Seeking Alpha

Home » Telecom Stocks » Transcripts

Syniverse Holdings Inc. Q4 2008 Earnings Call Transcript

February 11, 2009 | about: SVR

Font Size:
Print
Email
TweetThis
- Single Page View

Syniverse Holdings Inc. (SVR)

Q4 2008 Earnings Call Transcript

February 10, 2009 at 4:30 pm ET

Executives

Jim Huseby - Vice President, Investor Relations

Tony G. Holcombe - President and Chief Executive Officer

David W. Hitchcock - Chief Financial Officer

Analysts

Scott Sutherland - Wedbush Morgan Securities

Katherine Egbert - Jefferies & Co.

William Power - Robert W. Baird & Co., Inc.

Peter Jacobson - Brean Murray, Carret & Co.

Amir Rozwadowski - Barclays Capital

John Bright - Avondale Partners

Lauren Ye - JP Morgan

Presentation

Operator

Good day ladies and gentlemen and welcome to the Syniverse Holdings quarter four 2008 earnings conference call. Please be aware that this call is being recorded. At this time, I will turn the call over to Mr. Jim Huseby, Vice President of Investor Relations. Please go ahead Mr. Huseby.

Jim Huseby

Thank you Michel and good afternoon everyone. On behalf of Syniverse I want to thank you for joining us today. On the call with us today are Syniverse’s President and Chief Executive Officer, Tony Holcombe; and Chief Financial Officer, David Hitchcock.

During the call today, Tony will provide an overview of the quarter and of our expanding customer base then provide some updates on certain trends particularly around messaging and mobile data and provide some comments about our positioning for 2009. David will provide additional detail in the Company’s financial performance during the quarter, including our original reviews within greater detail about our guidance together with some sensitivity that we have identified to 2009. He will then turn the call back over to Tony for some concluding remarks before we open it up for your questions.

We issued a press release this afternoon and have prepared some slides that David will be speaking on this call. Both of these items are available in the Investor Relations section of our website at www.syniverse.com. We encourage you to download the sites for you use on this call if you have not already done so. Today’s call is also webcast over the internet. It too is available on our website and will be archived and available for replay shortly after we conclude.

In our press release and on today’s call we have included the discussion of certain non-GAAP measures, including adjusted EBITDA, adjusted net income, cash net income, and operating free cash flow. You will find a reconciliation of each of these items, as well as other information about our use of these measures in our earnings press release and on the website.

Before I turn things over to Tony I would like to caution all participants that today’s call may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Including statements about our business outlook, strategy, net revenue, adjusted EBITDA, net income, cash net income, and operating free cash flow outlooks for 2009, expected synergies related to BSG wireless, and statements about how the slowing global economy will affect our business and same as about historical results in the wireless communications industry that may suggest trends for our business. These statements are based on assumptions, estimates and other inherently subjective information available to us at this time and are not guarantees of future performance.

Actual results could materially differ from our current expectations as a result of many factors including unpredictable quarterly fluctuations in our business, changes in economic conditions, the effects of competition on our customers’ use of our services, changes in our customers’ network configurations, any adverse changes in our agreements with our vendors or partners, the impact of international expansion efforts on our business, our ability to integrate the operations of BSG Wireless and changes in our tax status. These and other risks and uncertainties associated with our business are described in our files with the Security and Exchange Commission. We assume no obligation to update any forward-looking information.

With that said, I will turn the call over to our President and CEO, Tony Holcombe.

Tony Holcombe

Thank you Jim and welcome everyone. On today’s call I will review our strong fourth quarter and overall 2008 financial results. I will then talk briefly about the current economic situation and how we believe Syniverse will fare and before turning it over to David for a deep dive into the numbers, I will discuss the coming year, some color on what you can expect from Syniverse and why we think we are well positioned looking forward.

If you had an opportunity to review our news release you know that Syniverse capped off a record year. For the first time, we surpassed the half billion dollar milestone in both total and net revenues. Our almost $502 million in net revenues for 2008 is a 35% increase from 2007. This was almost $130 million ahead of 2007 and includes a robust 20% organic growth in addition to the impact of the BSG acquisition.

We had a record fourth quarter as well with $125 million in net revenues. This nearly 25% year-over-year increase was better than expectations driven mainly by the delay and the direct connect between Sprint and Alltel. That number also represents 12% organic growth when compared to the fourth quarter 2007.

