First Quarter 2009 Highlights
* Revenue of $38.2 million, up 45.8% from $26.2 million in
Q1'08
* Pretax income of $14.3 million, up 127% from $6.3 million
for Q1'08
* Net income of $9 million, up 125% from $4 million for Q1'08
* Adjusted EBITDA (as defined below) of $19.1 million, up
107.6% from $9.2 million in Q1'08
* Billed minutes of 19.7 billion, an increase of 52.7% over Q1'08
* Company increases 2009 guidance
CHICAGO, April 30, 2009 (GLOBE NEWSWIRE) -- Neutral Tandem, Inc. (Nasdaq:TNDM), a leading provider of tandem interconnection services, today announced its first quarter 2009 financial results.
"We are very pleased with our first quarter results," stated Rian Wren, President and Chief Executive Officer of Neutral Tandem. "We believe that our performance reflects our ability to provide a valuable service to our customers and execute on our strategic growth initiatives."
First Quarter Results
Revenue increased 45.8% to $38.2 million for the three months ended March 31, 2009, compared to $26.2 million during the three months ended March 31, 2008. The increase in first quarter revenue was primarily related to an increase in the number of minutes carried over our network and expansion into additional geographical markets.
Billed minutes increased 52.7% to 19.7 billion minutes for the three months ended March 31, 2009, compared to 12.9 billion minutes for the three months ended March 31, 2008.
Network and facilities expenses for the three months ended March 31, 2009 were $11.5 million, compared to $9.1 million for the three months ended March 31, 2008. This increase was largely due to greater traffic volumes carried over our network and an increase in the number of markets in which we operate. Combined operating expenses consisting of Operations, Sales and Marketing, and General and Administrative expenses were $8.9 million for the three months ended March 31, 2009, compared to $7.6 million for the three months ended March 31, 2008. The increase primarily resulted from higher employee expenses, including additional headcount associated with our business growth.
Income from operations for the three months ended March 31, 2009 was $13.9 million, or 36.4% of revenue, compared to $6.2 million for the three months ended March 31, 2008, or 23.7% of revenue.
Pretax income for the three months ended March 31, 2009 was $14.3 million, up 127% from $6.3 million for the three months ended March 31, 2008.
Income tax expense for the three months ended March 31, 2009 was $5.3 million, compared to income tax expense of $2.2 million for the three months ended March 31, 2008. The effective tax rate for the three months ended March 31, 2009 was approximately 37.1%, compared to an effective tax rate of approximately 34.9% for the three months ended March 31, 2008.
Net income for the three months ended March 31, 2009 was $9 million, or $0.27 per diluted share, compared to $4 million, or $0.12 per diluted share, for the three months ended March 31, 2008.
Adjusted EBITDA, a non-GAAP measure, for the three months ended March 31, 2009 was $19.1 million, up 107.6% compared to $9.2 million for the three months ended March 31, 2008. The Adjusted EBITDA margin, a non-GAAP financial measure, for the three months ended March 31, 2009 was 50%, up from 35.1% for the three months ended March 31, 2008. This increase in Adjusted EBITDA margin was driven by the continued scaling of our operating expenses, as well as network efficiency and optimization efforts. See "Use of Non-GAAP Financial Measures" below for a discussion of the presentation of Adjusted EBITDA and a reconciliation to net income.
We expanded our footprint by commencing operations in 9 new markets during the first quarter of 2009. We operated in 109 markets as of March 31, 2009, as compared to 71 markets as of March 31, 2008.
Business Outlook
Based on actual results for the first three months of 2009 and management's current belief about minute-based revenue trends, expenses and the competitive environment, Neutral Tandem is raising its forecast for certain metrics.
Neutral Tandem now estimates:
-- Revenue for the full year of 2009 is expected to be between
$158 million and $165 million, an increase from the previous
forecast range of $151 million to $158 million.
-- Adjusted EBITDA, a non-GAAP financial measure, for the full
year of 2009 is expected to be between $74 million and $78
million, an increase from the previous forecast range of $66
million to $70 million.
-- Billed minutes for the full year of 2009 are estimated to be
between 83 billion minutes and 87 billion minutes, an increase
from the previous forecast range of 81 billion minutes to 85
billion minutes.
-- Capital expenditures for the full year of 2009 are expected
to be between $18 million and $20 million, consistent with
the previous forecast range.
-- Operations to commence in 30 new markets during the full year
of 2009, consistent with the previous forecast.
Wren concluded, "Despite the challenges facing the macro economy, we are very pleased with our first quarter performance. We continue to believe that the strength of our service offerings and the scalability of our business model positions us to drive growth in the business."
Webcast and Conference Call
A webcast and conference call will be held today, April 30, 2009 at 9:00 a.m. Eastern Time. A live webcast of the conference call as well as a replay will be available online on the company's corporate website at www.neutraltandem.com. Participants can also access the call by dialing 800-366-7449 (within the United States and Canada), or 303-262-2141 (international callers). A replay of the call will be available approximately two hours after the call has ended and will be available until approximately 11:59 p.m. (CST) on May 30, 2009. To access the replay, dial 800-405-2236 (within the United States and Canada), or 303-590-3000 (international callers) and enter the conference ID number: 11130536#.
