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USA Mobility (USMO)
Q1 2013 Earnings Call
May 10, 2013 10:00 am ET
Shawn E. Endsley - Chief Financial Officer
Vincent D. Kelly - Chief Executive Officer, President and Director
Previous Statements by USMO
» USA Mobility Management Discusses Q3 2012 Results - Earnings Call Transcript
» USA Mobility Management Discusses Q2 2012 Results - Earnings Call Transcript
» USA Mobility, Inc. Q1 2010 Earnings Call Transcript
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 first 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 is 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 2012 Form 10-K, our first quarter Form 10-Q, which we expect to file later today, 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
Thanks, Shawn, and good morning. We're pleased to speak with you today regarding our first quarter operating results and what we believe was an outstanding quarter for both our Wireless and Software businesses. We've continued the strong operating performance and momentum that we established in the second half of 2012. On the Wireless side, we again ended the quarter ahead of our key operating goals for total revenue, operating cash flow, average revenue per unit or ARPU, and operating expenses. In addition, our Wireless sales force once again exceeded our plan for subscribers including gross additions, while our annual rate of subscriber churn improved to its best level in the company's history. Our Software business also achieved excellent results for the quarter with increased revenue, record first quarter bookings, revenue backlog near an all-time high and a growing pipeline of prospective accounts. Overall, we were able to maintain strong consolidated cash flow margins, operate profitably while reducing expenses and once again, return capital to our stockholders.
Shawn will discuss our financial results in more detail in a few minutes. But first I want to review some of the key accomplishments we achieved during the quarter.
Number one. Subscriber and revenue trends in our Wireless business continued to improve in the first quarter with rates of paging unit and revenue erosion below or near historically low levels. Our annual rate of subscriber erosion improved to 8.5%, the lowest loss rate in the company's history while our annual rate of revenue erosion fell to 12.4%, also among the best in many years. These impressive results were due in part to another excellent performance by our Wireless sales team which continued to outperform our goals for gross replacements while again reducing gross disconnect. We were especially pleased to see the continuation of these positive trends in our top-performing Healthcare segment with a net loss rate remained low at 0.5% in the first quarter.
Number two. our Software business also posted strong results for the first quarter. Continuing the momentum we established over the second half of last year. Software revenue and bookings increased from the year-earlier quarter while the backlog exceeded $40 million at March 31. In addition, Amcom's pipeline of sales prospects increased substantially in recent months, the result of outstanding work by our dedicated sales and marketing team, and increasingly diversified customer base and wider recognition of our software solutions. Our Software business also continued to expand the scope of its international sales efforts during the quarter including the addition of key accounts in Canada, the Middle East, the Asia-Pacific region. During the quarter we also broaden our software sales leads within such market segment such as healthcare, public safety, education, business, and government services.
Number three. We continue to reduce operating expenses during the first quarter mostly in our Wireless operations consistent with our long-term business plan. Occurring operating expenses for Wireless excluding depreciation, amortization and accretion, declined 8.6% from the year-earlier quarter. Going forward, we expect operating expenses in our Wireless business will continue to decline. However, we expect a portion of these cost savings we offset by additional investment in our Software business as we continue to reposition the company for long-term growth.
Number four. Strong performances from both our Wireless and Software businesses resulted in consolidated EBITDA of $15.5 million for the first quarter. This represented a consolidated margin of 29.3%. First quarter EBITDA for Wireless totaled $14.3 million, a margin of 36.9%.