Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
USMO > SEC Filings for USMO > Form 10-Q on 10-May-2013All Recent SEC Filings

Show all filings for USA MOBILITY, INC | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for USA MOBILITY, INC


10-May-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Statements of Income

Forward-Looking Statements

This Quarterly Report contains forward-looking statements and information relating to USA Mobility, Inc. and its subsidiaries ("USA Mobility" or the "Company") that set forth anticipated results based on management's current plans, known trends and assumptions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "anticipate", "believe", "estimate", "expect", "intend", "will", "target", "forecast" and similar expressions, as they relate to USA Mobility are forward-looking statements.

Although these statements are based upon current plans, known trends and assumptions that management considers reasonable, they are subject to certain risks, uncertainties and assumptions, including but not limited to those discussed below and under the captions "Business," "Management's Discussion and Analysis of Financial Condition and Statements of Income ("MD&A")," and "Part I
- Item 1A -Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2012, filed with the United States Securities and Exchange Commission (the "SEC") on April 15, 2013 (the "2012 Annual Report"). Should known or unknown risks or uncertainties materialize, known trends change, or underlying assumptions prove inaccurate, actual results or outcomes may differ materially from past results and those described herein as anticipated, believed, estimated, expected, intended, targeted or forecasted. Investors are cautioned not to place undue reliance on these forward-looking statements.

The Company undertakes no obligation to update forward-looking statements. Investors are advised to consult all further disclosures the Company makes in its subsequent reports on Form 10-Q and Form 8-K that it will file with the SEC. Also note that, in the risk factors disclosed in the Company's 2012 Annual Report, the Company provides a cautionary discussion of risks, uncertainties and possibly inaccurate assumptions relevant to its business. These are factors that, individually or in the aggregate, could cause the Company's actual results to differ materially from past results as well as those results that may be anticipated, believed, estimated, expected, intended, targeted or forecasted. It is not possible to predict or identify all such risk factors. Consequently, investors should not consider the risk factor discussion to be a complete discussion of all of the potential risks or uncertainties that could affect USA Mobility's business, statement of income or financial condition, subsequent to the filing of this Quarterly Report.

Overview

The following MD&A is intended to help the reader understand the statements of income and financial condition of USA Mobility. The MD&A is provided as a supplement to, and should be read in conjunction with, our 2012 Annual Report and our condensed consolidated financial statements and accompanying notes. A reference to a "Note" in this section refers to the accompanying Unaudited Notes to the Condensed Consolidated Financial Statements for the Three Months Ended March 31, 2013.

USA Mobility, Inc., a holding company, which, acting through our indirect wholly-owned subsidiary, USA Mobility Wireless, Inc. ("wireless operations"), is a leading provider of wireless messaging, mobile voice and data and unified communications solutions in the United States. In addition, through our indirect wholly-owned subsidiary, Amcom Software, Inc. ("Amcom" or "software operations"), which we acquired on March 3, 2011, we provide mission critical unified communications solutions for contact centers, emergency management, mobile event notification, and Smartphone messaging. Our combined product offerings are capable of addressing a customer's mission critical communications needs. We provide paging services and selected software solutions in the United States and abroad, generally in Europe, Australia, Asia and the Middle East. We offer our services and products primarily to three major market segments:
healthcare, government, and large enterprise. For the three months ended March 31, 2013, 73% and 27% of our consolidated revenue was generated by our wireless and software operations, respectively.


Table of Contents

The following table indicates the revenue by key market segments for the periods stated and illustrates the relative significance of these market segments to our wireless operations.

                                      For the Three Months Ended March 31,
         Market Segment       2013         % of Total        2012         % of Total
                                             (Dollars in thousands)
         Healthcare         $  24,533            63.3%     $  26,131            59.0%
         Government             3,340             8.6%         4,147             9.4%
         Large Enterprise       4,558            11.8%         5,650            12.8%
         Other                  4,783            12.3%         6,228            14.0%

         Total Direct          37,214            96.0%        42,156            95.2%
         Total Indirect         1,565             4.0%         2,109             4.8%

         Total              $  38,779           100.0%     $  44,265           100.0%

Our software operations focus primarily on the healthcare and government market segments, but with a greater emphasis on the healthcare market segment.

                                      For the Three Months Ended March 31,
         Market Segment       2013         % of Total        2012         % of Total
                                             (Dollars in thousands)
         Healthcare         $   9,329            65.0%     $   7,655            61.4%
         Government             1,351             9.4%         1,416            11.4%
         Large Enterprise       1,173             8.2%           597             4.8%
         Other(1)                 634             4.4%           739             5.9%

         Total Direct          12,487            87.0%        10,407            83.5%
         Total Indirect         1,864            13.0%         2,063            16.5%

         Total              $  14,351           100.0%     $  12,470           100.0%

(1) Other includes hospitality, resort and billable travel revenue.

