DALLAS, Nov. 14 /PRNewswire-FirstCall/ -- Securus Technologies, Inc., a leading provider of inmate communications services and innovative offender and case management software design, today announced results for the quarter and nine months ended September 30, 2008.

    Highlights for Q3 2008:

    -- Q3 to Q3 Core (Direct and Syscon) Revenue Increase of 5.4%
    -- Q3 to Q3 EBITDA Increase of 188.2%, 131.9% on a Normalized Basis
    -- Q3 to Q3 FCF Increase of 858%, 593% on a Normalized Basis
    -- Q3 to Q3 Syscon Revenue Increase of 54.8%
    -- Q3 to Q3 Bad Debt Decrease of 31.6%
    -- TDCJ Win -- One of the largest inmate telecommunications contracts in
       the United States
    -- Refinancing of Revolving Credit Facility- Increased availability and
       extension of maturity date
    -- Executive Additions -- Increased bandwidth of Executive Team, history
       of achieving good results



                          Securus Technologies, Inc.
                  Consolidated Financial and Operating Data
               (Dollars and Calls in Thousands, Except per Unit)

                                                         For The Nine Months
                             Q3        Q2        Q3      Ended September 30,
                            2008      2008      2007       2008       2007

    Total Revenue         $95,794   $99,773   $95,033   $293,239   $298,410
    Revenue - Direct
     Provisioning         $81,661   $84,727   $79,755   $251,286   $258,593
    Revenue - Syscon (1)   $7,427    $7,426    $4,798    $19,042     $4,798
    EBITDA                $12,723   $10,168    $4,415    $31,127    $21,642
    Capital Expenditures   $4,620    $4,667    $5,360    $13,360    $16,948
    EBITDA less Capital
     Expenditures          $8,103    $5,501     $(945)   $17,767     $4,694
    Billed Calls           34,061    34,426    34,236    104,001    110,369
    Domestic Revenue
     per Call               $2.59     $2.68     $2.64      $2.64      $2.66
    Percent Prepaid
     Revenue - Direct
    Provisioning             46.8%     45.4%     36.3%      45.7%      34.0%
    Percent Bad Debt -
     Non-Syscon               8.5%      9.6%     12.2%       9.5%      13.8%
    Total Headcount           652       654       703        652        703
    Quota Carrying Field
     Sales Associates          41        41        46         41         46

    (1) Syscon Justice Systems, Ltd. was acquired on June 29, 2007.

Richard A. (Rick) Smith, Securus' Chief Executive Officer and President said, "We turned in another solid quarter as both EBITDA and free cash flow all showed significant growth in Q3 2008 versus 2007 -- EBITDA increased over 188%, while unlevered cash flow was a positive $8.1M after being negative $0.9M in Q3 2007. We had some one-time events that benefited Q3 2008 results but even if we normalized these out of the run-rate, Q3 results versus last year still showed over 100% improvement. Syscon revenue remained strong in the quarter and was 54.8% higher than a year ago. We settled multiple long standing patent infringement lawsuits in the quarter that will save us several million dollars in outside legal fees on a go forward basis. And, in partnership with Embarq, we were awarded a very large contract from the Texas Department of Criminal Justice (TDCJ) that we believe will generate up to $100M in revenue for Securus over the next seven years. Lastly, we hired a number of additional executives to the Securus leadership team in the quarter to improve customer service, improve our platform reliability and back office systems and improve both revenue growth and gross margin of the products we offer. The executives who came on board this past quarter were Danny de Hoyos, Vice President of Customer Service; Arlin B. Goldberg, Chief Information Officer; and Robert E. Pickens, Chief Marketing Officer. I've worked with all three of these executives for many years and I am confident in their abilities and leadership skills to improve our business results in each of their assigned areas."

William D. (Bill) Markert, Securus' Chief Financial Officer added, "In addition to the solid financial performance we saw in the third quarter, we were also able to refinance our revolver credit facility with Wells Fargo Foothill. The refinancing extended the maturity of the company's revolver out to June, 2011 and also expanded our cash availability under the new revolver. We were able to accomplish the refinancing in a very difficult credit environment which we believe shows a significant amount of confidence in our business model and in our execution."

