USA Mobility (USMO) Q3 2012 Earnings Call November 2, 2012 10:00 AM ET
Good morning, and welcome to the USA Mobility's Third Quarter Investor Call. Today's call is being recorded. On line today, we have Vince Kelly, President and Chief Executive Officer; Shawn Endsley, Chief Financial Officer; and MyLe Chang, Controller of USA Mobility. Also from the company's software subsidiary, Amcom Software, we have Colin Balmforth, President; Kate Bolseth, Chief Operating Officer; Lynn Danko, Chief Financial Officer; and Sean Collins, Executive Vice President, Selling and Marketing.
At this time, for opening comments, I will turn the call over to Mr. Endsley. Please go ahead, sir.
Shawn E. Endsley
Good morning. Thank you for joining us for our Third Quarter Investor Update.
Before we discuss our operating results, I want to remind everyone that today's conference call may include forward-looking statements that are subject to risks and uncertainties relating to USA Mobility's future financial and business performance. Such statements may include estimates of revenue, expenses and income as well as other predictive statements or plans which are dependent upon future events or conditions. These statements represent the company's estimates only on the date of this conference call and are not intended to give any assurance as to actual future results. USA Mobility's actual results could differ materially from these anticipated -- those anticipated in these forward-looking statements. Although these statements are based upon assumptions that the company believes to be reasonable, they are subject to risks and uncertainties. Please review the Risk Factors section relating to our operations and the business environment in which we compete contained in our 2011 Form 10-K, our third quarter Form 10-Q and related company documents filed with the Securities and Exchange Commission. Please note that USA Mobility assumes no obligation to update any forward-looking statements from past or present filings and conference calls.
With that, I'll turn the call over to Vince.
Vincent D. Kelly
Thanks, Shawn, and good morning. Before I begin reviewing what we believe was a fantastic quarter for both our software company and our wireless company, I want to take a minute to comment on the impact of Hurricane Sandy on USA Mobility.
As you know, we are headquartered in the Washington DC, Northern Virginia area but have significant operations and customers throughout the Northeast. The storm caused us to delay our earnings release and investor call by one day. On the Wireless side, our network and operations have held up very well. Like all wireless carriers in areas impacted by the storm, we experienced a few downed sites. However, we've been working diligently to restore them over the past few days. Fortunately, none of these outages caused major disruption of our service to our customers because of the redundant nature of our simulcast networks which allow for continuous coverage and network operation from other area sites when one site becomes disabled. In short, we never lost the ability to process messaging and our paging networks remained operational throughout the storm and its aftermath.
We also kept in close contact with our key accounts on the East Coast that may have been affected by the storm. Our teams have not only been fielding and resolving customer-reported issues but have proactively contacted all key accounts in the affected region. At this time, we have no significant customer issues related to the storm. The majority of our wireless customer service and back office operations are located outside of this region and thus were not impacted by the storm.
Locally, we did lose power for a couple days and many others have had power and connectivity issues with cellular, telco and Internet service. But as of today, all of our team members have been accounted for and we are functioning at full capacity. Additionally, our engineers are visiting our New York and New Jersey employees, who were hit hard, and providing supplies and help while they get back on their feet.
As for our Software business, our affected employees are safe and working from alternative locations where feasible. Our office in Manhattan on 33rd Street was shut down by the event and remains closed, but we have business continuity plans in place that are working successfully and our customer support lines were rolled over to other company sites.
Overall, the impact of the storm on USA Mobility was minimal and both Wireless and Software operations are running smoothly today.
I'm also cognizant that many of you on the phone today live in areas that were impacted by Sandy, and we wish you all the best for a speedy and full recovery. We understand all too well what challenges an event like this can present, but we also know the resolve and determination of our Northeastern fellow Americans and that you will come out of this stronger than ever.
Before we review third quarter results, I want to briefly comment on several recent management changes in our Software business. As I have previously mentioned, I had personally relocated up to Amcom headquarters in Minneapolis in early July after the departure of our former President and Chief Operating Officer. I did this for a variety of reasons but primarily to recruit a replacement President while working with our talented Minneapolis Amcom team over the course of the quarter. In mid September, we were delighted to welcome Colin Balmforth as President of Amcom and I was able to return home to Washington by quarter end.
