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PREMIERE GLOBAL SERVICES, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

August 8, 2014



OVERVIEW

PGi has been a leading global provider of collaboration software and services for over 20 years. Our cloud-based software applications empower business users to connect, collaborate and share ideas and information from their desktop, tablet or smartphone, enabling greater productivity in the office or on the go. We have a global presence in 25 countries in our three segments in North America, Europe and Asia Pacific. During 2014, we are continuing our strategy to transition PGi to a SaaS company, focusing our sales and marketing efforts on growing the market awareness and adoption of our next-generation collaboration solutions, iMeet and GlobalMeet. The following discussion and analysis reflects our results from continuing operations. Key highlights of our financial and strategic accomplishments for the second quarter ended June 30, 2014 include: Grew revenue from PGi SaaS products to $12.0 million for the three months ended June 30, 2014, an increase of greater than 50% compared to the same period in 2013; Generated 9.2% growth in our net revenues for the three months ended June 30, 2014 compared to the same period in 2013; Increased our gross margin to 59.1% of revenues, an increase of approximately 70 basis points from the three months ended March 31, 2014 and our highest reported level in three years; and Repurchased an aggregate of 1,228,197 shares of our common stock for approximately $16.0 million in the open market at an average price of $13.06 per share pursuant to our board-approved stock repurchase programs. Our primary corporate objectives for the remainder of 2014 are focused on continuing to: Expand our market reach and accelerate customer awareness and adoption of iMeet and GlobalMeet; Develop and release additional upgrades and enhancements to iMeet and GlobalMeet to increase their functionality, improve their competitive positioning and grow their market opportunities; and Transition our audio-only customers to our more integrated, online meeting solutions that provide a richer, more productive user experience.



We believe these strategic initiatives will increase the addressable market opportunity for PGi and our solutions. In the first six months of 2014, approximately 40% of our net revenues were generated outside the United States. Because we generate a significant portion of our net revenues from our international operations, movements in foreign currency exchange rates affect our reported results. We estimate that changes in foreign currency exchange rates during the first six months of 2014 had minimal impact on our net revenues as compared to the same period in 2013.

We have historically generated net revenue growth in our collaboration solutions. Revenue growth is typically driven by the increase of total minutes sold, partially offset by the decrease in average rates per minute. However, during the first six months of 2014, we experienced a decline in total minutes sold, absent the impact of recent acquisitions, primarily related to the previously-disclosed partial loss of one of our larger enterprise audio conferencing customers. With the exception of this change in our enterprise customer base, we believe this trend is consistent within the industry, and we expect it to continue in the foreseeable future. Despite this partial customer loss and continued price compression, our net revenues increased to $287.5 million in the first six months of 2014 as compared to $261.7 million in the same period in 2013, primarily due to growth generated from recent acquisitions. We have historically used our cash flows from operating activities for debt repayments, capital expenditures, stock repurchases, acquisitions and strategic investments. As of June 30, 2014, borrowings under our $475.0 million credit facility, including the uncommitted $75.0 million accordion feature, were $249.8 million. See "- Results of Operations - Liquidity and Capital Resources - Capital resources" for a description of our credit facility. We intend to continue to invest in enhancing and expanding our collaboration software suite through our continuing technology innovation and platform development. In addition, we plan to continue to reinvest excess earnings this year in sales and marketing initiatives designed to accelerate sales of our collaborative software applications and our transition to a SaaS model.

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The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of net revenues and expenses during the reporting period. Actual results could differ from the estimates. See the section in this quarterly report entitled "-Critical Accounting Policies." The following discussion and analysis provides information which we believe is relevant to an assessment and understanding of our condensed consolidated results of operations and financial condition. The results of operations for the three and six months ended June 30, 2014 are not indicative of the results that may be expected for the full fiscal year of 2014 or for any other interim period. The financial information and discussion presented herein should be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2013, which includes information and disclosures not included in this quarterly report. All significant intercompany accounts and transactions have been eliminated in consolidation.

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Source: Edgar Glimpses


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