Syniverse Holdings Inc Q4 2007 Earnings Call Transcript

Syniverse Holdings Inc. (SVR)

Q4 2007 Earnings Call

February 19, 2008 4:30 pm ET

Executives

Jim Huseby - VP of IR

Tony Holcombe - President and CEO

David Hitchcock - CFO

Analysts

Tom Kucera - Avondale Partners

Scott Sutherland - Wedbush Morgan Securities

Peter Jacobson - Brean Murray

Kim Celine - Goldman Sachs

Tom Ernst - Deutsche Bank

Amir Rozwadowski - Lehman Brothers

Will Power - Robert Baird

Lauren Ye - JPMorgan

Presentation

Operator

Welcome to Syniverse Holdings fourth quarter 2007 earnings conference call. Please be aware that this call is being recorded. At this time, I'll turn the call over to Jim Huseby Vice President of Investors Relations. Please go ahead, Mr. Huseby.

Jim Huseby

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

During the call today, Tony will provide an overview for quarter and discuss the drivers of growth that we have seen in our business. He will speak about some of our new products before moving to regional review and recapping our full year guidance. Dave will provide additional detail on the company's financial performance during the quarter and year and after that we will open up the call for your questions.

We issued a press release this afternoon and I have also prepared some slides that Dave will be speaking to on this call. Both of these items are available in the Investors Relations section of our website www.Syniverse.com. We encourage you to download the slides for your use on this call, if you haven't already done so. Today's call is also being webcast; 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've included discussion of certain non-GAAP measures, including adjusted EBITDA, adjusted net income, cash net income, and operating free cash flow. You'll find a reconciliation of each of these items in our earnings press release and on the website.

Before I turn things over to Tony, I'd like to caution all participants that today's call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 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 on our customers' use of our services, any adverse changes in our agreement with our vendors or partners, the impact of international expansion efforts on our business, our ability to integrate the operation of BSG wireless and changes in our tax status. These and other risks and uncertainties associated with our business are described in our filings with Securities and Exchange Commission.

So all that said, I'll turn the call over to our President and CEO, Tony Holcombe.

Tony Holcombe

Thank you, Jim and welcome everyone to Syniverse's fourth quarter earnings conference call. David and I will discuss our fourth quarter results before taking your questions. We will provide more detail about our business Analyst Day on Thursday in New York.

Syniverse recorded its first $100 million quarter in the fourth quarter of 2007, a sequential increase from our traditional third quarter seasonal fee. Messaging and mobile data solutions together with continued global expansion drove our results.

Fourth quarter net revenues were $100.2 million, up 18.5% from last year's fourth quarter and stronger than the $99.2 million that we had in our recent record third quarter. This sequential increase in the third quarter was organic, as our fourth quarter 2007 results did not include any P&L impact from BSG operations.

SMS services, mobile data roaming and MMS experienced strong growth in the quarter. This growth was driven by increased usage for existing subscribers as well as new data customers for the carriers. Adjusted EBITDA was $43.4 million, 39% higher than last year's fourth quarter and cash net income was 54% stronger than last year at $21.2 million. Syniverse also generated over $47 million of operating free cash in the quarter; another quarterly record.

For the year, net revenues were $371.9 million, a 13.1% increase relative to 2006. Adjusted EBITDA was $155.9 million, a 22.1% increase from last year on a margin of 41.9%. Cash net income was $75.3 million, 31.4% better than last year's $57.3 million and we generated $97.3 million of operating free cash flow.

Results in the quarter were again driven by strong growth in Technology Interoperability, up over 37% year-over-year to $53.6 million, higher than our typical seasonal third quarter high with strong growth from our SMS services, mobile data roaming and MMS together with continued growth in clearing. Higher clearing volumes led to healthy increases in revenues, both revenue growth and messaging and mobile data were stronger in both dollar terms and percentage.

Rather than slowing down, our messaging and mobile data revenues accelerated to post the fastest year-over-year growth since May 2005 and May 2006, respectively. Several trends have begun to emerge in our business; first, GSM call volume in the seasonal months, has increased. Second, data sessions the times subscriber usually services are growing on a linear curve at a 200% plus rate. Third, SMS traffic has become more seasonal and is larger than voice traffic in the seasonal periods. And finally, new devices like our UniRoam enabled blackberries and PC cards are creating new data subscribers for the carriers.

