Attached files
file | filename |
---|---|
8-K - FORM 8-K - Goodman Networks Inc | d31313d8k.htm |
Exhibit 99.1
Goodman Networks Reports Second Quarter Revenue
And Earnings
¡ Q2 Revenue of $186.7 million
¡ Q2 Adjusted EBITDA of $7.5 million
¡ Year-To-Date Six Month Revenue of $400.0 million
PLANO, TX, August 12, 2015 Goodman Networks Incorporated today announced financial results for the three and six months ended June 30, 2015. The Company reported Adjusted EBITDA of $7.5 million for the three months ended June 30, 2015, an increase from ($4.8) million during the three months ended March 31, 2015 driven by our continued efforts to streamline and align costs with the demand for the business. Additionally, the Company reported gross margins of 14.2% for the three months ended June 30, 2015, an increase of 5% from the three months ended March 31, 2015.
Our second quarter results demonstrate Goodmans agility to adapt to changes in the marketplace, stated Ron Hill, Goodman Networks executive chairman and chief executive officer. Our efforts to right-size the business, increase automation and optimize our end to end process work flow have led to significantly improved Adjusted EBITDA and operating margins in our second quarter results. We will maintain this focus throughout the year as we continue to look for additional operational synergies to improve the business.
Revenue was $186.7 million for the three months ended June 30, 2015, compared to $270.6 million for the three months ended June 30, 2014, a decrease of 31.0%. Revenue for the six months ended June 30, 2015 was $400.0 million compared to $527.2 million for the six months ended June 30, 2014, a decrease of 24.1%.
Infrastructure Services (IS) revenue declined 39.8% and 29.9% for the three and six months ended June 30, 2015, respectively, driven by the decrease in the volume of projects completed under our AT&T Mobility Turf Contract. Professional Services (PS) revenue decreased 32.5% and 34.8% for the three and six months ended June 30, 2015, respectively, resulting from the decrease in the volume of services provided to Alcatel-Lucent and AT&T. Field Services revenue decreased 5.3% and 3.5% for the three and six months ended June 30, 2015, respectively, driven primarily by the completion of the companys contract with Wild Blue.
Gross margin increased for the three months ended June 30, 2015 to 14.2% from 13.4% for the comparable prior year period, as a result of efforts to streamline and align costs with the demand for the business. Gross margin for the six months ended June 30, 2015 decreased to 11.5% from 13.2% for the comparable prior year period, due primarily to the decline in revenue outpacing our cost cutting efforts in the first quarter.
Net loss was $9.7 million and $38.3 million for three and six months ended June 30, 2015, respectively, compared to a net loss of $4.9 million and $15.2 million for the three and six months ended June 30, 2014, respectively.
Adjusted EBITDA was $7.5 million for the three months ended June 30, 2015, down from $12.4 million for the three months ended June 30, 2014, a decrease of 40% driven primarily by a decline in operating income. Adjusted EBITDA was $2.7 million for the six months ended June 30, 2015 compared to $16.8 million for the six months ended June 30, 2014.
Summary financial statements for the three and six months ended June 30, 2015 are included in Exhibit A to this earnings announcement.
Summary results are presented below.
