Good morning, and welcome to USA Mobility's Fourth Quarter and Year-End Investor Call. Today's call is being recorded. Online today, we have Vince Kelly, President and Chief Executive Officer; Shawn Endsley, Chief Financial Officer; Chris Heim, President of the company's Software Subsidiary, Amcom; and Dan Mayleben, Chief Operating Officer of Amcom. At this time, for opening comments, I'll turn the call over to Mr. Kelly. Please go ahead, sir.

Good morning. Thank you for joining us for our fourth quarter and 2011 year-end 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 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, which we expect to file as soon as practical, 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. I'm pleased to speak to you today regarding our fourth quarter and 2011 operating results and what we believe was another year of outstanding progress for USA Mobility. One of the key highlights of the past year, of course, was our acquisition in March of Amcom Software, the pivotal event in the company's history, because it not only expanded our communication services and capabilities beyond wireless, but created the opportunity for sustainable long-term growth. On a consolidated basis, nearly a year behind us in both our wireless and software businesses, our combined company met our internal…

Thanks, Vince, and good morning. Before I review our operating and financial results, as Vince mentioned, we expect to file our 2011 Form 10-K as soon as practical. As you know, the Form 10-K contains significantly more information about our business operations and financial performance than we will be able to cover on this call. So I encourage you to review it for further details. As Vince noted, we are pleased with our 2011 financial results and the progress we made toward meeting our long-term operating goals. We met or exceeded previously announced financial guidance for the year for both our wireless and software businesses and believe we have positioned the company well for another solid year in 2012. Continued improvement in the annual rates of subscriber and revenue erosion, combined with reduced operating expenses, contributed to strong cash flows and record high margins in our wireless business. While our software business reported solid bookings for the quarter and a record high backlog at year-end. Looking first at our wireless business. We are particularly pleased with the improvement in year-over-year subscriber trends as the annual pace of unit erosion has now improved for 9 consecutive quarters. Although we expect paging unit losses to continue for the foreseeable future, we are greatly encouraged by the declining rate of subscriber churn we've experienced in our wireless business over the past few years. With respect to the subscriber base, we ended the year with 1,668,000 units in service, a net decline of 11.7% or 221,000 units compared to a net decline of 13.4% or 293,000 units for 2010. The annual rate of subscriber erosion reached its lowest level in more than 7 years. Net unit losses were 53,000 in the fourth quarter compared to 58,000 in the third quarter and 61,000 in the…

Thanks, Shawn. 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 some of our sales and marketing activities in the fourth quarter; second, I will briefly review our current capital allocation strategy; and finally, I will comment on our business outlook for 2012. With respect to sales and marketing activities, both our wireless and software businesses continue to aggressively pursue new business opportunities during the fourth quarter. On the wireless side, we continue to sell wireless messaging solutions to our target market segments of healthcare, government and large enterprise. These core segments represented approximately 90% of our direct subscriber base at December 31 compared to 88% a year earlier. It also accounted for approximately 86% of our direct paging revenue in the fourth quarter compared to 83% in the year-earlier quarter. During the quarter, our wireless team continued to focus on its 4 primary goals: Develop new account relationships, expand business within existing accounts, retain our most valuable customers, especially within the healthcare sector, and generate sales opportunities for our software sales team. As a result, our wireless sales group exceeded expectations for subscribers, gross additions, retention and revenue within each of our key market segments, not only for the quarter, but for the full year. This accomplishment is a credit to the professionalism and dedication of our entire sales team, including the work of our key account management, or KAM team, and its positive impact on retaining our most valued wireless customers. Our KAM program involves monthly monitoring of 800 of our largest accounts in which we centralize account relationship management, including an evaluation of each customer satisfaction with service delivery and a cross-discipline approach among sales, operations and engineering personnel.…

[Operator Instructions] And we'll take our first question from Brent Morrison with Strome Group.

Looking at Amcom, it's been about 3 quarters now. Can you give me some more detail on the conversion ratio from paging, or wireless customers to software becoming both a paging and software customer or just becoming a software customer? I kind of had modeled in a little quicker conversion rate than what I'm seeing.

