BEDFORD, Mass., April 26 /PRNewswire-FirstCall/ -- Boston
Communications Group, Inc., (NASDAQ:BCGI) today announced that its
consolidated GAAP net income for the first quarter ended March 31,
2006 totaled $907,000 or $0.05 per share, including a one-time
income tax benefit of $975,000. On a non-GAAP basis, excluding the
one-time tax benefit and the legal expenses associated with the
Freedom Wireless lawsuit, the Company would have reported net
income of $720,000, or $0.04 per share for the first quarter of
2006. The consolidated GAAP net income compares with net income of
$1.6 million, or $0.09 per share, for the first quarter of 2005. On
a non-GAAP basis excluding legal expenses and related charges
associated with the Freedom Wireless lawsuit, the Company would
have reported net income of $3.0 million, or $0.17 per share for
the first quarter of 2005. Total revenues for the first quarter of
2006 were $24.7 million, a decrease of 6% from $26.4 million for
the first quarter of 2005 and down 6% sequentially from the fourth
quarter of 2005. As of March 31, 2006, bcgi had 3.75 million
subscribers on its Real-Time Billing platform, 40,000 lower than
March 31, 2005 and 342,000 lower than December 31, 2005. As
anticipated, the decrease in subscribers resulted from expected
conversions from Verizon Wireless, Cingular Wireless and Alltel
Corporation who, as previously disclosed, have migrated or continue
to migrate off the Company's Real-Time billing platform. This
decrease in subscribers was also the principal factor in the
revenue decline. Also partially contributing to the Company's
revenue decline was a decrease in the average billed rate per
minute of use per month ("MOU") of 53% and 31% compared to the
first quarter and fourth quarters of 2005, respectively, partially
offset by the increase in the average number of billed MOUs per
subscriber per month to 175 (46% and 20% higher than the first and
fourth quarters of 2005, respectively). These changes in average
billed rate and average usage per subscriber are principally due to
customers with lower contractual pricing and higher average usage
becoming a larger proportion of Real-Time Billing revenues, in
addition to customary volume discounts for those customers. Cost of
revenues, engineering, research and development, sales and
marketing and general and administrative expenses all increased for
the first quarter of 2006 compared to the first quarter of 2005 and
the fourth quarter of 2005. These increases resulted principally
from increased staffing and related labor and other costs the
Company incurred as it continues to implement initiatives and
invest resources in its global product diversification strategy.
The one-time income tax benefit recorded in the first quarter of
2006 was due to favorable resolutions of income tax items which the
Company had reserved that resulted in the reversal of a portion of
the valuation allowance against certain deferred tax assets that
are now realizable. Cash, short-term investments, and restricted
cash decreased $10.5 million from $80.8 million as of December 31,
2005 to $70.3 million as of March 31, 2006. This decrease was
primarily due to the payment of certain year-end accruals and the
timing of accounts receivable receipts which caused an increase in
average days sales outstanding to 86 days as of March 31, 2006, up
from 55 days at December 31, 2005. Freedom Wireless Litigation
Status The Company filed its principal appeal brief in the Freedom
Wireless litigation with the U.S. Court of Appeals for the Federal
Circuit. The Company believes the appeal process will continue into
2007. As previously announced, the Company has accrued an estimated
loss of $64.3 million with respect to the Freedom Wireless
judgment, excluding additional legal charges which are, and will
continue to be, expensed as incurred. However, the actual loss, if
any, may be higher or lower than the amount accrued and could be
higher than the current judgment of $165 million. Outlook The
Company anticipates that for the second quarter of 2006 revenues
and earnings will decrease compared to the first quarter of 2006
and that the Company will incur a net loss. These expectations are
based primarily on the Company's anticipation that, as previously
disclosed, Verizon Wireless will fully migrate off its Real-Time
Billing platform by June, 2006 and Cingular Wireless will continue
its migration during the quarter and be fully migrated off later in
2006. Each of those carriers, along with Alltel Corporation, who
migrated off the Real-Time Billing platform in the first quarter of
2006, collectively comprised approximately 19%, or $4.6 million, of
the Company's first quarter 2006 revenues. The Company expects that
these carriers will comprise a lower percentage of revenue in the
second quarter as these migrations continue and as Sprint Nextel,
who represented 66% of consolidated revenue in the first quarter,
is expected to increase its revenue in dollars and as a percentage
of the Company's overall revenues. The Company is continuing to
invest in its customer and product diversification strategy which
includes support of its bcgi Access Management, bcgi Payment and
Voyager Billing products and expansion into new domestic and
international wireless markets, including the developing MVNO
market. These strategic initiatives are expected to result in
spending in the second quarter at levels consistent with the first
quarter of 2006, except for a sequential increase in sales and
marketing expenses. Legal and other costs associated with the
Freedom Wireless litigation during the second quarter of 2006 are
estimated to be $1.0 million to $1.5 million. "We continue to
pursue our strategy of revenue diversification focused on
international expansion of our addressable markets," said E.Y.