Results for the three and six months ended June 30, 2014 and 2015 (dollars in thousands)
Three Months Ended June 30, 2015 | Six Months Ended June 30, 2015 | |||||||||||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||||||||||
Amount | Amount | Change ($) | Amount | Amount | Change ($) | |||||||||||||||||||
Revenues: |
||||||||||||||||||||||||
Professional Services |
$ | 24,415 | $ | 16,483 | $ | (7,932 | ) | $ | 46,612 | $ | 30,404 | $ | (16,208 | ) | ||||||||||
Infrastructure Services |
182,409 | 109,835 | (72,574 | ) | 357,035 | 250,426 | (106,609 | ) | ||||||||||||||||
Field Services |
63,740 | 60,356 | (3,384 | ) | 123,508 | 119,215 | (4,293 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total revenues |
270,564 | 186,674 | (83,890 | ) | 527,155 | 400,045 | (127,110 | ) | ||||||||||||||||
Cost of revenues: |
||||||||||||||||||||||||
Professional Services |
23,758 | 15,189 | (8,569 | ) | 44,973 | 29,352 | (15,621 | ) | ||||||||||||||||
Infrastructure Services |
153,113 | 95,374 | (57,739 | ) | 299,347 | 227,257 | (72,090 | ) | ||||||||||||||||
Field Services |
57,459 | 49,689 | (7,770 | ) | 113,214 | 97,483 | (15,731 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total cost of revenues |
234,330 | 160,252 | (74,078 | ) | 457,534 | 354,092 | (103,442 | ) | ||||||||||||||||
Gross profit: |
||||||||||||||||||||||||
Professional Services |
657 | 1,294 | 637 | 1,639 | 1,052 | (587 | ) | |||||||||||||||||
Infrastructure Services |
29,296 | 14,461 | (14,835 | ) | 57,688 | 23,169 | (34,519 | ) | ||||||||||||||||
Field Services |
6,281 | 10,667 | 4,386 | 10,294 | 21,732 | 11,438 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total gross profit |
36,234 | 26,422 | (9,812 | ) | 69,621 | 45,953 | (23,668 | ) | ||||||||||||||||
Gross margin as percent of segment revenues: |
||||||||||||||||||||||||
Professional Services |
2.7 | % | 7.9 | % | 3.5 | % | 3.5 | % | ||||||||||||||||
Infrastructure Services |
16.1 | % | 13.2 | % | 16.2 | % | 9.3 | % | ||||||||||||||||
Field Services |
9.9 | % | 17.7 | % | 8.3 | % | 18.2 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total gross margin |
13.4 | % | 14.2 | % | 13.2 | % | 11.5 | % | ||||||||||||||||
Selling, general and administrative expenses |
28,392 | 21,880 | (6,512 | ) | 60,462 | 50,173 | (10,289 | ) | ||||||||||||||||
Restructuring expense |
2,726 | 2,671 | (55 | ) | 2,726 | 9,009 | 6,283 | |||||||||||||||||
Impairment expense |
| 500 | 500 | | 2,775 | 2,775 | ||||||||||||||||||
Other Operating (income) expense |
(1,569 | ) | (0 | ) | 1,569 | (1,569 | ) | | 1,569 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Operating income |
6,685 | 1,371 | (5,314 | ) | 8,002 | (16,004 | ) | (24,006 | ) | |||||||||||||||
Other (income) loss |
(15 | ) | | 15 | (46 | ) | | 46 | ||||||||||||||||
Interest income |
| (37 | ) | (37 | ) | (73 | ) | (73 | ) | |||||||||||||||
Interest expense |
11,467 | 11,090 | (377 | ) | 23,154 | 21,945 | (1,209 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Loss before income taxes |
(4,767 | ) | (9,682 | ) | (4,915 | ) | (15,106 | ) | (37,876 | ) | (22,770 | ) | ||||||||||||
Income tax expense |
116 | 66 | (50 | ) | 65 | 397 | 332 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net loss |
$ | (4,883 | ) | $ | (9,748 | ) | $ | (4,865 | ) | $ | (15,171 | ) | $ | (38,273 | ) | $ | (23,102 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue decreased $83.9 million and $127.1 million, for the three and six months ended June 30, 2015, respectively, compared to the comparable prior year period. These decreases in revenue were driven primarily by the decreased volume of services provided to subsidiaries of AT&T Inc. and the decline in services provided to Sprint, Inc. due to the completion of certain programs. Cost of revenue as a percentage of revenue decreased to 85.8% for the three months ended June 30, 2015 from 86.6% for the three months ended June 30, 2014 as a result of our efforts to streamline costs and improve business processes. Cost of revenues as a percentage of revenue increased to 88.5% for the six months ended June 30, 2015 from 86.8% for the six months ended June 30, 2014. Cost of revenues declined slower than revenue as a result of the deferral in our cost reduction initiatives while we awaited finalization of our customer build plans and the change in the product mix during the six months ended June 30, 2015.
Selling, general and administrative expense of $21.9 million and $50.2 million for the three and six months ended June 30, 2015, respectively, decreased $6.5 million and $10.3 million from the three and six months ended June 30, 2014, respectively, due primarily to the realization of synergies under the 2014 restructuring plan. The selling, general and administrative expense as a percentage of revenue slightly increased to 11.7% for the three months ended June 30, 2015 from 10.5% in the same period of 2014. The selling, general and administrative expense as percentage of revenue for the six months ended June 30, 2015 was 12.5%, an increase from 11.5% from the six months ended June 30, 2014. The increase for both the three and six months ended June 30, 2015 was due primarily to a decline in revenue.
Interest expense, net of $11.1 million and $21.9 million for the three and six months ended June 30, 2015, respectively, decreased $0.4 million and $1.3 million from the three and six months ended June 30, 2014, respectively, as a result of the penalty for the delayed registration of the tack-on notes incurred only during the three and six months ended June 30, 2014.