Network service showed a 4% increase, our largest year-over-year increase since May 2005, as data networking our CRX and GRX services, typically our strongest growth products in this category, continue to pose very strong year-over-year increases. But growth in Network Services is more wide spread than usual this quarter. One driver is an expanding relationship with a major Internet backbone provider who was working with Syniverse for a variety of converge service offerings.

Additionally, a new product extension, our recently introduced GSM version of our popular business intelligence service called Visibility, showed accelerating growth. In fact, induction of this product by GSM operators contributed the strongest year-over-year increase for this product in the company's history. The other revenue lines largely continued their existing trends. Call Processing was up 5% due to the ongoing mix shift towards our growing Signaling Solutions product relative to the legacy anti-fraud solutions, while number affordability was slightly down.

Our new GSM Visibility Service that I mentioned a moment ago, is a product that seems significant in its early adoption, especially in CALA in North America, we have a number of key wins. This value added service provides operators with ability to manage the roaming business by giving them an immediate view of customer roaming activities. As a result, an operator can almost instantly identify and resolve customer service issues and an operator can provide a much higher service level to a subscriber.

The operator can provide real time support, like the system is integrated into their customer service environment, but additionally; the operator can look back for up to seven days to review past problems experienced by the subscriber. We believe this is a unique and highly cost effective service provided by Syniverse and we offer this service to our CDMA and GSM operators.

We've also seen a great deal of success with DataNet, our newly developed, new real time data roaming exchange product. We are extremely pleased the traction we've been gaining around the world with this product. Our solution is designed to meet and exceed the GSM Association's new real time data exchange roaming products standards.

We believe we clearly led the market in a number of contracts won thus far. As of the end of January, we had more than 60 signed contracts for customers such as Vodafone, Saudi Telecom, and VimpleCom, as examples. We have one contract in every region of the world. We also have quite a number of contracts under negotiation and the operators have already chosen DataNet, nine customers already implemented. And just last week, DataNet was named the best roaming product or service by the GSMA at the Global Mobile Awards at the Mobile World Congress in Barcelona, Spain. This prestigious award is a tremendous honor for Syniverse and singled out our DataNet product as the best solution available globally for GSM mobile operators, striving to combat the growing worldwide risk of roaming fraud.

In making the selection, one of the judges commented that Syniverse DataNet represents "a breakthrough in roaming data exchange for the back office, which should also revolutionize the roaming experience for the user". So between the GSMA Award and the fact that the GSMA deadline to be near-real time data exchange compliant is October this year, we expect continued solid success in advance of the October deadline.

Now let me briefly discuss some trends in each of our four global regions. North America remains our largest region, generating $78 million of net revenue in the quarter, slightly more than the third quarter and 23% better than last year's fourth quarter. Trends in North America remain consistent. SMS services, Mobile Data Roaming, and MMS drove a 55% year-over-year quarterly increase in North American technology interoperability, while the full year's growth was 28% versus 2006. Signaling solutions drove the 8% fourth quarter year-over-year increase in call processing, while number portability was up 2.4% and network services was flat.

With regards to Verizon renewal, we provided as much information as we could on our call last month and we don't have any thing new to report. We continue to believe that we are a value supplier to Verizon and remain confident that we will reach a mutually beneficial agreement, which is, as we said last month, that we will continue to service Verizon under existing terms until we execute the renewal.

Turning to EMEA. As expected, EMEA showed strong growth in the quarter. 77% year-over-year as Vodafone Spain and other operators migrated to our platform. These results do not include BSG. For the year, EMEA revenues grew 55%, while we continue to make significant regional progress through 2007. Highlights for the year include the acquisition of BSG, expanding our customer base in the Eastern Europe by winning Mobiltel early in the year, and following that up by winning the remaining six VimpelCom properties, with over 50 million subscribers later in the year.

Finally, our four-year Vodafone contract renewal. We've now got all the Vodafone properties on Syniverse and BSG platforms, except for India, which we are working through the conversion planning currently. Up to this point, EMEA revenues have been mostly from GSM clearing, but our product set is starting to broaden with financial clearing, DataNet, GSM visibility, and our continued work on various open-connectivity initiatives.

Looking ahead at 2008, EMEA will show a significant increase as a result of having BSG included in our P&L starting January 1st. We expect to see the same trend lines in 2008 as we discussed earlier, and we expect that EMEA will be our largest region outside of North America in 2008.