Cautions Concerning Forward Looking Statements
This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, included in this press release regarding Neutral Tandem's strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words "anticipates," "believes," "expects," "estimates," "projects," "plans," "intends," "may," "will," "would," and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Neutral Tandem may not actually achieve the plans, intentions or expectations disclosed in its forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements Neutral Tandem makes. Factors that might cause such differences include, but are not limited to: the impact of current and future regulation affecting the telecommunications industry, including a current proceeding in Connecticut in which several of our customers have made filings in support of a cost based transit rate; technological developments; the effects of competition; natural or man-made disasters; the impact of current or future litigation; the ability to attract, develop and retain executives and other qualified employees; the ability to obtain and protect intellectual property rights; changes in general economic or market conditions; and other important factors included in Neutral Tandem's reports filed with the Securities and Exchange Commission, particularly in the "Risk Factors" section of Neutral Tandem's Annual Report on Form 10-K for the period ended December 31, 2008. Neutral Tandem does not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
About Neutral Tandem, Inc.
Headquartered in Chicago, Neutral Tandem, Inc. is a leading provider of tandem interconnection services to wireless, wireline, cable and broadband telephony companies. Founded in 2003, Neutral Tandem facilitates inter-carrier communications with a cost-effective alternative to the Incumbent Local Exchange Carrier (ILEC) network. Neutral Tandem's solutions build redundancy, security and operational efficiencies into the nation's telecommunications infrastructure. As of March 31, 2009, Neutral Tandem was capable of connecting approximately 416 million telephone numbers assigned to carriers. Telephone numbers assigned to a carrier may not necessarily be assigned to, and in use by, an end user. Please visit Neutral Tandem's website at: www.neutraltandem.com.
The Neutral Tandem Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3797
The condensed consolidated statements of income, balance sheets and statements of cash flows are unaudited and subject to reclassification.
NEUTRAL TANDEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
----------------------------
2009 2008
----------------------------
Revenue $ 38,249 $ 26,226
Operating expense:
Network and facilities expense
(excluding depreciation and
amortization) 11,462 9,110
Operations 4,955 4,072
Sales and marketing 524 544
General and administrative 3,389 3,018
Depreciation and amortization 4,041 3,263
Gain on disposal of fixed assets (25) --
---------- ----------
Total operating expense 24,346 20,007
---------- ----------
Income from operations 13,903 6,219
---------- ----------
Other (income) expense
Interest expense, including debt
discount of $22 and $28,
respectively 133 299
Interest income (291) (898)
Other (income) expense (242) 550
---------- ----------
Total other (income) expense (400) (49)
---------- ----------
Income before income taxes
14,303 6,268
Provision for income taxes 5,259 2,245
---------- ----------
Net income $ 9,044 $ 4,023
========== ==========
Net income per share:
Basic $ 0.28 $ 0.13
========== ==========
Diluted $ 0.27 $ 0.12
========== ==========
Weighted average number of shares
outstanding:
Basic 32,529 31,094
========== ==========
Diluted
33,533 33,163
========== ==========
NEUTRAL TANDEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
March 31, Dec. 31,
2009 2008
---------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 128,636 $ 110,414
Receivables 17,394 16,785
Deferred tax asset 2,473 2,341
Other current assets 1,246 1,795
---------- ----------
Total current assets
149,749 131,335
Property and equipment--net 43,093 45,266
Restricted cash 440 440
Other assets 18,969 18,802
---------- ----------
Total assets
$ 212,251 $ 195,843
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,334 $ 258
Accrued liabilities:
Taxes payable 3,446 657
Circuit cost 2,192 3,358
Rent 1,153 1,183
Payroll and related items 1,754 952
Other 2,194 1,535
Current installments of long-term debt 2,336 2,961
---------- ---------
Total current liabilities 14,409 10,904
Other liabilities -- 191
Deferred tax liability 4,814 4,647
Long-term debt --excluding current
installments -- 235
---------- ---------
Total liabilities
19,223 15,977
Shareholders' equity:
Preferred stock--par value of $.001;
50,000,000 authorized shares; no
shares issued and outstanding at
March 31, 2009 and December 31, 2008 -- --
Common stock--par value of $.001;
150,000,000 authorized shares;
32,753,632 shares and 32,357,383
shares issued and outstanding at
March 31, 2009 and December 31, 2008,
respectively 33 32
Additional paid-in capital 155,850 151,733
Retained earnings 37,145 28,101
---------- ----------
Total shareholders' equity 193,028 179,866
---------- ----------
Total liabilities and shareholders'
equity $ 212,251 $ 195,843
========== ==========
NEUTRAL TANDEM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
-----------------------
2009 2008
---------- ---------
Cash Flows From Operating Activities:
Net income $ 9,044 $ 4,023
Adjustments to reconcile net cash
flows from operating activities:
Depreciation and amortization 4,041 3,263
Deferred income taxes 35 (417)
Gain on disposal of fixed assets (25) --
Non-cash share-based compensation 921 245
Amortization of debt discount 22 28
Changes in fair value of ARS (433) --