Income tax expense was $0.1 million for each of the three months ended June 30, 2015 and 2014. Income tax expense was $0.4 million for the six months ended June 30, 2015, an increase from $0.1 million from the same period in 2014.
Goodman Networks Conference Call Information
Goodman Networks will host a conference call to discuss its financial and operational results at 8:30 AM Central Time (CT) on Thursday, August 13, 2015. Dial-in information for the conference call is as follows:
Date: | Thursday, August 13, 2015 | |
Time: | 8:30 AM CT | |
Call-in number: | (855) 548-8663 or (412) 455-6154 | |
Participant Passcode: | 9248044 |
Please plan on accessing the conference call 5 minutes prior to the scheduled start time.
A replay of the call will be available within 24 hours of completion of the call. The replay of the call may be found at http://edge.media-server.com/m/p/wfvpc96j.
About Goodman Networks Incorporated
Goodman Networks is a leading national provider of end-to-end network infrastructure, field and professional services to the wireless telecommunications and satellite television industries. Our core services span the full network lifecycle, including the design, engineering, construction, deployment, integration, maintenance and decommissioning of wireless networks.
Forward-Looking Statements
This earnings release and the conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on managements current expectations, estimates and projections. Forward-looking statements are subject to risks and uncertainties that may cause actual results in the future to differ materially from the results projected or implied in any forward-looking statements contained in this earnings release. Such risks and uncertainties include our reliance on two customers, which have merged as of July 2015, for the vast majority of our revenues, our ability to maintain a level of service quality satisfactory to those two customers across a broad geographic area, our ability to manage or refinance our substantial level of indebtedness and our ability to generate sufficient cash to service our indebtedness, our ability to raise additional capital to fund our operations and meet our obligations, our ability to translate amounts included in our estimated backlog into revenue or profits, business and economic conditions and trends in the telecommunications industry affecting our customers, the adequacy of our insurance and other reserves and allowances for doubtful accounts, whether the carrying value of our assets may be impaired, the future impact of any acquisitions or dispositions, the anticipated outcome of other contingent events, including litigation, liquidity and other financial needs and the availability of financing, and the other risks detailed in our filings with the Securities and Exchange Commission. We do not undertake to update forward-looking statements.
Non-GAAP Financial Measures
We present EBITDA because we consider it to be an important supplemental measure of our operating performance and we believe that such information will be used by securities analysts, investors and other interested parties in the evaluation of our results. We present Adjusted EBITDA, which adjusts EBITDA for items that management does not consider to be reflective of our core operating performance, because it may be used by certain investors as a measure of operating performance. Management considers core operating performance to be that which can be affected by managers in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period. Adjusted EBITDA adjusts EBITDA to eliminate the impact of certain items, including: (i) share-based compensation (non-cash portion); (ii) certain restructuring fees and expenses; (iii) amortization of debt issuance costs; and (iv) impairment charges recognized on our long-lived assets.
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||
EBITDA and Adjusted EBITDA: |
||||||||||||||||
Net loss |
$ | (4,883 | ) | $ | (9,748 | ) | $ | (15,171 | ) | $ | (38,273 | ) | ||||
Income tax expense |
116 | 66 | 65 | 397 | ||||||||||||
Interest expense, net |
11,467 | 11,053 | 23,154 | 21,872 | ||||||||||||
Depreciation and amortization |
2,856 | 2,898 | 5,724 | 5,776 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total EBITDA |
9,556 | 4,269 | 13,772 | (10,228 | ) | |||||||||||
Share-based compensation |
1,010 | 968 | 2,045 | 2,930 | ||||||||||||
Restructuring expense |
2,726 | 2,671 | 2,726 | 9,009 | ||||||||||||
Amortization of debt issuance costs |
(865 | ) | (937 | ) | (1,735 | ) | (1,811 | ) | ||||||||
Asset impairments |
| 500 | | 2,775 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA |
$ | 12,427 | $ | 7,471 | $ | 16,808 | $ | 2,675 | ||||||||
|
|
|
|
|
|
|
|
Estimated Backlog
The Company refers to the amount of revenue it expects to recognize over the next 18 months from future work on uncompleted contracts, including master service agreements and new contractual agreements on which work has not begun, as its estimated backlog. The Company determines the amount of estimated backlog for work under master service agreements based on historical trends, anticipated seasonal impacts and estimates of customer demand based upon communications with customers. The Companys estimated 18-month backlog as of June 30, 2015 was $1.4 billion.