Moving over to Asia-Pacific, revenues were 34% higher for the whole year, as we had a whole year's contribution from ITHL compared only six months last year. But for the quarter, AP revenues were down by about 17%. Most of this decline was due to ITHL's strong performance in last's year fourth quarter, as ITHL had some unusually large contracts in Q4 2006. AP otherwise experienced strong growth in clearing, UniRoam and signaling solutions for the quarter. For the year, ITHL contributed $26 million, while the entire Asia-Pacific region contributed nearly $42 million, making it, in 2007, our largest region outside of North America.

Turning to [TRB] in Latin America, where we made some significant in-region investments over the past year by installing a new regional headquarters in Buenos Aires, adding offices in Sao Paulo and Mexico City and adding more in-region talent., some of whom are long term Syniverse veterans with in-region experience and some new local hires.

By making these investments, we are better able to focus on our customers' needs, while providing them with a high touch local customer service. We believe this investment will clearly differentiate Syniverse from the competition in this important region. Revenues in the region were up over 30% in the quarter to $6.8 million and finished the year with $23.9 million of revenues, 18% growth versus 2006. Our third consecutive year with double digit revenue growth in the region. Clearings saw a strong growth in both the quarter and for the full year, particularly on the GSM side. Other GSM services including GSM signaling and visibility, which I spoke about earlier, led the revenue growth.

Moving on to guidance, our outlook remains the same as when we preannounced last month. For the year we expect, net revenues are $425 million to $440 million, GAAP net income of $47.5 million to $54 million, adjusted EBIT of $190 million to $200 million, cash net income of $85 million to $90 million and operating free cash flow in excess of $100 million.

David will review how we are treating the costs and synergies associated with integrating BSG. And with that, let me turn it over to him.

David Hitchcock

Thanks Tony. I will be speaking to the slides that we have posted on our website and that Jim referred to earlier. Additionally, I want to highlight that we provided some additional disclosure this quarter in our press release tables. In addition to the data that we have always provided, we are now including a full balance sheet and cash flow statement. Additionally, you will find an additional breakdown of revenue by region.

I should point out that this is a preliminary balance sheet, which includes preliminary estimates of the purchase accounting allocations for the acquisition of the BSG wireless. These estimates are based on the best information available to the company as of today, but are subject to further change.

Let's go to slide 3, fourth quarter results highlights. This slide summarizes much of what Tony spoke about earlier. Syniverse posted our first $100 million quarter in the fourth quarter, with net revenues up strongly, both for the quarter and the year. Gross margin was strong in the fourth quarter at 65.9%, up 5.4 points from last year, as overall cost of goods sold, rose 2.2% for the year with a decline in support costs, partially offsetting increases in network and data processing costs.

SG&A remained well controlled at $23.7 million for the quarter or 23.7% of revenues, compared to $20.7 million or 24.5% of net revenues last year. About two thirds of the increase in sales and marketing is related to focus investments we've made outside of North America, with the balance being a timing issue for annual customer event. Over the past year, we've added sales staff on the ground on each of our regions, and established new offices in places like Buenos Aires and Sao Paulo, while increasing our global sales support.

The tick-up in G&A is mainly related to expenses associated with the secondary offering completed in the quarter. With depreciation and amortization up only slightly, operating income grew by 59% in the quarter and 41% for the year to $31.4 million and $107.4 million, respectively.

GAAP net income showed a significant decline in the quarter, but that was due to the reversal of a significant portion of our net deferred tax asset valuation allowance in the fourth quarter of 2006, which gave us a significant tax benefit, making year-over-year comparisons difficult. Backing up in line to the pre-tax income, the fourth quarter showed 89.4% gain as a result of the combination of much stronger operating income and lower interest expense for the year. For the year, pre-tax income increased 67%, translating net income down to EPS, Syniverse posted $0.25 per share in the quarter on a diluted share count of $67.8 million, while full year EPS were $0.78 on 67.5 million diluted shares.

Slide 4 reviews our non-GAAP measures and provides reconciliation from GAAP net income to adjusted EBITDA, much of which is shared with cash net income. The items of note include our tax provision due to the valuation allowance that I mentioned earlier and a slight increase in D&A as a result of greater depreciation on some of the investments we have made earlier in the year.

Otherwise there were relatively few adjustments that we have made during 2007. As discussed on our January 15 call, our 2008 guidance for adjusted EBITDA and cash net income includes adjustments for the one-time costs related to the BSG integration and the duplicative of costs that are expected to be eliminated. We will provide transparency in the both of these components on a quarterly basis to help you understand (a) what it is costing us to realize the synergies and (b) where we are in the synergy realization process.

