Company Acquires Callpointe

OMAHA, Neb., Aug. 03, 2017 (GLOBE NEWSWIRE) -- West Corporation (Nasdaq:WSTC), a global provider of communication and network infrastructure services, today announced its second quarter 2017 results.

Select Financial Information 

Unaudited, in millions except per share amounts		Three Months Ended June 30,											Six Months Ended June 30,
			2017				2016			% Change				2017				2016			% Change
Revenue		$	574.4			$	582.4			-1.4	%		$	1,146.9			$	1,153.2			-0.5	%
Operating Income			102.6				123.1			-16.7	%			210.8				232.0			-9.1	%
Net Income			44.8				33.0			35.7	%			98.9				77.5			27.5	%
Earnings per Share - Diluted			0.52				0.39			33.3	%			1.16				0.92			26.1	%
Cash Flows from Operating Activities			107.3				137.4			-21.9	%			160.0				197.5			-19.0	%
Cash Flows used in Investing Activities			(48.7	)			(3.1	)		NM				(80.0	)			(42.6	)		87.8	%
Cash Flows used in Financing Activities			(42.3	)			(42.3	)		-0.1	%			(76.6	)			(112.5	)		-31.9	%

Select Non-GAAP Financial Information¹

Unaudited, in millions except per share amounts		Three Months Ended June 30,											Six Months Ended June 30,
			2017				2016			% Change				2017				2016			% Change
EBITDA		$	150.6			$	173.5			-13.2	%		$	308.3			$	330.4			-6.7	%
Adjusted EBITDA			162.5				168.3			-3.5	%			327.0				333.9			-2.1	%
Covenant Adjusted EBITDA, before Pro Forma			167.8				171.1			-1.9	%			336.4				339.3			-0.8	%
Adjusted Operating Income			128.9				134.7			-4.3	%			258.2				268.8			-3.9	%
Adjusted Net Income			62.5				64.8			-3.6	%			131.3				128.4			2.3	%
Adjusted Earnings per Share - Diluted			0.73				0.77			-5.2	%			1.54				1.52			1.3	%
Free Cash Flow2			80.7				99.9			-19.2	%			106.8				123.6			-13.6	%

Operating Results
For the second quarter of 2017, revenue was $574.4 million, a decrease of 1.4 percent compared to the second quarter of 2016.

Second quarter 2017 operating income was $102.6 million, a decrease of 16.7 percent compared to the same quarter last year. This decrease is primarily due to the sale of Company real estate in the second quarter of 2016 and lower operating income in the Company’s Unified Communications Services segment, partially offset by the results of cost savings initiatives and higher operating income in the Company’s Safety Services, Interactive Services and Specialized Agent Services segments. Adjusted operating income decreased 4.3 percent in the second quarter of 2017 compared to the second quarter of 2016.

Net income increased 35.7 percent from the second quarter of 2016 to $44.8 million. The increase was driven primarily by $35.2 million of accelerated amortization of deferred financing costs related to the Company’s debt refinancing in 2016, partially offset by the $12.8 million gain recognized in 2016 on the sale of Company real estate. Adjusted net income¹ for the second quarter of 2017 was $62.5 million, a decrease of 3.6 percent from the second quarter of 2016.

EBITDA¹ for the second quarter of 2017 decreased 13.2 percent from the second quarter of 2016 to $150.6 million. Adjusted EBITDA¹ decreased 3.5 percent from the second quarter of 2016 to $162.5 million.

Second quarter of 2017 results by segment were as follows, as compared to the second quarter of 2016:

• Unified Communications Services revenue decreased 5.8 percent; adjusted organic revenue⁵ decreased 5.0 percent due to lower revenue in Conferencing, changes in product mix and a decrease in the average rate per minute for automated conferencing services, partially offset by growth in Unified Communications as a Service (UCaaS). Operating income decreased 18.9 percent primarily due to lower revenue. Adjusted operating income¹ decreased 18.7 percent.
   
• Safety Services revenue increased 8.1 percent; organic revenue increased 6.7 percent, primarily due to growth from clients adopting new technologies. Operating income increased $9.0 million, or 76.0 percent, to $20.9 million due to revenue growth and cost savings initiatives. Adjusted operating income¹ increased $8.5 million, or 52.0 percent, to $25.0 million.
   
• Interactive Services revenue increased 8.1 percent; organic revenue growth was 6.3 percent, primarily due to increased volumes from new and existing clients. Operating income increased 31.4 percent to $7.8 million and adjusted operating income¹ increased 11.4 percent to $14.4 million, primarily due to revenue growth.
   
• Specialized Agent Services revenue increased 2.8 percent primarily due to growth in healthcare advocacy services. Operating income increased $1.6 million to $4.5 million and adjusted operating income¹ increased $1.3 million to $9.8 million.

Balance Sheet, Cash Flow and Liquidity – Second Quarter Highlights

• Cash flows from operations were $107.3 million, a decrease of 21.9 percent, primarily due to the timing of accounts receivable collections and higher cash taxes due to the settlement of some tax audits.
   
