Alteva Reports Third Quarter Financial Results

PHILADELPHIA, PA--(Marketwired - Nov 13, 2015) - Alteva, Inc. ("Alteva" or the "Company") (NYSE MKT: ALTV), a premier provider of hosted Unified-Communications-as-a-Service ("UCaaS"), today announced selected financial results for the third quarter ended September 30, 2015.

Third Quarter 2015 Financial Results Highlights

• For the third quarter of 2015, the Company recorded Adjusted EBITDA* of $0.3 million, as compared to $0.1 million for the same period in 2014;
• The Company recorded operating loss of $(2.1) million for the third quarter of 2015, as compared to $(1.6) million for the same period in 2014;
• The Company had a net loss of $(1.8) million for the third quarter of 2015, as compared to $(1.3) million for the same period in 2014;
• For the third quarter of 2015, UC revenues increased by 10% to $4.7 million from $4.3 million for the third quarter of 2014;
• During the third quarter of 2015 the Company installed over 2,000 new users on its hosted platform, which brings the total users to over 57,000 at the end of the third quarter of 2015. This represented an increase of 15% compared to the end of third quarter 2014;
• During the third quarter of 2015, the Company had new customer sales of approximately 3,800 users;
• As of September 30, 2015, the Company had approximately 5,400 new customer users, or 9% of the installed base, sold and scheduled for implementation; and
• Gross profit margin decreased to 60% in the third quarter of 2015 from 61% for the third quarter of 2014.

Third Quarter 2015 Results

Revenues increased to $8.0 million in the third quarter of 2015 as compared to $7.6 million for the third quarter of 2014.

UC revenues were $4.7 million in the third quarter of 2015, an increase of 10% from $4.3 million for the same period in 2014. As a percentage of consolidated revenue, the UC segment contributed approximately 59% of revenues in the third quarter of 2015, as compared with 57% for the same period in 2014. The increase in UC revenues was attributable to the addition of new clients and the increase in services to existing clients. Approximately 91% of third quarter 2015 UC revenues and 92% of the third quarter 2014 revenues were from licenses and services which are expected to be recurring in nature, with the balance of revenues derived primarily from equipment sales that were mostly related to new customer implementations.

Telephone revenues were $3.3 million in the third quarters of 2015 and 2014. The Telephone segment contributed approximately 41% of revenues in the third quarter 2015, as compared with 43% for the same period of 2014. Telephone revenues were flat year-over-year as a result of continued access line losses being offset by higher revenue from pooling arrangements, an increase in access line rates, and custom pole work.

UC cost of service expenses were $2.3 million in the third quarter of 2015, as compared to $1.9 million in the third quarter of 2014. The increase in UC cost of services expenses was due to the variable costs associated with the additional seats on the platform and the hiring of additional operations personnel to support the implementation of new users, including the growing implementation backlog.

Depreciation and amortization expenses were $0.9 million in the third quarter of 2015 as compared to $0.9 million for the same period of 2014.

Gross profit increased by 3% to $4.8 million in the third quarter of 2015, from $4.6 million for the same period in 2014. Gross profit margin was 60% in the third quarter of 2015 as compared to 61% for the same period of 2014.

Selling, general and administrative expenses in the third quarter of 2015 were $6.0 million, as compared with $4.7 million for the same period in 2014. The increase was primarily due to professional fees and other costs associated with the merger and review of strategic alternatives.

During the third quarter of 2014 the Company incurred $0.6 million of expense in connection with the settlement with the former Chief Executive Officer.

For the third quarter of 2015, the Company had income tax benefit of $0.3 million, or 14% of loss before income taxes, as compared to an income tax benefit of $0.3 million, or 17% of loss before income taxes, for the third quarter of 2014. The estimated effective tax rate for each period includes projections of tax expense on the expected change in our valuation allowance for deferred tax assets. The estimated effective tax rate differed from the U.S. statutory rate primarily due to the expected increase in the valuation allowance, which resulted in an overall tax benefit recorded for the period ended September 30, 2015.

For the third quarter of 2015, the Company recorded a net loss of $(1.8) million and net loss of $(1.3) million for the third quarter of 2014.

Basic and diluted net loss per share was $(0.31) for the third quarter of 2015, as compared with basic and diluted net earnings of $(0.23) in the same period of 2014.