Adjusted EBITDA margins remained healthy at 43.3% for the quarter and 41.9% for the year. At the bottom of page 4, you can see that cash net income was $21.2 million or $0.31 in the fourth quarter, versus $13.8 million or $0.20 a year ago. For the year, cash net income increased 31.4% to $75.3 million with cash EPS at a $1.11.

Slide 5 cuts the revenue by both service line on the top and by region on the bottom of the slide. Tony spoke much of this in detail, so I won't cover that ground again. However, I do want to point out the ongoing shifts within our revenue line. There has been an evolution in our top line mix towards technology interoperability since the company went public. In 2004, we were really a network company transitioning towards interoperability solutions.

Network Services were 42% of our net revenues, while Technology Interoperability was only 26%. As we exit 2007, 53.5% of fourth quarter revenues were Technology Interoperability, while Network Services is down to 31% and with the inclusion of BSG in 2008, Technology Interoperability will likely continue to grow as a percentage of our total revenue. Also, we dramatically globalize the revenue base of the company. Going back to 2004, 92% of our revenues were from North America and just 3% were from Asia Pacific and EMEA combined.

Today is a much different story with over 22% our fourth quarter revenues coming from outside North America and with the closing of the BSG transaction, we expect non-North American revenues to be roughly a third of our total net revenues in 2008.

Slide 6, provides our cash flow metrics. As Tony mentioned very early on, we generated over $47 million of operating free cash during the quarter. The key driver in the quarter was really the strong EBITDA combined with terrific cash collections. Fourth quarter is typically a strong cash collection period, as we get paid on the invoices generated during our seasonally strong third quarter.

For the year, we had $121.3 million of cash from operations including the $24.5 million paid in interest and $6 million in cash taxes. And invested $27.7 million in CapEx and generated $97.3 million of operating pre cash flow, $23 million or 31% higher than we generated in 2006.

Slide 7, we have outlined some selected balance sheet items. Obviously, our balance sheet at 12/31/2007 includes the impact of the BSG acquisition. At the end of the year, we had $49 million in cash and increase from our typical level the past two or three years mainly due to the cash we acquired on BSG's balance sheet.

The BSG acquisition increased goodwill to $609 million, while intangibles were up by $50 million mostly related to customer relationships. Debt balances are really the key thing to focus on this slide. The $175 million of 7.75 notes hasn't changed since issued in the third quarter of 2005. The credit facility has undergone some significant changes over the past quarter.

As we pointed out in our preannouncement call last month, we took on $290 million of new debt to fund BSG, while paying down $57 million on the facility in the quarter. The remainder of the balance change in a long term note versus September 30 is driven by the strengthening of the Euro between December 19^th and December 31^st and the associated impact on our Euro denominated term loan. This leaves a credit facility balanced at $348 million at December 31st, compared to $136.6 million at the end of last year. Given the strong adjusted EBITDA and debt repayment, our leverage ratio was very manageable; 3.3x at year end and over half a turn lower 2.7x on a pro forma basis, including BSG and the expected synergies.

So in conclusion, Syniverse capped off a terrific 2007 with very strong fourth quarter results. Strong revenue performance, coupled with well managed costs base drove very strong margin, bottom line and cash flow performance. Again, organic clearing growth, growing adoption of wireless data and our focus investments outside of North America have driven our top line. These trends have changed our revenue profile over the last several years from a North American-focus network dependent company through global interoperability company with 2008 likely to continue these trends.

Now let me turn it back over to Tony.

Tony Holcombe

Thank you, David. Before we open up the line to questions, I want to thank all of the Syniverse employees around the world for the hard work and dedication to make 2007 so successful. I’ve long said that Syniverse has the most talented employees in the industry and our results for 2007 speak for themselves. And now, with the addition of the talented BSG employees, Syniverse is stronger than ever.

I also want to remind all of you that we will be hosting our Analyst Day meeting in the Grand Hyatt in New York on Thursday. You have an opportunity to hear from the leaders of our company from around the world and how each of them creates value in the marketplace. The formal presentation starts at 8:15, like last year we are hosting a pre-meeting primer for those who would like to learn the fundamentals of the specialized topic. This year's primer will cover financial query. We certainly look forward to seeing you in New York on Thursday.