Snowden, bcgi's president and chief executive officer. "We were
very happy with the sales traction we achieved at the 3GSM World
Conference and CTIA Wireless 2006. Along with our recently
announced licensing agreement with Convergys Corporation, the
newest member of bcgi's Global Alliance Program, we believe we are
well positioned to meet the growing needs of worldwide wireless
operators." Use of Non-GAAP Financial Measures The non-GAAP
operating results included in this release are non-GAAP financial
measures under the rules of the Securities and Exchange Commission.
In the first quarter of 2006, these results exclude a $975,000
one-time income tax benefit and $1.2 million of legal and related
costs to defend the Freedom Wireless litigation and the
corresponding estimated income tax effect. The Company included
this information because the Company believes this information is
an appropriate measure for evaluating the Company's operating
performance and will assist investors in understanding the
company's results of operations on a comparative basis. The Company
uses this non-GAAP information internally to help the Company's
management more accurately assess the ongoing nature of the
Company's operations and measure the Company's performance on a
comparative basis. This non-GAAP information supplements the GAAP
financial information contained herein, and is not intended to
represent a measure of performance in accordance with disclosures
prepared in accordance with GAAP. Conference Call The Company will
be holding a conference call and web cast at 5:00PM ET on
Wednesday, April 26, 2006 to discuss results for the period ended
March 31, 2006 and management's outlook. The Company's President
and CEO, E.Y. Snowden, and Chief Financial Officer, Karen A.
Walker, will host the call. Parties interested in listening to the
call should dial 1-800-423-5972 at least 10 minutes prior to the
start of the call. For those unable to participate at the
designated time, a replay will be available for seven days
following the call via telephone at 1-800-642-1687 (conf id
7672910) and will be available for 90 days on the web at
http://www.bcgi.net/. ABOUT THE COMPANY bcgi delivers innovative
products and services that enable mobile operators and MVNOs
worldwide to differentiate their offerings and increase market
penetration while reducing costs. Founded in 1988, bcgi is a leader
in identifying and addressing new market needs with proven
solutions, including prepaid and postpaid billing, payments and
access management. For more information, visit
http://www.bcgi.net/. CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS This press release contains, in addition
to historical information, forward-looking statements that involve
risks and uncertainties, including statements regarding revenues
and earnings estimates, the timing of customer migrations,
estimates of future legal expenses, estimates of appeals process
length and expectations regarding new product offerings and
expansion into new markets. Such statements are based on
management's current expectations and are subject to a number of
uncertainties and risks that could cause actual results to differ
materially from those described in the forward-looking statements.
Among the important factors that would cause actual results to
differ materially from those indicated by such forward looking
statements are: an unfavorable judgment in the appeal of the
Freedom Wireless suit which could result in substantial damages and
indemnification obligations that could exceed the Company's ability
to pay and could significantly restrict bcgi's ability to conduct
business, including the Company seeking protection under U.S.