Colin is a veteran software executive with extensive global business experience. He has relocated to Minneapolis. Colin brings with him a successful track record of increasing software revenue and profitability. We are truly excited to add Colin's considerable talents and strong leadership capabilities to our management team. As previously announced, Colin succeeds Chris Heim, who left Amcom in June but remains a member of USA Mobility's Board of Directors. Colin has joined us for our investor call today.
In addition, in mid October, Amcom named Lynn Danko as Chief Financial Officer. With more than 20 years of financial management experience, largely in the software industry, Lynn will also play an important role in helping drive Amcom's revenue growth and market expansion going forward. As the person responsible for Amcom's overall financial operations, we believe Lynn's managerial skills and professional experience will prove to be key assets for our Software business as it pursues its short- and long-term business goals.
The appointment of these 2 talented executives effectively completes the management realignment at Amcom that we initiated in July. At that time, as you will recall, we promoted Kate Bolseth to Chief Operating Officer and Sean Collins to Executive Vice President of Selling and Marketing. This talented group of professionals now comprise the core members of Amcom's executive leadership team. We're delighted to have them with us and look forward to working with each of them as we grow our software business in the years ahead.
Turning to our quarterly results, I want to begin by highlighting what we believe was an extremely successful quarter for USA Mobility. On a consolidated basis, we reported operating results that were in line with our prior financial guidance for 2012.
On the Wireless side, we ended the quarter ahead of our key operating goals for subscribers, including gross additions and net churn, total revenue, operating cash flow, average revenue per unit and operating expenses. At the same time, our Software business reported an increase in quarter-over-quarter revenue, along with a record bookings performance for the quarter. Our Software revenue backlog also reached an all-time high and we expanded our pipeline of prospective accounts.
As a result of our growth, I'm excited to inform you Amcom opened a regional office in the Middle East; landed a number of new sizable accounts, including accounts with the U.S. Military; and launched new software solutions for the healthcare market. Overall, we were able to maintain strong consolidated cash flow margins, reduce expenses and operate profitably while again returning capital to stockholders in the form of dividend distributions and repurchases of our common stock. John will discuss our financial results in more detail in a few minutes, but first I want to review some other key highlights of the quarter.
Number one. Wireless subscriber trends continued to show significant improvement in the third quarter as the annual rate of paging unit erosion reached its lowest level in 8 years. These results were due to another impressive performance by our wireless sales team, which continued to outperform our plan for gross placements while again reducing gross disconnects. We were especially pleased to see continuation of these positive trends in our top-performing healthcare segment where the net loss rate remains below 1%.
Number two. Wireless revenue trends also continued to improve during the quarter, with the quarterly rate of revenue erosion recording its best level in more than a year. The improvement in Wireless revenue trends once again benefited from a relatively stable paging ARPU and slower pace of subscriber churn. Going forward, we expect Wireless subscriber and revenue trends to improve. However, the rate of improvement will remain challenging as alternatives to paging services continue to evolve.
Number three. After reporting solid results for the second quarter, our Software business followed up with a record-setting performance in the third quarter. Revenues increased from the prior quarter. Operations bookings, which exclude maintenance renewals, rose to an all-time high of $9.5 million and we posted a record backlog at September 30. By way of comparison, operations bookings were approximately $7 million in the first quarter and $7.25 million in the second quarter. Operations bookings are what ultimately drive top line revenue in a software company.
In addition, Amcom's pipeline of sales leads continue to grow, the result of outstanding work by our talented software selling and marketing teams, combined with the compelling benefits of our customized software solutions. In addition, as previously noted, Amcom expanded the scope of its international sales efforts during the quarter, opening the office in Dubai; as well as broadened its sales focus within such market segments as hospitality, education, business and government services.
Number four. We continued to reduce operating expenses in the third quarter, mostly in our Wireless operations, consistent with our long-term business plan. Going forward, we expect operating expenses in our Wireless business will continue to decline. However, we expect a certain portion of those cost savings to be offset by additional investment in our Software business as we continue to reposition the company for long-term growth.