Total revenues for the third quarter of 2008 were $95.8 million, a decrease $4.0M from the second quarter of 2008 but $0.8 million increase from the third quarter of 2007. The sequential decline is due primarily to seasonality within our business as call volumes are the lowest in the third quarter of each year and bad debt continued to decline. Also contributing to the lower revenue was a state mandated rate reduction for one of our DOC contracts as well as the impact from two hurricanes that hit states in which we have over 150 sites. Syscon, our offender management software subsidiary, had flat revenues in the quarter but grew over 54% from the same quarter last year.

Cost of service in the third quarter was 73.9% of revenue, flat with Q2 2008 but significantly better than the 77.1% we achieved in the third quarter of 2007. Driving this year over year improvement was our lowering of bad debt expense. Non-Syscon bad debt as a percent of revenue dropped to 8.5% in this quarter which compares favorably to the 9.6% we incurred in Q2 2008 and 12.2% in the second quarter last year. We believe this drop is due primarily to shifting our focus to selling prepaid services versus selling on a post-paid basis. Our prepaid revenue as a percent of our direct provisioning segment increased from 36.3% in the third quarter 2007 to 46.8% in the third quarter this year.

Sales, general and administrative expenses for the third quarter of 2008 were $12.3 million, a reduction of $3.6 million from the second quarter of 2008 and $5.1M decline from a year ago. The third quarter of this year included both favorable and unfavorable one time charges including (1) the patent infringement lawsuits we settled in the quarter which we accounted for as a credit to operating expense; and (2) additional costs recorded associated with our executive leadership changes we made. The net of these two items as well as some other smaller one time charges resulted in SG&A being approximately $2.5M lower than our current run-rate.

EBITDA for the third quarter of 2008 was $12.7 million, an increase of $2.6 million from the second quarter of 2008 and an increase of $8.3 million from the third quarter of 2007. EBITDA is a non-GAAP measure. Below is a schedule reconciling reported GAAP net loss to EBITDA. As mentioned above, we had a net benefit of one-time charges in Q3 2008 of $2.5M that favorably impacted Q3 results. The second quarter of 2008 also had roughly $0.6M of one-time benefits. So, if you normalized for these one-time items in both quarters, our normalized EBITDA sequential growth would have been roughly $0.6M, or about 6%.

                         Securus Technologies, Inc.
                Consolidated Net Loss to EBITDA Reconciliation
                                (In Thousands)

                                                           For The Nine Months
                          Q3         Q2          Q3        Ended September 30,
                         2008       2008        2007        2008        2007

    Net Loss           $(6,638)   $(8,533)   $(13,187)   $(25,118)   $(29,232)
      Interest expense
       and other, net   10,137      9,271       7,744      29,593      22,531
      Income taxes
       (benefit)           351        774         (46)        526         848
      Depreciation and
       amortization      8,873      8,656       9,904      26,126      27,495
    EBITDA            $ 12,723    $10,168      $4,415     $31,127     $21,642

Capital expenditures were $4.6 million in the third quarter vs. $4.7 million in the second quarter of 2008 and $5.4 million in third quarter last year. We have spent approximately $13.4 million dollars in capital expenditures in the first nine months of 2008, $3.6M less than the first nine months of 2007. The decline in spending from 2007 levels continues to be driven by both last year's deployment of our packet-based architecture as well as lower signing bonuses paid.

Net loss for the third quarter of 2008 was $6.6 million, an improvement of $1.9 million from the second quarter of 2008 and $6.5 million from the third quarter of 2007. The improvements in net loss were primarily due to lower bad debt incurred in 2008 as well as the net benefits from the one-time items explained above.

Cash and restricted cash at September 30, 2008 was $5.1 million, a slight decline from the $5.9 million balance at the end of the second quarter. As of September 30, the Company had $17.5 million of availability under its revolving credit facility. However, this availability improved to $24.6 million after our new refinancing was completed.

Investor Call

Management is holding an investor conference call on Friday, November 14, 2008 at 10:00 a.m. (CST) to discuss quarterly results. Investors are invited to participate by calling:

    US Dial in:             800-762-8779
    International Dial in:  1-480-248-5081
    Passcode:               3934479

    Replay details are as follows:

    Replay Dates:           November 14 - December 13, 2008
    Replay available at:    1:00 p.m. CST
    US Replay Dial in:      800-406-7325
    International Dial in:  303-590-3030
    Replay Passcode:        3934479

About Securus Technologies, Inc.