And with that we'll be happy to take the questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of John Bright with Avondale Partners. Please proceed with your question.

Tom Kucera - Avondale Partners

Good afternoon. This is Tom Kucera for John Bright. Tony, I noticed in your release that you mentioned a revenue item that affected revenues for the quarter one-time item and I didn't hear you saying anything about that on the call. Is there any other color you could give on that?

David Hitchcock

Yeah, this is David. There was nothing significant there, when we had closed the books and preparation for the January 15th call, we had expected an item to be reserved and therefore decrease our revenue for the quarter. Subsequent to that call, we had favorable resolution as a one-time item, nothing significant about it.

Tom Kucera - Avondale Partners

Okay. Next, I am hearing a lot of chatter here on data roaming in Europe and the potential regulations there. I am wondering what your exposure is to that, if you couldn't characterize that?

Tony Holcombe

Well I think our belief, just like as we talked about all the EU changes, Tom, is that we think that's good news for us. Anything that increases the uptake of data roaming, the more traffic increases, the more beneficial it is to us on a regional basis and on a global basis.

Tom Kucera - Avondale Partners

Well, I guess I am wondering more in terms of, for example with Vodafone and some of your other EU customers, is your exposure to data or your penetration there really the same as in the US?

Tony Holcombe

Tom, I am not sure I quite followed your question relative specifically to Vodafone or contract with Vodafone will cover all types of clearing, so that would include voice, it would include SMS, it would include data type sessions. So in that environment again, if rates go down and traffic increases, that generally is a very good thing for us.

Tom Kucera - Avondale Partners

All right. Thank you.

Operator

Your next question comes from the line of Scott Sutherland with Wedbush Morgan Securities. Please proceed with your question.

Scott Sutherland - Wedbush Morgan Securities

Great thank you. Good afternoon.

Tony Holcombe

Hey Scott.

Scott Sutherland - Wedbush Morgan Securities

Couple of question for you guys. First, with continued solid cash flow, what is your appetite for M&A with some interesting assets out there such as VeriSign and others, or are you looking to pay down the debt first and maybe M&A later, now you've just acquired BSG?

Tony Holcombe

Yeah, I think relative to M&A, our philosophy has been very consistent, it's basically unchanged Scott. There are some assets available, we will certainly evaluate those, our philosophy has been pretty consistent here; we are looking for global growth. We're looking for new services, next generation, services. Or we are looking for a customer base that could be leveraged.

So as we look out in the future, we are looking at those types of properties. We certainly are actively in the M&A front. We have people working full time, looking at a variety of options there and I expect us to be able to do some things in the future as we look at what's out there. But again, as always, that depends on what's available, at what price. As we tend to not overpay for items, with an ever fairly disciplined approach. At the end of the day, we are going to see the items that give us new products and services and potentially new customer relationships.

Scott Sutherland - Wedbush Morgan Securities

Okay. In your reporting segment, which has been relatively flat outside the bump-up from Canada, what kind of growth drivers you see there? I know you have Singapore, how material is that, when does that kick-in, what type of countries do you see? Well, do you see any changes with the percentage of people taking up phone numbers with them in the US?

Tony Holcombe

Yeah. I think the impede is that Singapore contracts will start to go online in 2008, and those are certainly in our guidance numbers today. Whereas a significant new opportunity in Mexico that we're certainly chasing, it is no secret for everybody out in the marketplace. We expect India to start to ramp-up. There is the renewal of the UK contract, to which we provide the existing service today and there are some other potential contracts available in the European market.

So again, we are going to be selective and look at those to make sense financially from the scale and scope standpoint. So, given our chances to win some proportion of those, we feel pretty good. Relative to quoting ourselves, the trends are what they have been. We don't see really any significant change in the US market in that regard.

Scott Sutherland - Wedbush Morgan Securities

Okay. This is probably my last question. The potential drop in data and SMS, roaming services in Europe, you mentioned you have Vodafone. Do you have Telia Sonera, VimpelCom and several other properties out there offering the same services, are those things you still need to win?

Tony Holcombe

No. Basically in the GSM environment, the roaming and clearing contracts will cover all aspects. It covers voice, SMS, MMS, data type for transaction. So if we have the contract, we stand to benefit from all the increased traffic.

Scott Sutherland - Wedbush Morgan Securities

Okay, great. Thank you.