Adjusted EBITDA for the fourth quarter was $55 million nearly 28% higher than last year’s fourth quarter and cash net income was 26% stronger than last year at $27 million. Syniverse also generated over $42 million of operating free cash in the quarter.

Cash on hand on December 31 was about $165 million up almost $40 million versus the end of September. The strength in our numbers was driven by data and messaging growth in our global mobile industry. For example, industry mobile data revenue increased 18% from 2007 to 2008 and during the same timeframe global SMS and internet traffic increased 33%.

Our growing customer base also significantly contributed to an outstanding 2008. Not only did we achieve a 98% customer retention rate, we also continued to expand outside of North America.

In 2008 alone we added 97 new customers around the world as well as the 180 who came to us via the BSG acquisition. A good many of these new customers came from our EMEA region where we saw excellent new customer growth in the developing markets of Eastern Europe and Africa. We now have customers in countries such as Romania, Rwanda, Tunisia, Uganda and Croatia and in Asia Pacific. Our new customer base spreads from Pakistan to Fiji and the Cook Islands to Japan. While new CALA accounts include operators in Chile, Uruguay, Columbia and Panama among others; and in North America we added 29 new customers.

I cannot leave last year without talking about our acquisition of the wireless printing business of BSG and the Alltel Sprint direct connects.

We closed the BSG deal in December 2007 and put a tremendous amount of focus throughout 2008 on its integration in the Syniverse, so far, this acquisition has lived up to and perhaps even exceeded our expectations as the integration is going well both from a product and a cultural standpoint. We gained an excellent group of talented people and broader customer reach and we are on schedule with our customer upgrades to the new platform. We continue to expect $12 million in annual run rate cost savings by the end of 2009.

As for the direct connect between Alltel and Sprint it has been implemented and David will give you the financial details in a few minutes.

In our third quarter earnings call we told you we believe that direct connection will be implemented in November; instead, that implementation did not take effect until mid-January. The delay in implementation was positive for our fourth quarter revenue. Moreover, it is our understanding from Verizon that due to several factors, they chose not to prevent it from going forward. Nonetheless, we continue to believe Verizon’s preferred approach is to have one vendor manage its mobile data roaming. As for other NBR customers, we have 55 of them today and we expect that number to grow throughout 2009.

Data roaming is a valuable revenue stream to the operators. It is also a service that subscribers expect as they their smart phone devices any time and any where. Our data roaming services for both CDMA and GSM carriers and their subscribers provide the ubiquitous connectivity while providing many value added services, such as quality of service, message notification and real time track of specific issues. We expect our services to continue to be the preferred solutions for operators around the world.

I want to take a few minutes now to talk about the current global economic situation. There is no need to rehash too much here as we are bombarded on a daily basis with headlines, talking heads and dire predictions. Fortunately though, I think our industry will take less of a hit than others will. And the recent fourth quarter earnings calls, AT&T and Verizon both said that 2009 will be a tough year but stated that the wireless part of their business is the strongest and they expect growth in wireless despite the recession.

I think we can agree that one of the very last things an individual give up in hard times is his/her mobile phone. A second car will be sold. The cable TV plan will be discontinued and a household’s legacy landline contract will be terminated, but consumers simply will not give up their cell phones. What appears to be happening is that consumers are finding that their mobile device is the most convenient, all purpose communications device that they have.

So, communication’s traffic is migrating to the mobile device. This increased traffic often in the form of mobile messaging and data has powerful impacts on Syniverse. Even as voice roaming traffic slows, the continued growth of global data and messaging transactions will drive organic volume growth across our business.

As a result, voice roaming transactions could be flat or even decline modestly but the total number of transactions process is increased as a result of the growth in the data and messaging transactions.

We have seen the impact of these trends in our GSM clearing house. In January 2007, voice accounted for 52% of our total transactions, while messaging and data sessions accounted for the remaining 48%. Two years later in January 2009, voice slipped to 35% while messaging and data were 65% of total transactions and with total clearing transactions increasing almost 50%.

