Warwick Valley Telephone Company (NASDAQ: WWVY), referred to as WVT
Communications Group or the Company, the parent company of leading
cloud communications pioneers, today announced financial results
for its second quarter and six months ended June 30, 2012.
Financial results and recent corporate development highlights
include:
- Cloud or unified communications ("UC") revenues net of
eliminations were $3.3 million in second quarter 2012, an increase
of 169% from $1.2 million in prior year period
- Total second quarter revenues increased 18.5% over prior
year
- Provisioning of new business customers for UC services
continues at record levels
- Gross profit was $3.5 million in second quarter 2012, an
increase of 20% from $2.9 million in second quarter 2011
- Gross profit as a percentage of revenues increased to 50.1% in
second quarter 2012, from 49.3% second quarter 2011
- Investments in selling, general and administrative expenses to
support Cloud Communications growth strategies continued
- The Company received $3.25 million in cash distributions and
recorded $3.1 million of income from Orange County-Poughkeepsie
Limited Partnership ("O-P") investment for the quarter ended June
30, 2012
- Second quarter 2012 net loss of $(228,000), or $(0.04) per
common share
- Declared quarterly cash dividend of $0.27 per common share for
the second quarter of 2012
- Ranked #9 in North America Hosted IP Telephony/UC Services
Market by Frost & Sullivan*
Second Quarter 2012 Results
Revenues for the three-month period ended June 30, 2012
increased 19% to $6.9 million, as compared to $5.8 million for the
same period of 2011. The increase in revenues of over $1 million is
primarily attributable to the consolidation of financial results
for the acquisition of Alteva and organic unified communications
services revenue growth, partially offset by a decline of nearly $1
million in Telephone segment revenues.
In the first quarter of 2012, the Company realigned its segment
reporting and management structure as a result of the Alteva
acquisition in 2011. The Company's segments are strategic business
units that offer different products and services and are now
managed as Telephone service and Unified Communications ("UC") or
Cloud Communications services. Revenues discussed in this press
release for periods prior to the first quarter of 2012 have been
presented on the basis of the new segment reporting.
UC services revenues net of eliminations were $3.3 million in
the second quarter of 2012, an increase of 169% from $1.2 million
in the prior year period. Telephone services revenues net of
eliminations were $3.6 million in the second quarter of 2012, a
decrease from $4.6 million in the corresponding 2011 period. As a
percentage of consolidated revenue, the UC segment contributed 47%
of revenues in the second quarter as compared with 21% in the same
period of the prior year and 46% in the first quarter of 2012. The
Telephone segment contributed 53% of revenues in the second quarter
as compared with 79% in the second quarter of 2011 and 54% in the
first quarter of 2012.
Gross profit increased by 20% to $3.5 million in the second
quarter of 2012 from $2.9 million in the same period of 2011. Gross
profit as a percentage of revenues increased to 50.1% in the second
quarter 2012 from 49.3% in the 2011 period. The improvement in
gross profit in dollars as well as on a margin basis primarily
reflects the substantial increase in consolidated revenues
contributed from higher margin UC segment revenues as a percentage
of total revenues in the second quarter as compared to the earlier
period.
Selling, general and administrative ("SG&A") expenses in the
second quarter of 2012 increased to $5.6 million from $4.1 million
in the corresponding period of 2011. The 37% increase in SG&A
expenses reflects the additional operating expenses for Alteva as
well as the current and ongoing requirements to support the
Company's Cloud Communications growth strategies. Included in
SG&A for the three months ended June 30, 2012 was $203,000 of
nonrecurring charges. These charges were primarily professional
fees and other costs related to the Alteva acquisition and the
corporate restructuring.
Total other income for the three-month period ended June 30,
2012 was $3.1 million as compared to $2.2 million for the same
period in 2011. This increase is primarily due to O-P distributions
of $1.5 million in excess of the Company's share of the O-P
earnings for the period. This increase was partially offset by
lower O-P earnings as a result of the transition from wholesale to
retail.
For the three-month period ended June 30, 2012, the Company had
a net loss of $(228,000), or $(0.04) per basic and diluted share,
compared to a net loss of $(240,000), or $(0.05) per basic and
diluted share, for the three-month period ended June 30, 2011.
Balance Sheet and Subsequent Events
WVT Communications Group had $1.7 million of cash, cash
equivalents and short-term investments available at June 30, 2012
as compared with $4.8 million at December 31, 2011. The decrease
was primarily related to the purchase of network equipment and seat
licenses, the increased level of operating expenses, and payment of
dividends. Capital expenditures for the first six months of 2012
were $1.5 million compared to $1.8 million in the same period of
the prior year.
The Board of Directors of WVT Communications Group declared a
regular quarterly dividend of $0.27 per share on the Company's
common shares. The dividend was paid on June 29, 2012 to
shareholders of record as of June 25, 2012. In addition, the Board
of Directors declared the regular quarterly dividend of $1.25 per
share on the outstanding 5,000 shares of the Company's 5% Preferred
Shares that was paid on June 29, 2012 to shareholders of record as
of June 25, 2012. Dividends distributed by the Company are paid
using the cash distributions from the O-P.