Wireless Operations

Our wireless operations provide one-way and advanced two-way wireless messaging services including information services throughout the United States. We also offer voice mail, personalized greeting, message storage and retrieval, and equipment loss and/or maintenance protection to both one-way and two-way messaging subscribers.

We market and distribute our wireless services through a direct sales force and a small indirect sales channel.

Direct. The direct sales force rents or sells products and messaging services directly to customers ranging from small and medium-sized businesses to companies in the Fortune 1000, healthcare and related businesses, and Federal, state and local government agencies. We will continue to market to commercial enterprises, especially healthcare organizations, that are interested in low cost, highly reliable critical messaging. We maintain a sales presence in key markets throughout the United States in an effort to gain new customers and to retain and increase sales to existing customers. We also maintain several corporate groups, such as our Key Account Management team, focused on retaining and selling additional services to our key healthcare accounts as well as a team selling to government and national accounts. Our direct sales efforts also include a focus on cross-selling Amcom services to our extensive list of wireless customers.

Indirect. Within the indirect channel, we contract with and invoice an intermediary for airtime services. The intermediary or "reseller" in turn markets, sells, and provides customer service to the end user. Generally, there is no contractual relationship that exists between us and the end subscriber. Therefore, operating costs per unit to provide these services are lower than those required in the direct distribution channel. Indirect units in service


Table of Contents

typically have lower average revenue per unit ("ARPU") than direct units in service. The rate at which subscribers disconnect service in the indirect distribution channel has generally been higher than the rate experienced with direct customers, and we expect this trend to continue in the foreseeable future.

The following table summarizes the breakdown of our direct and indirect units in service at specified dates:

                                As of                        As of                        As of
                              March 31,                  December  31,                  March 31,
                                 2013                         2012                         2012
Distribution Channel    Units       % of Total       Units       % of Total       Units       % of Total
                                                      (Units in thousands)
Direct                   1,397            94.4%       1,421            93.8%       1,508            93.2%
Indirect                    83             5.6%          94             6.2%         109             6.8%

Total                    1,480           100.0%       1,515           100.0%       1,617           100.0%

As noted above in the "Overview", our key market segments are healthcare, government and large enterprise. The following table indicates the percentage of our units in service by key market segments for the periods stated and illustrates the relative significance of these market segments to our wireless operations.

                       As of March 31,       As of December 31,       As of March 31,
   Market Segment           2013                    2012                   2012
   Healthcare                     68.4%                    67.1%                 63.6%
   Government                     10.1%                    10.3%                 11.5%
   Large Enterprise                8.3%                     8.5%                  9.3%
   Other                           7.6%                     7.9%                  8.8%

   Total Direct                   94.4%                    93.8%                 93.2%
   Total Indirect                  5.6%                     6.2%                  6.8%

   Total                         100.0%                   100.0%                100.0%

The following table sets forth information on our direct units in service by account size for the periods stated:

                                           As of                          As of                          As of
                                         March 31,                    December  31,                    March 31,
                                           2013                           2012                           2012
Account Size                      Units        % of Total        Units        % of Total        Units        % of Total
                                                                  (Units in thousands)
1 to 3 Units                          49              3.5%           52              3.6%           61              4.1%
4 to 10 Units                         29              2.1%           31              2.2%           37              2.5%
11 to 50 Units                        71              5.1%           75              5.3%           86              5.7%
51 to 100 Units                       47              3.4%           49              3.5%           54              3.6%
101 to 1000 Units                    321             23.0%          334             23.5%          373             24.7%
> 1000 Units                         880             62.9%          880             61.9%          897             59.4%

Total direct units in service      1,397            100.0%        1,421            100.0%        1,508            100.0%

Our core offering includes subscriptions to one-way or two-way messaging services for a periodic (monthly, quarterly, semi-annual, or annual) service fee. This is generally based upon the type of service provided, the geographic area covered, the number of devices provided to the customer and the period of commitment. A subscriber to one-way messaging services may select coverage on a local, regional or nationwide basis to best meet their messaging needs. Two-way messaging is generally offered on a nationwide basis. We offer ancillary services, such as voicemail and equipment loss/maintenance protection, which help increase the monthly recurring revenue we receive along with these traditional messaging services.