We expect messaging and data transactions to continue to grow as the adoption of smart phones continues to increase and new data applications are developed. Mobile data adoption has been strong but penetration is still low. A year ago only 5% of the total subscriber base of three large North American carriers utilized their mobile data roaming service. Today, that percentage has doubled to 10% but the penetration rate is still very low.

We believe that it will continue to increase driving volume growth to Syniverse. We also pay close attention to handset statistics and what we are seeing is encouraging especially when we look at the smart phone sector.

Smart phone ownership is currently spreading beyond the traditional enterprise user niche. Sit in any coffee shop today and you will see students and grandparents, as well as business people using data-enabled devices. According to one industry analyst, smart phones accounted for about 13% of all handset sales in 2008. With an estimated of 31% predicted that these devices will be about 23% of all handsets sold in four years.

Individuals who own smart phones are more likely to send messages, pictures and videos and they spend more time checking email, getting directions and looking up sport scores. In other words, they create more transactions for us to process. That is good news for Syniverse.

Now, let us look at ahead to 2009. Where we are confident Syniverse is well prepared to weather current economic challenges. I would like to outline the reasons for you right now.

First, we have a strong business model that continues to generate cash. A transaction-based business such as ours works better than most other models in a difficult economic environment.

Second, anticipating the risks of 2009 we implemented the program of cost controls last year that were already in place and working as we move in the 2009. We thought it was prudent to get a jump on this in light of the macroeconomic environment instead of waiting. This decision will serve us well this year.

Third, we have a strong balance sheet. We ended the year with $165 million of cash in the bank and our debt does not mature until four years from now. In today’s economic environment this is an excellent position for any company.

Fourth, we have no large contracts up for renewal this year since a number of our largest renewals were successfully closed in 2008, including contracts with AT&T, Verizon Wireless, T-mobile and [Telus] giving us good revenue predictability.

Five, we see ample opportunities for continued customer growth. Today, we provide at least one service to about 2/3 of the world’s wireless operators, so we have additional prospects to go after in the mobile space. We see the market expanding as well. More and more internet providers, cable operators and other providers who are outside our traditional mobile operator market are looking for someone to provide the services they need as they move in to the mobile space and want to provide interconnection and interoperability between fixed and mobile services.

We are also continuing work on possible number of portability projects in China and India. We recently responded to an RFP in India, a country that has about 347 million cell phone users. We expect the final decision about the license awardees in March and optimistic about our chances there.

And six, we continue to move forward with our product pipeline. We are increasing our focus on messaging to position ourselves to capitalize on exploding growth and data that I have already talked about today.

The centerpiece of efforts here is Syniverse NEXT, an advanced messaging hub. This solution provides interworking between operators for the exchange of presence data, IM, SMS and MMS messages across networks, protocols and message types. Operators will be able to offer their subscribers more interactive, intuitive and convenience presence space messaging service and give those subscribers the ability to spontaneously communicate and share experiences with individuals, groups, and social networking communities from any device, anywhere, anytime.

Let me give you a little background to help explain what makes NEXT a unique, one-of- a-kind product. In today’s mobile instant messaging world there are pockets of IM communities, groups of subscribers who use instant messaging within a well defined group, but the members of those communities are, for the most part, unable to send mobile instant messages to members of other IM communities whether mobile or fixed line or to their buddies texting using SMS.

Presence information, information that lets a subscriber’s buddies know if a subscriber is on a network among other things, also is missing in today’s platforms.

Syniverse NEXT solves these problems. The hub performs all the complex messaging protocol interworking and interoperability between roaming partners insuring subscribers’ messages move freely around the world and it eliminates messaging barriers caused by divergent formats.

IM messages, for example, can be converted and delivered in SMS format to recipients who are not yet part of an IM community. No other messaging hub offers this level of interoperability.

I am pleased to report that we were the only hub provider selected to participate in the ongoing FMCA which stands for Fixed Mobile Convergence Association messaging open presence trial. The trial focuses on providing secure presence interconnections between operators and online communities via hub structure and it utilizes the same transaction based model that we successfully operate today.

The six operators taking part in the trial are Brazil Telecom, British Telecom, KPN, Korea Telecom, NTT Communications and Telecom South Africa, a very nice representation from around the globe.

The first part of the trial has wrapped up successful and we are not about to embark on the next phase. The industry will be hearing a lot about Syniverse NEXT in the coming months. We are featuring it at mobile world showcase next week in Barcelona and again at CTIA in April. It is also prominently showcased in our newly revamped corporate website that just launched yesterday.