Bankruptcy Code, the loss of additional customers (beyond Verizon
Wireless, Cingular Wireless and Alltel Corporation) or certain of
their markets because of negative pressure caused by the Freedom
Wireless suit or for any other reason, specifically, Sprint Nextel
Corporation, who represented 66% of the Company's consolidated
revenues for the three months ended March 31, 2006, greater than
expected pricing reductions from major carrier customers, network
outages that can cause reductions in revenue due to penalty clauses
contained in certain of our carrier customer contracts, or
non-renewal of customer contracts, including Sprint Nextel
Corporation whose contract expires in the first quarter of 2007,
the ability to market and sell new solutions to wireless operators,
as well as the other factors that may affect future operating
results detailed in bcgi's form 10-K for the year ended December
31, 2005 filed with the Securities and Exchange Commission. BOSTON
COMMUNICATIONS GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (Unaudited and in thousands, except per share amounts) Three
Months Ended 3/31/06 12/31/05 3/31/05 Revenues: Real-time billing
$21,646 $23,509 $24,224 Other 3,071 2,751 2,128 $24,717 $26,260
$26,352 Expenses: Cost of revenues (1) 7,172 6,742 6,227
Engineering, research and development 4,622 4,434 4,029 Sales and
marketing 3,216 2,865 2,436 General and administrative 3,914 3,432
3,745 General and administrative - legal expense(2) 1,230 1,385
2,210 Depreciation and amortization 5,318 5,353 5,554 Total
operating expenses 25,472 24,211 24,201 Operating income (loss)
(755) 2,049 2,151 Interest income 687 531 400 Income (loss) before
income taxes (68) 2,580 2,551 Provision (benefit) for income taxes
(975) (72) 918 Net income $907 2,652 $1,633 Basic Net Income Per
Share: Net income $0.05 $0.15 $0.09 Weighted average common shares
outstanding 17,775 17,734 17,602 Diluted Net Income Per Share: Net
income $0.05 $0.15 $0.09 Weighted average common shares outstanding
17,780 17,735 17,726 Notes to Condensed Consolidated Statements of
Operations: (1) Exclusive of depreciation and amortization, which
is shown separately. (2) General and administrative - legal
expenses consist primarily of legal and related fees to defend the
patent infringement suits brought by Freedom Wireless. CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited and in thousands) March 31,
December 31, 2006 2005 Current assets: Cash and short-term
investments $28,378 $39,350 Restricted cash 41,910 41,466 Accounts
receivable, net of allowance for billing adjustments and doubtful
accounts of $1,134 in 2006 and $949 in 2005 22,624 14,830 Prepaid
expenses and other assets 4,150 3,443 Tax refund receivable 909 --
Total current assets 97,971 99,089 Property and equipment, net
50,567 53,283 Goodwill and other assets 22,871 22,919 Total assets
$171,409 $175,291 LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable and accrued expenses $14,723 $20,177
Accrued estimated loss from litigation 64,300 64,300 Total current
liabilities 79,023 84,477 Non-current liabilities: Accrued pension
liability 4,756 4,468 Shareholders' equity: Common stock and
additional paid-in capital 106,751 106,409 Accumulated deficit
(19,121) (20,063) Total shareholders' equity 87,630 86,346 Total
liabilities and shareholders' equity $171,409 $175,291 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in thousands)
Three months ended March 31, 2006 2005 OPERATING ACTIVITIES Net
income $907 $1,633 Adjustments to reconcile net income to net cash
used in operations: Depreciation and amortization 5,318 5,554
Deferred income taxes -- (135) Stock compensation expense 159 --
Changes in operating assets and liabilities: Accounts receivable,