Goodman Networks Contact:
Investor Relations: | Geoffrey Miller | |
Interim Chief Financial Officer | ||
gemiller@goodmannetworks.com | ||
(972) 421-5197 |
Goodman Networks Incorporated
Consolidated Balance Sheets
(In Thousands, Except Share Amounts and Par Value)
December 31, 2014 | June 30, 2015 | |||||||
(Unaudited) | ||||||||
Assets |
||||||||
Current Assets |
||||||||
Cash |
$ | 76,703 | $ | 53,849 | ||||
Accounts receivable, net of allowances for doubtful accounts of $877 at December 31, 2014 and $194 at June 30, 2015, respectively |
66,354 | 35,985 | ||||||
Unbilled revenue on completed projects |
16,780 | 15,288 | ||||||
Costs in excess of billings on uncompleted projects |
81,410 | 47,059 | ||||||
Inventories |
18,638 | 18,025 | ||||||
Prepaid expenses and other current assets |
6,727 | 5,895 | ||||||
Assets held for sale |
4,000 | 3,500 | ||||||
Income tax receivable |
513 | 334 | ||||||
|
|
|
|
|||||
Total current assets |
271,125 | 179,935 | ||||||
Property and equipment, net of accumulated depreciation of $29,776 at December 31, 2014 and $32,153 at June 30, 2015, respectively |
24,638 | 21,684 | ||||||
Deferred financing costs, net |
14,491 | 12,448 | ||||||
Deposits and other assets |
2,821 | 2,656 | ||||||
Insurance collateral |
12,249 | 15,032 | ||||||
Intangible assets, net of accumulated amortization of $9,361 at December 31, 2014 and $12,270 at June 30, 2015, respectively |
19,558 | 16,650 | ||||||
Goodwill |
69,178 | 69,178 | ||||||
|
|
|
|
|||||
Total assets |
$ | 414,060 | $ | 317,583 | ||||
|
|
|
|
|||||
Liabilities and Shareholders Deficit |
||||||||
Current Liabilities |
||||||||
Accounts payable |
$ | 94,851 | $ | 65,505 | ||||
Accrued expenses |
73,574 | 67,145 | ||||||
Income taxes payable |
1,783 | 15 | ||||||
Billings in excess of costs on uncompleted projects |
36,316 | 9,922 | ||||||
Deferred revenue |
426 | 1,126 | ||||||
Liabilities related to assets held for sale |
3,646 | 3,564 | ||||||
Deferred rent - short term |
188 | 162 | ||||||
Current portion of capital lease and notes payable obligations |
1,366 | 1,410 | ||||||
|
|
|
|
|||||
Total current liabilities |
212,150 | 148,849 | ||||||
Notes payable |
326,648 | 326,402 | ||||||
Capital lease obligations |
1,045 | 730 | ||||||
Accrued expenses, non-current |
8,484 | 7,636 | ||||||
Deferred revenue, non-current |
8,874 | 11,740 | ||||||
Deferred tax liability, non-current |
1,428 | 1,707 | ||||||
Deferred rent |
454 | 442 | ||||||
|
|
|
|
|||||
Total liabilities |
559,083 | 497,506 | ||||||
Shareholders Deficit |
||||||||
Common stock, $0.01 par value, 10,000,000 shares authorized; 1,029,072 issued and 912,754 outstanding at December 31, 2014 and June 30, 2015 |
10 | 10 | ||||||
Treasury stock, at cost, 116,318 shares at December 31, 2014 and June 30, 2015 |
(11,756 | ) | (11,756 | ) | ||||
Additional paid-in capital |
18,525 | 21,886 | ||||||
Accumulated other comprehensive income |
14 | 26 | ||||||
Accumulated deficit |
(151,816 | ) | (190,089 | ) | ||||
|
|
|
|
|||||
Total shareholders deficit |
(145,023 | ) | (179,923 | ) | ||||
|
|
|
|
|||||
Total liabilities and shareholders deficit |
$ | 414,060 | $ | 317,583 | ||||
|
|
|
|
Goodman Networks Incorporated
Consolidated Statements of Operations
(In Thousands)
(Unaudited)
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2014 | 2015 | 2014 | 2015 | |||||||||||||
Revenues |
$ | 270,564 | $ | 186,674 | $ | 527,155 | $ | 400,045 | ||||||||
Cost of revenues |
234,330 | 160,252 | 457,534 | 354,092 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit (exclusive of depreciation and amortization included in selling, general and administrative expense shown below) |
36,234 | 26,422 | 69,621 | 45,953 | ||||||||||||
Selling, general and administrative expenses |
