Updated: Earnings: Virgin Mobile’s Q1 Was Tough; Looking At Opportunities For Growth
By Tricia Duryee - Mon 05 May 2008 01:16 PM PST
Virgin Mobile (NYSE: VM) released its first quarter earnings today, showing that results were substantially lower compared to the year-ago period, however, they were at the upper end of expectations for the quarter. The results are coming out after a week-long run up in their stock and rumors surfacing that they may receive a private-equity investment. The stock is up 33 cents, or about 9.4 percent today to trade at around $3.83 a share. Last week, the stock traded as high as $4.96 share, prompting the New York Stock Exchange to ask Virgin to explain the run-up. The company declined. We reported here at mocoNews that one reason for the stock run-up could be expectations of a company sale, or least some part of it, to either a PE, institutional or hedge fund investor, or a strategic. Update: In after-hours trading today, the stock has already declined 73 cents to $3.02 from today’s close of $3.75, hinting that the market may have been expecting an announcement of some kind.
Dan Schulman, Virgin Mobile USA’s CEO, talked to us today, addressing both today’s earnings release and the rumors. He said: “What I’m most pleased about is that we feel like the second quarter is a transitional quarter—our last negative quarter, and then the back-half of the year will have positive growth.” As far as the rumors, told us that they are always looking for opportunities. “We don’t comment on any rumors out there, but we have said that we believe that there are opportunities for us in terms of non-organic growth, such as another MVNO, or capability set that we might be able to avail ourselves of...Certainly there are a lot of opportunities that we see, and we think some of them are intriguing for us, but it’s a matter of what makes the most sense.”
Highlights of its Q1 financial results:
-- EPS totaled 7 cents a share (on expectations of 1 to 4 cents a share).
-- Adjusted EBITDA was $28.7 million in Q1 (on expectations of $21 to 24 million)
-- Q1 revenues totaled $304 million (on expectations of up to $293 million).
-- Q1 Gross adds were down to 796,000 from 882,000 in the year ago period
-- Q1 Net customer adds were down to 17,772 from 309,721 in the year ago period.
Turnaround Initiatives: Schulman said that he liked the way the numbers were headed, and that he believed Q2 was going to be another period of transition for the company, but they had a lot on the horizon to be excited about. It recently changed its pricing plans to be more competitive, and it’s increasing its expansion by adding 600 more third party stores, 900 stores through Sears, and by going into 20 percent more Wal-Mart (NYSE: WMT) retail locations, while also upping its shelf space in all of the Wal-Mart stores. “With these things together, we have not only have started out on the right foot for the year, but setting ourselves up to see good growth as we move into the second half of 2008, and enter 2009,” he said.
Projections: He attributed the company’s problems to having a weak Q4 when other pre-paid wireless companies were discounting heavily and a weak economy. He reiterated the company’s 2008 guidance of adjusted EBITDA of $105 to $130 million (compared to $99 million in 2007), and EPS of 19 to 35 cents a share.
UPDATE: In the call:
-- The company did not address rumors during the call, and analysts didn’t ask about them until the final question. Schulman again declined to comment, other than to add that they are always looking for new opportunities. Also, during the call he mentioned an earlier announcement that David Messenger has assumed the responsibilities of Chief Administrative & Corporate Development Officer, to reflect his role “in shaping the company’s corporate development.” “We do see a number of opportunities sout there, and we are putting some senior attention on them,” Schulman added.
Posted in: Companies, Operators, MVNO, Virgin, Money, Earnings