net (7,829) (4,047) Prepaid expenses and other assets (853) (638)
Income taxes (receivable) payable (2,804) 917 Accounts payable,
accrued expenses and deferred revenue (2,909) (3,600) Other
non-current liabilities 288 245 Net cash used in operations (7,723)
(71) INVESTING ACTIVITIES Restricted cash (444) -- Payment of
earnout of acquired business (647) (591) Purchases of long-term
investments -- (454) Sales of short-term investments, net of
purchases (3,610) (1,745) Purchase of property and equipment
(2,375) (4,616) Net cash used in investing activities (7,076)
(7,406) FINANCING ACTIVITIES Proceeds from employee stock purchase
plan 198 372 Net cash provided by financing activities 198 372
Decrease in cash and cash equivalents (14,601) (7,105) Cash and
cash equivalents at beginning of period 14,601 9,467 Cash and cash
equivalents at end of period $-- $2,362 Non-GAAP Statements of
Income Impact of Non-GAAP Adjustments on Reported Net Income
(Unaudited and in thousands, except for per share amounts) Three
Months ended March 31, 2006 GAAP Adjustments Non-GAAP As Adjusted
Net revenues: $24,717 $-- $24,717 Expenses: Cost of revenues 7,172
-- 7,172 Engineering, research and development 4,622 -- 4,622 Sales
and marketing 3,216 -- 3,216 General and administrative 3,914 --
3,914 General and administrative - legal expense (1) 1,230 (1,230)
-- Depreciation and amortization 5,318 -- 5,318 Total operating
expenses 25,472 (1,230) 24,242 Operating income (loss) (755) 1,230
475 Interest income 687 -- 687 Income from before income taxes (68)
1,230 1,162 Provision /(benefit) for income taxes (2) (975) 1,347
442 Net income $907 $(117) $720 Basic Net Income Per Share: Net
income $0.05 $0.04 Weighted average common shares outstanding
17,775 17,775 Diluted Net Income Per Share: Net income $0.05 $0.04
Weighted average common shares outstanding 17,780 17,885 (1) Amount
primarily represents the legal and related fees associated with the
Freedom Wireless lawsuits. (2) Amount represents the adjustment
necessary to adjust the GAAP tax rate, which includes a benefit for
the reversal of a valuation allowance for certain deferred tax
assets, to the Company's annual effective tax rate excluding these
amounts, or 38%. Non-GAAP Statements of Income Impact of Non-GAAP
Adjustments on Reported Net Income (Unaudited and in thousands,
except for per share amounts) Three months ended March 31, 2005
GAAP Adjustments Non-GAAP As Adjusted Net revenues: $26,352 $--
$26,352 Expenses: Cost of revenues 6,227 -- 6,227 Engineering,
research and development 4,029 -- 4,029 Sales and marketing 2,436
-- 2,436 General and administrative 3,745 -- 3,745 General and
administrative - legal expense (1) 2,210 (2,210) -- Depreciation
and amortization 5,554 -- 5,554 Total operating expenses 24,201
(2,210) 21,991 Operating income 2,151 2,210 4,361 Interest income
400 -- 400 Income before income taxes 2,551 2,210 4,761 Provision
for income taxes (2) 918 796 1,714 Net income $1,633 1,414 $3,047
Basic Net Income Per Share: Net income $0.09 $0.17 Weighted average
common shares outstanding 17,602 17,602 Diluted Net Income Per
Share: Net income $0.09 $0.17 Weighted average common shares
outstanding 17,726 17,726 (1) Amount primarily represents the legal
and related fees associated with the Freedom Wireless lawsuits. (2)
Amount of the tax impact at the Company's annual effective tax rate
of the legal and related fees associated with the Freedom Wireless
lawsuits. DATASOURCE: Boston Communications Group, Inc. CONTACT:
Email inquiries - ; or Financial Relations Board: Joe Calabrese,
Investor Inquiries, +1-212-827-3772 Web site: http://www.bcgi.net/
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