• Free cash flow^1,2 decreased 19.2 percent to $80.7 million due to lower cash flows from operations, partially offset by a decrease in capital expenditures. The Company invested $26.6 million, or 4.6 percent of revenue, in capital expenditures during the second quarter of 2017.
   
• 4.31x net leverage at June 30, 2017 (net debt to pro forma adjusted EBITDA ratio, as calculated pursuant to the Company’s senior secured term debt facilities⁴) compared to 4.45x at December 31, 2016.
   
• Repaid $44.9 million in debt; cash balance of $191.8 million at June 30, 2017.

Pending Merger with Apollo
On May 9, 2017, the Company announced that it entered into a definitive merger agreement with affiliates of certain funds managed by affiliates of Apollo Global Management, LLC (NYSE:APO), a leading global alternative investment manager, to be acquired for $23.50 per share in cash. Early termination of the waiting period for the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, was granted on June 6, 2017 and the required foreign antitrust approvals for the merger were obtained in July 2017. The Company also received approval from the Federal Communications Commission for the merger in July 2017. On July 26, 2017, the Company’s stockholders approved the merger. The merger remains subject to specified closing conditions (to the extent not already satisfied) and is expected to close during the second half of 2017.

Acquisition
On May 2, 2017, the Company completed the acquisition of Callpointe.com, Inc., a provider of automated appointment messaging services for healthcare providers. The acquired business operations will be integrated into the Company's Interactive Services reportable segment. The purchase price was approximately $25.9 million and was funded by cash on hand.

About West Corporation
West Corporation (Nasdaq:WSTC) is a global provider of communication and network infrastructure services. West helps its clients more effectively communicate, collaborate and connect with their audiences through a diverse portfolio of solutions that include unified communications services, safety services, interactive services such as automated notifications, telecom services and specialized agent services.

For 30 years, West has provided reliable, high-quality voice and data services. West has sales and operations in the United States, Canada, Europe, the Middle East, Asia Pacific and Latin America. For more information, please call 1-800-841-9000 or visit www.west.com.

Forward-Looking Statements
This press release contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, including with respect to the proposed transaction and business combination between affiliates of funds managed by Apollo Global Management, LLC and the Company, including statements regarding the benefits of the proposed transaction and the anticipated timing of the proposed transaction. Forward-looking statements can be generally identified by the use of words such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "intends," "continue" or similar terminology. These statements reflect only West's current expectations and are not guarantees of future performance or results. These statements are subject to various risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. These risks and uncertainties include, but are not limited to, the risk that the proposed transaction may not be completed in a timely manner, or at all, which may adversely affect the Company’s business and the price of the common stock of the Company; the failure to satisfy the conditions to the consummation of the proposed transaction, including the receipt of certain governmental and regulatory approvals; the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; the effect of the announcement or pendency of the proposed transaction on the Company’s business relationships, operating results, and business generally; risks that the proposed transaction disrupts current plans and operations of the Company and potential difficulties in the Company’s employee retention as a result of the proposed transaction; risks related to diverting management’s attention from the Company’s ongoing business operations; the outcome of any legal proceedings that may be instituted against the Company, its officers or directors related to the merger agreement or the proposed transaction; the possibility that competing offers or acquisition proposals for the Company will be made; risks regarding the failure to obtain the necessary financing to complete the proposed transaction; risks related to the equity and debt financing and related guarantee arrangements entered into in connection with the proposed transaction; competition in West’s highly competitive markets; increases in the cost of voice and data services or significant interruptions in these services; West’s ability to keep pace with its clients’ needs for rapid technological change and systems availability; the continued deployment and adoption of emerging technologies; the loss, financial difficulties or bankruptcy of any key clients; security and privacy breaches of the systems West uses to protect personal data; the effects of global economic trends on the businesses of West’s clients; the non-exclusive nature of West’s client contracts and the absence of revenue commitments; the cost of pending and future litigation; the cost of defending against intellectual property infringement claims; the effects of extensive regulation affecting many of West’s businesses; West’s ability to protect its proprietary information or technology; service interruptions to West’s data and operation centers; West’s ability to retain key personnel and attract a sufficient number of qualified employees; increases in labor costs and turnover rates; the political, economic and other conditions in the countries where West operates; changes in foreign exchange rates; West’s ability to complete future acquisitions, integrate or achieve the objectives of its recent and future acquisitions; and future impairments of our substantial goodwill, intangible assets, or other long-lived assets. In addition, West is subject to risks related to its level of indebtedness. Such risks include West’s ability to generate sufficient cash to service its indebtedness and fund its other liquidity needs; West’s ability to comply with covenants contained in its debt instruments; West’s ability to obtain additional financing; the incurrence of significant additional indebtedness by West and its subsidiaries; and the ability of West’s lenders to fulfill their lending commitments. West is also subject to other risk factors described in documents filed by the Company with the United States Securities and Exchange Commission. 