Number five. We continued to maintain strong cash flow margins through the quarter due to a strong performance by both our Wireless and Software business. However, as I previously mentioned, our ability to sustain such high margins in our Wireless business become increasingly difficult as Wireless revenue continues to decline and our ability to reduce Wireless operating expenses becomes a much greater challenge.
Number six. We again met our goal of generating sufficient free cash flow during the quarter to return capital to stockholders in the form of cash dividends. We paid a regular quarterly dividend of $0.125 per share on September 7, totaling approximately $2.8 million. In addition, our Board of Directors yesterday declared a regular quarterly dash -- cash distribution of $0.125 per share payable on December 7 to stockholders of record on November 16.
Number seven. Following renewal of the company's stock repurchase program in July, we resumed share repurchases during the third quarter, buying back 434,982 shares of common stock for approximately $4.9 million at an average price of $11.30 per share. At September 30, approximately 21 -- or approximately $20.1 million of the authorized $25 million remained available for purchase under the buyback program, which extends through December 31, 2013. Since the buyback program began in 2008, we've repurchased a total of 5,991,313 shares of our common stock for approximately $56.6 million at an average price of $9.45 per share. Including the September dividend, we've now returned a total of $459.2 million to our stockholders over the past 8 years in the form of cash distributions and stock repurchases.
I'll comment further on our capital allocation strategy in a few minutes. Overall, we are very pleased with our operating performance in the third quarter. And we believe we will sustain our momentum over the balance of the year. We met or exceeded the majority of our key operating goals, successfully completed several important product and business development initiatives in our Software business, generated significant free cash flow and, again, returned capital to our stockholders.
Despite these solid achievements, I assure you we are firmly focused on the future. Our goal is to finish the year strong by continuing to aggressively execute our business plan and pursue all appropriate opportunities to create additional value for our stakeholders. I'll comment further on our operating performance and related business activities in a few minutes, but first, Shawn will review our third quarter financial results. Shawn?
Shawn E. Endsley
Thanks, Vince. Before I review our quarterly results, I wanted to let you know that we expect to file our third quarter Form 10-Q later today. I encourage you to review the Form 10-Q since it contains many aspects of our business operations and financial performance that we will not have time to cover on this call.
As Vince noted, we were pleased with our third quarter results which were largely consistent with the financial guidance for 2012 we provided in July. Record-low subscriber churn, reduced operating expenses and a relatively stable ARPU again resulted in strong cash flows and high margins in our Wireless business, while the Software business reported an increase in revenue, record bookings and a higher backlog at September 30 and a solid pipeline of future sales leads.
Looking first at our Wireless business. We were again pleased with the steady improvement in both subscriber and revenue trends during the quarter. With respect to our customer base, we ended the quarter with 1,546,000 units in service, a net decrease of 37,000 units compared to a decline of 58,000 units in the third quarter of 2011. The quarterly rate of subscriber loss improved to 2.3% from 3.3% in the year-earlier quarter, while our annual rate of net unit lost reached an 8-year low of 10.2% versus 11.7% a year ago.
Gross placements for Wireless totaled 49,000 units in the third quarter compared to 55,000 units in the second quarter and 58,000 units in the third quarter of 2011. Gross disconnects totaled 86,000 units versus 116,000 units in the year-earlier quarter. As a result, the gross disconnect rate improved to 5.5% in the third quarter from 6.5% a year earlier.
Healthcare again was our most stable market segment, with the highest rate of gross placements and lowest rate of net unit losses. While the gross placement rate for healthcare in the third quarter was 3.7%, well, the net unit loss rate was 0.9%. Overall, healthcare accounted for 79.2% of direct gross placements and 65.1% of paging revenue in our direct channel. At September 30, healthcare represented 65.9% of our total Wireless subscriber base compared to 61.7% a year ago. We expect that our healthcare base will continue to increase as a percentage of our total subscriber base.
Total ARPU for the third quarter was $8.36 compared to $8.45 in the second quarter and $8.59 in the year-earlier quarter. While overall pricing levels in our paging business remained relatively stable, we expect ARPU will continue to decline slowly over time as customers with a large number of units in service continue to increase as a percentage of our direct subscriber base.
