DALLAS, Aug. 12 /PRNewswire/ -- Securus Technologies, Inc., a leading provider of inmate communications services and innovative offender and case management software design, today announced results for the second quarter ended June 30, 2009.
Highlights for Q2 2009:
- Continued good execution on EBITDA and Free Cash Flow in Q2 and YTD 2009
- On track to achieve 2009 for all 2009 financial metrics
- Highest Normalized EBITDA and Free Cash Flow in company history
- Continued progress on Project Initiatives, ahead of 2009 Budget for Q1 and Q2 2009
- Q2 to Q2 EBITDA growth of 17.6%
- Q2 to Q2 Free Cash Flow growth of 49.0%
- Q2 to Q2 EBITDA Margin increase of 26.5%
- Q2 to Q2 Free Cash Flow Margin increase of 60.0%
- Q2 to Q2 Percent Bad Debt for Classic Securus decrease of 4.2%
- Q2 to Q2 Prepaid Revenue increase of 14.9%
- Customer Service Insourcing Project on track for Q4 Phase I cutover
- Agreement executed with Archonix to provide bundled Jail Management System (JMS)and Inmate Telecom product set
- Secure Call Network (SCN) Software Upgrade completed successfully, feature set expanded
Securus Technologies, Inc.
Consolidated Financial and Operating Data
(Dollars in thousands, except per unit amounts)
For The Six Months
Q2 Q1 Q2 Ended June 30,
2009 2009 2008 2009 2008
---- ---- ---- ---- ----
Total
Revenue $92,668 $96,220 $99,773 $188,888 $197,445
Revenue -
Direct
Provisioning $80,418 $82,917 $84,727 $163,335 $169,625
Revenue -
Syscon $5,332 $6,215 $7,426 $11,547 $11,615
EBITDA $11,958 $13,140 $10,168 $25,098 $18,405
Capital
Expenditures $3,762 $2,722 $4,667 $6,484 $8,740
EBITDA less
Capital
Expenditures $8,196 $10,418 $5,501 $18,614 $9,665
Billed
Calls (000s) 30,907 33,657 34,426 64,564 69,940
Domestic
Revenue
per Call $2.83 $2.67 $2.68 $2.75 $2.66
Percent
Prepaid
Revenue -
Direct
Provisioning 55.0% 53.9% 45.4% 54.4% 45.2%
Percent Bad
Debt -
Non-Syscon 9.2% 9.4% 9.6% 9.3% 10.0%
Total
Headcount 667 688 654 667 654
Quota Carrying
Field Sales
Associates 37 39 41 37 41
Richard A. Smith, Chairman and CEO of Securus Technologies said, "We have another solid quarter of EBITDA and Free Cash Flow growth - Q2 to Q2 EBITDA growth was 17.6% and Free Cash Flow growth was 49.0% and for YTD June, EBITDA growth was 36.4% and Free Cash Flow grew 92.6% - good results for sure. This growth for both metrics is primarily due to continued good execution of our Project Initiatives - we beat our budgeted levels for both Q1 and Q2, and our forecast is to beat the budgeted levels for Q3 and Q4 as well - so nice work there by the Securus Team. We have a lot of work to do in building better processes, Associate capabilities, and execution - but our work to date is showing good results. Both Syscon revenue and Direct Provisioning revenue are lower Q2 to Q2, and YTD June 2009 versus 2008 - primarily the impact of the poor economy and new sales being pushed out and purchase decisions deferred - we saw this more clearly in our Q2 2009 results and I expect this to eventually turn around. In spite of the clear economic headwind for Core revenue - we were able to post double digit EBITDA and Free Cash Flow growth metrics - and I am proud of that."
Revenue in the second quarter totaled $92.7 million, down $3.6 million from Q1 2009 results. The sequential decline was caused by a number of factors. First quarter results have historically been our strongest quarter from a call volume perspective and we typically see a drop off in call volume and associated revenue in the remaining quarters of the year. Also, we have begun experiencing a growing negative trend in call volumes generated in existing sites. We believe the poor economic environment is the primary cause for this drop in calls. Lastly, Syscon results in Q2 2009 were negatively impacted by a poor global economy as governmental agencies are postponing decisions to make awards. Syscon revenue sequentially was $0.9 million, or 14.2% lower than the first quarter.
On an annual basis, total company revenue was $7.1 million, or 7.1% lower versus the second quarter of 2008. Direct provisioning revenue made up $4.3 million of the reduction due primarily to lower call volumes. Wholesale revenue was down $0.7 million from the second quarter of 2008 due to the ongoing trend of our wholesale partners, who also compete directly with us, to terminate our services as their underlying facility contracts expire. Syscon revenue was $2.1 million lower than the second quarter of 2008 due to lower United Kingdom revenue that we have not yet replaced with new contracted revenue elsewhere due to the poor economic environment.