Operator

Your next question comes from the line of Peter Jacobson with Brean Murray. Please proceed with your question.

Peter Jacobson - Brean Murray

Thank you, good afternoon.

Tony Holcombe

Hi Peter.

Peter Jacobson - Brean Murray

Hi. You mentioned earlier, I think an October deadline associated with GSM. Was that something separate from the open connectivity initiative, or is it related to that?

Tony Holcombe

No, it's related to the near real-time data exchange, Peter. The GSM Association has basically set October 2008 as the deadline for operators to be up and operational on the near real-time data exchange. So we are working aggressively to sign customers up and get them implemented and advance to the deadline.

You are not required to go live, but you'd certainly take more significant exposure risk if you don't go live. So our philosophy is, almost everybody will try to get up and operational, if they any type of roaming activity. As of that October deadline, there might be a few scribers to follow over the next several months that realize they are taking some significant liability if they don't go live with the service. So that is what the reference was to.

Peter Jacobson - Brean Murray

Okay. And can you provide us with an update on open connectivity and what the latest developments have been; won't you anticipate some revenue from that?

Tony Holcombe

Yeah. On open connectivity, we are now participating in a variety of trials with several carrier partners today. Those are mostly technical trials, they workout a variety of technical issues. We've been very supportive of this initiative with the GSMA and actually had several conversations with the GSMA in Barcelona last week about ways to accelerate this process to get this process up and going.

I think it's very positive. I think you will see trials continue through the first part of the year. I think you will see some selected applications in 2008. So I don't think we see significant revenue upside for this in 2009. But we certainly see it as a growing movement and tend to participate in it, as it rolls out from '08 and '09.

Peter Jacobson - Brean Murray

Okay. And then my last question regarding the free cash flow, I think you had previously guided to over $80 million for 2007 and over $100 million for 2008. Was there something specifically that contributed to overachievement on that in 2007 and does that number suggest that maybe the $100 million for '08 is conservative?

David Hitchcock

The impact in the fourth quarter was really driven by the stronger EBITDA and also we had very strong cash collections in the fourth quarter. Normally strong, but very strong. Our DSO at the end of the year was 58 days, that's down seven days from the end of last year. So that gives you a feel for how strong the cash collections were. We also had an M&A re-class in the fourth quarter driven by some of the expenses that we expect over in the year. So, nothing significant there that would portend anything differently at this point in time for 2008.

Peter Jacobson - Brean Murray

Okay, great. Thank you very much.

Operator

Your next question comes from line of Liz Grausam with Goldman Sachs. Please proceed with your question.

Kim Celine - Goldman Sachs

Hi. This is [Kim Celine] for Liz. I was just hoping to get an update on the integration plan for BSG wireless; how that's going and any sort of timeframe that you had?

David Hitchcock

Okay. Yeah Kim, as rather the BSG integration, I think we laid out a fair amount of detail on the last call and so rather than go back and review that, I'll talk to a little about where we are today. Our focus in the first half of this year, I think the first quarter, has been integrating the sales teams and account management teams; that's been completed. We had some difficult SG&A expenses that we want to take out and that's fundamentally completed at this point.

We have put the sales teams together. We have had a global sales conference for training on the cross our services and they have been presenting with services that each of them can cross out of their customer base and quotas have been handed out and assignments have been handed out and everybody is off and running in that regard.

So, relative to first phase as far as people, where exactly where we want to be, relative to technology. The technology teams are working together on the integration of the various solutions and the various platforms and finance and as we expected, that activity would take between now and probably to the end of second quarter, and starting by the end of second quarter we would start to engage customers in some selective transitional points.

So, bottom line is, we are right exactly where we thought we would be, no real surprises. Pleased with the results so far, particularly pleased with the integration of the teams. The staffs are working extraordinarily well together, getting very-very positive feedback on employee base and fundamentally very positive feedback on the customer side, as they await what new services may be available to them.

Kim Celine - Goldman Sachs

All right. Thank you.

Operator

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

Tom Ernst - Deutsche Bank

Good afternoon, gentlemen and thanks for taking my question.

Tony Holcombe

Hi, Tom.

Tom Ernst - Deutsche Bank

I'm curious what you have seen in the last month your, since you've talked to us last in terms of competitive responses on the BSG side of the business or perhaps if it's induced any sort of competitive response here in North America as well.

Tony Holcombe

Nothing specific, Tom. As you might expect, the competition would like to go out and so discord and confusion to the market place, but we've been very careful about how we communicate with the customers and the training and the communication plan.

