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Alteva Reports Second Quarter 2013 Financial Results

21% UC Revenue Growth Drives 54% Increase in Adjusted EBITDA; Company Returns to Profitability

PHILADELPHIA, PA -- (Marketwired) -- 08/12/13 -- Alteva ("Alteva" or the "Company") (NYSE MKT: ALTV), a leading Unified-Communications-as-a-Service ("UCaaS") provider, today announced financial results for the second quarter ended June 30, 2013 and recent corporate developments, including:

  • Significant progress made in achieving positive earnings before interest, taxes, depreciation and amortization ("EBITDA"), exclusive of O-P contributions, by the end of first quarter 2014
  • Adjusted EBITDA* of $2.0 million in the second quarter 2013, an increase of 54% from $1.3 million during the same period of the prior year
  • Discontinuation of quarterly common stock dividend payments to support future growth initiatives and strengthen financial position
  • UC revenues net of eliminations were $3.9 million in second quarter 2013, an increase of 21% from $3.3 million in the same period last year; slight decrease in year-over-year Telephone segment revenue in-line with management expectations
  • UC contributed 53% of second quarter consolidated revenues, up from 47% in second quarter of 2012
  • 38,440 users on Alteva's hosted platform at the end of second quarter 2013, an increase of over 15% of installed base at the end of first quarter 2013
  • Combined retail and wholesale seats in implementation equivalent to 7% of the installed base at end of second quarter of 2013
  • Gross profit increased to $4.2 million in the second quarter 2013, up by 23% from the same period of the prior year
  • Gross profit as a percentage of revenues of 57% in the second quarter 2013 increased from 50% in the same period of the prior year
  • Net income of $40,000 in the second quarter 2013, as compared to a $(228,000) net loss in the same period of the prior year
  • Alteva received $3.25 million in cash distributions from Orange County-Poughkeepsie Limited Partnership ("O-P") investment, which were recorded as other income in the second quarter of 2013
  • Alteva paid a quarterly cash dividend of $0.27 per common share for the second quarter of 2013
  • Proceeding with process improvements and expense reduction initiatives that are expected to yield $2.0 million in annualized cost savings; approximate 20% workforce reduction in the Warwick location

Management Comments

"We are very pleased with the results for the second quarter as we continued to experience increased momentum, delivering strong UCaaS recurring revenue growth, improved gross margin, positive net income for the first time since the implementation of our business transformation, and substantial growth in adjusted EBITDA," said David Cuthbert, Alteva's President and Chief Executive Officer. "This performance was driven by the successful execution of our strategy to improve our standing in the UCaaS market while solidifying our competitive position.

"As we continue to increase revenues and improve our operating performance, increases in cash flow will be used to strengthen the balance sheet and best position the Company for continued growth. Supporting these objectives, after the end of the quarter, the Company's Board of Directors approved the discontinuation of common stock dividend payments. We believe our operational performance improvements and the difficult corporate decisions we have made affecting our workforce and our shareholders in the near-term will deliver substantial returns for all of our stakeholders in the long-term. We will continue to carefully examine all aspects of our business to ensure maximum performance, profitability and return on our investment. We are proud of the accomplishments of the first half of 2013 and the trajectory that has been set."

Second Quarter 2013 Results

Revenues were $7.4 million in the second quarter of 2013, an increase of 8% from $6.9 million for the same period in 2012.

UC revenues, net of eliminations, were $3.9 million in the second quarter of 2013, an increase of 21% from $3.3 million for the same period in 2012. As a percentage of consolidated revenue, the UC segment contributed approximately 53% of revenues in the second quarter of 2013 as compared with 47% for the same period in 2012. The increase in UC revenues was attributable to organically generated UC services revenue growth.

Telephone services revenues, net of eliminations, were $3.5 million in the second quarter of 2013, as compared with $3.6 million for the same period in 2012. The Telephone segment contributed approximately 47% of revenues in the second quarter 2013 as compared with 53% for the same period of 2012 and 49% in the first quarter of 2013. Telephone services revenues were marginally lower as a result of access line losses which were partially offset by an increase in access lines rates and modest growth in broadband Internet services revenues.

Gross profit increased by 23% to $4.2 million in the second quarter of 2013 from $3.4 million in the same period of 2012. Gross profit as a percentage of revenues was 57% in the second quarter 2013, as compared with 50% for the same period of 2012. The continued improvement in gross profit primarily reflects the substantial increase in revenues contributed by the UC segment and the Company's ability to leverage its existing infrastructure.

Selling, general and administrative ("SG&A") expenses in the second quarter of 2013 were $6.3 million, as compared with $5.6 million for the same period of 2012. The increase in SG&A expenses was primarily attributable to $324,000 of nonrecurring severance charges related to the Company's Telephone workforce reduction and a $264,000 increase in non-cash stock-based compensation related to management changes.