About Alteva
Alteva (NYSE MKT: ALTV) is a premier provider of Unified Communications and Collaboration solutions for business. Alteva's Unified-Communications-as-a-Service (UCaaS) solution integrates and optimizes best-in-class cloud-based technologies and business applications to deliver a comprehensive voice, video and collaboration service for the office and mobile workforce. Alteva is committed to delivering meaningful value to our customers through a consistent, high quality and unified user experience across multiple devices, platforms and operating systems. These attributes have positioned Alteva as a leading hosted communications provider and the partner of choice for a growing number of business customers nationwide and internationally. To learn more about Alteva, please visit www.alteva.com. You can also follow Alteva on Twitter @AltevaInc or LinkedIn.

*Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization adjusted to exclude non-cash stock-based compensation, severance related expense, income from equity method investment, restructuring costs and other special charges, and merger and strategic alternatives expenses. A reconciliation of adjusted EBITDA to net income (loss) can be found at the end of the following tables. Adjusted EBITDA is commonly used by management and investors as an indicator of operating performance and liquidity. Adjusted EBITDA is not considered a measure of financial performance under GAAP and it should not be considered as an alternative to net income (loss), or other financial statement data presented in accordance with GAAP in our consolidated financial statements.

Safe Harbor Statement

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements, without limitation, regarding expectations, beliefs, intentions, growth, profitability, or strategies regarding the future. Such statements include, without limitation, statements containing the words "believes," "anticipates," "intends," "expects," "will" and words of similar import. Alteva intends that such forward-looking statements be subject to the safe-harbor provided by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause Alteva's actual results, performance or achievements or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: expectations of future profitability; general economic and business conditions, both nationally and in the geographic regions in which Alteva operates; industry capacity; demographic changes; technological changes and changes in consumer demand; the successful integration of Alteva's acquired businesses; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; legislative proposals relating to the businesses in which Alteva operates; competition; or the loss of any significant ability to attract and retain qualified personnel. Given these uncertainties, current and prospective investors should be cautioned in their reliance on such forward-looking statements. Except as required by law, Alteva disclaims any obligation to update any such factors or to publicly announce the results of any revision to any of the forward-looking statements contained herein to reflect future events or developments. A more comprehensive discussion of risks, uncertainties, financial reporting restatements, and forward-looking statements may be seen in Alteva's Annual Report on Form 10-K and other periodic filings with the U.S. Securities and Exchange Commission.

ALTEVA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
			Three Months Ended								Nine Months Ended
			September 30,								September 30,
			2015				2014				2015				2014
Operating revenues:
	Unified Communications		$	4,718			$	4,308			$	13,703			$	12,753
	Telephone			3,252				3,263				9,915				9,946
	Total operating revenues			7,970				7,571				23,618				22,699
Operating expenses:
	Cost of services and products (exclusive of depreciation and amortization expense)			3,201				2,924				9,687				8,843
	Selling, general and administrative expenses			6,015				4,726				16,664				15,686
	Depreciation and amortization			891				931				3,383				2,753
	Restructuring costs and other special charges			-				600				-				700
	Total operating expenses			10,107				9,181				29,734				27,982
Operating loss				(2,137	)			(1,610	)			(6,116	)			(5,283	)
Other income:
	Interest (expense) income, net			(2	)			20				10				(173	)
	Income from investment			-				-				-				52,373
	Other income (expense), net			25				(4	)			1,515				23
	Total other income, net			23				16				1,525				52,223
(Loss) income before income taxes				(2,114	)			(1,594	)			(4,591	)			46,940
Income tax (benefit) expense				(296	)			(264	)			(753	)			16,982
Net (loss) income				(1,818	)			(1,330	)			(3,838	)			29,958
Preferred dividends				6				6				19				19
Net (loss) income applicable to common stock			$	(1,824	)		$	(1,336	)		$	(3,857	)		$	29,939
Basic (loss) earnings per common share			$	(0.31	)		$	(0.23	)		$	(0.66	)		$	4.96
Diluted (loss) earnings per common share			$	(0.31	)		$	(0.23	)		$	(0.66	)		$	4.96
Weighted average shares of common stock used to calculate loss per common share:
	Basic			5,871				5,826				5,853				5,802
	Diluted			5,871				5,826				5,853				5,802
Dividends declared per common share			$	-			$	-			$	2.60			$	-