So, from that standpoint, I think most of our customers understand that as we communicated around that and as we evolve the process and look at how the process will come forward, we will talk and communicate to them. We think we have an excellent approach; suffice it to say that we have very minimally impacted their operations by giving them additional feature functionality. So, from that standpoint, I think we feel pretty good about where we are.

Tom Ernst - Deutsche Bank

Okay, last month I asked you for any anecdotes of either customer optimism or apprehension headed into it. You probably had the chance to talk with many here over the last month, including last week. Any changes or surprises in the reaction here the last month?

Tony Holcombe

No. Not really at all. I think most of the customers are appreciative of our approach and how we are going to be presented to them. Obviously, they have lots of question and our answer to them is we’ve give the answers to questions as to work through a variety of questions that they may have at individual level and at a group level and the technology level. So, now no, no new news in that regard Tom.

Tom Ernst - Deutsche Bank

Okay. Shifting to the different topic if you permit, lot's of talk out about last week, are we beginning to see the creeping signs of reduction in handset volume forecast and things like that? Are you seeing anything in your traffic data and either roaming, porting, signaling etcetera that indicate any sort of downward tick in volumes?

Tony Holcombe

As we can clearly keep trying to articulate, we see dramatic growth and consumer subscriber of the carriers utilizing data related services. We see strong SMS growth, we see tremendous MMS growth, we see really that the star is basically mobile data sessions. So think Blackberries, IP sessions, think PC cards, anything that enables the subscriber to get to the web and utilize our received data.

We just see tremendous growth in that area and the roaming environment; again remember, we talked from a roaming perspective and again we see tremendous growth in that. We also are starting to see tremendous growth driven by the release of certain types of devices. So, as an example, as Verizon rolls out its Blackberry device, which we enable with the UniRoam; that device can work on a GSM environment, we see tremendous growth in that activity in volume. So, from our perspective we just see a huge ground swell; subscribers really accessing data and utilizing that data in a very large way.

Tom Ernst - Deutsche Bank

Okay, helpful, one final one. And if you said this on the call I missed, I apologize, but any update on your large customer contract; is it in month-to-month status, please?

Tony Holcombe

Well, I did say and the answer was no, we didn't have any update. We are still on the process working to negotiations the variety of issues; basically there is no real news for us report at this time.

Tom Ernst - Deutsche Bank

Okay. Thanks again.

Operator

Your next question comes from the line Amir Rozwadowski with Lehman Brothers. Please proceed with your question.

Amir Rozwadowski - Lehman Brothers

Great, thank you for taking the questions gentlemen. Any 10% customers this quarter?

Tony Holcombe

The only 10% plus customer we have is Verizon and there is no change in that.

Amir Rozwadowski - Lehman Brothers

Okay, great. And then in things like data, data seems to be area of continued growth and upside for you folks. Do you have a of sense, roughly, of what the percentage contribution for mobile data was this quarter and if you look out '08 do you have a sense where you think that could be, in terms of ballpark, for your revenues?

David Hitchcock

Yeah, I don't know if we had that number exactly at our fingertips; we might follow-up with you on Analyst Day specifically about those numbers. I think we try to give a lot more color in this slide relative to what data is doing and I think we are going to be talking quite a bit about data at Analyst Day on Thursday. So, I think we can give you some information there.

Amir Rozwadowski - Lehman Brothers

Okay. That certainly would be helpful and then lastly, if I may, how would you characterize the risk associated with your synergies in '08; specifically, are you hedging against any potential delays in transferring customers to the BSG platform because it seems that you are taking some of those synergies upfront in your '08 guidance and just wanted to get some clarifications in terms of some of the risks that you see there. Thank you very much.

Tony Holcombe

Yeah, I think related to the synergies we've spread the synergies over a two year horizon. So, I think we've given ourselves ample time to work through the variety of issues. Again, as I said earlier and I don't want to minimize this. It's very important to understand from a technological standpoint, we have our teams working together.

We are very confident and the approach and the solution we are going to roll out to the customer, then the customer is going to be very, very happy with the approach we have taken, so we are relatively confident with that. Having said that, most of the synergies in 2008; it really related to some of the upfront people SG&A and other cost and like as I said earlier, we are well on track to achieve those synergies at this point.