Total other income for the second quarters of 2013 and 2012 was $3.1 million. Other income includes the income from the Company's O-P investment of $3.25 million and $3.1 million in the second quarters of 2013 and 2012, respectively.

For the second quarter of 2013, the Company had net income of $40,000, or $0.01 per basic and diluted common share, as compared to a net loss of $(228,000), or $(0.04) per basic and diluted common share, for the same period in 2012.

The Company also announced today that it has decided to discontinue future dividends. On an annual basis, this will result in cash savings of approximately $6 million, which will be used to support future growth initiatives and strengthen the Company's financial position.

Conference Call

The Company will conduct a conference call to discuss second quarter results today 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, no access code required, approximately 10 minutes prior to the start of the conference call. 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 877-344-7529 (toll free) or 412-317-0088, access code: 10032066, beginning 12:00 p.m. eastern on August 12, 2013 through September 2, 2013, and via the Company's website at www.alteva.com.

About Alteva

Alteva, Inc. (NYSE MKT: ALTV) is a premier provider of hosted UCaaS that significantly enhances business productivity and efficiency. Alteva's 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 and severance related expense. A reconciliation of adjusted EBITDA to the most comparable GAAP measure can be found at the end of the following tables.

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, dividends, 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; reduction in cash distributions from the Orange County-Poughkeepsie Limited Partnership; 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 and forward-looking statements may be seen in Alteva's Annual Report on Form 10-K, as amended, 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     Six Months Ended
                                       June 30,              June 30,
                                 --------------------  --------------------
                                    2013       2012       2013       2012
                                 ---------  ---------  ---------  ---------

Net Revenue
  Unified Communications         $   3,920  $   3,252  $   7,876  $   6,526
  Telephone                          3,527      3,634      7,311      7,441
                                 ---------  ---------  ---------  ---------
  Total operating revenues           7,447      6,886     15,187     13,967

Operating expenses
  Cost of services and products
   (exclusive of depreciation
   and amortization expense)         3,215      3,434      7,004      6,982
  Selling, general and
   administrative expenses           6,329      5,603     13,681     11,011
  Depreciation and amortization        961      1,296      1,963      2,575
                                 ---------  ---------  ---------  ---------
  Total operating expenses          10,505     10,333     22,648     20,568
                                 ---------  ---------  ---------  ---------
  Operating loss                    (3,058)    (3,447)    (7,461)    (6,601)

Other income (expense)
  Interest income (expense)           (178)      (112)      (414)      (169)
  Income from equity method
   investment                        3,250      3,096      6,500      4,521
  Other income (expense), net           29        136        137        131
                                 ---------  ---------  ---------  ---------
  Total other income                 3,101      3,120      6,223      4,483
                                 ---------  ---------  ---------  ---------
  Income (loss) before income
   taxes                                43       (327)    (1,238)    (2,118)

Income tax expense (benefit)             3        (99)      (445)      (656)
                                 ---------  ---------  ---------  ---------
  Net income (loss)                     40       (228)      (793)    (1,462)

Preferred dividends                      7          7         13         13
                                 ---------  ---------  ---------  ---------
  Income (loss) applicable to
   common stock                  $      33  $    (235) $    (806) $  (1,475)
                                 =========  =========  =========  =========

Basic earnings (loss) per share  $    0.01  $   (0.04) $   (0.14) $   (0.26)
                                 =========  =========  =========  =========
Basic earnings (loss) per
 puttable common share           $       -  $   (0.04) $       -  $   (0.26)
                                 =========  =========  =========  =========

Diluted earnings (loss) per
 share                           $    0.01  $   (0.04) $   (0.14) $   (0.26)
                                 =========  =========  =========  =========
Diluted earnings (loss) per
 puttable common share           $       -  $   (0.04) $       -  $   (0.26)
                                 =========  =========  =========  =========

Weighted average shares of
 common stock used to calculate
 earnings per share
  Basic                              5,775      5,731      5,760      5,723
                                 =========  =========  =========  =========
  Basic (puttable common)                -        272          -        272
                                 =========  =========  =========  =========
  Diluted                            6,205      5,731      5,760      5,723
                                 =========  =========  =========  =========
  Diluted (puttable common)              -        272          -        272
                                 =========  =========  =========  =========

                                 =========  =========  =========  =========
  Dividends declared per common
   share                         $    0.27  $    0.27  $    0.54  $    0.54
                                 =========  =========  =========  =========




                                   ALTEVA
                   CONDENSED CONSOLIDATED BALANCE SHEETS
              (amounts in thousands, except per share amounts)



                                                   June 30,    December 31,
                                                     2013          2012
                                                 ------------  ------------
Assets                                            (Unaudited)
Current assets
  Cash and cash equivalents                      $        790  $      1,799
  Accounts receivable, net of allowance for
   uncollectibles - $463 and $638, respectively         2,892         3,320
  Prepaid income taxes                                  1,667         1,222
  Deferred income taxes                                   268           268
  Other current assets                                  1,682         1,844
                                                 ------------  ------------
Total current assets                                    7,299         8,453
                                                 ------------  ------------

