   $ 188     $ -  
  Receivables from sale of assets   $ -     $ 408  
                   
   
   
ALTEVA  
RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME (LOSS)  
AS IT IS PRESENTED ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
(in thousands)  
                     
                     
    Three Months Ended September 30,   Nine Months Ended September 30,  
    2014     2013   2014   2013  
Net income (loss)   $ (1,330 )   $ 343   $ 29,958   $ (337 )
Depreciation and amortization     931       956     2,753     2,919  
Stock-based compensation     170       333     677     1,020  
Severance related charges     11       129     307     1,167  
Loss on disposal, restructuring costs and other special charges     600       404     700     404  
Interest (income) expense, net     (20 )     179     173     593  
Income tax expense (benefit)     (264 )     654     16,982     303  
Adjusted EBITDA   $ 98     $ 2,998   $ 51,550   $ 6,069