These forward-looking statements speak only as of the date on which the statements were made. West undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law.

WEST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands except per share data)
		Three Months Ended June 30,
			2017				2016			% Change
Revenue		$	574,393			$	582,397			-1.4	%
Cost of services			245,341				249,426			-1.6	%
Selling, general and administrative expenses			226,450				209,870			7.9	%
Operating income			102,602				123,101			-16.7	%
Interest expense, net			36,231				37,712			-3.9	%
Accelerated amortization of deferred financing costs			-				35,235			NM
Other income, net			(1,045	)			(1,214	)		NM
Income before tax			67,416				51,368			31.2	%
Income tax expense			22,652				18,389			23.2	%
Net income		$	44,764			$	32,979			35.7	%
Weighted average shares outstanding:
Basic			83,556				82,598
Diluted			85,527				84,281
Earnings Per Share - Basic		$	0.54			$	0.40			35.0	%
Earnings Per Share - Diluted		$	0.52			$	0.39			33.3	%
SELECTED SEGMENT FINANCIAL DATA:
		Three Months Ended June 30,
			2017				2016			% Change
Revenue:
Unified Communications Services		$	348,546			$	370,158			-5.8	%
Safety Services			80,419				74,423			8.1	%
Interactive Services			79,179				73,232			8.1	%
Specialized Agent Services			69,354				67,495			2.8	%
Intersegment eliminations			(3,105	)			(2,911	)		NM
Total		$	574,393			$	582,397			-1.4	%
Depreciation:
Unified Communications Services		$	16,263			$	17,293			-6.0	%
Safety Services			3,980				4,495			-11.5	%
Interactive Services			4,770				4,023			18.6	%
Specialized Agent Services			3,524				2,846			23.8	%
Total		$	28,537			$	28,657			-0.4	%
Amortization:
Unified Communications Services - SG&A		$	2,252			$	3,378			-33.3	%
Safety Services - SG&A			3,041				3,572			-14.9	%
Safety Services - COS			3,392				3,379			0.4	%
Interactive Services - SG&A			4,975				5,327			-6.6	%
Specialized Agent Services - SG&A			4,186				4,594			-8.9	%
Deferred financing costs			1,863				39,144			NM
Total		$	19,709			$	59,394			-66.8	%
Share-based compensation:
Unified Communications Services		$	3,399			$	3,493			-2.7	%
Safety Services			989				993			-0.4	%
Interactive Services			602				620			-2.9	%
Specialized Agent Services			1,117				1,069			4.5	%
Total		$	6,107			$	6,175			-1.1	%
Cost of services:
Unified Communications Services		$	168,102			$	173,651			-3.2	%
Safety Services			28,206				26,689			5.7	%
Interactive Services			17,035				16,918			0.7	%
Specialized Agent Services			33,528				33,760			-0.7	%
Intersegment eliminations			(1,530	)			(1,592	)		NM
Total		$	245,341			$	249,426			-1.6	%
Selling, general and administrative expenses:
Unified Communications Services		$	108,424			$	107,745			0.6	%
Safety Services			31,316				35,863			-12.7	%
Interactive Services			54,316				50,356			7.9	%
Specialized Agent Services			31,295				30,829			1.5	%
Corporate Other			2,674				(13,604	)		NM
Intersegment eliminations			(1,575	)			(1,319	)		NM
Total		$	226,450			$	209,870			7.9	%
Operating income:
Unified Communications Services		$	72,020			$	88,762			-18.9	%
Safety Services			20,897				11,871			76.0	%
Interactive Services			7,828				5,958			31.4	%
Specialized Agent Services			4,531				2,906			55.9	%
Corporate Other			(2,674	)			13,604			NM
Total		$	102,602			$	123,101			-16.7	%
Operating margin:
Unified Communications Services			20.7	%			24.0	%
Safety Services			26.0	%			16.0	%
Interactive Services			9.9	%			8.1	%
Specialized Agent Services			6.5	%			4.3	%
Total			17.9	%			21.1	%

SELECTED FINANCIAL DATA:
						Contribution
Changes in Revenue - 2Q17 compared to 2Q16:		Consolidated				to Rev. Growth
Revenue for the three months ended June 30, 2016		$	582,397
Revenue from acquired entities3			3,302			0.6	%
Estimated impact of foreign currency exchange rates6			(3,956	)		-0.7	%
Adjusted organic growth5			(7,350	)		-1.3	%
Revenue for the three months ended June 30, 2017		$	574,393			-1.4	%
		Unified
		Communications				Contribution
Changes in Revenue - 2Q17 compared to 2Q16:		Services				to Rev. Growth
Revenue for the three months ended June 30, 2016		$	370,158
Revenue from acquired entities3			962			0.3	%
Estimated impact of foreign currency exchange rates6			(3,956	)		-1.1	%
Adjusted organic growth5			(18,618	)		-5.0	%
Revenue for the three months ended June 30, 2017		$	348,546			-5.8	%
		Safety				Contribution
Changes in Revenue - 2Q17 compared to 2Q16:		Services				to Rev. Growth
Revenue for the three months ended June 30, 2016		$	74,423
Revenue from acquired entities3			1,008			1.4	%
Organic growth			4,988			6.7	%
Revenue for the three months ended June 30, 2017		$	80,419			8.1	%
		Interactive				Contribution
Changes in Revenue - 2Q17 compared to 2Q16:		Services				to Rev. Growth
Revenue for the three months ended June 30, 2016		$	73,232
Revenue from acquired entities3			1,332			1.8	%
Organic growth			4,615			6.3	%
Revenue for the three months ended June 30, 2017		$	79,179			8.1	%