Revenue from Wireless totaled $41.4 million compared to $48.5 million in the year-earlier quarter. The quarterly rate of revenue erosion improved to 3.1% from 3.3% in the second quarter and 6.8% in the prior year quarter. The annual rate of revenue erosion was 14.6% in the third quarter compared to 17.9% in the second quarter and 14.4% in the third quarter of 2011.
Paging revenue, the largest component of Wireless revenue, declined 3.2% in the third quarter to $39.2 million from $40.5 million in the second quarter. The annual rate of paging revenue decline was 13% for the quarter compared to 14.3% for the prior quarter.
All other Wireless revenue categories, which represented 5.3% of total Wireless revenue, decreased 1.3% from the previous quarter.
Turning to our Software business. Revenue for the third quarter totaled $13.7 million compared to $13.2 million in the second quarter and $12.9 million in the year-earlier quarter. The $13.7 million in third quarter revenue included $6.6 million of maintenance revenue and $7.1 million of operations revenue.
Software bookings for the third quarter increased to $15.7 million compared to $15.1 million in the second quarter and $14.2 million in the year-earlier quarter. This is a record high for the company.
Bookings are all purchase orders received from customers during the quarter and represent future revenue that will be realized upon installation or over the maintenance service period. The Software backlog reached a record high of $26.4 million at September 30, an increase from $25.4 million at June 30 and $21.3 million a year earlier. The backlog consists of all previous purchase orders received from customers not yet recognized as revenue. The total backlog at September 30 consists of $11.9 million in operations bookings and $14.5 million in future maintenance renewals. We expect to convert this backlog into revenue in future quarters.
Finally, the maintenance renewal rate for Software was 98% for the third quarter, once again confirming that customer satisfaction and demand for Amcom's suite of software solutions remains very strong.
On a consolidated basis, total revenue for the third quarter was $55.1 million compared to $56 million in the second quarter and $61.5 million in the year-earlier quarter. Excluding purchase accounting adjustments, total consolidated revenue for the year-earlier quarter would have been $63 million.
Consolidated operating expenses, excluding depreciation, amortization and accretion, were $37.3 million in the third quarter, with $25.1 million for Wireless and $12.2 million for Software, a decline of 7.2% from $14.2 million in the third quarter of 2011. Payroll and related expenses, which includes commissions, totaled $18.4 million for the third quarter, including $10.8 million for Wireless and $7.6 million for Software. Payroll and related expenses represent the largest element of operating expenses for both businesses.
Payroll and related expenses for Wireless declined 9.7% from the year-earlier quarter. Payroll and related expenses for Software represented 62.1% of its operating expenses for the quarter, excluding depreciation, amortization and accretion expenses, and reflect our investment in growing the Software business.
Company-wide headcount at September 30 was 776 full-time equivalent employees, including 396 for Wireless and 280 for Software, compared to 705 a year earlier, with 455 from Wireless and 250 from Software. Going forward, we will continue to adjust staffing levels as necessary to meet the anticipated requirements for both our Wireless and Software businesses.
Site rent expense, our second largest element of operating expenses, declined 2.1% to $4.3 million in the third quarter versus the prior quarter and 20.4% from the year-earlier quarter. At September 30, we operated 4,769 active transmitters compared to 4,795 at June 30, 2012. We reduced the number of our paid active transmitters to 2,399 at September 30 from 2,419 at June 30. While the number of transmitters located at customer-provided sites, that is, those with no associated rent expense, was 2,370 and represented 49.7% of our active transmitters at the end of the quarter.
Beyond payroll and related expenses, which include commissions, and site rent expenses, all other recurring expenses, which exclude depreciation, amortization and accretion for Wireless, in the third quarter totaled $10 million compared to $11.2 million in the third quarter of 2011, a reduction of 10.7%, while all other recurring expenses for Software in the third quarter of 2012 totaled $4.6 million.
Depreciation, amortization and accretion expense was $4.7 million in the third quarter, with $2.9 million for Wireless and $1.8 million for Software, compared to $4.6 million in the second quarter, with $2.9 million for Wireless and $1.7 million for Software.