ALTEVA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
			September 30,				December 31,
			2015				2014
			(Unaudited)
Assets
Current assets
	Cash and cash equivalents		$	6,471			$	24,047
	Trade accounts receivable - net of allowance for uncollectibles - $421 and $402 at September 30, 2015 and December 31, 2014, respectively			2,919				2,737
	Other accounts receivable			598				488
	Materials and supplies			273				167
	Prepaid expenses			703				349
	Prepaid income taxes			498				311
	Receivable and deferred income taxes			1,190				43
Total current assets				12,652				28,142
	Property, plant and equipment, net			11,050				12,384
	Intangibles, net			4,382				5,020
	Seat licenses, net			1,537				1,543
	Goodwill			9,006				9,006
	Other assets			1,474				1,023
Total assets			$	40,101			$	57,118
Liabilities and shareholders' equity
Current liabilities
	Short-term debt		$	405			$	325
	Accounts payable			1,317				1,216
	Advance billing and payments			317				274
	Accrued taxes			947				1,056
	Pension and post retirement benefit obligations			276				276
	Accrued wages			914				1,036
	Deferred revenue			857				705
	Other accrued expenses			2,792				2,180
Total current liabilities				7,825				7,068
	Long-term debt			403				295
	Payable and deferred income taxes			1,008				766
	Pension and postretirement benefit obligations			8,826				8,833
Total liabilities				18,062				16,962
Shareholders' equity
	Preferred shares - $100 par value, authorized and issued shares of 5; $0.01 par value, authorized and unissued shares of 10,000			500				500
	Common stock - $0.01 par value, authorized shares of 10,000; issued shares of 6,903 and 6,826 at September 30, 2015 and December 31, 2014, respectively			69				69
	Treasury stock - at cost, 902 and 885 common shares at September 30, 2015 and December 31, 2014, respectively			(8,202	)			(8,077	)
	Additional paid in capital			14,731				14,047
	Accumulated other comprehensive loss			(3,215	)			(3,997	)
	Retained earnings			18,156				37,614
Total shareholders' equity				22,039				40,156
Total liabilities and shareholders' equity			$	40,101			$	57,118

ALTEVA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
				Nine Months Ended September 30,
				2015				2014
CASH FLOW FROM OPERATING ACTIVITIES
Net (loss) income				$	(3,838	)		$	29,958
	Adjustments to reconcile net (loss) income to net cash used in operating activities:
		Depreciation and amortization			3,383				2,753
		Stock based compensation expense			684				677
		Distribution in excess of equity in earnings and gain on sale from equity investment			-				(49,776	)
		Other non-cash operating activities			(958	)			230
	Changes in assets and liabilities:
		Trade accounts receivable			(182	)			(269	)
		Prepaid expenses and other assets			(1,204	)			(272	)
		Accounts payable and accrued expenses			1,022				922
		Accrued taxes			(109	)			4,029
		Pension and postretirement benefit obligations			775				139
	Net cash used in operating activities				(427	)			(11,609	)
CASH FLOW FROM INVESTING ACTIVITIES
		Capital expenditures			(688	)			(222	)
		Purchase of seat licenses and other intangibles			(353	)			(115	)
		Proceeds from sale of assets			-				33
		Proceeds received in excess of income from equity investments			-				49,776
	Net cash (used in) provided by investing activities				(1,041	)			49,472
CASH FLOW FROM FINANCING ACTIVITIES
		Proceeds from debt			-				2,443
		Repayment of debt and capital leases			(363	)			(12,575	)
		Purchase of treasury stock			(125	)			(399	)
		Dividends (Common and Preferred)			(15,620	)			(19	)
	Net cash used in financing activities				(16,108	)			(10,550	)
Net change in cash and cash equivalents					(17,576	)			27,313
Cash and cash equivalents at beginning of period					24,047				1,636
Cash and cash equivalents at end of period				$	6,471			$	28,949
Supplemental disclosure of non-cash investing activities:
	Acquisition of equipment and seat licenses under capital leases			$	368			$	390
	Seat licenses acquired but not paid			$	-			$	188

ALTEVA
RECONCILIATION OF ADJUSTED EBITDA TO NET INCOME (LOSS)
AS IT IS PRESENTED ON THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
			Three Months Ended September 30,								Nine Months Ended September 30,
			2015				2014				2015				2014
Net income (loss)			$	(1,818	)		$	(1,330	)		$	(3,838	)		$	29,958
	Depreciation and amortization			891				931				3,383				2,753
	Stock-based compensation			332				170				684				677
	Severance related charges			-				11				-				307
	Restructuring costs and other special charges			-				600				-				700
	Merger and strategic alternatives expenses			1,209				-				1,852				-
	Interest (income) expense, net			2				(20	)			(10	)			173
	Income from investment			-				-				-				(52,373	)
	Income tax expense (benefit)			(296	)			(264	)			(753	)			16,982
Adjusted EBITDA			$	320			$	98			$	1,318			$	(823	)