WEST CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands except per share data)
		Six Months Ended June 30,
			2017				2016			% Change
Revenue		$	1,146,935			$	1,153,176			-0.5	%
Cost of services			487,783				490,438			-0.5	%
Selling, general and administrative expenses			448,327				430,713			4.1	%
Operating income			210,825				232,025			-9.1	%
Interest expense, net			71,423				76,195			-6.3	%
Accelerated amortization of deferred financing costs			24				35,235			NM
Other income, net			(3,715	)			(174	)		NM
Income before tax			143,093				120,769			18.5	%
Income tax expense			44,233				43,235			2.3	%
Net income		$	98,860			$	77,534			27.5	%
Weighted average shares outstanding:
Basic			83,459				82,874
Diluted			85,369				84,425
Earnings Per Share - Basic		$	1.18			$	0.94			25.5	%
Earnings Per Share - Diluted		$	1.16			$	0.92			26.1	%
SELECTED SEGMENT FINANCIAL DATA:
		Six Months Ended June 30,
			2017				2016			% Change
Revenue:
Unified Communications Services		$	699,621			$	732,871			-4.5	%
Safety Services			156,674				145,587			7.6	%
Interactive Services			156,672				144,961			8.1	%
Specialized Agent Services			141,102				135,873			3.8	%
Intersegment eliminations			(7,134	)			(6,116	)		NM
Total		$	1,146,935			$	1,153,176			-0.5	%
Depreciation:
Unified Communications Services		$	32,593			$	34,836			-6.4	%
Safety Services			8,043				9,049			-11.1	%
Interactive Services			9,663				7,943			21.7	%
Specialized Agent Services			6,918				5,630			22.9	%
Total		$	57,217			$	57,458			-0.4	%
Amortization:
Unified Communications Services - SG&A		$	4,539			$	6,771			-33.0	%
Safety Services - SG&A			5,851				6,955			-15.9	%
Safety Services - COS			6,855				6,648			3.1	%
Interactive Services - SG&A			9,828				10,382			-5.3	%
Specialized Agent Services - SG&A			8,526				9,188			-7.2	%
Deferred financing costs			3,751				44,053			NM
Total		$	39,350			$	83,997			-53.2	%
Share-based compensation:
Unified Communications Services		$	6,423			$	7,821			-17.9	%
Safety Services			1,854				2,220			-16.5	%
Interactive Services			1,147				1,381			-16.9	%
Specialized Agent Services			2,108				2,419			-12.9	%
Total		$	11,532			$	13,841			-16.7	%
Cost of services:
Unified Communications Services		$	335,249			$	339,847			-1.4	%
Safety Services			53,731				54,004			-0.5	%
Interactive Services			34,320				33,070			3.8	%
Specialized Agent Services			68,797				66,911			2.8	%
Intersegment eliminations			(4,314	)			(3,394	)		NM
Total		$	487,783			$	490,438			-0.5	%
Selling, general and administrative expenses:
Unified Communications Services		$	210,962			$	215,194			-2.0	%
Safety Services			62,760				70,739			-11.3	%
Interactive Services			106,169				100,125			6.0	%
Specialized Agent Services			64,216				61,538			4.4	%
Corporate Other			7,040				(14,161	)		NM
Intersegment eliminations			(2,820	)			(2,722	)		NM
Total		$	448,327			$	430,713			4.1	%
Operating income:
Unified Communications Services		$	153,410			$	177,830			-13.7	%
Safety Services			40,183				20,844			92.8	%
Interactive Services			16,183				11,766			37.5	%
Specialized Agent Services			8,089				7,424			9.0	%
Corporate Other			(7,040	)			14,161			NM
Total		$	210,825			$	232,025			-9.1	%
Operating margin:
Unified Communications Services			21.9	%			24.3	%
Safety Services			25.6	%			14.3	%
Interactive Services			10.3	%			8.1	%
Specialized Agent Services			5.7	%			5.5	%
Total			18.4	%			20.1	%

