USA Mobility, Inc. Q1 2010 Earnings Call Transcript

USA Mobility, Inc. Q1 2010 Earnings Call Transcript
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USA Mobility, Inc. (USMO)

Q1 2010 Earnings Call Transcript

May 6, 2010 10:00 am ET


Vince Kelly – President and CEO

Tom Schilling – COO and CFO



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Thank you for standing by, everyone and welcome to this USA Mobility's first quarter investor conference call. Just a quick reminder, today's call is being recorded. Online today, we have Vince Kelly, President and CEO and Tom Schilling, Chief Operating Officer and CFO.

At this time, for opening comments, I would like to turn the call over to Mr. Kelly. Please go ahead, sir.

Vince Kelly

Good morning. Thank you for joining us for our first quarter investor update. Before we discuss our operating results, I wanted to remind everyone that today's conference call may include forward-looking statements that are subject to risks and uncertainties related to USA Mobility's future financial and business performance. Such statements may include estimates of revenue, expenses and income, as well as other predictive statements or plans, which are dependent upon future events or conditions.

These statements represent the company's estimates only on the date of this conference call and are not intended to give any assurance as to actual future results. USA Mobility's actual results could differ materially from those anticipated in these forward-looking statements. Although these statements are based upon assumptions that the company believes to be reasonable, they are subject to risks and uncertainties.

Please review the risk factor section relating to our operations and the business environment in which we compete contained in our 2009 Form 10-K, our first quarter Form 10-Q and related company documents filed with the Securities and Exchange Commission. Please note that USA Mobility assumes no obligation to update any forward-looking statements from past or present filings and conference calls.

Let me begin by highlighting what we believe was an extraordinarily successful first quarter for USA Mobility. Despite a still sluggish economy, high jobless rates nationwide and continued migration of customers to alternative wireless services, we ended the quarter ahead of our key operating goals for subscribers, total revenue, average revenue per unit or ARPU, operating expenses and operating cash flow. At the same time, we were able to maintain cash flow margins, operate profitably with a low cost operating structure and once again return capital to our stockholders.

Tom will discuss our financial results in more detail in a few minutes, but first I want to point out just a few of the key accomplishments we achieved during the quarter.

Number one, subscriber and revenue trends showed significant improvement in the first quarter as the economic recovery gained momentum and unemployment rates began to stabilize. Our annual rate of subscriber erosion for the first quarter of 2010 was the lowest in 15 months, while our quarterly lost rate was the best in more than two years.

Number two, we are very pleased with the progress we made in reducing operating expenses in the first quarter. Excluding depreciation, amortization and accretion, operating expenses declined 20% over the past year and are down nearly 40% from two years ago.

Number three, the slowdown in revenue erosion and continued cost management resulted in an increase in earnings before interest, taxes, depreciation, amortization and accretion or EBITDA, for the first quarter. It also allowed us to maintain and very strong EBITDA margin of 35%.

Number four, most importantly, for stockholders we continue to meet our goal of generating sufficient free cash flow during the first quarter to return capital to stockholders, consistent with our capital allocation strategy. We have produced $17.9 million in cash from operations in the first quarter, allowing us to pay a regular quarterly cash distribution of $0.25 per share on March 31, 2010.

In addition, our Board of Directors, yesterday, declared a regular quarterly cash distribution of $0.25 per share to be paid on June 25, 2010.

Number five, we've purchased 364,407 shares of the company's common stock during the first quarter under our stock repurchase program that commenced in August of 2008. As of April 1st, approximately $20.4 million remain available for purchases under the currently approved plan.

Overall, we are very pleased with our results for the first quarter and I believe we're well positioned for a solid year in 2010.

At this point, I'll ask Tom Schilling, our COO and CFO, to review our first quarter financial results and provide additional comments on our recent operating performance. Tom?

Tom Schilling

Thanks, Vince and good morning. As Vince mentioned, we're very pleased with the company's first quarter results, which are in line with our previously announced financial guidance.

Continued reductions in operating expense combined with reduced customer churn and an increase in ARPU contributed to strong cash flows and a higher EBITDA margin for the quarter.

We're especially pleased with the improvement in subscriber trends during the quarter, which had deteriorated significantly for most of 2009, as a result of the weak economy and sharp increase in unemployment.

We ended the quarter with 2,099,000 subscribers, a net decrease of 83,000 units during the quarter, compared to a decline of 115,000 units in the prior quarter and 208,000 units in the year earlier quarter. The quarterly rate of subscriber loss improved to 3.8% from 5% in the fourth quarter and 7.4% in the year earlier quarter.

Our annual rate of net unit loss improved to 19.5% compared to 22.5% in the fourth quarter and 21.8% in the year earlier quarter. Total growth placements increased to 76,000 in the first quarter from 68,000 in the fourth quarter, while disconnects declined to 159,000 from 183,000 in the prior quarter.

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