Transcript Slide 1
FBR Technology & Growth Conference June 2, 2005 Safe Harbor This presentation contains “forward-looking” statements, including statements about business outlook and strategy, and statements about historical results that may suggest trends for our business. These statements are based on estimates and information available to us at the time of this presentation and are not guarantees of future performance. Actual results could differ materially from our current expectations as a result of many factors, including: unpredictable quarterly fluctuations in our business; the effects of competition or consumer and merchant use of our service; any adverse changes in our agreements with our listings providers; the impact of international expansion efforts on our business; and changes in our tax status. These and other risks and uncertainties associated with our business are described in the prospectus for our IPO This presentation includes non-GAAP financial measures, that are different from financial measures calculated in accordance with GAAP and may be different from non-GAAP calculations made by other companies. A quantitative reconciliation of non-GAAP information to the most directly comparable GAAP financial measures is available on our website. 2 Syniverse at a Glance Syniverse simplifies wireless technology complexities by integrating disparate wireless carriers’ systems and networks in order to provide seamless global voice and data communications to wireless subscribers. 18 Years of Operations $316.0 LTM Net Revenue1 Over 300 Customers, 40 44% EBITDA Margin2 countries 30 Services 14% Adjusted Net Income Margin3 1 Based on LTM Net Revenue as of 3/31/05 and excludes off-network database fees of $19.2 million. Based on LTM Net Revenues as of 3/31/05 and includes one-time adjustments 3 Based on LTM ending 3/31/05 and includes add-backs 2 3 Transaction-Based Revenue Model Wireless Subscriber Events Turn on phone Caller ID data displayed Roam on another carrier’s network Send SMS message to subscriber on other carrier “A Value-Added Toll Booth on the Wireless Highway” Maintain phone number when switching carriers Wi-Fi subscriber roams onto another network 4 Investment Highlights Leading provider of mission-critical, transaction-based technology services Extensive and collaborative customer relationships Well positioned for growth in existing and new markets Proven management team Superior operating model delivering strong financial results 5 A Complex Set of Relationships… A Complex Industry…A Simple Solution Network Services 1. Allow Verizon subscriber to roam on ALLTEL’s network Technology Interoperability 2. Allow Verizon and ALLTEL to exchange billing records for subscriber roaming Technology Interoperability 3. Allow subscribers to exchange SMS messages between carrier networks Number Portability 4. Allow subscribers to keep their cell phone number when switching carriers 6 Industry Complexity Fuels Demand for Our Services Diverse Signaling Standards (CDMA, TDMA, GSM, iDEN, Wi-Fi) Disparate Network Architecture (Lucent, Nortel, Ericsson, Motorola) Multiple Network Protocols (X.25, Frame Relay, SS7, Internet Protocol) Distinct Billing Record Formats (CIBER, TAP, RADIUS) 7 Compelling Industry Growth Dynamics Global Wireless Subscribers (bn) 13% CAGR 2.0 1.2 2003 16% CAGR 10.6 5.8 2007E Global Wi-Fi Hotspots (000) 48% CAGR Global Roaming Call Volume (bn) 213.2 2003 2007E Global SMS Text Messages (bn) 15% CAGR 1,068.5 604.1 44.6 2003 2007E 2003 2007E Source: IDC and Strategy Analytics 8 Broad Suite of Services Service Line Carrier Issue Technology Interoperability Exchange billing data among hundreds of roaming partners Syniverse Solution Clearinghouse services Network Managing numerous networks and databases adds complexity SS7 network and database access Number Portability FCC mandate drives increased operational complexity Centralized carrier data exchange Other Different protocols inhibit voice and data roaming Translation and routing services 9 Technology Interoperability Services 30% Services Largest wireless clearinghouse in North America Translate different protocols to support voice, data and Wi-Fi roaming Route SMS messages between domestic and international carriers Major Customers Verizon Wireless, T-Mobile, Sprint, ALLTEL, Dobson SFR, SK Telecom, KDDI, China Unicom, Vivo, RadioMovil Revenue Transaction-based (roaming calls cleared, SMS messages sent) 1Q05 revenue $23.2mm Growth Wireless subscriber and roaming volume Wi-Fi expansion and subscriber growth Mobile data services and SMS volume growth 10 Network Services Services Operate leading independent SS7 network Provide translation and routing services that enable wireless calls Provide access to databases (Caller ID, LNP, 800 Service) Major Customers Cingular, Verizon Wireless, T-Mobile, ALLTEL, Dobson BT Ignite, France Telecom, Belgacom, China Mobile, RadioMovil Revenue Transaction-based (calls made) and fixed-fee (circuits, ports) 1Q05 revenue $32.2mm Growth Wireless subscriber and roaming volume growth Mobile data services and SMS volume growth VOIP adoption and new database services 42% 11 Number Portability Services 15% Services Major Customers Process over 90% of the industry’s number porting transactions Provide data exchange between carriers Mitigate operational impact (billing, customer care, switching, etc.) Verizon Wireless, Cingular, Nextel, T-Mobile, Sprint, ALLTEL Revenue Transaction-based (customers retaining number when changing carriers) 1Q05 revenue $11.7mm Growth Wireless porting growth Wireless subscriber growth Industry churn rates 