Consolidated EBITDA for the third quarter was $17.8 million or 32.2% of revenue compared to $21.3 million or 34.6% of revenues in the year-earlier quarter. Excluding purchase accounting adjustments, EBITDA in the year-earlier quarter would have been $22.8 million or 36.2% of revenue.
Third quarter EBITDA included $16.3 million from Wireless or a margin of 39.3%, and $1.5 million from Software. A schedule reconciling operating income to EBITDA has been included in our earnings release.
Capital expenses in the third quarter were $2.7 million, with virtually all of it from the Wireless business, compared to $1.8 million in the year-earlier quarter. Capital expenses were primarily for the purchase of paging devices.
Net income for the third quarter was $8 million or $0.36 per fully diluted share compared to $10.4 million or $0.46 per fully diluted share in the third quarter of 2011. Adjusted net income for the year-earlier quarter, excluding purchase accounting adjustments, would have been $11.6 million or $0.51 per fully diluted share.
Turning to the balance sheet. We ended the quarter with a cash balance of $49.5 million. I would also remind you that, while we repaid our previous debt balance in the second quarter, our existing credit facility remains in place and provides us with approximately $40 million in borrowing capacity. With our cash balance and available borrowing capacity, we can address opportunities for creating long-term stockholder value that may come along from time to time.
Finally, with regard to financial expectations for 2012, we are maintaining the guidance for consolidated results for the full year that we provided in July. To reiterate that prior guidance, we expect total revenues for 2012 to range from $215 million to $227 million; operating expenses, excluding depreciation, amortization and accretion, to range from $154 million to $162 million; and capital expenses to range from $7.1 million to $9.5 million.
Finally, I would remind you once again that our projections are based on current trends and that those trends are always subject to change.
With that, I'll turn it back over to Vince.
Vincent D. Kelly
Before we take your questions, I want to comment briefly on a few other items that may be of interest. First, I'll provide a quick update on our recent sales and marketing activities. Second, I'll briefly review our current capital allocation strategy. And third, I'll briefly comment on our business outlook.
With respect to our sales and marketing activities, both our Wireless and Software teams continued to aggressively pursue new business during the quarter. On the Wireless side, we continued to sell wireless messaging solutions to our target market segments of healthcare, government and large enterprise. These core segments represented approximately 91% of our direct subscriber base at September 30 compared to 90% a year ago. They also accounted for approximately 87% of our direct paging revenue in the third quarter compared to 85% a year ago.
During the quarter, our Wireless sales team continued to pursue its 4 primary goals of developing new account relationships, adding business to existing accounts, retaining key customers and generating sales opportunities for our Software sales team. As a result, our Wireless team again exceeded its third quarter targets for subscribers, gross additions, retention and revenue. In fact, our net unit loss for the quarter of 2.3% was the second lowest in the company's recent history, with healthcare again contributing the highest number of gross placements and fewest disconnects.
In addition, our Wireless sales force added 3 new hospital accounts during the quarter, while their ongoing efforts to create sales opportunities for Amcom sales team resulted in 4 new Software accounts. I would add that our Wireless team's continued strong performance is especially impressive given the challenging and changing nature of the paging industry and availability of alternative wireless products. Jim Boso, President of USA Mobility Wireless, and his entire team have done a fantastic job. In addition to their dedication and hard work, the excellent results are a testament to their ability to articulate why paging continues to be relevant today as the best low-cost, reliable and network-survivable option among all other wireless technologies. Contributing to ongoing demand for our wireless products, of course, especially among healthcare subscribers, is Amcom's extensive presence and positive reputation within the healthcare industry.
Our Software sales and marketing team also had an outstanding quarter as Amcom posted record bookings. Although we again closed much of our business in the North American healthcare market, we made considerable in-roads in the Middle East. In particular, we opened a regional office in Dubai. We also sold a full suite of healthcare solutions to a new high-profile hospital in the Persian Gulf region, which was a big win for us. We are very pleased to see an increasing number of organizations in that part of the world select us to help unify their mission-critical communications, a process that often incorporates clinical patient environments, emergency departments, radiology, lab work, security response, an organization's call center and more.
