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8-K - 8-K - Goodman Networks Inc | d925971d8k.htm |
Exhibit 99.1
Goodman Networks Reports First Quarter Revenue
And Earnings
¡ Q1 Revenue of $213.4 million
¡ Q1 Adjusted EBITDA of $(4.8) million
PLANO, TX, May 13, 2015 Goodman Networks Incorporated today announced financial results for the three months ended March 31, 2015.
Revenue was $213.4 million for the three months ended March 31, 2015, compared to $256.6 million for the three months ended March 31, 2014, a decrease of 16.8%. Infrastructure Services (IS) revenue declined 19.5% driven by the decrease in the volume of projects completed under our Mobility Turf Contract with AT&T Mobility, LLC. Professional Services (PS) revenue decreased 37.3% resulting from the decrease in the volume of services provided to Alcatel-Lucent and AT&T offset slightly by an increase in the volume of frequency, spectrum, engineering and optimization projects. Gross Profit declined $13.9 million for the three months ended March 31, 2015 to $19.5 million from $33.4 million for the three months ended March 31, 2014 due to the decline in revenue and increased overhead cost as a percentage of revenue and changes in product mix resulting in lower margins. Field Services (FS) revenue was $58.9 million for the three months ended March 31, 2015 compared to $59.8 million for the three months ended March 31, 2014, relatively flat year over year. Net loss was $28.5 million for the three months ended March 31, 2015, compared to a net loss from of $10.3 million for the three months ended March 31, 2014.
Adjusted EBITDA was ($4.8) million for the three months ended March 31, 2015, down from $4.4 million for the three months ended March 31, 2014, a decrease driven primarily by the decline of revenues and gross margins in our IS segment. Summary financial statements for the three months ended March 31, 2015 are included in Exhibit A to this earnings announcement.
We have had a difficult start to 2015 due to a number of market challenges, stated Ron Hill, Goodman Networks executive chairman and chief executive officer. Despite these challenges, we remain optimistic about our growth prospects for 2016 and beyond. As carriers increase spectrum holdings and upgrade their network to keep pace with increasing consumer demand, Goodman is uniquely positioned to capitalize on this growth in the marketplace.
Summary results are presented below.
Results for the three months ended March 31, 2015 and 2014 (dollars in thousands)
Three Months Ended March 31 | ||||||||||||
2014 | 2015 | |||||||||||
Amount | Amount | Change ($) | ||||||||||
Revenues: |
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Professional Services |
$ | 22,197 | $ | 13,921 | $ | (8,276 | ) | |||||
Infrastructure Services |
174,626 | 140,591 | (34,035 | ) | ||||||||
Field Services |
59,768 | 58,859 | (909 | ) | ||||||||
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Total revenues |
256,591 | 213,371 | (43,220 | ) | ||||||||
Cost of revenues: |
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Professional Services |
21,242 | 14,163 | (7,079 | ) | ||||||||
Infrastructure Services |
146,208 | 131,881 | (14,327 | ) | ||||||||
Field Services |
55,754 | 47,796 | (7,958 | ) | ||||||||
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Total cost of revenues |
223,204 | 193,840 | (29,364 | ) | ||||||||
Gross profit: |
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Professional Services |
955 | (242 | ) | (1,197 | ) | |||||||
Infrastructure Services |
28,418 | 8,710 | (19,708 | ) | ||||||||
Field Services |
4,014 | 11,063 | 7,049 | |||||||||
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Total gross profit |
33,387 | 19,531 | (13,856 | ) | ||||||||
Gross margin as percent of segment revenues: |
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Professional Services |
4.3 | % | (1.7 | )% | ||||||||
Infrastructure Services |
16.3 | % | 6.2 | % | ||||||||
Field Services |
6.7 | % | 18.8 | % | ||||||||
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Total gross margin |
13.0 | % | 9.2 | % | ||||||||
Selling, general and administrative expenses |
32,070 | 28,293 | (3,777 | ) | ||||||||
Restructuring expense |