12 Enterprise 4% Other Services Call Processing 8% Call Processing International signaling Services Major Customers solutions Fraud detection SK Telecom, China Unicom, KDDI, ALLTEL, Verizon Wireless Enterprise Solutions Corporate invoice consolidation, reporting and analytical tools Verizon Wireless, ALLTEL, U.S. Cellular Revenue Transaction-based (roaming calls) 1Q05 revenue $6.4mm Subscriber-based (subscribers) 1Q05 revenue $3.1mm National account program Growth International subscriber growth Roaming call volume growth Fraud growth 13 Defensible Leadership Position Competitive Landscape Third Party Service Provider Technology Interoperability Network Services WLNP Services Call Processing Syniverse VeriSign NeuStar MACH Substantial Barriers to Entry High business switching / disruption risk for customers Strong customer relationships with long-term contracts Long history of trust with confidential subscriber and financial data Highly integrated and broad service offering difficult to replicate Sizeable fixed operating cost base required Flexible pricing options due to bundled service offering 14 Decreasing Revenue Concentration Revenue Concentration1 Carrier Customers 2001 1Q05 Change Top 1 29% 13% (16%) 2 thru 5 25% 25% - 6 thru 10 10% 14% 4% All other 36% 48% 12% Total 100% 100% 15 1 Percentages based on Net Revenues Consolidation Provides Incremental Opportunities We provide both carriers with WLNP services Sprint / Nextel Opportunity to capture Nextel clearing and network business Migration to CDMA may result in additional opportunities Opportunity to capture Cingular GSM signaling Cingular / AT&T Wireless Opportunity to capture combined clearing Opportunity to capture AT&T WLNP Alltel is major customer utilizing most of our services Alltel / Western Wireless Opportunity to capture Western WLNP and network 16 Growth Organically and Through Acquisition Strategy Further penetrate existing base of Organic Growth over 300 customers in 40 countries Identify and win new international customers Expand services and enter new sectors Opportunity/ History International Wi-Fi Messaging & Mobile Data MVNO VoIP Extend range and scope of services Acquisition Criterion offered Expand and leverage customer base Increase profitability and improve strategic positioning Enter new markets Increase scale of business EDS IOS N.A. Softwright Brience 17 Experienced Management Team Our team has an average of 19 years relevant industry experience Name Role Previous Experience Edward Evans CEO Dobson, Bellsouth, U.S. Cellular, GTE Raymond Lawless CFO Intermedia Communications, Bell Atlantic Paul Wilcock CTO Verizon Robert Garcia General Counsel Verizon Paul Corrao VP, Network Operations Intermedia Communications, AT&T, Bell Atlantic Charles Drexler VP, Sales Metro PCS, Lucent Linda Hermansen VP, Business Development & Strategy Verizon Gil Mosher VP, Operations Verizon Michael O’Brien VP, Marketing GE, Verizon Eugene Bergen Henegouwen Managing Director, Europe Intervention Machine, AVIO Digital Dennis Ng Managing Director, Asia Pacific Progress Software, Sam-Negma, AT&T 18 Superior Operating Model Scalable Economics High Visibility 80% Transaction Based Recurring Revenues 98% Recurring Revenues Low Capital Intensity 4.8% Capex / Revenue1 Scalability and Leverage: Distinct Investment Value High Margins 61.4% Gross Margin1 Low Sales & Marketing 43.2% EBITDA Margin1 20.7% SG&A / Revenue1 Suite of Services Proven ability to extend platform to new services 1 Based on Net Revenue for 1Q05, and excludes Headquarters move related capital. 19 Net Revenue Growth in Recurring Business Lines ($ in millions) $309 $292 NonRecurring Business Lines Recurring Business Lines $23 $267 $242 $112 $180 $65 $202 $31 $211 $286 $76 $3 $73 2001 2002 2003 2004 1Q05 20 Diversified Product Offering Drives Solid Growth ($ in millions) Net Revenue 1Q04 1Q05 Enterprise $3.1 4% Enterprise $3.7 5% WLNP $11.1 16% WLNP $11.7 15% Network $32.2 42% Network $29.8 44% Technology Interoperability $15.3 22% Technology Interoperability $23.2 30% Call Processing $9.3 13% $69.3 million Call Processing $6.4 8% $76.6 million 21 Accelerating Profitability Momentum ($ in millions) Quarterly year over year growth comparison 2003 2004 2005 $37.7 $34.9 $33.1 $33.9 $29.2 $27.4 $26.6 $24.7 $23.9 $10.8 $13.1 $12.1 $11.3 $11.7 $9.6 $9.1 $7.4 $7.0 $5.3 $5.3 $14.4 $13.4 $4.3 $7.4 $6.4 $3.6 $1.5 Q1 Q2 Q3 Adj. EBITDA 4Q Q1 Q2 Q3 Adj. Net Income 4Q Q1 Q2 Q3 4Q Cash Net Income 22 Cash Net Income Adjustments Long-term Benefits – driven by prior acquisitions GAAP Acquisition-Related Amortization – Approximately $24 million annual acquisition related tangible and intangible asset amortization Tax Deductible Amortization of Goodwill – Approximately $24 million in additional annual deductions – Not amortized for GAAP purposes, only affects cash flow – Duration of approximately 14 years Near-term Benefits – NOLs as of 12/31/04 totaling approximately $80 million 23 Strong Capital Structure ($ in millions) Senior Subordinated Notes, net of discount Credit Facility, net of discount Total Debt Class A Cumulative Redeemable Preferred Stock As of 12/31/04 As of 3/31/05 $241.8 215.6 $457.4 $157.3 239.4 $396.7 335.6 - Common Stock 37.1 Accumulated Deficit & other comprehensible income (143.9) 457.3 (161.0) Total Owners Equity $296.4 $(106.9) 24 Investment Highlights Leading provider of mission-critical, transaction-based technology services Extensive and collaborative customer relationships Well positioned for growth in existing and new markets Proven management team Superior operating model delivering strong financial results 25