SELECTED FINANCIAL DATA:
						Contribution
Changes in Revenue - 2Q17 YTD compared to 2Q16 YTD:		Consolidated				to Rev. Growth
Revenue for the six months ended June 30, 2016		$	1,153,176
Revenue from acquired entities3			5,616			0.5	%
Estimated impact of foreign currency exchange rates6			(8,467	)		-0.7	%
Adjusted organic growth5			(3,390	)		-0.3	%
Revenue for the six months ended June 30, 2017		$	1,146,935			-0.5	%
		Unified
		Communications				Contribution
Changes in Revenue - 2Q17 YTD compared to 2Q16 YTD:		Services				to Rev. Growth
Revenue for the six months ended June 30, 2016		$	732,871
Revenue from acquired entities3			1,153			0.2	%
Estimated impact of foreign currency exchange rates6			(8,467	)		-1.2	%
Adjusted organic growth5			(25,936	)		-3.5	%
Revenue for the six months ended June 30, 2017		$	699,621			-4.5	%
		Safety				Contribution
Changes in Revenue - 2Q17 YTD compared to 2Q16 YTD:		Services				to Rev. Growth
Revenue for the six months ended June 30, 2016		$	145,587
Revenue from acquired entities3			1,857			1.3	%
Organic growth			9,230			6.3	%
Revenue for the six months ended June 30, 2017		$	156,674			7.6	%
		Interactive				Contribution
Changes in Revenue - 2Q17 YTD compared to 2Q16 YTD:		Services				to Rev. Growth
Revenue for the six months ended June 30, 2016		$	144,961
Revenue from acquired entities3			2,606			1.8	%
Organic growth			9,105			6.3	%
Revenue for the six months ended June 30, 2017		$	156,672			8.1	%

 

WEST CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
		June 30,				December 31,				%
			2017				2016			Change
Assets:
Current assets:
Cash and cash equivalents		$	191,835			$	183,059			4.8	%
Trust and restricted cash			17,414				20,141			-13.5	%
Accounts receivable, net			399,998				369,068			8.4	%
Income taxes receivable			-				4,366			NM
Prepaid assets			53,395				40,886			30.6	%
Deferred expenses			41,022				44,886			-8.6	%
Other current assets			29,267				31,889			-8.2	%
Total current assets			732,931				694,295			5.6	%
Property and Equipment:
Property and equipment			1,131,873				1,088,205			4.0	%
Accumulated depreciation and amortization			(805,200	)			(755,754	)		6.5	%
Net property and equipment			326,673				332,451			-1.7	%
Goodwill			1,947,832				1,916,192			1.7	%
Intangible assets, net			300,991				315,474			-4.6	%
Other assets			172,518				182,426			-5.4	%
Total assets		$	3,480,945			$	3,440,838			1.2	%
Liabilities and Stockholders' Deficit:
Current Liabilities:
Accounts payable		$	69,730			$	78,881			-11.6	%
Deferred revenue			133,087				151,148			-11.9	%
Accrued expenses			233,789				224,871			4.0	%
Current maturities of long-term debt			47,834				39,709			20.5	%
Total current liabilities			484,440				494,609			-2.1	%
Long-term obligations			3,064,850				3,129,963			-2.1	%
Deferred income taxes			103,059				88,864			16.0	%
Other long-term liabilities			153,099				169,251			-9.5	%
Total liabilities			3,805,448				3,882,687			-2.0	%
Stockholders' Deficit:
Common stock			87				86			1.2	%
Additional paid-in capital			2,240,801				2,223,379			0.8	%
Retained deficit			(2,410,711	)			(2,490,455	)		-3.2	%
Accumulated other comprehensive loss			(67,454	)			(87,633	)		-23.0	%
Treasury stock at cost			(87,226	)			(87,226	)		0.0	%
Total stockholders' deficit			(324,503	)			(441,849	)		-26.6	%
Total liabilities and stockholders' deficit		$	3,480,945			$	3,440,838			1.2	%

Reconciliation of Non-GAAP Financial Measures

Adjusted Operating Income Reconciliation
Adjusted operating income is not a measure of financial performance under generally accepted accounting principles ("GAAP"). The Company believes adjusted operating income provides a relevant measure of operating profitability and a useful basis for evaluating the ongoing operations of the Company. Adjusted operating income is used by the Company to assess operating income before the impact of acquisitions and acquisition-related costs and certain non-cash items. Adjusted operating income is used by the Company as a benchmark for performance and compensation by certain executives. Adjusted operating income should not be considered in isolation or as a substitute for operating income or other profitability data prepared in accordance with GAAP. Adjusted operating income, as presented, may not be comparable to similarly titled measures of other companies. Set forth below is a reconciliation of adjusted operating income from operating income.  