Well, Brent, one thing that I want to make clear, and maybe we haven't done a good job making this clear in the past, is we don't necessarily want to convert them so that they turn in their pagers and just take Amcom software. I mean, if they're going to leave paging, then we certainly want to do that. If they've already made that decision, the goal was to take existing USA Mobility customers and sell Amcom services to them because what you're going to find is in most hospitals today, you still have pagers, but you also have smartphones, tablets and all kinds of now wireless devices and monitors that through Amcom middleware can completely be integrated and you can communicate in a user-controllable and definable fashion that those messages, how you would like to define them and how you would like to distribute them. So from our perspective, that's going very well. We haven't got the statistics for you today in terms of, here is the exact amount of accounts, et cetera, and I don't think that's information we want to release for competitive purposes. But It's going very well and it's something that was one of the premises for doing the acquisition, and we're pleased with our progress.

Sure. I'm just -- the way I kind of understood it is the Amcom will be a safety net as paging customers leave because they're leaving to adopt the latest technology smartphones or tablets and things like that, and you can catch them with Amcom. So it's kind of going from one pocket to the other. But the bookings are showing that it's almost like a software business in itself. Maybe those -- the introduction and the leveraging of the customer relationship takes a little bit longer to turn into sales? But now, it's been 3 quarters and we're looking at this run rate of $12 million, $15 million. I was thinking it was going to be a little bit more rapid.

Yes, I think that -- I don't want to say you have it backwards, but one of the things that happened in 2011, and I don't think it was a coincidence, was that we purchased the Amcom early in the year and we ended up having our lowest churn rate in the company's history...

Now was that because of Amcom though? Or just because the customers are...

I think yes. I think part of it was because of Amcom because I think it underscored our long-term commitment to the healthcare space. If you just wanted to run a standalone paging company and you know your customer base is going to be getting smaller every year, when you talk to those customers when it's time to renew those contracts, they get nervous. Now -- and when we had our annual convention for Amcom this past fall, and I had spoke with customers that were both USA Mobility paging customers and Amcom software customers, they get it. They understand the long-term commitment. So I think that helped us immensely. So the goal is to have the rate of paging erosion slow down and have that stay low, but also sell. The goal was certainly not to purposely churn paging subscribers off of paging and put them on the Amcom software, and that's going to happen by itself over a long period of time, but you want to slow the process of the paging conversion because paging is incredibly profitable right now. If you look at the margins, and we're setting record margins now every year, our margins in the paging business have expanded. Amcom was a long-term investment, a long-term growth platform, is doing quite well from where we sit, it's meeting its -- our internal goals. And so yes, I think it's a good part of this company's future, but paging's going to be around for a while. And hopefully, that continued improvement that we've seen in paging in terms of subscriber erosion and margins, hopefully, we'll be able to at least maintain that. We certainly don't want to exacerbate the churn and increase the customer conversion.

Sure. Well, I thought it was going to slow the churn, as well as introduce you to Amcom prospects. My next question is I was surprised to hear about the dividend, cutting the dividend rate in -- for more expenditures to grow the software business? Now I thought the synergies of purchasing Amcom was to have a very cheap way of cross-selling. Now where would you need to invest and how much money are you talking about investing into the software business?

Amcom is absolutely a cross-selling opportunity, and we just talked about that, we're doing it. But Amcom's also a software business, and software businesses need to be invested in. You need to add, from a product development standpoint, internal research and development to add modules and functionalities and grow it. And you also need to acquire certain functionality because it saves you a couple of years, 2, 3, 4 years of development time and kind of gives you a jumpstart. So absolutely, going forward, we want to invest in our software business, we want to grow our software business, we also want to maintain a dividend with a reasonable yield. And that -- those are all things that are under consideration and that we're studying right now.

[Operator Instructions] And we'll take a follow-up from Brent Morrison with Strome Group.

Regarding the debt repayment with the stock cost of about 7%, 7% yield, why do you choose to pay down the debt rather than buy back the stock?

Well, right now, there's no sense in paying interest on carrying debt. We didn't pay it all off because we didn't want to incur a prepayment penalty, but we'll probably, unless we do an acquisition, we'll probably just pay it off. And we are, I think I mentioned on my prepared comments, we are currently evaluating the stock repurchase program that we have in place. And as soon as we make a decision on that, we'll be getting back to you guys.

Okay. And then do you have the breakdown of the software revenue between the 3 buckets? It wasn't in the press release.

We will provide that in the 10-K, which we're filing shortly.

