West Corporation Reports Third Quarter 2013 Result

OMAHA, Neb., Oct. 28, 2013 (GLOBE NEWSWIRE) -- West Corporation (Nasdaq: WSTC ), a leading provider of technology-driven communication services, today announced its third quarter 2013 results.

Key Quarterly Highlights:

"West Corporation continued to drive strong profitability during the third quarter," said Tom Barker, CEO.  "We grew Adjusted EBITDA and Adjusted Net Income during the quarter and our free cash flow generation remains robust, growing by nearly 21 percent through the first nine months of the year."

Dividend

The Company today also announced a $0.225 per common share quarterly dividend.  The dividend is payable November 18, 2013, to shareholders of record as of the close of business on November 8, 2013. 

Consolidated Operating Results

For the third quarter of 2013, revenue was $665.4 million compared to $656.9 million for the same quarter of the previous year, an increase of 1.3 percent. 

The Unified Communications segment had revenue of $370.8 million in the third quarter of 2013, an increase of 3.3 percent over the same quarter of the previous year. The Communication Services segment had revenue of $306.2 million in the third quarter of 2013, 1.8 percent higher than the third quarter of 2012. The Company's platform-based businesses ¹ had revenue of $483.0 million in the third quarter of 2013, an increase of 2.2 percent over the same quarter of the previous year. 

Adjusted EBITDA ² for the third quarter of 2013 was $174.8 million, or 26.3 percent of revenue, compared to $168.2 million, or 25.6 percent of revenue, for the third quarter of 2012, an increase of 3.9 percent. EBITDA was $171.5 million in the third quarter of 2013 compared to $154.1 million in the third quarter of 2012, an increase of 11.3 percent. 

Adjusted Operating Income ² for the third quarter of 2013 was $140.6 million, or 21.1 percent of revenue, compared to $148.4 million, or 22.6 percent of revenue in the same quarter of 2012, a decrease of 5.2 percent. Operating Income was $123.4 million in the third quarter of 2013 compared to $117.3 million in the third quarter of 2012, an increase of 5.2 percent. 

Adjusted Net Income ² was $59.7 million in the third quarter of 2013, an increase of 33.2 percent from the same quarter of 2012.  Net Income was $46.1 million in the third quarter of 2013, compared to $22.1 million in the same quarter of 2012. The improvement in profitability was driven by lower share-based compensation, deleveraging, a lower cost of debt and operating leverage. 

Balance Sheet, Cash Flow and Liquidity

At September 30, 2013, West Corporation had cash and cash equivalents totaling $211.0 million and working capital of $349.0 million. Interest expense was $51.3 million during the three months ended September 30, 2013 compared to $69.2 million during the comparable period last year.  

The Company's net debt to pro forma Adjusted EBITDA ratio, as calculated pursuant to the Company's senior secured term debt facilities, was 4.60x at September 30, 2013.

"Our cash flow generation continued at a strong pace for the nine months ended September 30, 2013. In the third quarter we realized the full effect of our debt reduction and lower interest rates from financing activities completed during the first half of the year," said Paul Mendlik, CFO. "During the third quarter, we repaid $35 million of debt outstanding on our revolving trade accounts receivable financing facility. We also completed an amendment to that facility which increased the line of credit to $185 million and extended the maturity to June 2018, providing West Corporation with increased financial flexibility."

Cash Flows from Operations were $276.7 million for the nine months ended September 30, 2013 compared to $243.9 million in the period last year. Free Cash Flow ^2,4 increased to $188.7 million in the year-to-date period of 2013 compared to $156.1 million in the same period of 2012. 

During the third quarter of 2013, the Company invested $29.4 million, or 4.4 percent of revenues, in capital expenditures primarily for software and computer equipment. 

2013 Guidance Update

The Company has updated some of its guidance ranges for the year ending December 31, 2013 in the table below. The Company is reiterating the previous guidance provided for all other metrics. This revised guidance assumes no acquisitions or changes in the current operating environment, no additional capital structure changes and foreign currency exchange rates used in its previous guidance. 

"Organic revenue growth for the year has been more challenging than we anticipated," said Tom Barker. "Despite reduced revenue expectations, we anticipate strong profitability and cash flows. The midpoint of our Free Cash Flow guidance has been increased by $25 million."

Conference Call

The Company will hold a conference call to discuss these topics on Tuesday, October 29, 2013 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 be available on the Company's website at www.west.com .

About West Corporation

West Corporation (Nasdaq: WSTC ) is a leading provider of technology-driven communication services. West offers its clients a broad range of communications and network infrastructure solutions that help them manage or support critical communications. West's customer contact solutions and conferencing services are designed to improve its clients' cost structure and provide reliable, high-quality services. West also provides mission-critical services, such as public safety and emergency communications.