Reconciliation of Adjusted Operating Income from Operating Income
Unaudited, in thousands
		Three Months Ended June 30,
Consolidated:			2017				2016			% Change
Operating income		$	102,602			$	123,101			-16.7	%
Amortization of acquired intangible assets			14,454				16,871			-14.3	%
Share-based compensation			6,107				6,175			-1.1	%
Gain on sale of real estate			-				(12,848	)		NM
M&A and acquisition-related costs			5,765				1,401			311.5	%
Adjusted operating income		$	128,928			$	134,700			-4.3	%
Adjusted operating income margin			22.4	%			23.1	%
Unified Communications Services:
Operating income		$	72,020			$	88,762			-18.9	%
Amortization of acquired intangible assets			2,252				3,378			-33.3	%
Share-based compensation			3,399				3,493			-2.7	%
M&A and acquisition-related costs			349				387			-9.8	%
Adjusted operating income		$	78,020			$	96,020			-18.7	%
Adjusted operating income margin			22.4	%			25.9	%
Safety Services:
Operating income		$	20,897			$	11,871			76.0	%
Amortization of acquired intangible assets			3,041				3,572			-14.9	%
Share-based compensation			989				993			-0.4	%
M&A and acquisition-related costs			55				-			NM
Adjusted operating income		$	24,982			$	16,436			52.0	%
Adjusted operating income margin			31.1	%			22.1	%
Interactive Services:
Operating income		$	7,828			$	5,958			31.4	%
Amortization of acquired intangible assets			4,975				5,327			-6.6	%
Share-based compensation			602				620			-2.9	%
M&A and acquisition-related costs			1,036				1,059			-2.2	%
Adjusted operating income		$	14,441			$	12,964			11.4	%
Adjusted operating income margin			18.2	%			17.7	%
Specialized Agent Services:
Operating income		$	4,531			$	2,906			55.9	%
Amortization of acquired intangible assets			4,186				4,594			-8.9	%
Share-based compensation			1,117				1,069			4.5	%
Adjusted operating income		$	9,834			$	8,569			14.8	%
Adjusted operating income margin			14.2	%			12.7	%
Corporate Other:
Operating income (loss)		$	(2,674	)		$	13,604
Gain on sale of real estate			-				(12,848	)
M&A and acquisition-related costs			4,325				(45	)
Adjusted operating income		$	1,651			$	711

 

Reconciliation of Adjusted Operating Income from Operating Income
Unaudited, in thousands
		Six Months Ended June 30,
Consolidated:			2017				2016			% Change
Operating income		$	210,825			$	232,025			-9.1	%
Amortization of acquired intangible assets			28,744				33,296			-13.7	%
Share-based compensation			11,532				13,841			-16.7	%
Gain on sale of real estate			-				(12,848	)		NM
M&A and acquisition-related costs			7,100				2,489			185.3	%
Adjusted operating income		$	258,201			$	268,803			-3.9	%
Adjusted operating income margin			22.5	%			23.3	%
Unified Communications Services:
Operating income		$	153,410			$	177,830			-13.7	%
Amortization of acquired intangible assets			4,539				6,771			-33.0	%
Share-based compensation			6,423				7,821			-17.9	%
M&A and acquisition-related costs			694				878			NM
Adjusted operating income		$	165,066			$	193,300			-14.6	%
Adjusted operating income margin			23.6	%			26.4	%
Safety Services:
Operating income		$	40,183			$	20,844			92.8	%
Amortization of acquired intangible assets			5,851				6,955			-15.9	%
Share-based compensation			1,854				2,220			-16.5	%
M&A and acquisition-related costs			183				-			NM
Adjusted operating income		$	48,071			$	30,019			60.1	%
Adjusted operating income margin			30.7	%			20.6	%
Interactive Services:
Operating income		$	16,183			$	11,766			37.5	%
Amortization of acquired intangible assets			9,828				10,382			-5.3	%
Share-based compensation			1,147				1,381			-16.9	%
M&A and acquisition-related costs			1,353				1,611			-16.0	%
Adjusted operating income		$	28,511			$	25,140			13.4	%
Adjusted operating income margin			18.2	%			17.3	%
Specialized Agent Services:
Operating income		$	8,089			$	7,424			9.0	%
Amortization of acquired intangible assets			8,526				9,188			-7.2	%
Share-based compensation			2,108				2,419			-12.9	%
Adjusted operating income		$	18,723			$	19,031			-1.6	%
Adjusted operating income margin			13.3	%			14.0	%
Corporate Other:
Operating income (loss)		$	(7,040	)		$	14,161
Gain on sale of real estate			-				(12,848	)
M&A and acquisition-related costs			4,870				-
Adjusted operating income (loss)		$	(2,170	)		$	1,313

Adjusted Net Income and Adjusted Earnings per Share Reconciliation
Adjusted net income and adjusted earnings per share (EPS) are non-GAAP measures. The Company believes these measures provide a useful indication of profitability and basis for assessing the operations of the Company without the impact of bond redemption premiums, acquisitions and acquisition-related costs, significant restructuring costs and certain non-cash items. Adjusted net income should not be considered in isolation or as a substitute for net income or other profitability metrics prepared in accordance with GAAP. Adjusted net income, as presented, may not be comparable to similarly titled measures of other companies. The Company utilizes these non-GAAP measures to make decisions about the use of resources, analyze performance, measure management’s performance with stated objectives and compensate management relative to the achievement of such objectives. Set forth below is a reconciliation of adjusted net income from net income. 