Table of Contents

The following table summarizes the breakdown of our one-way and two-way units in service at specified dates:

                                            As of                                 As of                                 As of
                                          March 31,                           December  31,                           March 31,
                                             2013                                  2012                                  2012
Service Type                      Units           % of Total            Units           % of Total            Units           % of Total
                                                                           (Units in thousands)
One-way messaging                    1,362                92.0%            1,394                92.0%            1,483                91.7%
Two-way messaging                      118                 8.0%              121                 8.0%              134                 8.3%

Total                                1,480               100.0%            1,515               100.0%            1,617               100.0%

The demand for one-way and two-way messaging declined at each specified date and we believe demand will continue to decline for the foreseeable future. Demand for our services has also been impacted by the uncertainty in the United States economy and high unemployment rates nationwide.

As demand for one and two messaging has declined, we have developed or added service offerings in order to increase our revenue potential and mitigate the decline in our wireless business. During 2012, we launched a new service called Amcom Mobile Connect Select that allows our paging numbers and network to integrate with smartphones to deliver a paging experience via a smartphone application. We will continue to look for ways to innovate and provide customers the highest value possible

We provide wireless messaging services to subscribers for a periodic fee, as described above. In addition, subscribers either lease a messaging device from us for an additional fixed monthly fee or they own a device, having purchased it either from us or from another vendor. We also sell devices to resellers who lease or resell devices to their subscribers and then sell messaging services utilizing our networks.

We derive the majority of our revenues from fixed monthly or other periodic fees, charged to subscribers for wireless messaging services. Such fees are not generally dependent on usage. As long as a subscriber maintains service, operating results benefit from recurring payment of these fees. Revenues are generally based upon the number of units in service and the monthly charge per unit. The number of units in service changes based on subscribers added, referred to as gross placements, less subscriber cancellations, or disconnects. The net of gross placements and disconnects is commonly referred to as net gains or losses of units in service or net disconnect rate. The absolute number of gross placements as well as the number of gross placements relative to average units in service in a period, referred to as the gross placement rate, is monitored on a monthly basis. Disconnects are also monitored on a monthly basis. The ratio of units disconnected in a period to average units in service for the same period, called the disconnect rate, is an indicator of our success at retaining subscribers, which is important in order to maintain recurring revenues and to control operating expenses.

The following table sets forth our gross placements and disconnects for the periods stated:

                                                                          For the Three Months Ended
                                          March 31, 2013                      December 31, 2012                      March 31, 2012
                                     Gross                                 Gross                                Gross
Distribution Channel               Placements        Disconnects        Placements         Disconnects        Placements        Disconnects
                                                                             (Units in thousands)
Direct                                      42                 66                 48                 72                44                 91
Indirect                                     1                 12                  2                  9                 1                  5

Total                                       43                 78                 50                 81                45                 96


Table of Contents

The following table sets forth information on the direct net disconnect rate by account size for our direct customers for the periods stated:

                                                          For the Three Months Ended
                                        March 31,                 December 31,                March 31,
Account Size                              2013                       2012                       2012
1 to 3 Units                                   (4.8%)                      (5.5%)                   (6.2%)
4 to 10 Units                                  (6.0%)                      (5.5%)                   (6.2%)
11 to 50 Units                                 (4.8%)                      (4.6%)                   (7.1%)
51 to 100 Units                                (4.0%)                      (2.6%)                   (3.9%)
101 to 1000 Units                              (3.9%)                      (2.6%)                   (1.7%)
> 1000 Units                                   (0.2%)                      (0.6%)                   (2.7%)

Total direct net unit loss %                   (1.7%)                      (1.7%)                   (3.0%)

The other factor that contributes to revenue, in addition to the number of units in service, is the monthly charge per unit. As previously discussed, the monthly charge per unit is dependent on the subscriber's service, extent of geographic coverage, whether the subscriber leases or owns the messaging device, and the number of units the customer has in the account. The ratio of revenues for a period to the average units in service, for the same period, commonly referred to as ARPU, is a key revenue measurement as it indicates whether charges for similar services and distribution channels are increasing or decreasing. ARPU by distribution channel and messaging service are monitored regularly.

The following table sets forth ARPU by distribution channel for the periods stated:

                                         ARPU For the Three Months Ended
                                  March 31,        December 31,       March 31,
          Distribution Channel      2013               2012             2012
          Direct                 $      8.40       $        8.47     $      8.67
          Indirect                      5.85                5.74            6.14
          Consolidated                  8.25                8.29            8.50

While ARPU for similar services and distribution channels is indicative of changes in monthly charges and the revenue rate applicable to new subscribers, this measurement on a consolidated basis is affected by several factors, including the mix of units in service and the pricing of the various components of our services. Gross revenues decreased year over year but at a slower rate than previous years. We expect future sequential annual revenues to decline in line with recent trends. The change in ARPU in the direct distribution channel is the most significant indicator of rate-related changes in our revenues. The decrease in consolidated ARPU for the quarter ended March 31, 2013 from the quarter ended March 31, 2012 was due to the change in composition of our customer base as the percentage of units in service attributable to larger customers continues to increase. These larger customers benefit from lower pricing associated with their larger number of units-in-service. We believe that without further price adjustments, ARPU would trend lower for both the direct and indirect distribution channels in 2013 and that price increases could mitigate, but not completely offset, the expected declines in both ARPU and revenues.