Founded in 1986 and headquartered in Omaha, Nebraska, West serves Fortune 1000 companies and other clients in a variety of industries, including telecommunications, retail, financial services, public safety, technology and healthcare. West has sales and operations in the United States, Canada, Europe, the Middle East, Asia Pacific and Latin America. For more information on West Corporation, please call 1-800-841-9000 or 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. The statements contained in the 2013 guidance update are forward-looking statements. 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, but are not limited to, competition in West's highly competitive industries; increases in the cost of voice and data services or significant interruptions in these services; West's ability to keep pace with its clients' needs for rapid technological change and systems availability; the continued deployment and adoption of emerging technologies; the loss, financial difficulties or bankruptcy of any key clients; security and privacy breaches of the systems West uses to protect personal data; the effects of global economic trends on the businesses of West's clients; the non-exclusive nature of West's client contracts and the absence of revenue commitments; the cost of pending and future litigation; the cost of defending West against intellectual property infringement claims; extensive regulation affecting many of West's businesses; West's ability to protect its proprietary information or technology; service interruptions to West's data and operation centers; West's ability to retain key personnel and attract a sufficient number of qualified employees; increases in labor costs and turnover rates; the political, economic and other conditions in the countries where West operates; changes in foreign exchange rates; West's ability to complete future acquisitions and integrate or achieve the objectives of its recent and future acquisitions; future impairments of our substantial goodwill, intangible assets, or other long-lived assets; and West's ability to recover consumer receivables on behalf of its clients. In addition, West is subject to risks related to its level of indebtedness. Such risks include West's ability to generate sufficient cash to service its indebtedness and fund its other liquidity needs; West's ability to comply with covenants contained in its debt instruments; the ability to obtain additional financing; the incurrence of significant additional indebtedness by West and its subsidiaries; and the ability of West's lenders to fulfill their lending commitments. West is also subject to other risk factors described in documents filed by the company with the United States Securities and Exchange Commission. 

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, except to the extent required by applicable law.

Reconciliation of Non-GAAP Financial Measures

Adjusted Operating Income Reconciliation

Adjusted Operating Income is not a measure of financial performance under generally accepted accounting principles ("GAAP"). The Company believes Adjusted Operating Income provides a relevant measure of operating profitability and a useful basis for evaluating the ongoing operations of the Company. Adjusted Operating Income is used by the Company to assess Operating Income before the impact of IPO-related expenses, expenses terminated in connection with the IPO and non-cash items. Adjusted Operating Income should not be considered in isolation or as a substitute for Operating Income or other profitability data prepared in accordance with GAAP. Adjusted Operating Income, as presented, may not be comparable to similarly titled measures of other companies. Set forth below is a reconciliation of Adjusted Operating Income to Operating Income. 

Adjusted Net Income, Adjusted EPS, Pro forma Adjusted Net Income and Pro forma Adjusted EPS Reconciliation

Adjusted Net Income, Adjusted EPS, Pro forma Adjusted Net Income and Pro forma Adjusted EPS are non-GAAP measures. The Company believes these measures provide a useful indication of profitability and basis for assessing the operations of the Company without the impact of IPO-related expenses, expenses terminated in connection with the IPO, bond redemption premiums, M&A and acquisition related costs, the expiration of an earn-out payment obligation related to an acquisition and non-cash items. 

Adjusted Net Income should not be considered in isolation or as a substitute for Net Income or other profitability metrics prepared in accordance with GAAP. Adjusted Net Income, as presented, may not be comparable to similarly titled measures of other companies. 

Pro forma Adjusted Net Income represents Adjusted Net Income after giving effect to pro forma adjusted interest expense. Pro forma adjusted interest expense reflects the impact of lower debt balances and lower interest rates post IPO. This includes the pro forma savings for the full periods from the redemption of the $450 million senior subordinated notes and the pricing amendment to the senior secured term loan facilities as if these transactions had been completed January 1, 2013. Pro forma results also present shares outstanding as if the Company's IPO had been completed January 1, 2013.

Set forth below is a reconciliation of Adjusted Net Income and Pro forma Net Income to Net Income. 

Free Cash Flow Reconciliation

The Company believes Free Cash Flow provides a relevant measure of liquidity and a useful basis for assessing the Company's ability to fund its activities, including the financing of acquisitions, debt service, stock repurchases and distribution of earnings to shareholders. Free Cash Flow is calculated as Cash Flows from Operations less cash Capital Expenditures. Free Cash Flow is not a measure of financial performance under GAAP. Free Cash Flow should not be considered in isolation or as a substitute for Cash Flows from Operations or other liquidity measures prepared in accordance with GAAP. Free Cash Flow, as presented, may not be comparable to similarly titled measures of other companies. Set forth below is a reconciliation of Free Cash Flow to Cash Flows from Operations.

EBITDA and Adjusted EBITDA Reconciliation

The common definition of EBITDA is "Earnings Before Interest Expense, Taxes, Depreciation and Amortization." In evaluating liquidity and performance, the Company uses earnings before interest expense, share based compensation, taxes, depreciation and amortization, and one-time IPO-related expenses, or "Adjusted EBITDA." EBITDA and Adjusted EBITDA are not measures of financial performance or liquidity under GAAP. EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for Net Income, Cash Flows from Operations or other income or cash flows data prepared in accordance with GAAP. EBITDA and Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. EBITDA and Adjusted EBITDA are used by certain investors as measures to assess the Company's ability to service debt. Adjusted EBITDA is also used in the Company's debt covenants, although the precise adjustments used to calculate Adjusted EBITDA included in the Company's credit facility and indentures vary in certain respects among such agreements and from those presented below. Certain adjustments to Adjusted EBITDA were excluded from the calculations below consistent with the adjustments made for Adjusted Operating Income and Adjusted Net Income. Set forth below is a reconciliation of EBITDA and Adjusted EBITDA to Cash Flows from Operations and Net Income. 

^{____________________________________
1}  Platform-based businesses include the Unified Communications segment, Intrado, West Interactive and HyperCube.
²  See Reconciliation of Non-GAAP Financial Measures below.
³ Reflects the impact of post-IPO reduced debt balances and lower interest rates resulting from the Company's pricing amendments to its senior secured term loan facilities and redemption of the $450 million senior subordinated notes as if these transactions had been completed on January 1, 2013. Pro forma results also present shares outstanding as if the Company's IPO had been completed on January 1, 2013.
⁴ Free Cash Flow is calculated as Cash Flows from Operations less cash Capital Expenditures.
N/A: Not Applicable
NM: Not Meaningful

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