Reconciliation of Adjusted Net Income from Net Income
Unaudited, in thousands except per share data
	Three Months Ended June 30,										Six Months Ended June 30,
		2017			2016			% Change				2017			2016			% Change
Net income	$	44,764		$	32,979			35.7	%		$	98,860		$	77,534			27.5	%
Amortization of acquired intangible assets		14,454			16,871							28,744			33,296
Amortization of deferred financing costs		1,863			39,144							3,751			44,053
Interest rate swap ineffectiveness		15			-							77			-
Share-based compensation		6,107			6,175							11,532			13,841
Gain on sale of real estate		-			(12,848	)						-			(12,848	)
M&A and acquisition-related costs		5,765			1,401							7,100			2,489
Pre-tax total		28,204			50,743							51,204			80,831
Income tax expense on adjustments		10,478			18,911							18,801			30,007
Adjusted net income	$	62,490		$	64,811			-3.6	%		$	131,263		$	128,358			2.3	%
Diluted shares outstanding		85,527			84,281							85,369			84,425
Adjusted EPS - diluted	$	0.73		$	0.77			-5.2	%		$	1.54		$	1.52			1.3	%

Free Cash Flow Reconciliation
The Company believes free cash flow provides a relevant measure of liquidity and a useful basis for assessing the Company’s ability to fund its activities, including the financing of acquisitions, debt service, stock repurchases and distribution of earnings to shareholders. Free cash flow is calculated as cash flows from operating activities less cash capital expenditures. Free cash flow is not a measure of financial performance under GAAP. Free cash flow should not be considered in isolation or as a substitute for cash flows from operating activities or other liquidity measures prepared in accordance with GAAP. Free cash flow, as presented, may not be comparable to similarly titled measures of other companies. Set forth below is a reconciliation of free cash flow from cash flows from operating activities. 

Reconciliation of Free Cash Flow from Operating Cash Flow
Unaudited, in thousands
	Three Months Ended June 30,									Six Months Ended June 30,
		2017			2016		% Change				2017			2016		% Change
Cash flows from operating activities	$	107,273		$	137,433		-21.9	%		$	160,046		$	197,485		-19.0	%
Cash capital expenditures		26,576			37,507		-29.1	%			53,248			73,864		-27.9	%
Free cash flow	$	80,697		$	99,926		-19.2	%		$	106,798		$	123,621		-13.6	%

EBITDA, Adjusted EBITDA and Covenant Adjusted EBITDA Reconciliation
The common definition of EBITDA is “Earnings Before Interest Expense, Taxes, Depreciation and Amortization.” In evaluating liquidity and performance, the Company uses “Adjusted EBITDA” and “Covenant Adjusted EBITDA.” The Company defines Adjusted EBITDA as earnings before interest expense, share-based compensation, taxes, depreciation and amortization, gain on sale of buildings, significant restructuring costs and transaction costs. The Company defines Covenant Adjusted EBITDA as Adjusted EBITDA plus post-acquisition synergies, site closures and other impairments, other non-cash reserves and certain litigation settlement costs and excluding unrestricted subsidiaries. EBITDA, Adjusted EBITDA and Covenant Adjusted EBITDA are not measures of financial performance or liquidity under GAAP. Although the Company uses Adjusted EBITDA and Covenant Adjusted EBITDA as measures of its liquidity and performance, the use of Adjusted EBITDA and Covenant Adjusted EBITDA is limited because it does not include certain material costs, such as depreciation, amortization and interest, necessary to operate the business and for Covenant Adjusted EBITDA, includes adjustments for synergies that have not been realized. In addition, certain adjustments included in the calculation of Covenant Adjusted EBITDA are based on management’s estimates and do not reflect actual results. For example, post-acquisition synergies included in Covenant Adjusted EBITDA are determined in accordance with the Company’s senior credit facilities and indenture governing the Company’s outstanding notes, which provide for an adjustment to EBITDA, subject to certain specified limitations, for reasonably identifiable and factually supportable cost savings projected by the Company in good faith to be realized as a result of actions taken following an acquisition. EBITDA, Adjusted EBITDA and Covenant Adjusted EBITDA should not be considered in isolation or as a substitute for net income, cash flow from operating activities or other income or cash flow data prepared in accordance with GAAP. Adjusted EBITDA and Covenant Adjusted EBITDA, as presented, may not be comparable to similarly titled measures of other companies. Adjusted EBITDA and Covenant Adjusted EBITDA are presented here as the Company understands investors use them as a measure of its historical ability to service debt and compliance with covenants in its senior credit facilities. Further, Adjusted EBITDA is presented here as the Company uses it to measure its performance and to conduct and evaluate its business during its regular review of operating results for the periods presented. The Company uses this non-GAAP measure to make decisions about the use of resources, analyze performance and measure management’s performance with stated objectives. Pro forma adjustments are based on loan covenants. Set forth below is a reconciliation of EBITDA, Adjusted EBITDA and Covenant Adjusted EBITDA from cash flow from operating activities and net income.