The following table sets forth information on direct ARPU by account size for the periods stated:

                                          For the Three Months Ended
                                March 31,        December 31,       March 31,
            Account Size           2013              2012             2012
            1 to 3 Units        $    15.22       $       15.29     $     15.49
            4 to 10 Units            14.33               14.39           14.45
            11 to 50 Units           12.06               12.04           12.15
            51 to 100 Units          10.47               10.47           10.52
            101 to 1000 Units         8.84                8.94            9.04
            > 1000 Units              7.23                7.24            7.35

            Total direct ARPU   $     8.40       $        8.47     $      8.67


Table of Contents

Software Operations

Our software operations offer a focused suite of unified communications solutions that include call center operations, clinical alerting and notifications, mobile communications and public safety solutions. Given the focused nature of our software products, our primary market has been the healthcare industry, particularly hospitals. We have identified hospitals with 200 or more beds as the primary targets for our software solutions.

We develop, sell, and support enterprise-wide systems for hospitals and other organizations needing to automate, centralize, and standardize mission critical communications. These solutions are used for contact centers, clinical alerting and notification, mobile communications and messaging and for public safety notifications. These areas of market focus compliment the market focus of our wireless operations outlined above. We have a sales presence and customer base both domestically, throughout the United States, and internationally, in Europe, Australia, Asia and the Middle East.

Our software operations have established solutions for:

Hospital Call Centers - These solutions encompass operator and answering services along with call recording, scheduling and selective additional support modules.

Clinical Workflow Communication - These solutions address hospital code processing as well as physician support tools.

Communication Applications - These solutions support hospital notification and appointment support.

Communications Infrastructure - These solutions support the wireless messaging infrastructure and offer a software product that can link disparate communications software ("middleware").

Public Safety - These solutions implement and support emergency communication systems.

In our software operations we sell software solutions, professional services (installation and training), equipment (to be used in conjunction with the software) and post-contract support (on-going maintenance). Our software is licensed to end users under an industry standard software license agreement. Our software operations are organized as follows to support this business.

Marketing. We have a centralized marketing function which is focused on supporting our software products and vertical sales efforts by strengthening our Amcom brand, generating sales leads, and facilitating the sales process. These marketing functions are accomplished through targeted email campaigns, webinars, regional and national user conferences, monthly newsletters, and participation at industry trade shows.

Sales. We have organized our global sales organization into two theaters: the Americas and International. We sell our software products through a direct and channel sales force. The direct sales effort is geographically focused with the exception of dedicated government specialists. The direct sales force targets unified communication leadership such as chief information officers, information technology directors, telecommunications directors and contact center managers. Additionally, we target clinical leadership including chief medical officers and chief nursing officers. The timing for a direct sale from initial contact to final sale ranges from 6 to 18 months depending on the type of software solution.

The direct sales force is complemented by a channel sales force consisting of a dedicated team of managers. These managers coordinate relationships with alliance partners who provide sales introductions for our direct sales force.

Professional Services. We offer implementation services for our software products. These implementation services are provided by a dedicated group of professional service employees. Our professional services staff uses a branded, consistent methodology that provides a comprehensive phased work plan for both new software installations and/or upgrades. In support of our implementation methodology, we manage the various aspects of the process through a professional services automation tool. A typical implementation process ranges from 30 to 180 days depending on the type of implementation. We may also use professional services partners to implement our solutions for customers.


Table of Contents

Customer Support. To support our software products, we have established a dedicated customer support organization. Due to the mission critical nature of our software products, we provide 24 hours a day, 7 days a week, 365 days a year customer support that customers can access via telephone, email or the Internet.

Product Development. We maintain a product development group focused on developing new software products along with ongoing maintenance and enhancement . . .

  Add USMO to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for USMO - All Recent SEC Filings
Sign Up for a Free Trial to the NEW EDGAR Online Pro
Detailed SEC, Financial, Ownership and Offering Data on over 12,000 U.S. Public Companies.
Actionable and easy-to-use with searching, alerting, downloading and more.
Request a Trial Sign Up Now


Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.