DALLAS, March 27 /PRNewswire/ -- Securus Technologies, Inc., a leading provider of inmate communications services and innovative offender and case management software design, today announced results for the fourth quarter and year ended December 31, 2008.
Highlights for Q4 and Full Year 2008: -- Continued Substantial Operational and Financial Metric Improvements -- Q4 to Q4 Core (Direct and Syscon) Revenue Increase of 6.2% -- Q4 to Q4 Syscon Revenue Increase of 94.4% -- Q4 to Q4 EBITDA Increase of 26.5% -- Q4 to Q4 Free Cash Flow Increase of 73.7% -- Q4 to Q4 Levered Free Cash Flow Increase of 81.0% -- Q4 to Q4 Bad Debt Decrease of 39.1% -- 2008 versus 2007 Proforma Syscon Revenue Increase of 28.1% -- 2008 versus 2007 Proforma EBITDA Increase of 37.2% -- 2008 versus 2007 Proforma Free Cash Flow Increase of 173.1% -- 2008 versus 2007 Proforma Levered Free Cash Flow Increase of 118.4% -- 2008 versus 2007 Bad Debt Decrease of 38.2% -- Executive Additions - Increased bandwidth, history of achieving results, Larry Ehlers - VP of Software Development and Applications.
"2008 was a year in which we made significant strides at improving our financial and operating performance," stated Richard A. Smith, Securus' Chief Executive Officer and President. "The 37.2% annual increase in Proforma EBITDA and 173.1% improvement in Proforma Free Cash Flow versus 2007 reflects our on-going commitment to deliver on the EBITDA improving initiatives we started in 2008 and which we will continue to implement over the next several years. We continue to enhance the executive management team with the recent addition of Larry Ehlers, our new Vice President of Software Development and Applications. I have worked previously with Larry Ehlers and I know he will deliver good results. Although 2009 will be challenging for us given the current economic conditions facing the United States and the world, I like the initiatives that we have documented and the ways that we can grow EBITDA and cash flow. One of these initiatives is our plan to construct a sophisticated customer service call center that will handle all of our customer's needs on a domestic basis. This action will significantly improve customer satisfaction of the friends and families of inmates who use our calling services. We also believe this action will help drive more calling revenue by making it easier for our friends and family customers to fund prepaid calling accounts. We plan to spend incremental capital in 2009 to bring additional products and features to our correctional facility customers, as well as to enhance the reliability, redundancy and call throughput of our packet-based network. We have a dedicated team of Associates (a.k.a. employees) at Securus that will extend the positive momentum that we started in 2008--and I am looking forward to see what we can accomplish in 2009."
The following table highlights financial and operating results: Securus Technologies, Inc. Consolidated Financial and Operating Data (Dollars in Thousands, Except Per Unit Amounts) Q4 Q3 Q4 2008 2008 2007 Total Revenue $95,364 $95,794 $93,441 Revenue - Direct Provisioning $82,278 $81,661 $80,111 Revenue - Syscon (1) $6,095 $7,427 $3,135 EBITDA $10,641 $12,723 $8,411 Capital Expenditures $3,686 $4,620 $4,408 EBITDA less Capital Expenditures $6,955 $8,103 $4,003 Billed Calls 34,003 34,061 34,126 Domestic Revenue per Call $2.63 $2.59 $2.65 Percent Prepaid Revenue - Direct Provisioning 48.6% 46.8% 39.2% Percent Bad Debt - Non-Syscon 8.0% 8.5% 12.9% Total Headcount 654 652 709 Quota Carrying Field Sales Associates 41 41 46 For The Twelve Months Ended December 31, Proforma 2008 2007 2007 (1) Total Revenue $388,603 $391,850 $403,540 Revenue - Direct Provisioning $333,564 $338,703 $338,703 Revenue - Syscon (1) $25,137 $7,933 $19,623 EBITDA $41,768 $30,053 $30,440 Capital Expenditures $17,046 $21,356 $21,389 EBITDA less Capital Expenditures $24,722 $8,697 $9,051 Billed Calls 137,903 144,494 144,494 Domestic Revenue per Call $$2.64 $2.66 $2.66 Percent Prepaid Revenue - Direct Provisioning 46.4% 35.2% 35.2% Percent Bad Debt - Non-Syscon 9.1% 13.6% 13.6% Total Headcount 654 709 709 Quota Carrying Field Sales Associates 41 46 46 (1) Syscon Justice Systems, Ltd. was acquired on June 29, 2007.
Total revenues for the fourth quarter of 2008 were $95.4 million, a decrease $0.4 million from the third quarter of 2008 but $1.9 million higher than the fourth quarter of 2007. The small sequential decline in the fourth quarter is partly due to the attrition of our wholesale business, lower Syscon revenue due in part to seasonality, and the poor economic conditions that became more pronounced in the last two months of the quarter. The year-over-year quarterly revenue growth is due entirely to the 6.2% growth of our "core" business segments - Direct Provisioning and Syscon.