  Property, plant and equipment, net                   15,535        16,446
  Seat licenses, net                                    1,727         1,514
  Intangible assets, net                                6,256         6,617
  Goodwill                                              9,121         9,121
  Deferred income taxes                                   771           874
  Other assets                                            613           420
                                                 ------------  ------------

  Total assets                                   $     41,322  $     43,445
                                                 ============  ============
Liabilities and Shareholders' Equity
Current liabilities
  Short-term debt                                $     14,764  $          -
  Accounts payable                                      1,139           886
  Advance billing and payments                            390           367
  Accrued taxes                                           625           619
  Pension and postretirement benefit
   obligations, current portion                         1,089         1,089
  Accrued wages                                         1,454         1,005
  Other accrued expenses                                2,629         2,754
                                                 ------------  ------------
Total current liabilities                              22,090         6,720
                                                 ------------  ------------

  Long-term debt                                          147        14,095
  Pension and postretirement benefit obligations        7,929         8,095
                                                 ------------  ------------

  Total liabilities                                    30,166        28,910
                                                 ------------  ------------

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 issued 6,977 and 6,577
   shares, respectively                                    70            66
  Treasury stock - at cost, 830 and 818 shares,
   respectively of common stock                        (7,612)       (7,486)
  Additional paid-in capital                           12,509        11,826
  Accumulated other comprehensive loss                 (3,813)       (3,999)
  Retained earnings                                     9,502        13,628
                                                 ------------  ------------

  Total shareholders' equity                           11,156        14,535
                                                 ------------  ------------

  Total liabilities and shareholders' equity     $     41,322  $     43,445
                                                 ============  ============




                                ALTEVA, INC.
              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Unaudited)
                           (amounts in thousands)


                                                  Six Months Ended June 30,
                                                 --------------------------
                                                     2013          2012
                                                 ------------  ------------
CASH FLOW FROM OPERATING ACTIVITIES

Net loss                                         $       (793) $     (1,462)
  Adjustments to reconcile net loss to net cash
   provided (used) by operating activities:
    Depreciation and amortization                       1,963         2,575
    Write off of deferred financing fees                   61             -
    Allowance (recoveries) for uncollectibles            (175)          160
    Write off obsolete inventory                           92             -
    Stock based compensation expense                      687           398
    Distribution in excess of income from equity
     investment included in net loss                   (2,839)       (1,384)
    Change in fair value of derivative liability            -           (65)
Changes in assets and liabilities:
    Trade accounts receivable                             603          (970)
    Other current assets                                 (510)         (841)
    Accounts payable                                      253          (121)
    Other accruals and liabilitites                       477          (487)
                                                 ------------  ------------

  Net cash used in operating activities                  (181)       (2,197)
                                                 ------------  ------------

CASH FLOW FROM INVESTING ACTIVITIES
    Capital expenditures                                 (414)       (1,499)
    Acquired intangibles                                  (57)            -
    Purchase of seat licenses                            (333)         (405)
    Distribution in excess of income from equity
     investment                                         2,839         3,363
                                                 ------------  ------------

  Net cash provided by investing activities             2,035         1,459
                                                 ------------  ------------


CASH FLOW FROM FINANCING ACTIVITIES
    Proceeds from borrowings                           17,593         1,725
    Repayment of borrowings                           (16,878)         (759)
    Payment of fees for acquisition of debt              (119)            -
    Payment of amount due in connection with
     business acquisition                                   -          (118)
    Purchase of treasury stock                           (126)         (111)
    Dividends (Common and Preferred)                   (3,333)       (3,144)
                                                 ------------  ------------

  Net cash used in financing activities                (2,863)       (2,407)
                                                 ------------  ------------

  Net change in cash and cash equivalents              (1,009)       (3,145)

  Cash and cash equivalents at beginning of
   period                                               1,799         4,575
                                                 ------------  ------------

  Cash and cash equivalents at end of period     $        790  $      1,430
                                                 ============  ============

Supplemental disclosure of non-cash financing
 activities:
  Capital lease obligations incurred for the
   acuisition of seat licenses                   $        101  $          -
                                                 ============  ============
  Treasury stock acquired in connection with
   cashless exercise of stock options            $          -  $        677
                                                 ============  ============






                                   ALTEVA
           RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME (LOSS)
 AS IT IS PRESENTED ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)
                           (amounts in thousands)

                                                       Three Months Ended
                                                           March 31,
                                                    -----------------------
                                                        2013        2012
                                                    ----------- -----------
Net Income (loss)                                   $        40 $      (228)
Depreciation and amortization                               961       1,296
Stock-based compensation                                    469         205
Severance related charges                                   324           -
Interest expense, net                                       178         112
Income tax expense (benefit)                                  3         (99)
                                                    ----------- -----------
Adjusted EBITDA                                     $     1,975 $     1,286
                                                    =========== ===========


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