Reconciliation of EBITDA and Adjusted EBITDA from Operating Cash Flow
Unaudited, in thousands
	Three Months Ended June 30,								Six Months Ended June 30,								Last Twelve Months
		2017				2016				2017				2016			Ended 6/30/17
Cash flows from operating activities	$	107,273			$	137,433			$	160,046			$	197,485			$	389,755
Income tax expense		22,652				18,389				44,233				43,235				67,421
Deferred income tax benefit (expense)		1,888				6,132				(8,010	)			3,755				18,446
Interest expense and other financing charges		36,786				73,267				72,437				112,252				146,345
Provision for share-based compensation		(6,107	)			(6,175	)			(11,532	)			(13,841	)			(23,079	)
Amortization of deferred financing costs		(1,863	)			(39,144	)			(3,751	)			(44,053	)			(8,040	)
Gain on sale of real estate		-				12,848				-				12,848				1,216
Other		(209	)			(712	)			(588	)			(886	)			(1,214	)
Changes in operating assets and liabilities,
net of business acquisitions		(9,835	)			(28,496	)			55,511				19,628				27,727
EBITDA		150,585				173,542				308,346				330,423				618,577
Provision for share-based compensation		6,107				6,175				11,532				13,841				23,079
M&A and acquisition-related costs		5,765				1,401				7,100				2,489				8,356
Gain on sale of real estate		-				(12,848	)			-				(12,848	)			(1,216	)
Significant restructuring		-				-				-				-				8,423
Adjusted EBITDA	$	162,457			$	168,270			$	326,978			$	333,905			$	657,219
Site closures, severance and asset impairments		4,067				1,789				5,966				2,657				6,158
Non-cash foreign currency loss		1,178				695				1,869				3,329				3,407
Other, net		78				349				1,627				(603	)			857
Covenant Adjusted EBITDA, before Pro Forma	$	167,780			$	171,103			$	336,440			$	339,288			$	667,641
Pro Forma adjustments																		18,239
Covenant Adjusted EBITDA, after Pro Forma																	$	685,880
Cash flows from operating activities	$	107,273			$	137,433			$	160,046			$	197,485
Cash flows used in investing activities	$	(48,687	)		$	(3,124	)		$	(79,993	)		$	(42,584	)
Cash flows used in financing activities	$	(42,266	)		$	(42,301	)		$	(76,647	)		$	(112,546	)
Reconciliation of EBITDA and Adjusted EBITDA from Net Income
Unaudited, in thousands
	Three Months Ended June 30,								Six Months Ended June 30,
		2017				2016				2017				2016
Net income		44,764				32,979				98,860				77,534
Interest expense and other financing charges		36,786				73,267				72,437				112,252
Depreciation and amortization		46,383				48,907				92,816				97,402
Income tax expense		22,652				18,389				44,233				43,235
EBITDA		150,585				173,542				308,346				330,423
Provision for share-based compensation		6,107				6,175				11,532				13,841
M&A and acquisition-related costs		5,765				1,401				7,100				2,489
Gain on sale of real estate		-				(12,848	)			-				(12,848	)
Adjusted EBITDA		162,457				168,270				326,978				333,905
Site closures, severance and asset impairments		4,067				1,789				5,966				2,657
Non-cash foreign currency loss		1,178				695				1,869				3,329
Other, net		78				349				1,627				(603	)
Covenant Adjusted EBITDA, before Pro Forma	$	167,780			$	171,103			$	336,440			$	339,288

^{________________________________________________________
1} See Reconciliation of Non-GAAP Financial Measures below.
² Free cash flow is calculated as cash flows from operating activities less cash capital expenditures.
3 Revenue growth attributable to acquired entities for the second quarter of 2017 includes 911 ETC, Vocus and Callpointe. 
⁴ Based on loan covenants. Covenant loan ratio is debt net of cash and excludes accounts receivable securitization debt.
⁵ Adjusted organic revenue growth, a non-GAAP metric, excludes revenue from acquired entities and the estimated impact of foreign exchange rates. The Company believes adjusted organic growth provides a useful measure of growth in its ongoing business. A reconciliation to GAAP revenue is presented in the Selected Financial Data table below.
⁶ Our consolidated revenues and expenses are subject to variations caused by the net effect of foreign currency translation due to our international operations. It is difficult to predict the future fluctuations of foreign exchange rates and how those fluctuations will impact our consolidated operations. Our revenues and expenses from our international operations are generally denominated in local currencies, therefore, the impact of currency fluctuations on our operating income and operating margin is partially mitigated. In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we compare the percentage change in the results from one period to another period using constant currency presentation. The constant currency growth rates are calculated by translating the 2017 results at the 2016 average exchange rates. Constant currency growth rates are a non-GAAP measure.
NM: Not Meaningful

AT THE COMPANY:	
Dave Pleiss
Investor Relations
West Corporation
(402) 963-1500
DMPleiss@west.com