EBITDA for the fourth quarter of 2008 was $10.6 million, $2.1 million lower than the third quarter but $2.2 million higher than Q4 2007. We recorded approximately $2.5 million of one-time benefits in Q3 2008, so if you were to normalize for this, Q4 EBITDA results would have been roughly $0.4 million higher sequentially. The growth in EBITDA from Q4 2007 is due primarily to the EBITDA improvement initiatives we implemented in 2008, improvement in our bad debt levels due in part to a higher proportion prepaid calling, as well as the improved financial performance at Syscon. EBITDA is a non-GAAP measure. Below is a schedule reconciling reported GAAP net loss to EBITDA.
Securus Technologies, Inc. Consolidated Net Loss to EBITDA Reconciliation (In Thousands) For The Twelve Months Q4 Q3 Q4 Ended December 31, 2008 2008 2007 2008 2007 Net Loss $(8,901) $(6,638) $(11,172) $(34,019) $(40,404) Interest expense and other, net 12,303 10,137 8,956 41,896 31,487 Income taxes (benefit) (1,035) 351 1,074 (509) 1,922 Depreciation and amortization 8,274 8,873 9,553 34,400 37,048 EBITDA $10,641 $12,723 $8,411 $41,768 $30,053
Capital expenditures in the fourth quarter were $3.7 million, $0.9 million and $0.7 million lower than Q3 2008 and Q4 2007, respectively. Our capital expenditures in 2008 were approximately 20% lower than 2007 due to better management of upfront customer acquisition capital in 2008 as well as incremental capital spent on 2007 deployment of our packet-based architecture.
Net loss for the fourth quarter of 2008 was $8.9 million, a reduction of $2.3 million from the third quarter of 2008 but $2.3M better than the fourth quarter of 2007. The sequential decline is due primarily to the net one-time favorable benefits we recorded in the third quarter of 2008. The improvement in net loss from 2007 was driven by the EBITDA initiatives we worked on in 2008, lower bad debt, higher prepaid calling penetration, and better performance at Syscon.
Cash and equivalents, excluding of restricted cash, at December 31, 2008 was $6.6 million and the total cash available to the Company at the end of 2008, including our revolver, was roughly $20 million. The company was in full compliance with all of its debt covenants for each quarter in 2008.
Investor Call
Management is holding an investor conference call on Monday, March 30, 2009 at 10:00 a.m. (CT) to discuss fourth quarter and year-end 2008 results. Investors are invited to participate by calling:
US Dial in: 800-762-8779 International Dial in: 1-480-248-5081 Passcode: 4023484 Replay details are as follows: Replay Dates: March 30, 2009 - April 29, 2009 Replay available at: 1:00 p.m. CDT US Replay Dial in: 800-406-7325 International Dial in: 303-590-3030 Replay Passcode: 4023484 About Securus Technologies, Inc.
Securus Technologies, Inc. is one of the largest suppliers of inmate communications and information management solutions, serving approximately 2,600 correctional facilities nationwide. A recognized leader in providing comprehensive, innovative technical solutions and responsive customer service, Securus' sole focus is the specialized needs of the corrections and law enforcement communities. Securus is headquartered in Dallas, TX, with regional offices in Bedford, MA; Raleigh, NC; Carrollton and Allen, TX; and Atlanta, GA. For more information please visit the Securus website at http://www.securustech.net/
Syscon Holdings, Ltd., our wholly-owned subsidiary, is a world leader in innovative Offender and Case Management Software design and delivery. Syscon's Elite and Exact systems offer management functionality from booking and legal documentation through trust accounting, commissary, and medical records to the management of parole and other forms of community supervision. Syscon's systems have been implemented in many States and large Counties across North America, in Australia and in England. Syscon solutions help manage more than 300,000 inmates and former inmates every day. For more information about Syscon, please visit http://www.syscon.net/.
Special Note Regarding Forward-Looking Statements
The foregoing release contains statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are only predictions and are not guarantees of future performance. Investors are cautioned that any such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations and business environment of Securus Technologies, Inc. that may cause the actual results to be materially different from any future results expressed or implied in such forward-looking statements. Securus assumes no obligation to update the information contained in this press release.