Securus Technologies, Inc. is one of the largest suppliers of inmate communications and information management solutions, serving approximately 2,600 correctional facilities nationwide. A recognized leader in providing comprehensive, innovative technical solutions and responsive customer service, Securus' sole focus is the specialized needs of the corrections and law enforcement communities. Securus is headquartered in Dallas, TX, with regional offices in Bedford, MA; Raleigh, NC; Carrollton and Allen, TX; and Atlanta, GA. For more information please visit the Securus website at http://www.securustech.net

Syscon Holdings, Ltd., our wholly-owned subsidiary, is a world leader in innovative Offender and Case Management Software design and delivery. Syscon's Elite and Exact systems offer management functionality from booking and legal documentation through trust accounting, commissary, and medical records to the management of parole and other forms of community supervision. Syscon's systems have been implemented in many States and large Counties across North America, in Australia and in England. Syscon solutions help manage more than 300,000 inmates and former inmates every day. For more information about Syscon, please visit http://www.syscon.net.

Special Note Regarding Forward-Looking Statements

The foregoing release contains statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are only predictions and are not guarantees of future performance. Investors are cautioned that any such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations and business environment of Securus Technologies, Inc. that may cause the actual results to be materially different from any future results expressed or implied in such forward-looking statements. Securus assumes no obligation to update the information contained in this press release.

                          SECURUS TECHNOLOGIES, INC.
                     CONDENSED CONSOLIDATED BALANCE SHEETS
          (Dollars in thousands, except share and per share amounts)


                                           December 31,     September 30,
                                               2007            2008
                                                            (unaudited)
    ASSETS
    Cash and cash equivalents                 $2,072          $3,590
    Restricted cash                            1,535           1,593
    Accounts receivable, net                  50,788          40,237
    Prepaid expenses and other current
     assets  5,437  5,904
    Deferred income taxes                      3,034           3,309
        Total current assets                  62,866          54,633
    Property and equipment, net               40,797          35,956
    Intangibles and other assets, net        119,427         106,166
    Goodwill                                  69,035          67,143
        Total assets                        $292,125        $263,898

    LIABILITIES, REDEEMABLE, CONVERTIBLE
     PREFERRED STOCK AND STOCKHOLDERS'
     DEFICIT
    Accounts payable                         $28,161         $25,082
    Due to related party                       1,000           2,336
    Accrued liabilities                       40,188          36,124
    Deferred revenue and customer advances    16,674          15,066
    Current deferred tax                       1,261           1,176
        Total current liabilities             87,284          79,784
    Deferred income taxes                     15,352          13,915
    Due to related party                       3,510               -
    Long-term debt                           263,276         273,549
    Other long-term liabilities                1,593           2,301
        Total liabilities                    371,015         369,549

    Commitments and contingencies

    Series A redeemable convertible
     preferred stock, $2,000 stated value,
     total redemption value $10,200 and
     $11,170 at December 31, 2007 and
     September 30, 2008; 5,100 shares
     authorized and outstanding at
     December 31, 2007 and September 30,
     2008                                      9,971          10,987

    Stockholders' deficit:
      Common stock, $0.001 par value,
       1,290,000 and 1,355,000 shares
       authorized at December 31, 2007
       and September 30, 2008, respectively
       677 and 155,333 shares issued and
       outstanding at December 31, 2007 and
       September 30, 2008, respectively            7                7
      Additional paid-in capital              35,620           34,630
      Accumulated other comprehensive income   1,935              266
      Accumulated deficit                   (126,423)        (151,541)
        Total stockholders' deficit          (88,861)        (116,638)
    Total liabilities, redeemable,
     convertible preferred stock and
     stockholders' deficit                  $292,125         $263,898



                          SECURUS TECHNOLOGIES, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
        For the Three and Nine Months Ended September 30, 2007 and 2008
                            (Dollars in thousands)

