DALLAS, Aug. 19 -Securus Technologies, Inc. announced today that it will be holding a quarterly investor call on Thursday, August 25th at 10:00 am Eastern Time to discuss its results of operations for the quarterly period ended June 30, 2005 as set forth in its recently filed Quarterly Report on Form 10-Q. To access the call, participants should dial (866) 548-4703, then when prompted enter 270744.
As more fully set forth in its recently filed Quarterly Report, Securus generated operating revenues of $95.1 million for the three-month period ended June 30, 2005. For the three months ended June 30, 2004, calculated on a pro forma basis for comparative purposes, Securus and its subsidiaries, including its Evercom subsidiary, generated combined revenues of $90.8 million. The proforma basis is adjusted to include the operating results of Evercom for the three months ended June 30, 2004, prior to Securus' acquisition of Evercom on September 9, 2004.
In reference to recent actions by large telephone companies, most recently Verizon and AT&T, to exit the inmate telecommunications business, Mr. Falcone stated that "in our prime contract line of business (direct provisioning), we are experiencing very solid revenue growth and we expect it to continue in the future. The actions by Verizon and AT&T follow previous decisions by BellSouth and Qwest to also exit the inmate telecommunications business. We are confident we can continue to gain market share in our prime contract business. However, as expected, we continue to experience reductions in our intra-industry revenue streams currently being generated from AT&T, Verizon and other customers in our telecommunications services and Solutions product lines. Overall, however, independent competitors in the industry should benefit over the long-term as a result of the exit by these large competitors from the inmate telecommunications business. Securus is well-positioned to grow its prime contract revenues considering that we are the largest independent company in the industry, maintain an excellent reputation for service, and have an extensive intellectual property portfolio and experienced management team."
In discussing the Company's revenue components, Richard Falcone, Securus' Chief Executive Officer, stated, "We continue to demonstrate strength at growing our prime contract revenue. We have grown our prime contract revenue substantially between the second quarter of 2004 and the second quarter of 2005 and we have continued to gain significant prime contract market share during 2005. Additionally, we have renewed approximately 94% of our prime contract revenues generated from accounts that have come up for renewal in 2005." The Company indicated that the full extent of revenue growth in the prime contract business is not immediately apparent in a year over year comparison because of the conversion of Securus' contract with the State of North Carolina in late 2004 from prime contract to Solutions services. At the time of conversion, this contract was generating over $12 million of prime contract revenue annually, or over $3 million per quarter.
The Solutions services line of business also exhibited strong revenue growth year over year due in part to the conversion of the State of North Carolina contract, as well as further contract awards from AT&T/Global, Securus' largest Solutions customer. In the future, revenue from Solutions services is expected to decline as a result of the exit of AT&T from the inmate telecommunications market.
These positive increases were offset by a substantial decline in highly profitable telecommunications services revenues and equipment sales revenues. The decline in these business segments was a result of both the exit of Verizon and AT&T from the inmate telecommunications market, as well as the strategy employed by Securus to focus on growing its prime contract business by seeking to convert accounts from the telecommunications services business to prime contract and which, as expected, resulted in a lower customer retention rate in telecommunications services. Additionally, this strategy resulted in lower equipment sales to customers who did not want to purchase equipment from Securus because they are competing with the Company on a prime contract basis.
For the three months ending June 30, 2005, Securus reported earnings before interest, income taxes, depreciation and amortization ("EBITDA") of $10.3 million. Securus' EBITDA was negatively impacted by a total of $0.8 million, comprised of $0.2 million of legal fees related to the Condes litigation, as further explained in the 10-Q, and $0.6 million of severance costs. EBITDA reconciles to a reported operating income of $4.5 million for the three-month period ending June 30, 2005, as follows (in millions):
Operating Income $ 4.5
Add Back:
Depreciation and amortization 5.8
EBITDA $ 10.3
The Company believes EBITDA is an important financial measure used by the Company's lenders to monitor operating performance. The Company also believes EBITDA provides meaningful insight to its investors in understanding the Company's operating performance.
Mr. Falcone stated, "We continue to be pleased with the pace of our consolidation and integration activities, and have realized the majority of expected synergies."
Special Note Regarding Forward-Looking Statements:
The foregoing release contains statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are only predictions and are not guarantees of future performance. Investors are cautioned that any such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations and business environment of Securus that may cause the actual results to be materially different from any future results expressed or implied in such forward-looking statements.