We have other products in our pipeline as well, including our new IPX solution. This global network transport solution means operators need only connect to a single network to utilize the full suite of wireless data services and take advantage of the wireless data explosion.

Another area that we will get a lot of focus this year is business intelligence. What we will do here is to provide operators with a set of tools that will help them collect, examine and analyze complex data. This will allow them to forecast trends and make business decisions that will optimize their revenue and offer their subscribers a better user experience.

We announced the first solution in these suites of products, RoamWise, last Thursday. And finally, I want to invite you to visit our just launched, newly redesigned corporate website. It has been quite a few months in the making and it is like anything you have seen from us before and I believe it makes a pretty bold statement about who Syniverse is today and where we are heading. I think you like what you will see.

So, to wrap up, as you just heard we have got a lot going on here at Syniverse. We are coming off a record 2008 and have excellent opportunities both in terms of expanding our customer base and expanding our already 124 customers’ strong presence in the messaging market.

Syniverse also was in an excellent position financially. This is a huge plus for both our current and potential customers, as they can confidently turn to Syniverse knowing we have the financial stability to insure we are able to service our critical business needs both today and tomorrow; and most importantly, we are in the heart of an industry that continues to grow and expand.

I have no doubt the Syniverse is well positioned to take advantage of the markets’ opportunities and I am certainly looking forward of what 2009 will bring to Syniverse.

Now, let us go to David now for an in-depth look at our financials and our 2009 guidance.

David Hitchcock

Thanks Tony. As Jim indicated, I will be speaking from the slides that are posted on our website. I will start on Slide 2.

Syniverse delivered solid fourth quarter with net revenues of $125 million nearly 25% higher than last year’s very strong fourth quarter. These results capped an outstanding 2008 which totaled over $500 million in net revenue, a 35% increase compared to 2007. Growth in the fourth quarter was strong, despite the full quarter’s impact of new Verizon pricing as we benefited from a delay in the MBR in sourcing between Sprint and Alltel that we spoke about last quarter. This benefit has proven to be temporary; however, as a direct connection was implemented in January.

Our margins remained strong at near 67%, 80 basis points higher than last year’s fourth quarter and came in at a robust 68% for the full year. The continued strong volumes in technology interoperability driven by global messaging and mobile data growth kept these margins high and helped offset the impact of new Verizon contract.

SG&A was higher than last year’s quarter with the incremental cost from the BSG acquisition accounting for roughly half of the increase. In addition, one-time items, such as the cost associated with the shareholder rights plan put in place during the quarter, employee severance cost and the significant bad debt reserve reversal in last year’s quarter accounted for another 25% of the increase. Given the strong top line, higher sales incentive also contributed to the increase in expenses. Some of these additional expenses, most notably the severance costs are upfront cost necessary to realize the cost reductions that we are permitted to for 2009.

Depreciation and amortization and net interest costs were higher in 2008 compared to 2007 due to the acquisition and integration of BSG, leading to an 11% increase in pretax income and 4% increase in GAAP net income with diluted GAAP EPS at $0.25.

For the full year, net income increased by nearly 50% or GAAP EPS was up over 48% to a $1.15 per share per diluted share.

Moving to Slide 3 and we will talk about the reconciliation of our non-GAAP measures. We delivered just over $55 million of adjusted EBITDA in the fourth quarter, up $12 million almost 28% versus the prior year quarter. Several of the reconciling items increased year-over-year most notably net interest expense driven by the incremental debt we took on to finance the BSG acquisition, depreciation, and amortization mainly driven by the intangible amortization from the BSG purchase price allocation and the BSG transition expenses.

Our tax rate remained consistent with what we have been speaking about since the second quarter call at 37.4%.

Cash net income for the quarter was almost $27 million, 26% higher than last year. Cash EPS was $0.39 in the fourth quarter of 2008 compared to $0.31 last year as our share count inched up by less than a percent.

For the full year 2008, the business generated adjusted EBITDA of $234 million, while cash net income was $114 million and cash EPS was $1.68 with all three metrics up more than 50% versus 2007.