Cost of service in the second quarter of 2009 was 68.8% of revenue, roughly the same as Q1 2009 but better than the 69.8% we experienced in the second quarter of 2008. The year over year improvement was driven by our improvement in bad debt expense - direct provisioning and wholesale bad debt expense dropped $0.9 million, or 9.6% from Q2 2008 levels. We also are starting to experience some favorable trends of telecom expense due to the actions we have taken over the past twelve months. Our telecom expense as a percent of domestic revenue has dropped from 10.1% in Q2 2008 to 9.2% in the most recent quarter. We have put more focus on validating the rates we pay for services as well as grooming or disconnecting network circuits that are underutilized or not required given existing traffic volumes. Lastly, our field service costs continue to run favorable to last year's run-rate by roughly 20.6% as we have focused on becoming more efficient in our operations.
Sales, general and administrative expenses for Q2 2009 were $16.9 million, $0.2 million higher than Q1 2009 but $3.0 million, or 15.1% lower than the second quarter of last year. The slight sequential increase from Q1 2009 was due primarily to Q1 results including the favorable intellectual property patent infringement settlement we recorded that lowered Q1 09 operating expense. The annual decline is due entirely to our continued focus on reducing operating expenses through our EBITDA improving initiatives.
EBITDA for the second quarter of 2009 was $12.0 million, a decrease of $1.2 million from the first quarter but $1.8 million higher than Q2 2008 reported results. The sequential decline is primarily due to seasonality, lower call volumes due to the economy, poorer Syscon results (also due to the economy), and the favorable patent settlement recorded in Q1 2009. The annual increase in EBITDA from second quarter 2008 is due primarily to the on-going completion of our EBITDA improving initiatives. EBITDA is a non-GAAP measure. Below is a schedule reconciling reported GAAP net loss to EBITDA.
Securus Technologies, Inc.
Reconciliation of Net Loss to EBITDA
(In thousands)
For The Six Months
Q2 Q1 Q2 Ended June 30,
2009 2009 2008 2009 2008
---- ---- ---- ---- ---
Net Loss $(5,673) $(5,446) $(8,533) $(11,120) $(18,479)
Interest
expense and
other, net 9,087 10,611 9,271 19,699 19,455
Income tax
expense 311 36 774 347 175
Depreciation
and
amortization 8,233 7,939 8,656 16,172 17,254
----- ----- ----- ------ ------
$11,958 $13,140 $10,168 $25,098 $18,405
EBITDA ======= ======= ======= ======= =======
Capital expenditures were $3.8 million in the second quarter versus $2.7 million in the first quarter of 2009 and $4.7 million in second quarter last year. The sequential increase is due primarily to timing of infrastructure spending. On a year-to-date basis, capital expenditures are $6.5 million through June 2009 versus $8.7 million spent for the first six months of 2008. The 25.8% decline is due primarily to lower signing bonuses offered on newly acquired or renewed contracts as well as lower moves, adds and changes (MACs) capital spending being required in 2009.
Net loss for the second quarter of 2009 was $5.7 million, roughly flat with Q1 2009 but $2.9 million better than the second quarter of 2008. The improvement in net loss is due primarily to operating improvements we are making to the business.
Cash and restricted cash at June 30, 2009 was $13.2 million, a $5.0 million increase from December 31, 2008. As of June 30, 2009, the Company had an additional $11.1 million of working capital availability under its revolving credit facility.
Investor Call
Management is holding an investor conference call on Thursday, August 13 at 10:00 a.m. (CDT) to discuss quarterly results. Investors are invited to participate. Details of the conference call are as follows:
Call Date: August 13, 2009
Call Time: 10:00 a.m. CDT
US Dial in: 800-762-8779
International Dial in: +1 480-629-9770
Conference ID: 4118256
Replay details are as follows:
------------------------------
Replay Dates: August 13, 2009 - September 12, 2009
Replay available at: 1:00 p.m. CDT
US Replay Dial in: 800-406-7325
International Dial in: +1 303-590-3030
Replay Passcode: 4118256
About Securus Technologies, Inc.
Securus Technologies, Inc. is one of the largest suppliers of detainee communications and information management solutions, serving approximately 2,300 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 Carrollton and Allen, TX and Atlanta, GA. For more information please visit the Securus website at www.securustech.net.