Amcom also had a strong quarter on the public safety side of business as a record number of military and municipal 911 emergency response centers selected our dispatch solution. Other major sales booked during the quarter included a Naval Air Base, a large defense contractor, a college medical center and a key government healthcare agency.
During the quarter, we released an improved version of Amcom's Critical Test Results Management solution, which includes new features for hospitals to improve patient care and physician productivity. In addition, we announced a new version of our clinical middleware solution to improve productivity for mobile nurses, and we completed the testing process for certification from the U.S. Department of Defense for Amcom's call center software.
Looking ahead, we're now gearing up for our Connect 12 user conference later this month in Orlando. This 3-day event brings together customers, partners and many key staff members to discuss the benefits of Amcom Software solutions through interactive group presentations and one-on-one discussions. For example, we will host numerous in-depth sessions on such subjects as mobile communications and related trends. Attendees will also learn ways they can use our solutions to address challenges in their industry and how we can work with them to use new communication technology that truly improve safety in various environments.
Finally, I would note that our previously announced effort to expand Amcom's sales and marketing resources is beginning to pay off. Newly hired personnel are already contributing to lead generation and prospect follow-up. As a result, our pipeline has continued to grow. Part of that success can be attributed to targeted e-marketing efforts to build our leads database to increase trade show and webinar activities. Of note, Amcom recently completed 2 customer case study webinars for key industry publications. In one, a Wisconsin-based customer shared lessons learned while implementing secured smartphone communications. In the other, a Minneapolis-based healthcare provider spoke about the importance of linking clinical communications throughout the hospital. Based on feedback, both webinars were well received and were excellent learning opportunities for participants.
Turning to our capital allocation strategy. I would again emphasize that our management and Board of Directors remain fully committed to our long-stated goal of creating stockholder value. To that end, we continue to evaluate how best to deploy our capital resources in a way that will both support sustainable business growth as well as maximize stockholder value over time.
Over the past 2 years, we've made a number of strategic decisions regarding capital allocation that we believe position us well for the future. The purchase of Amcom in March 2011 was a strategic investment that represented a unique opportunity for USA Mobility to begin the transition from a declining paging business to growth-oriented software business. The acquisition also allowed us to leverage our position as the premier messaging provider to the healthcare industry by adding the premier portfolio of mission-critical software solutions for healthcare providers. To further this transition, we repaid virtually all of the debt related to the Amcom acquisition in 1 year. We are still in the early stages in the transition process. As part of that evolution, we still need to expand the depth and breadth of our software applications, server capabilities and market penetration over the next few years. As we pursue that goal, we expect to allocate a significant portion of our retained capital to pursue software acquisitions and other related growth opportunities in the software space. While specific add-on investments have yet to be identified, we believe it's essential to retain and reallocate capital for those purposes. This strategic objective should enable us to support and grow our Software business income and to use our significant deferred tax assets before they expire unused.
As you know, we revised the company's annual dividend rate to $0.50 per share in the third quarter to better reflect our projected cash flows over the next several years. We believe this action strengthened the company's financial position while maintaining a significant yield on our common stock and, most importantly, allows us to retain strategic capital as we continue to reposition the company for the future. In addition, we believe renewal of the company's stock repurchase plan in July also demonstrates our commitment to return capital to stockholders in the short term as our long-term growth strategy continues to evolve.
With regard to future capital allocation decisions, our Board of Directors and management will continue to assess all options and make decisions based on cash flow projections and opportunities to pursue long-term growth. As we move closer to a business model that can sustain long-term revenue growth, capital allocation decisions will focus on opportunities for long-term capital appreciation and total return. As always, we will also continue to manage our balance sheet prudently by maintaining ample liquidity to support our working capital requirements.
With regard to our business outlook. We're very pleased with our third quarter results and look for continued progress in both our Wireless and Software businesses over the balance of the year. Indeed, we are off to a good start in the fourth quarter, and as Shawn mentioned, we are maintaining our previous financial guidance for full year 2012.
As we look ahead to 2013, we are greatly encouraged by the stability we've seen in our Wireless business and the significant progress and momentum we've achieved in the Software business over the past year. Although we realize the sales cycle in the software industry can be uneven from time to time, as we've noted on previous investor calls, we remain very optimistic about the long-term growth potential for our Software business and expect to achieve further progress in coming quarters, especially with our new leadership group now in place.