Okay. And has the average cost of a software customer changed at all? Before, I think you had about $120,000 with about 20% in maintenance. Is that going up or staying the same?

Chris or Dan, you want to take that?

Yes. It's going up slightly as we're selling more modules to the existing customers.

And around what figure?

About $130,000.

$130,000?

On average sales price. You said cost, but Brent, I think you meant sales price.

Sales price, yes. So $12 million and $130,000, so is that -- are you selling about 100 customers a quarter or installing? Would that -- is that a right way to look at it?

Yes. Well, the $130,000 is related to new customers. So in addition to selling solutions to new customers, we had a fair amount of business where it just sales back to the install base. The sales back to the install base have an average sales price of about $65,000 or $70,000. So each quarter, we have a blend of new customers and existing customers.

Okay. So there's a decent amount of cross selling activity in as far as new modules within an Amcom customer too or in it also?

Absolutely.

Okay. And then I have one last question and that's the write-down of the maintenance revenue. You -- back to my accounting knowledge, you'd write the maintenance revenue down if customers canceled, and you weren't going to book that revenue in the future. What exactly was the reason why you have the $6.3 million write-down with a high 90% rate of renewal?

Yes. Brent, it's an accounting rule. We're going to let our Chief Financial Officer take that one.

Yes, the maintenance revenue write-down was $6.1 million, and that occurs at the time of the acquisition. The accounting rules require you to take your deferred maintenance that you have on your balance sheet, write that down to what they expect to be fair value. And the result of that is as that deferral gets recognized in revenue over time, we reduce the maintenance revenue. However, that's all completely gone, and starting in 2012, there will be no reduction of maintenance revenue for this purchase accounting adjustment.

Okay. I'm just curious why it was written down. Did those -- did that, those group of clients cancel? Or you weren't going to be able to book it?

You know what, this is one of those accounting rules that you really, at least for me, you scratch your head at because we continued collecting that cash and...

Okay. So that's why I was curious why you keep saying what revenue would have been if we didn't write it down. If it's gone and you're not going to get it anyway. So I'm just curious why you guys go back to it quarter-after-quarter. I know it's over, but...

Yes, it's a great question and I wish you'd ask the financial accounting standards board about that because then it's dropped or stopped. You keep collecting the cash. So we look at it differently internally, but you have to report it this way.

So you are collecting. Okay, that's great.

And we'll take the next question from David Maisel [ph] with JW Milligan [ph].

It's actually JW [ph] at JW Milligan [ph]. I just want a clarification here. The other analyst indicated that you had cut the dividend. What I see is you maintained the dividend, and you may look at what you'll do going forward. So I just want to clarify that you maintained it. And what do you want to do going forward on the dividend?

You clarified it correctly, we maintained the dividend. And I think I was pretty clear in my comments that we're continuing to evaluate it. It probably will not stay at $1 a year in the future as we look to add on additional acquisitions and make additional software investments both internally in further development, and again, through acquisition. But we haven't made an affirmative decision one way or another on that yet. We're just analyzing. We're continuing to look at it.

Are you saying you might reduce it?

Yes, absolutely.

By the next quarter?

We didn't say, nor have we decided.

I mean you came up on my radar screen originally because of the dividend, and I followed quite a while. Then I found out you're a pretty interesting company, but the dividend gave me some comfort. So I just wonder what -- I don't know how much guidance you can give me on that.

I think I was pretty clear in my comments, we continue to pay a dividend, we continue to pay the existing rate, we're going to evaluate whether or not we want to change that rate going forward. If we do, we'll still probably pay a pretty darn good yield regardless of what level we set the dividend at. And that's about all I can say at this point because we literally have not made a decision one way or another. We're continuing to evaluate it in light of other opportunities that deploy capital to grow long-term shareholder value.

Okay. Because it seem like you'd have the cash flow to do it if you wanted to.

Yes, but that cash flow can be used for a lot of things as you well know.

Okay. Do you know when we'd see a decision on that?

No. We're continuing to evaluate it. I don't know how I can be more clear than that.

There are no further questions. I'll turn the conference back over to you, Mr. Vince.

Okay. Well, thank you for joining us this morning. We look forward to speaking with you again after we release our first quarter results. And thanks, everyone, and have a great day.

That does conclude today's conference. Thank you for your participation.