USA Mobility Management Discusses Q2 2012 Results - Earnings Call Transcript

USA Mobility (USMO)

Q2 2012 Earnings Call

July 31, 2012 10:00 am ET

Executives

Shawn E. Endsley - Chief Financial Officer and Chief Accounting Officer

Vincent D. Kelly - Chief Executive Officer, President and Director

Sean Collins

Analysts

James Altschul

Mark Phelan

Brent Morrison

Richard A. Murphy - Cross River Capital Management LLC

Presentation

Operator

Good morning, and welcome to USA Mobility Second Quarter Investor Call. Today's call is being recorded. On line today, we have Vince Kelly, President and Chief Executive Officer; Shawn Endsley, Chief Financial Officer; Kate Bolseth, Chief Operating Officer of the company's software subsidiary, Amcom Software; and Sean Collins, EVP of Selling and Marketing of Amcom. At this time, for opening comments, I will turn the call over to Mr. Endsley. Please go ahead, sir.

Shawn E. Endsley

Good morning. Thank you for joining us for our second quarter investor update. Before we discuss our operating results, I want to remind everyone that today's conference call may include forward-looking statements that are subject to risks and uncertainties relating 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 Factors section relating to our operations and the business environment in which we compete contained in our 2011 Form 10-K, our second 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.

With that, I'll turn the call over to Vince.

Vincent D. Kelly

Thank you, Shawn, and good morning. Before we review our second quarter results, I want to comment briefly on the management realignment we announced last month, including the appointment of Kate Bolseth as Chief Operating Officer in Amcom.

Previously, Kate was Amcom's Vice President of Product Strategy and Development, and in that role, she's been instrumental in the company's growth in recent years. Kate succeeds Dan Mayleben who, along with former Amcom President Chris Heim, left Amcom in June to pursue an opportunity outside the company. We're delighted to have Kate join our senior management team. She also joins us on our call this morning.

Sean Collins joins us as well. He was recently promoted to the Executive Vice President of Selling and Marketing at Amcom and continues to play a key role for us in that capacity as we look to grow our Software business.

Finally, Jim Boso, has been promoted to President of our wireless company, USA Mobility Wireless. Formerly Executive Vice President of Sales and Marketing at USA Mobility, Jim has made significant contributions to the success of our business over the years.

We were very pleased to be able to fill this key positions from within the company, a testament to the managerial talent and bench strength in both our key businesses.

I would also note that we are currently working with Spencer Stuart in conducting a search for a new President of Amcom to replace Chris Heim, who remains a director of USA Mobility. We hope to fill that key position in the next several months. In the meantime, I personally have relocated to Minneapolis to help oversee our Software operations and conduct recruiting activities from Amcom's headquarters office.

Turning to our quarterly results. Let me begin by highlighting what we believed was another outstanding quarter for USA Mobility. On a consolidated basis, we reported solid performance largely consistent with our previously announced financial guidance for 2012. On the Wireless side, we ended the quarter ahead of our key operating goals for subscribers, total revenue and operating cash flow, average revenue per unit, or ARPU, and operating expenses. In addition, our Wireless salesforce exceeded the company's plan for subscribers, including gross additions and net churn. At the same time, our Software business increased quarter-over-quarter revenue and bookings. Our backlog rose to a new high, and we expanded our pipeline of prospective accounts. We also acquired Clinical Test Results Management solution and launched several new software products for the healthcare market.

Overall, we were able to maintain strong consolidated cash flow margins, operate profitably while reducing expenses, and once again, returned capital to our stockholders in the form of dividend distributions.

Shawn will discuss our financial results in more detail in a few minutes, but first, I want to review some key accomplishments we achieved during the quarter. Number one, Wireless subscriber churn showed significant improvement in the second quarter as the rates of paging unit losses reached their best levels in nearly 8 years. These record results were due to an understanding performance by our Wireless sales team, which increased direct gross placements from the prior quarter, while disconnects continued to decline. We were very pleased to see this positive trends in our Wireless business, especially within our top-performing Healthcare segment with a net loss weight improved to a record low 0.2%.

Number two, Wireless revenue trends also continued to improve during the quarter with a quarterly rate of revenue erosion recording at second best level since the second quarter of 2008. The improved rate of Wireless revenue erosion continues to benefit from relatively stable paging ARPU and a slower pace of subscriber churn. Going forward, we expect Wireless subscriber and revenue trends will remain a challenge as technology alternatives continue to evolve. However, we are greatly encouraged by our second quarter results.

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