Slide 4 breaks down our revenues by service line and by region. Technology interoperability continues to drive the top line but nearly 50% growth overall in the quarter. BSG contributed nearly $13 million to technology interoperability bringing fourth quarter organic growth for this revenue line to 26% and 12% for the total Company.

NDR was the key driver of this strong growth with healthy increases from ITHL and our messaging products.

For the year, BSG contributed $55 million in revenue. So, organic growth was 42.5% for technology interoperability and 20.1% for the total Company in 2008.

Network was $30 million in the quarter. We saw a strong growth in our SS7 and data networking products while declining trends for other products continued.

Number portability was strong at almost $8 million, a double digit increase versus last year driven by higher porting volumes. For the year, number portability rose 8% after two years of negative growth.

Call processing was down in the quarter, as signaling solution continues to be impacted by the CDMA to GSM migrations and lower revenues from some of our customers in Asia Pacific, while the legacy fraud products continue their long term trend. And finally, Enterprise Solutions was down in the quarter, as a small product set winds down.

The bottom half of the slide breaks down our revenues by geographic region, and you can see that North America generated 72% of our revenues for both the quarter and for the year down from 78% in 2007. While North America’s revenue percentage declined due to the inclusion of BSG. Growth was strong due to the trends in messaging and mobile data. CALA slowed to a 6% year-over-year growth rate in the fourth quarter, as we saw continued impact on our Signaling Solutions service from a customer migrating from CDMA to GSM that we have spoken about previously and a decline in GSM transport.

EMEA showed strong fourth quarter growth though that was due to the addition of BSG. Excluding BSG, EMEA grew about 1% in the quarter but nonetheless ended up 24% organically for the year.

Some of the fourth quarter softness was likely a result of the slower economy in Europe as cross border travel appears to have slowed.

Asia Pacific contributed $14 million this quarter or 11% of the total. At sales of technology products from ITHL were stronger than they were in the fourth quarter of last year. For the year, the region generated over $46 million or 9% of net revenues but double digit growth including the incremental revenues in the BSG acquisition.

Let us move to Slide 5 and talk about cash flow. In the current environment where cash is king, this slide takes on even more importance than usual and fortunately for Syniverse we have always generated significant free cash flow. This quarter was no different.

The business generated almost $43 million of free cash flow in the fourth quarter. As usual, the fourth quarter was our strongest from the cash flow perspective. Given that we are still collecting cash from our seasonal peak in the third quarter and we are not burdened with the semiannual interest payment on our subordinating notes like we are in the first and third quarters.

At this quarter is $43 million free cash to the $86 million we have generated through September 30^th and we ended the year with nearly $129 million of operating free cash flow.

Let me focus for a minute on our level of capital expenditures. We invested just over $11 million in the quarter which topped off a heavy CapEx year for Syniverse. Overall, we invested over $40 million this year or about 8.1% of net revenue, $13 million higher than 2007. Much of the capital increase was for projects that we have been talking about for much of the year, the BSG integration, our investment for Singapore number portability and Syniverse NEXT which Tony discussed earlier.

Year 2008 proves to be a good time to make these investments, as our financial performance was very strong. In 2009, we expect to back off some of our discretionary capital spending and return to our more normalized level of roughly 7.5% of net revenues.

At the bottom of the page you can see some supplemental information relevant to our cash flow. We paid $6 million in cash interest and principal repayments plus $2 million in cash taxes during the quarter. For the year, we paid $11 million in cash taxes. From the tax perspective, in 2008, we fully utilized our federal net operating loss carry forward and expect to be a full cash taxpayer in 2009.

Turning to the balance sheet items on Slide 6, we continue to build our cash reserves in the fourth quarter so that at December 31^st our cash balance was almost $166 million. On the liability side, the balance on our [seven to three] quarters notes is $175 million, while our credit facility is down $4 million from September 30^th and over $9 million from December 31^st, 2007 reflecting required amortization and the impact of currency fluctuations on euro base debt.

Interest costs on the credit facility were impacted by volatility and LIBOR during the quarter. As I mentioned on our last year, we fixed $100 million of our variable debt and a 5.26 percentage rate so that we now have $275 million or 54% of our outstanding debt at fixed rates. The balance is variable with the favorable margin of 250 basis points. As most of you know, we have no near term repayment requirements. Our next maturity is in 2013.