Management Comments
"As we move through the halfway mark of 2012, we are making
solid progress with investments to build out our platform for
sustainable long term growth," said Duane W. Albro, WVT
Communication Group's Chief Executive Officer. "This follows last
year's pinnacle achievement of acquiring and integrating Alteva to
accelerate our Cloud Communications strategy. With the investments
and corporate developments of 2012, we will have set the stage for
significant scalability through organic growth and potential
acquisitions as well for margin and profit improvements in the
years to come.
"We are pleased to report our UC revenues growing by 169%
year-over-year and that we continue to maintain a record level of
provisioning business customers for addition to our platform. In
the second quarter of 2012, our UC segment contributed nearly half
of our consolidated revenue, which is more than double the amount
contributed in the same period one year ago. We are clearly
demonstrating increasing prominence in Cloud Communications as
evidenced by Frost & Sullivan ranking us as the ninth largest
hosted IP telephony and UC services provider in North America.
"To bolster our position for future growth, we have been
strengthening our executive management team, substantially
increased our office space to accommodate our expanded sales and
marketing staff, invested in information systems and network
infrastructure to assure the highest level of service to our
growing customer base, and have been enhancing our corporate
governance. From a small company operating in a limited territory
offering regulated landline telephone services, we are now
nationally ranked with a diversified business focused on the large
and growing market for Cloud Communications."
Conference Call
The Company will conduct a conference call to discuss second
quarter results today at 9:00 a.m. eastern. Investors and other
interested parties can listen to the call by dialing the
participant numbers of 877-317-6789 (toll free) or 412-317-6789, no
access code required, approximately 10 minutes prior to the start
of the conference call. The conference call will also be webcast
live on the WVT Communications Group website at www.wvtcg.com.
A replay of this conference call will also be available by
dialing 877-344-7529 (toll free) or 412-317-0088, access code:
10016612, beginning 11:00 a.m. eastern on August 10 through August
27, and via the investor relations section of the Company's
website.
WVT Communications Group is a world technology leader in
providing cloud-based Unified Communications (UC) solutions for
small, medium and enterprise businesses. Founded in 1902, the
Company has continued to adapt and remain on the forefront of
technology, chiseling its position among the most stable and
respected communications vendors on the globe. Moving forward, it
is forging the new model that communications providers, large and
small, are striving to emulate. WVT Communications Group is merging
new innovations, such as those from Alteva and USA Datanet, with
proven technology from industry leaders like Microsoft, Cisco,
BroadSoft, Panasonic, and Polycom to build the ideal hosting
architecture for communications.
Through its USA Datanet (targeting businesses under 35
employees), Alteva (targeting businesses over 35 employees and
those with branch offices), and Warwick Valley Telephone (a highly
respected traditional telecom provider turned premier regional
broadband company) businesses, WVT Communications Group is enabling
businesses of any size to communicate more efficiently with
hassle-free communications tools. By overlaying a UC division on
its stabile, regional broadband company, WVT Communications Group
has positioned itself in front of its peer legacy telecom companies
and created an evolutionary change in its strategy. With this, the
company may offer its residential customers a similar suite of UC
applications and services for use in a home environment that its
business customers can enjoy. Visit www.wvtcg.com or call
855-U-GO-CLOUD.
All trademarks are the properties of their respective owners.
*Frost & Sullivan Analysis, March 2012
Safe Harbor Statement
This press release contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, including
statements, without limitation, regarding expectations, beliefs,
intentions or strategies regarding the future. WVT Communications
Group intends that such forward-looking statements be subject to
the safe-harbor provided by the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause
WVT Communications Group's actual results, performance or
achievements or industry results to be materially different from
any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business
conditions, both nationally and in the geographic regions in which
WVT Communications Group operates; industry capacity; demographic
changes; technological changes and changes in consumer demand; the
successful integration of WVT Communication Group's acquired
businesses; existing governmental regulations and changes in, or
the failure to comply with, governmental regulations; legislative
proposals relating to the businesses in which WVT Communication
Group operates; reduction in cash distributions from the Orange
County-Poughkeepsie Limited Partnership; competition; or the loss
of any significant ability to attract and retain qualified
personnel. Given these uncertainties, current and prospective
investors should be cautioned in their reliance on such
forward-looking statements. Except as required by law, WVT
Communications Group disclaims any obligation to update any such
factors or to publicly announce the results of any revision to any
of the forward-looking statements contained herein to reflect
future events or developments. A more comprehensive discussion of
risks, uncertainties and forward-looking statements may be seen in
WVT Communications Group's Annual Report on Form 10-K and other
periodic filings with the U.S. Securities and Exchange
Commission.