                                  For the Three              For The Nine
                                   Months Ended              Months Ended
                             September     September   September     September
                                 30,          30,          30,          30,
                                2007         2008         2007         2008
                                   (unaudited)               (unaudited)
    Revenue:
    Direct call provisioning  $79,755      $81,661     $258,593     $251,286
    Offender management
     software                   4,798        7,427        4,798       19,042
    Wholesale services         10,480        6,706       35,019       22,911
    Total revenue              95,033       95,794      298,410      293,239
      Cost of service
       (exclusive of
       depreciation and
       amortization shown
       separately below):
    Direct call provisioning,
     exclusive of bad debt
     expense                   55,017       57,145      175,083      172,927
    Direct call provisioning
     bad debt expense           8,203        6,171       29,648       20,410
    Offender management
     software
      Expense                   3,456        3,693        3,456       10,372
    Wholesale services
     expense                    6,600        3,805       22,339       13,948
    Total cost of service      73,276       70,814      230,526      217,657
    Selling, general and
     administrative expense    17,342       12,257       45,628       44,231
    Restructuring costs             -            -          614          224
    Depreciation and
     amortization expense       9,904        8,873       27,495       26,126
    Total operating costs
     and expenses             100,522       91,944      304,263      288,238
    Operating income (loss)    (5,489)       3,850       (5,853)       5,001
    Interest and other
     expenses, net              7,744       10,137       22,531       29,593
    Loss before income
     taxes                    (13,233)      (6,287)     (28,384)     (24,592)
    Income tax expense
     (benefit)                    (46)         351          848          526
    Net loss                  (13,187)      (6,638)     (29,232)     (25,118)
    Accrued dividends on
     redeemable convertible
     preferred stock                -         (334)           -       (1,017)
    Net loss available to
     common stockholders     $(13,187)     $(6,972)    $(29,232)    $(26,135)



                          SECURUS TECHNOLOGIES, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
             For the Nine Months Ended September 30, 2007 and 2008
                            (Dollars in thousands)


                                                   September 30, September 30,
                                                        2007          2008
                                                            (unaudited)
    CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                          $(29,232)    $(25,118)
    Adjustment to reconcile net loss to net
     cash provided by operating activities:
      Depreciation and amortization                     27,495       26,126
      Amortization of fair value of contracts acquired     861        2,761
      Deferred income taxes                             (1,052)      (1,199)
      Non-cash interest expense                          8,214        9,288
      Equity loss from unconsolidated affiliate            102            -
      Stock-based compensation                              51           26
      Amortization of deferred financing
       costs and debt discounts                          1,540        2,578
    Changes in operating assets and liabilities:
      Restricted cash                                      (57)         (58)
      Accounts receivable                               15,748       10,175
      Prepaid expenses and other current assets            245         (557)
      Intangible and other assets                          569          634
      Accounts payable                                  (7,291)      (7,577)
      Accrued liabilities and other liabilities         (5,384)      (4,513)
          Net cash provided by operating activities    $11,809      $12,566

    CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchase of property and equipment including
       costs of intangibles                           $(16,948)    $(13,360)
      Cash consideration paid for acquired business    (43,689)           -
      Proceeds from sale of unconsolidated affiliate       985            -
      Property insurance proceeds                           88            -
          Net cash used in investing activities       $(59,564)    $(13,360)

    CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from issuance of second-priority
       senior secured notes                            $39,060           $-
      Advances on revolving credit facility, net        10,894          319
      Cash overdraft                                       562        4,568
      Debt issuance costs                               (5,009)      (1,468)
      Advance from or (payment to) related party         5,000       (2,174)
          Net cash provided by financing activities    $50,507       $1,245
      Effect of exchange rates on cash and
       cash equivalents                                 (1,222)       1,067
      Increase in cash and cash equivalents             $1,530       $1,518
      Cash and cash equivalents at the beginning
       of the period                                       558        2,072
      Cash and cash equivalents at the end of
       the period                                       $2,088       $3,590

    SUPPLEMENTAL DISCLOSURES:
    Cash paid during period for:
      Interest                                         $18,337      $21,813
      Income taxes                                        $236         $846
    NONCASH FINANCING AND INVESTING ACTIVITIES:
      Non-cash consent fee                                $400           $-
      Leasehold improvements                               $ -         $710

SOURCE Securus Technologies, Inc.