Amir Rozwadowski - Lehman Brothers

Okay. But any shifts on any given quarter that wouldn't necessarily shift the full estimation for '08 right now that you guys are seeing?

Tony Holcombe

No. Not right now. Basically as we've given the annual guidance, we've calculated that in and given ourselves plenty of latitude to be able to handle that.

Amir Rozwadowski - Lehman Brothers

Great, thank you very much for taking the questions gentlemen.

Operator

Your next question comes from the line of Will Power with Robert Baird. Please proceed with your question.

Will Power - Robert Baird

Great, thanks. Good afternoon. I guess two quick questions; first can you update us on how you're thinking about the BSG financial clearing opportunity, what you're hearing from your sales people in the field. Any early successes or anecdotes on that front?

Tony Holcombe

Yeah, well we are very excited about that. I tell you that the Syniverse sales force was tremendously excited to see financial clearing house in their bag to sell. They have a lot of prospects. We've brought over several of the BSG employees to be specialists to help our sales force sell that in North America, CALA, AP regions. We have strong sales forces. So they are all actively working on that. We will certainly have some success as we talk about here soon, I am confident of that. We are seeing a lot of customer interest in our ability to provide that service today.

And then secondarily, just kind of a follow-up to that, we are working on building and rolling out our CDMA solution for CDMA customers. We are very confident we are going to have a great platform in that area. So we can cover both GSM and CDMA. Again, another opportunity for us on a go forward basis, so I'd say the reaction is very, very positive, both on the sales force side and the customer side. Our guys are very excited to be selling it, we are going to get some wins.

Will Power - Robert Baird

Okay. That sounds good. And then my second question relates to the NOLs. Can you just update us on where you stand on NOLs and when you expect to be a full cash tax payer? Thanks.

David Hitchcock

Sure. We did use in 2007 $34 million of NOLs, that gives a balance of 46 which we do expect to utilize in 2008. We expect to be a minimal cash tax payer in 2008, but that will run us through the NOLs that we have in front of us.

Will Power - Robert Baird

Okay great. Thanks.

Operator

(Operator Instructions). Your next question comes from the line of Lauren Ye with JPMorgan. Please proceed with your question.

Lauren Ye - JPMorgan

Hi guys, this is Lauren for Sterling Auty. He has had a question on the Verizon renewal again. First, I think you mentioned before that this was part of your 2008 guidance. I just wanted to know if has that timing on that renewal changed, since we last spoke?

David Hitchcock

No.

Lauren Ye - JPMorgan

Okay. And then can you just remind me, first is VimpelCom, all of the properties gone live, and is that incremental for Q1 and going into '08?

David Hitchcock

The very large properties have gone live, Lauren. There are still a couple of the smaller ones that are going through a conversion process, but they are much smaller as far as a revenue impact for us.

Lauren Ye - JPMorgan

And when are they going to be done?

David Hitchcock

I don't have that right off the top of my head. I would say if I had to speculate within the next 90 to 120 days. I am pretty sure that we could speak to that. But we can get back to you, I just don't have it at my fingertip.

Lauren Ye - JPMorgan

Okay. And then just lastly in your network services, how do you think this area will play out in '08. I am just trying to understand, in Q4 there was Internet backbone provider, good growth from CRX, GRX. Do you think this is sustainable and do you see any of the environment there changing at all?

David Hitchcock

I don't see the environment changing per se. I think the trends are pretty consistent right now. The CRX/GRX is a driver growth. We have a great product set there. We are signing up customers every month and implementing them. So that's a very positive. As we pointed out, we had a nice expansion relationship with a customer, that's a nice driver that's baked into the '08 guidance.

Outside of that, I think the market is what the market is, I don't expect it to get appreciably better or all of a sudden start growing dramatically. We have VeriSign selling their asset in the marketplace today. So how that plays out is yet to be seen. So from our standpoint, I think that's the major trend that we would talk to.

Lauren Ye - JPMorgan

Okay. Very good. Thanks.

Operator

There are no further questions at this time. I would now like to turn the call back over to Mr. Tony Holcombe.

Tony Holcombe

Hey, thank you operator. I want to thank everyone for joining us today for our call. I certainly look forward to seeing you all in New York on Thursday, so we can spend some time and you get a chance to meet the remainder of the management team and ask everyone questions and we can kind of lay out what 2008 looks like for Syniverse. Thank you for joining us today.

Operator

Thank you for your participation in today's conference. This concludes the presentation, you may now disconnect.

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