Q4 2003 Boston Communications Group Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: At this time I would like to welcome everyone to the bcgi fourth quarter and annual earnings conference call. All lines have been placed on mute to prevent any background noise. (OPERATOR INSTRUCTIONS). I would now like to turn the call over to Mr. Peter Seltzberg with the Financial Relations Board, for opening remarks.

PETER SELTZBERG, INVESTOR RELATIONS, BOSTON COMMUNICATIONS GROUP: Thanks. Good afternoon. By now you should have had a chance to view today's press release, but if anyone still needs a copy a please call us at 212-4445-8453, and request fax or e-mail; alternatively, view and download the release at the Boston Communications corporate Website, www.bcgi.net.

On the line with us today are E.Y. Snowden, President and CEO, and Karen Walker, Chief Financial Officer of Boston Communications Group. Please note that management is happy to speak privately with investors and analysts regarding overall strategy, industry trends and historical issues; however, more specific questions regarding updates on financial guidance or other material information will only be discussed in widely disseminated press releases or via open conference calls such as the one being held today.

I would also like to caution everyone that various remarks the Company may make about the Company's future expectations, plans, and prospects, constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward looking statements as a result of various important factors, including those discussed in the form 10-Q for the three months ended September 30, 2003, and Form 10-K for the year ended December 31st, 2002, which are on file with the SEC. In addition, any forward-looking statements represent our views only as of today, and should not be relied upon as representing our views as of any subsequent day. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if estimates change; and therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

Without further delay, I would like to turn the call over to E.Y. Snowden. Please go ahead, E.Y.

E. Y. SNOWDEN, PRESIDENT & CEO, BOSTON COMMUNICATIONS GROUP: Thank you, Peter. And again, welcome to Boston Communication Group's fourth quarter and year end 2003 conference call. We're pleased to be talking with you today about our fourth consecutive quarter of record-breaking earnings and a record-breaking year for bcgi.

Our GAAP earnings per share of 24 cents this quarter were up 135 percent over the prior year's fourth quarter. Our 2003 GAAP earnings per share of 87 cents were up 381 percent over the prior year, and in the days when we would describe pro forma earnings excluding legal costs, we would have said we earned $1.00 per share this year.

2003 corporate revenues of 103 million were up 46 percent over 2002, and this translated directly into another 5 million of free cash flow for the quarter, bolstering bcgi's already strong balance sheet to record financial strength of 66.5 million in cash and investments.

Our net subscriber additions on the prepaid platform for the quarter were 217,000, slightly ahead of the guidance we provided in October, 2003. As we described in our last quarterly conference call, we anticipated lower than normal holiday period adds, due to many carriers focusing their marketing strategies on attracting and retaining post-paid subscribers in the wake of wireless number portability, as well as next generation data applications. Our Q4 subscriber growth was aided somewhat by the reduction in our average monthly churn rate to 8.8 percent, down from 9.6 percent per month last quarter and an improvement from the 9.2 percent per month rate in the fourth quarter a year ago. So for the full year 2003, we added just over 900,000 subscribers, increasing our base 31 percent from year end 2002.

Over the course of the past year, as we have talked about our strategic initiative to diversify our customer base, we have often mentioned Nextel Communications and the extraordinary success they have had with the Boost Mobile lifestyle based brand, targeted towards the youth market in California and Nevada. A few months ago, Nextel publicly described a limited geographic expansion of this prepaid wireless offering in 2004, and today, we are happy to announce the signing of a multiyear contract for bcgi to support this expansion.

We don't have any other specific customer news to share at this time, and we have not included any other major prepaid customer wins in our guidance, but the state-of-the-art capabilities of our prepaid platform, further enhanced by our recent announcement of our certification of interoperability for bcgi prepaid wireless on GSM networks utilizing CAMEL standards for intelligent networking, positions us favorably for future wins in the growing prepaid and hybrid billing space.

This important Nextel win is but one prong of our revenue diversification initiative, albeit an important prong. Over the course of the last three years, we've built a sizable and profitable business serving the regional wireless carriers in America. Initially, we targeted this segment with prepaid wireless, and succeeded in taking some share from the incumbent suppliers in this space. Then, with the acquisition of Infotech Solutions Corp. last year, we added the feature-rich Voyager postpaid billing and customer care solution to our offering, and have created a technological competitive advantage over the other providers to the regional markets. We are very pleased that our performance in this initiative has exceeded our expectations and that our product set and skilled sales organization have created a richer pipeline of new business in this diverse market than ever.

As we have discussed in the past, underlying the real-time services that bcgi provides wireless carriers, our unique technology and service model have given us a platform with distinct competitively differentiated capabilities in the transaction processing space. We believe that we are alone in yearly transacting billions of micro payments, averaging about 50 cents per transaction, all done in real-time at carrier class standards of reliability with significant transaction complexity. These are the strong capabilities we are leveraging into new business opportunities where bcgi can extend our leadership.

The payment services business we began a year and a half ago is a good example of this important diversification for bcgi. In particular, we believe that the introduction …