Clearly, there is a negative carry associated with holding significant cash while maintaining our existing debt balances. Nonetheless, we believe that it has been prudent to build these balances through the year to provide us with flexibility during these unprecedented times in the credit markets. We continue to evaluate all of our options though our priorities have not changed.

But nearly $514 million of long term debt and $234 million of adjusted EBITDA for the past year, our total leverage ratio stands at 2.2 times on December 31^st and net of $166 million of cash on our balance sheet is only 1.5 times, very comfortable levels.

As I have done each quarter since we have made the BSG acquisition, I will discuss the breakdown of our transition expenses on Slide 7.

We recorded $3.5 million in transition expenses in the fourth quarter, finishing the year at $13.2 million. Of this total, almost $2 million was spent in the quarter and just $105 million for the year on integration specific cost. This cost increased from the third quarter as we had more temporary headcount to enable the initial upgrades and prepare for those that are upcoming.

I expect that these integration specific costs are currently at or near their peak and will likely stay at around this level through the first quarter before starting to ramp down in the final three quarters of the project.

The remaining transition costs, $2 million for the quarter and just $109 million for the year, represent the duplicative cost that we have incurred that are expected to be eliminated upon full integration. These duplicative costs tipped down by $200,000 this quarter, as our upgrades begin and platform related savings started to be realized. As more volume has shifted from the legacy platform to the newer, more efficient platform, additional savings will be realized, which was why our upgrade schedule is so critical. So, you can expect these duplicative costs will continue to trend down throughout 2009.

An underappreciated aspect of our successful customer upgrades is that we have built and installed the second platform here in Tampa to compliment the existing platform in Germany that we inherited from BSG. This new platform has been tested and is currently in production so we have upgraded customers from the legacy of Syniverse, GSM platform to both the legacy BSG platform in Germany and the newly built platform in Tampa. This enables us to efficiently upgrade our entire GSM customer base while improving the service levels that we provide to customers.

The net of all of this is that we continue to expect that we will realize $12 million of run rate cost synergies by the end of 2009, with over $5 million run rate synergies achieved as of December 31^st. We are ahead of schedules on achieved synergies though those significant work remains.

Now, let me say a few words about our 2009 guidance. First, for 2009 we are making a small modification to our methodology for calculating cash net income and cash net income per share. We are updating our view of our expected long term effective tax rate to 37.5% from the current 39% due to the broader international component of our business and tax strategies that we have implemented and expect to implement. This change increases 2009 cash net income per share by roughly $0.03.

Before I review the specifics of our guidance, I think it is important that I update you on the three key items impacting our business in 2009, the new Verizon pricing, the Verizon Alltel acquisition, and the Sprint Alltel MDR direct connect. Other than later implementations of the MDR direct connect there has been no change to the key assumptions on these events that we shared with you during 2008.

Adjusting our $502 million of actual 2008 revenues for these items assuming the pricing and direct connect were in effect as of January 1^st, 2008 and consistent timing on the Verizon Alltel integration results in pro forma 2008 revenue of $430 million.

In addition to properly estimating the size and timing of these key items, the current economic environment and greater volatility in foreign exchange has made forecasting more challenging than in the past. Despite these challenges, we believe that there is value in providing you with our view to the year.

For 2009, we are guiding to net revenues between $460 million and $480 million, GAAP net income of $64.5 million to $74 million, adjusted EBITDA of $210 million to $225 million, cash net income of $99 to $108 million and operating free cash flow in excess of $100 million.

Now let me share a few sensitivities. We have assumed that the economic climate will have a mild but noticeable impact on our roaming business which is about 55% of our total business. This includes products like products like our roaming clearinghouse, mobile data roaming, uniroam, signaling solutions and others. Evidence through January suggests that there are maybe some impacts though it is still difficult to forecast how significant the impact will be.

We have seen some declines in our roaming clearing house particularly in Europe and other products driven by global roaming. We will continue to monitor these impacts closely and provide updates during the year as necessary. We also have greater FX exposure this year than in prior years. About 15 % of net revenues mostly as it relates to the euro. We have assumed a roughly 10% weakening in the euro versus the dollar as compared to 2008.