In short, we believe USA Mobility is progressing well and is on the right track. While the demand for paging continues to decline, as expected, the value of paging for critical messaging remains strong and should allow us to continue to generate solid cash flow for the foreseeable future. At the same time, our Software business enjoys a firmly established and leading position in the growing mission-critical communication space. We believe these combined strengths not only complement each other exceptionally well but create a solid foundation for a successful future.
As usual, we will continue to keep you updated on our progress and other corporate events through press releases and future investor calls.
At this point, I'll ask the operator to open the line up for your questions. [Operator Instructions] Operator?
[Operator Instructions] Our first question today comes from Jeff Tuck. [ph]
I would just like to go review the Amcom purchase and to see what you've learned from it and what sort of faith existing shareholders can have in the company in determining the appropriate use of their cash. Since the purchase, your stock price is down approximately 45%. Based on the most current quarter, it looks like the annualized -- in annualizing EBITDA, it looks like the Amcom purchase was approximately 27x cash flow. What confidence should your shareholders have that the cash that you're generating from your balance sheet is appropriately being used to purchase new companies instead of returning that cash to the shareholders?
Vincent D. Kelly
Okay. A couple of things there in your analysis. The company has actually done extremely well in terms of total return to shareholders. We looked at it since the last time we changed our dividend, going back to the beginning of May in 2008, and we're up about 146%. And that's relative to other 2% to 4% dividend payers, which we think is the right range for a company like this. They were up about 32.5% over that same time period. And telecom, in general, that is down significantly over that same time period. So I think, from a total return standpoint, we've been very good stewards of our shareholders' capital. That's point number one. Point number two, you should not be looking at Amcom as a multiple on cash flow because we bought Amcom to tradition that -- to transition a declining paging business into a growing software business. And as part of that transition, as we said on prior conference calls, we made the affirmative decision to actually increase our spend and lower our cash flow on the Software side for future growth. And that -- there is a delay when you do that. Some of these software solutions have a 12-month to 18-month lead time. We just now set a record operations bookings number in the third quarter. We went from $7 million in the first quarter to $7.25 million in the second quarter then $9.5 million in the third quarter. There's a delay on that in terms of seeing it in revenue because, once you sell the software, you have to install it and we use a completed contract method to recognize that revenue. So you will see a pretty big spike in revenue in the fourth quarter relative to the second quarter and third quarter as those installations get out there and get completed. So we think we're going in the right direction. It's not easy to transition the business from a declining paging business to a growing software business. And a lot of companies try to transition their business and fail. And a lot of companies do acquisitions, and I think we all know most of them fail. We will not. This is going to be successful. It's already starting to show the fruits of those efforts, and we will continue to do so. And as I said, we have a very good outlook for the balance of the year and we have a very good outlook for the future. There's a lot of exciting things going on in this company right now, a lot of great things going on at Amcom. We've got over 2,800 customers in 24 countries. We've got customers in China, Japan, Bermuda, Indonesia, Hong Kong, Singapore, New Zealand, Saudi Arabia, Africa, India, including the United States. We've got a lot of great things going on. We've got a new leadership team over on the Software side. So from myself personally, I'm bullish on the company. I think we're going to do very well. And I think it would be a mistake just to look at the amount of cash flow that the software company is currently throwing off and compare that to the purchase price.
Okay. I'll ask you one follow-up question, then: Can you project out a year or 2 ahead on where you think the Amcom's contribution will be?
Vincent D. Kelly
We do project that -- yes, yes. The answer is yes, and we're going to share the number for 2013 with you when we report our fourth quarter results in early February.
Vincent D. Kelly
Operator, I don't see any other questions in the queue. And we're painfully aware of what's happening in the Northeast this past week, and we have a lot of our callers that have dialed in from the Northeast, so perhaps we'll go ahead and conclude the call today. And I want to thank everybody for joining us. We look forward to speaking with you after we release our fourth quarter and our -- and year-end results early next year. Thanks again. And everyone, have a great day.
Thank you. And again, that does conclude today's conference. We thank you all for joining us.
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