SECURUS TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share and per share amounts) December 31, December 31, 2007 2008 ASSETS Cash and cash equivalents $2,072 $6,576 Restricted cash 1,535 1,599 Accounts receivable, net 50,788 45,316 Prepaid expenses 5,437 6,116 Current deferred income taxes 3,034 1,973 Total current assets 62,866 61,580 Property and equipment, net 40,797 35,364 Intangibles and other assets, net 119,427 98,550 Goodwill 69,035 63,468 Total assets $292,125 $258,962 LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT Accounts payable $28,161 $14,743 Due to related party 1,000 - Accrued liabilities 40,188 44,371 Deferred revenue and customer Advances 16,674 15,069 Current deferred income taxes 1,261 817 Total current liabilities 87,284 75,000 Deferred income taxes 15,352 10,893 Due to related party, net 3,510 - Long-term debt 263,276 288,341 Other long-term liabilities 1,593 2,238 Total liabilities 371,015 376,472 Commitments and contingencies Series A redeemable convertible preferred stock, $2,000 stated value, total redemption value $10,200 and $11,489 at December 31, 2007 and December 31, 2008; 5,100 shares authorized and outstanding at December 31, 2007 and 2008. 9,971 11,321 Stockholders' deficit: Common stock, $0.001 stated value; 1,290,000 and 1,355,000 shares authorized at December 31, 2007 and 2008; 677 and 161,037 shares issued and outstanding at December 31, 2007 and 2008, respectively. 7 8 Additional paid-in capital 35,620 34,304 Accumulated other comprehensive income (loss) 1,935 (2,701) Accumulated deficit (126,423) (160,442) Total stockholders' deficit (88,861) (128,831) Total liabilities, redeemable convertible preferred stock and stockholders' deficit $292,125 $258,962 SECURUS TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2006, 2007 and 2008 (Dollars in thousands) December 31, December 31, December 31, 2006 2007 2008 Revenue: Direct call provisioning $341,237 $338,703 $333,564 Offender management software - 7,933 25,137 Wholesale services 60,660 45,214 29,902 Total revenue 401,897 391,850 388,603 Cost of service (exclusive of depreciation and amortization shown separately below): Direct call provisioning, exclusive of bad debt expense 227,375 229,680 229,456 Direct call provisioning bad debt expense 40,830 37,776 25,889 Offender management software expense - 6,110 13,540 Wholesale services expense 41,894 29,197 18,219 Total cost of service 310,099 302,763 287,104 Selling, general and administrative expenses 52,387 58,420 59,507 Restructuring costs - 614 224 Depreciation and amortization 30,258 37,048 34,400 Total operating costs and expenses 392,744 398,845 381,235 Operating income (loss) 9,153 (6,995) 7,368 Interest and other expenses, net 27,811 31,487 41,896 Loss before income taxes (18,658) (38,482) (34,528) Income tax expense (benefit) 1,461 1,922 (509) Net loss (20,119) (40,404) (34,019) Accrued dividends on redeemable convertible preferred stock - - (1,351) Net loss available to common stockholders $(20,119) $(40,404) $(35,370) SECURUS TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2006, 2007, and 2008 (Dollars in thousands) For the Year Ended 2006 2007 2008 CASH FLOWS FROM OPERATING ACTIVITIES FROM CONTINUING OPERATIONS: Net loss from continuing operations $(20,119) $(40,404) $(34,019) Adjustments to reconcile net loss to net cash provided by operating activities from continuing operations: Depreciation and amortization 30,258 37,048 34,400 Amortization of fair value of contracts acquired - 1,360 3,489 Deferred income taxes 1,123 922 (2,365) Conversion of interest paid "in kind" to secured subordinated notes 9,011 10,678 12,650 Amortization of deferred financing costs and debt discounts 1,550 2,251 3,542 Other operating activities, net (241) 169 (25) Changes in operating assets and liabilities, net of effects of acquisitions: Restricted cash (65) (74) (68) Accounts receivable (994) 20,459 3,813 Prepaid expenses and other current assets 596 191 (862) Other assets (727) 376 654 Accounts payable (6,630) (11,251) (9,057) Accrued liabilities 5,318 (1,266) 5,254 Net cash provided by operating activities from continuing operations $19,080 $20,459 $17,406 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment and intangible assets $(27,176) $(21,356) $(17,046) Cash consideration paid for acquired business - (43,717) - Dividends received from unconsolidated affiliate 50 - - Proceeds from sale of unconsolidated affiliate - 985 - Property insurance proceeds - 88 - Net cash used in investing activities $(27,126) $(64,000) $(17,046) SECURUS TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) For the Years Ended December 31, 2006, 2007 and 2008 (Dollars in thousands) For the Year Ended December 31, 2006 2007 2008 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of second-priority senior secured notes $- $39,060 $- Cash overdraft 2,856 (3,958) (4,151) Net advances on revolving credit facility 3,225 1,775 11,511 Debt issuance costs - (4,853) (1,757) Proceeds (payments) related to loan payable to related party, net - 4,510 (4,510) Payments on other debt (108) - - Proceeds from issuance of common stock 1 1 1 Proceeds from issuance of Series A preferred stock - 10,200 - Series A preferred stock issuance costs - (229) - Net cash provided by financing activities $5,974 $46,506 $1,094 Effect of exchange rates on cash and cash equivalents - (1,451) 3,050 Increase (decrease) in cash and equivalents $(2,072) $1,514 $4,504 Cash and cash equivalents at beginning of period 2,630 558 2,072 Cash and cash equivalents at end of period $558 $2,072 $6,576 SUPPLEMENTAL DISCLOSURES: Cash paid during the period for: Interest $17,483 $18,715 $22,207 Income taxes $266 $239 $846 NONCASH FINANCING AND INVESTING ACTIVITIES: Non-cash consent fee $- $400 $- Leasehold improvements $- $- $710