Syscon Holdings, Ltd., our wholly-owned subsidiary headquartered in Vancouver, British Columbia, 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 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. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share amounts)
December 31, June 30,
2008 2009
---- ----
ASSETS (Unaudited)
Cash and cash
equivalents $6,576 $11,837
Restricted cash 1,599 1,349
Accounts receivable, net 45,316 39,549
Prepaid expenses 6,116 5,527
Current deferred income taxes 1,973 1,981
----- -----
Total current assets 61,580 60,243
Property and equipment, net 35,364 30,666
Intangibles and other assets, net 98,550 92,912
Goodwill 63,468 64,656
------ ------
Total assets $258,962 $248,477
======== ========
LIABILITIES , REEDEMABLE
CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT
Accounts payable $14,743 $11,054
Accrued liabilities 44,371 36,376
Deferred revenue and
customer advances 15,069 15,514
Current deferred income taxes 817 699
--- ---
Total current
liabilities 75,000 63,643
Deferred income taxes 10,893 11,539
Long-term debt 288,341 298,436
Other long-term liabilities 2,238 2,428
----- -----
Total liabilities 376,472 376,046
Commitments and contingencies
Series A redeemable convertible
preferred stock, $2,253 stated value,
total redemption value $11,489 and
$12,207 at December 31, 2008 and June
30, 2009; 5,100 shares authorized
and outstanding at December 31, 2008
and June 30, 2009 11,321 12,070
Stockholders' deficit:
Common stock, $0.001 par value;
1,355,000 and 1,675,000 shares
authorized at December 31, 2008
and June 30, 2009; 161,037
and 157,911 shares issued and
outstanding at December 31, 2008
and June 30, 2009 8 8
Additional paid-in capital 34,304 33,555
Accumulated other
comprehensive loss (2,701) (1,640)
Accumulated deficit (160,442) (171,562)
-------- --------
Total stockholders' deficit (128,831) (139,639)
-------- --------
Total liabilities, redeemable
convertible preferred stock and
stockholders' deficit $258,962 $248,477
======== ========
SECURUS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2008 and 2009
(Dollars in thousands)
For The Three Months For The Six Months
Ended June 30, Ended June 30,
2008 2009 2008 2009
-------------------- -------------------
(Unaudited) (Unaudited)
Revenue:
Direct
call
provisioning $84,727 $80,418 $169,625 $163,335
Offender
management
software 7,426 5,332 11,615 11,547
Wholesale
services 7,620 6,918 16,205 14,006
----- ----- ------ ------
Total
revenue 99,773 92,668 197,445 188,888
Cost of
service
(exclusive
of depreciation
and amortization
shown separately
below):
Direct call
provisioning,
exclusive
of bad debt
expense 55,028 50,761 110,086 103,247
Direct
call
provisioning
bad debt
expense 6,876 6,638 14,239 13,820
Offender
management
software
expense 4,014 2,468 6,679 5,375
Wholesale
services
expense 3,746 3,921 8,032 7,691
----- ----- ----- -----
Total
cost of
service 69,664 63,788 139,036 130,133
Selling,
general and
administrative
expense 19,941 16,922 39,780 33,657
Restructuring
costs - - 224 -
Depreciation and
amortization 8,656 8,233 17,254 16,172
----- ----- ------ ------
Total
operating
costs and
expenses 98,261 88,943 196,294 179,962
------ ------ ------- -------
Operating
income 1,512 3,725 1,151 8,926
Interest and
other expenses,
net 9,271 9,087 19,455 19,699
----- ----- ------ ------
Loss before
income
taxes (7,759) (5,362) (18,304) (10,773)
Income tax
expense 774 311 175 347
--- --- --- ---
Net loss (8,533) (5,673) (18,479) (11,120)
Accrued dividends
on redeemable
convertible
preferred stock (335) (415) (683) (749)
---- ---- ---- ----
Net loss
available to
common
stockholders $(8,868) $(6,088) $(19,162) $(11,869)
======= ======= ======== ========
SECURUS TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2008 and 2009
(Dollars in thousands)
June 30, June 30,
2008 2009
---- ----
(Unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(18,479) $(11,120)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation and
amortization 17,254 16,172
Amortization of fair value
of contracts acquired 1,829 -
Deferred income taxes (294) 331
Conversion of interest
paid "in kind" to senior
subordinated notes 6,063 7,161
Amortization of deferred
financing costs and debt
discounts 1,623 2,029
Other operating
activities, net 18 (16)
Changes in operating
assets and liabilities:
Restricted cash (25) 252
Accounts receivable 5,906 6,147
Prepaid expenses and other
current assets (1,627) 631
Other assets (64) (145)
Accounts payable (6,256) (2,321)
Accrued liabilities (2,729) (7,726)
------ ------
Net cash provided by
operating activities $3,219 $11,395
------ -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and
equipment and intangible assets $(8,740) $(6,484)
Proceeds from sale of
asset - 100
--- ---
Net cash used in investing activities $(8,740) $(6,384)
------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net advances on revolving
credit facility $4,893 $2,436
Change in cash overdraft 3,233 (1,474)
Debt issuance costs - (77)
Advance payment to related
party (900) -
---- ---
Net cash provided by
financing activities $7,226 $885
------ ----
Effect of exchange rates
on cash and cash equivalents 528 (635)
Increase in cash and cash
equivalents $2,233 $5,261
Cash and cash equivalents
at the beginning of the period 2,072 6,576
----- -----
Cash and cash equivalents
at the end of the period $4,305 $11,837
====== =======
SUPPLEMENTAL DISCLOSURES:
Cash paid during period for:
Interest $11,019 $11,426
======= =======
Income taxes $780 $965
==== ====
NONCASH FINANCING AND INVESTING
ACTIVITIES:
Leasehold improvements $- $155
=== ====