This change impacts our year over year growth by ½ to 2 percentage points on the top line and roughly $00.03 on cash EPS. The result of all these moving pieces combined with the additional scale of our business is a slightly widened guidance range. The midpoint of our net revenue guidance range assumes 9% organic growth off of our performed in 2008 base. This growth rate is consistent with our long term expectations of mid to high single digit top line organic growth supplemented by M&A.

Our guidance assumes that we will see roaming traffic continue to grow but at a slower pace and that we will continue to execute on the opportunities that we have to add new customers and to sell additional services to existing customers. Our range for adjusted EBITDA reflected changes in the top line plus our commitment to lower cost by 45% versus 2008. We have already taken action to tightly control discretionary spending and have adjusted over headcount levels as well. Our total headcount, employees plus contractors peaked at 1281 in October and we ended the year at 1242.

In summary, we had a great year in 2008 and are well-positioned financially for 2009 with a consistent business model that generates strong free cash flow and a healthy balance sheet. We are well-positioned to meet the challenges of 2009 and take advantage of the continued opportunities for growth that we are focused on.

Before we go to the Q&A I would like to turn it over again to Tony.

Tony G. Holcombe

Thank you David, I just want to take a minute to thank everyone who had contributed to the success that Syniverse saw in 2008. I truly appreciate the confidence our customers continue to have on our services, solutions and employees. And as for the Syniverse employees around the world, we have what I consider the most talented group of people in the industry and I truly believe that it is their hard work, dedication, and commitment that directly led to our record breaking results last year. Thanks to all of you.

And now I had like to ask the operator to begin the Q&A session.

Question-and-Answer Session

Operator

(Operator instruction)

Your first question comes from the line of John Bright - Avondale Partners. Please proceed.

John Bright - Avondale Partners

Tony, what was the impact in the quarter from the Sprint-Alltel, on the top line in the bottom line basis for them delaying that implementation?

David W. Hitchcock

The estimate was exactly what we have told you it was going to be in November which is roughly $8 million on the top line.

John Bright - Avondale Partners

And from a margin standpoint what was then the cash EPS impact?

David W. Hitchcock

From a bottom line perspective as you well know given the model that we have from that short of a period there was a very little sensitivity on the cost basis. So the majority of it flowed through to the bottom line.

Operator

Your next question comes from the line of Tom Ernst of Deutsche Bank Securities. Please proceed.

Tom Ernst - Deutsche Bank Securities

It seems like you are being prudent and your guiding for some of the economic impact. I think our analysis would suggest that with the organic growth you had less the three contracts you mentioned; the pro forma revenue growth and your technology and offer ability has been super 40% growth and unless I am doing the math wrong or were seeing some… Let me ask the question in 2 ways here. First, the other business, the other 45% of your business that is not the roaming business, what are you assuming for macroeconomics sensitivity in those, are we taking the hit there? If that is not a big hit, it looks like you are conservatively assuming of having loss at the growth rate and I have seen the big concern and I assume your approach is you just want to caution as you enter this year? Is that the case?

David W. Hitchcock

Yes, Tom the answered question is on the other businesses which are unless they were presuming really modest and no impact base on the way does business models have been working and we think that is probably prudent. You are right were assuming probably having as the growth rate in the roaming. I think to give you a little color on that is we always have been watching very closely and we have been watching this now particularly closely for the months of October and November, December and January data.

And we can certainly see slowing in traffic. David, as he mentioned in his remarks, Europe traffic had dropped fairly considerably. It is still growing but not at the rates it has been. We have seen modest impact in CALA, A slowing trend that grows in Asia Pacific same for North America. So looking at that, I think our approach right now is to be prudent about what we expect to see but we will continue to monitor and as David also said in his remarks, if the situation changes we will certain provide updates.

Ernst, Tom of Deutsche Bank Securities

Okay. One follow-up if you will permit. The call processing services has been roughly sliding over the last two years but this quarter showed a pretty strong down downtick. Is the rate of deceleration or the decline in that business picking up in 2009?

David W. Hitchcock

I think we have seen a couple of things here we talked about. We had some pricing impact there early in year. Also had some custom migrations from CDMA to GSM and those have just as grown off the base that we had in the third and fourth quarters of last year. We do see some acceleration in the second half of this year.

Operator

Your next question comes from the line of William Power of Robert W. Baird & Co., Inc Please proceed.