(tables follow)
WARWICK VALLEY TELEPHONE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
($ in thousands except share and per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2012 2011 2012 2011
---------- ---------- ---------- ----------
Operating revenues
Telephone $ 3,634 $ 4,600 $ 7,441 $ 9,348
Unified Communications 3,252 1,211 6,526 2,641
---------- ---------- ---------- ----------
Total operating revenues 6,886 5,811 13,967 11,989
Operating expenses
Cost of services and
products (exclusive of
depreciation and
amortization expense) 3,434 2,944 6,982 6,191
Selling, general and
administrative expenses 5,603 4,103 11,011 7,588
Depreciation and
amortization 1,296 1,341 2,575 2,738
---------- ---------- ---------- ----------
Total operating expenses 10,333 8,388 20,568 16,517
---------- ---------- ---------- ----------
Operating loss (3,447) (2,577) (6,601) (4,528)
Other income (expense)
Interest income (expense) (112) 2 (169) 59
Income from equity method
investment 3,096 2,198 4,521 5,416
Other income (expense),
net 136 9 131 15
---------- ---------- ---------- ----------
Total other income
(expense) 3,120 2,209 4,483 5,490
---------- ---------- ---------- ----------
Income (loss) before
income taxes (327) (368) (2,118) 962
Income taxes (benefit) (99) (128) (656) 330
---------- ---------- ---------- ----------
Net income (loss) (228) (240) (1,462) 632
Preferred dividends 7 7 13 13
---------- ---------- ---------- ----------
Income (loss) applicable
to common stock $ (235) $ (247) $ (1,475) $ 619
========== ========== ========== ==========
Basic earnings (loss) per
share $ (0.04) $ (0.05) $ (0.26) $ 0.11
========== ========== ========== ==========
Basic earnings (loss) per
puttable common share $ (0.04) $ 0.00 $ (0.26) $ 0.00
========== ========== ========== ==========
Diluted earnings (loss)
per share $ (0.04) $ (0.05) $ (0.26) $ 0.11
========== ========== ========== ==========
Diluted earnings (loss)
per puttable common share $ (0.04) $ 0.00 $ (0.26) $ 0.00
========== ========== ========== ==========
Weighted average shares of
common stock used to
calculate earnings per
share
Basic 5,730,702 5,406,894 5,722,824 5,400,822
========== ========== ========== ==========
Basic (puttable common) 272,479 0 272,479 0
========== ========== ========== ==========
Diluted 5,730,702 5,406,894 5,722,824 5,424,287
========== ========== ========== ==========
Diluted (puttable common) 272,479 0 272,479 0
========== ========== ========== ==========
Dividends declared per
common share $ 0.27 $ 0.26 $ 0.54 $ 0.52
========== ========== ========== ==========
WARWICK VALLEY TELEPHONE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands except share and per share amounts)
June 30, December 31,
2012 2011
------------ ------------
Assets (Unaudited)
Current assets
Cash and cash equivalents $ 1,430 $ 4,575
Short term investments 260 259
Accounts receivable - net of allowance for
uncollectibles - $613 and $759 in 2012 and
2011, respectively 3,527 2,717
Other accounts receivable 199 174
Materials and supplies 794 832
Prepaid expenses 929 731
Prepaid income taxes 3,371 2,715
Deferred Income taxes 405 405
------------ ------------
Total current assets 10,915 12,408
------------ ------------
Property, plant and equipment, net 24,949 25,425
Unamortized debt issuance costs 6 45
Intangible assets, net 8,446 8,605
Investments 0 1,979
Goodwill 9,121 9,121
Other assets 336 333
------------ ------------
Total assets $ 53,773 $ 57,916
============ ============
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $ 7,325 $ 5,600
Current maturities of long-term debt 380 1,139
Accounts payable 1,595 1,715
Amounts due in connection with business
acquisition 2,247 2,377
Derivative liability in connection with
business acquisition 66 131
Advance billing and payments 382 390
Customer deposits 45 51
Accrued taxes 774 521
Pension and postretirement benefit obligations 622 622
Other accrued expenses 2,519 3,347
------------ ------------
Total current liabilities 15,955 15,893
------------ ------------
Amounts due in connection with business
acquisition 484 472
Deferred income taxes 1,503 1,358
Pension and postretirement benefit obligations 9,613 9,915
------------ ------------
Total liabilities 27,555 27,638
------------ ------------
Commitments and contingencies
Puttable common stock, $.01 par value, 272,479
shares issued and outstanding 4,125 4,125
Shareholders' equity
Preferred shares - $100 par value; authorized
and issued shares of 5,000; $0.01 par value
authorized and unissued shares of 10,000,000 500 500
Common stock - $0.01 par value; authorized
shares of 10,000,000 issued 6,309,569 and
6,217,839 shares at June 30, 2012 and
December 31, 2011, respectively 63 62
Treasury stock - at cost, 788,825 and 735,391
shares of common stock at June 30, 2012 and
December 31, 2011, respectively (7,049) (6,262)
Additional paid in capital 7,265 6,191
Accumulated other comprehensive loss (4,720) (4,979)
Retained earnings 26,034 30,641
------------ ------------
Total shareholders' equity 22,093 26,153
------------ ------------
Total liabilities and shareholders' equity $ 53,773 $ 57,916
============ ============
Investor contact: Jordan Darrow Darrow Associates, Inc.
(631) 367-1866 jdarrow@darrowir.com PR Contact: Melissa
Lande Lande PR 212-706-9003 mlande@landepr.com
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