Changes in fair value of ARS Rights 191 --
Excess tax benefit associated with
stock option exercise (2,781) --
Changes in assets and liabilities:
Receivables-net (609) (63)
Other current assets 549 11
Other noncurrent assets 75 53
Accounts payable 206 762
Accrued liabilities 5,644 (420)
Noncurrent liabilities -- 99
---------- ---------
Net cash flows from operating
activities 16,880 7,584
---------- ---------
Cash Flows From Investing Activities:
Purchase of equipment (1,000) (4,319)
Proceeds from sale of equipment 27 --
Purchase of investments -- (25,001)
---------- ---------
Net cash flows from investing
activities (973) (29,320)
---------- ---------
Cash Flows From Financing Activities:
Proceeds from the issuance of common
shares associated with stock option
exercise 416 1,639
Excess tax benefit associated with
stock option exercise 2,781 --
Principal payments on long-term debt (882) (1,291)
---------- ---------
Net cash flows from financing
activities 2,315 348
---------- ---------
Net Increase In Cash And Cash Equivalents 18,222 (21,388)
Cash And Cash Equivalents-Beginning 110,414 112,020
---------- ---------
Cash And Cash Equivalents-End $ 128,636 $ 90,632
========== =========
Supplemental Disclosure Of Cash Flow
Information:
Cash paid for interest $ 69 $ 421
========== =========
Cash paid for taxes $ 198 $ 1,518
========== =========
Supplemental Disclosure Of Noncash Flow
Items:
Investing Activity-Accrued purchases
of equipment $ 1,041 $ 1,298
========== =========
Use of Non-GAAP Financial Measures
In this press release we disclose"Adjusted EBITDA", which is a non-GAAP financial measure. For purposes of SEC rules, a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure, calculated and prepared in accordance with generally accepted accounting principles in the United Sates (GAAP).
EBITDA is defined as net income before (a) interest expense, net (b)income tax expense and (c) depreciation and amortization. Adjusted EBITDA is defined as EBITDA as further adjusted to eliminate the change in the fair value of warrants and non-cash share based compensation. We believe that the presentation of Adjusted EBITDA included in this press release provides useful information to investors regarding our results of operations because it assists in analyzing and benchmarking the performance and value of our business.We believe that presenting Adjusted EBITDA facilitates company-to-company operating performance comparisons of companies within the same or similar industries by backing out differences caused by variations in capital structure, taxation and depreciation of facilities and equipment (affecting relative depreciation expense),which may vary for different companies for reasons unrelated to operating performance. These measures provide an assessment of controllable operating expenses and afford management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance. They provide an indicator for management to determine if adjustments to current spending decisions are needed. Furthermore, we believe that the presentation of Adjusted EBITDA has economic substance because it provides important insight into our profitability trends, as a component of net income, and allows management and investors to analyze operating results with and without the impact of depreciation and amortization, interest and income tax expense and the change in fair value of warrants and non-cash share based compensation.Accordingly, these metrics measure our financial performance based on operational factors that management can impact in the short-term,namely the operational cost structure and expenses of our business. In addition, we believe Adjusted EBITDA is used by securities analysts,investors and other interested parties in evaluating companies, many of which present an EBITDA measure when reporting their results.Although we use Adjusted EBITDA as a financial measure to assess the performance of our business, the use of Adjusted EBITDA is limited because it does not include certain material costs, such as depreciation, amortization and interest, necessary to operate our business. We disclose the reconciliation between EBITDA and Adjusted EBITDA and net income below to compensate for this limitation. While we use net income as a significant measure of profitability, we also believe that Adjusted EBITDA, when presented along with net income,provides balanced disclosure which, for the reasons set forth above,is useful to investors in evaluating our operating performance and profitability. Adjusted EBITDA included in this press release should be considered in addition to, and not as a substitute for, net income as calculated in accordance with generally accepted accounting principles as a measure of performance.
The following is a reconciliation of net income to EBITDA and
Adjusted EBITDA:
NEUTRAL TANDEM, INC. AND SUBSIDIARIES
Reconciliation of Non-GAAP Financial Measures
to GAAP Financial Measures
(Unaudited)
(Dollars in thousands)
---------------------------- ----------
Twelve
Months
Three Months Ended Ended
March 31, Dec. 31,
---------------------------- ----------
2009 2008 2009 (1)
---- ---- ----------
Net income $ 9,044 $ 4,023 $ 34,250
Interest expense
(income), net (158) (599) (750)
Provision(benefit)
for income taxes 5,259 2,245 20,100
Depreciation and
amortization 4,041 3,263 15,000
---------------------------- ----------
EBITDA $ 18,186 $ 8,932 $ 68,600
Non-cash share-
based
compensation 921 245 7,400
---------------------------- ----------
Adjusted EBITDA $ 19,107 $ 9,177 $ 76,000
============================ ==========
(1) The amounts expressed in this column are based on current
estimates as of the date of this press release. This
reconciliation is based on the midpoint of the guidance range
announced in this press release.