28,392 | 21,880 | 60,462 | 50,173 | ||||||||||||
Restructuring expense |
2,726 | 2,671 | 2,726 | 9,009 | ||||||||||||
Impairment expense |
| 500 | | 2,775 | ||||||||||||
Other operating income |
(1,569 | ) | | (1,569 | ) | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income (loss) |
6,685 | 1,371 | 8,002 | (16,004 | ) | |||||||||||
Other income |
(15 | ) | | (46 | ) | | ||||||||||
Interest expense, net |
11,467 | 11,053 | 23,154 | 21,872 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Loss before income taxes |
(4,767 | ) | (9,682 | ) | (15,106 | ) | (37,876 | ) | ||||||||
Income tax expense |
116 | 66 | 65 | 397 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net loss |
$ | (4,883 | ) | $ | (9,748 | ) | $ | (15,171 | ) | $ | (38,273 | ) | ||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income: |
||||||||||||||||
Foreign currency translation adjustments |
| 26 | | 26 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive loss |
$ | (4,883 | ) | $ | (9,722 | ) | $ | (15,171 | ) | $ | (38,247 | ) | ||||
|
|
|
|
|
|
|
|
Goodman Networks Incorporated
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Six Months Ended June 30, | ||||||||
2014 | 2015 | |||||||
Operating Activities |
||||||||
Net loss |
$ | (15,171 | ) | $ | (38,273 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization of property and equipment |
2,912 | 2,857 | ||||||
Amortization of intangible assets |
2,812 | 2,909 | ||||||
Amortization of debt discounts and deferred financing costs |
1,689 | 1,797 | ||||||
Impairment charges |
920 | 2,775 | ||||||
Provision of doubtful accounts |
283 | (118 | ) | |||||
Deferred tax expense |
(146 | ) | 279 | |||||
Share-based compensation expense |
2,045 | 3,361 | ||||||
Accretion of contingent consideration |
265 | | ||||||
Change in fair value of contingent consideration |
(250 | ) | (726 | ) | ||||
Loss on sale of property and equipment |
136 | 32 | ||||||
Changes in: |
||||||||
Accounts receivable |
23,812 | 30,487 | ||||||
Unbilled revenue |
3,781 | 1,491 | ||||||
Costs in excess of billings on uncompleted projects |
(9,274 | ) | 34,351 | |||||
Inventories |
(4,744 | ) | 613 | |||||
Prepaid expenses and other assets |
1,417 | (1,745 | ) | |||||
Accounts payable and other liabilities |
(19,084 | ) | (31,954 | ) | ||||
Income taxes payable / receivable |
14,376 | (1,589 | ) | |||||
Billings in excess of costs on uncompleted projects |
10,397 | (26,402 | ) | |||||
Deferred revenue |
7,318 | 3,566 | ||||||
Deferred rent |
| (71 | ) | |||||
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
23,494 | (16,360 | ) | |||||
|
|
|
|
|||||
Investing Activities |
||||||||
Purchases of property and equipment |
(6,486 | ) | (2,023 | ) | ||||
Proceeds from the sale of property and equipment |
21 | 11 | ||||||
Change in due from shareholders |
1 | 2 | ||||||
|
|
|
|
|||||
Net cash used in investing activities |
(6,464 | ) | (2,010 | ) | ||||
|
|
|
|
|||||
Financing Activities |
||||||||
Proceeds from lines of credit |
491,320 | 380,948 | ||||||
Payments on lines of credit |
(491,320 | ) | (380,948 | ) | ||||
Payments on capital lease and notes payable obligations |
(4,379 | ) | (512 | ) | ||||
Payments on contingent arrangements |
(141 | ) | | |||||
Payments on guarantee arrangements |
| (4,000 | ) | |||||
Payments for deferred financing costs |
(1,255 | ) | | |||||
Proceeds from exercise of warrants and stock options |
43 | | ||||||
|
|
|
|
|||||
Net cash used in financing activities |
(5,732 | ) | (4,512 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash |
| 28 | ||||||
|
|
|
|
|||||
Increase (Decrease) in cash |
11,298 | (22,854 | ) | |||||
Cash, Beginning of Period |
59,439 | 76,703 | ||||||
|
|
|
|
|||||
Cash, End of Period |
$ | 70,737 | $ | 53,849 | ||||
|
|
|
|