| 6,338 | 6,338 | |||||||||
Impairment expense |
| 2,275 | 2,275 | |||||||||
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Operating income |
1,317 | (17,375 | ) | (18,692 | ) | |||||||
Other (income) loss |
(31 | ) | | 31 | ||||||||
Interest income |
(0 | ) | (36 | ) | (36 | ) | ||||||
Interest expense |
11,687 | 10,855 | (832 | ) | ||||||||
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Loss before income taxes |
(10,339 | ) | (28,194 | ) | (17,855 | ) | ||||||
Income tax expense |
(51 | ) | 331 | 382 | ||||||||
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Net loss |
$ | (10,288 | ) | $ | (28,525 | ) | $ | (18,237 | ) | |||
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Total revenue decreased $43.2 million, as expected, driven primarily by the decreased volume of services provided to subsidiaries of AT&T Inc. and a $9.3 million decline in services provided to Sprint, Inc. due to the completion of certain programs. Cost of revenue as a percentage of revenue increased to 90.8% for the three months ended March 31, 2015 from 87.0% for the three months ended March 31, 2014. Overall, cost of revenues declined slower than revenue as a result of the deferral in our cost cutting initiatives, while waiting for further validation of our customer build plans, and the change in product mix during the three months ended March 31, 2015.
Selling, general and administrative expense of $28.3 million for the three months ended March 31, 2015 decreased $3.8 million from $32.1 million for the three months ended March 31, 2014 due to a reduction in professional fees, cost savings from the 2014 restructuring plan, a
reduction in travel and entertainment expenses and the elimination of the earn-out obligation in connection with our acquisition of the Custom Solutions Group (CSG) of Cellular Specialties, Inc. The selling, general and administrative expense as a percentage of revenue increased to 13.3% for the three months ended March 31, 2015 from 12.5% for the three months ended March 31, 2014 due primarily to the decline in revenue.
Interest expense of $10.9 million for the three months ended March 31, 2015 decreased $0.8 million from $11.7 million for the three months ended March 31, 2014 as a result of the penalty for the delayed registration of the exchange offer for the tack-on notes incurred during the three months ended March 31, 2014. Income tax expense was $0.3 million for the three months ended March 31, 2015 compared to an income tax benefit of $50,000 for the three months ended March 31, 2014. The decrease was driven primarily by the change in deferred tax liabilities and state income taxes.
Goodman Networks Conference Call Information
Goodman Networks will host a conference call to discuss its financial and operational results at 7:30 AM Central Time (CT) on Thursday, May 14, 2015. Dial-in information for the conference call is as follows:
Date: | Thursday, May 14, 2015 | |
Time: | 7:30 AM CT | |
Call-in number: | (866) 515-2910 or (617) 399-5124 | |
Participant Passcode: | 58202749 |
Please plan on accessing the conference call 5 minutes prior to the scheduled start time.
A replay of the call will be available for 7 days. To listen to a replay of the call, please dial (888) 286-8010 or (617) 801-6888 and use passcode 59413634 prior to 11:59 PM CT on Thursday May 21, 2015.
About Goodman Networks Incorporated
Goodman Networks is a leading national provider of end-to-end network infrastructure and professional services to the wireless telecommunications industry. 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 announced a plan to merge, 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 March 31, | ||||||||
2014 | 2015 | |||||||
EBITDA and Adjusted EBITDA: |
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Net income (loss) from continuing operations |
$ | (10,288 | ) | $ | (28,525 | ) | ||
Income tax expense (benefit) |
(51 | ) | 331 | |||||
Interest income |
| (36 | ) | |||||
Interest expense |
11,687 | 10,855 | ||||||
Depreciation and amortization |
2,868 | 2,877 | ||||||
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Total EBITDA |
4,216 | (14,498 | ) | |||||
Share-based compensation |
1,035 | 1,963 | ||||||
Restructuring expense |
| 6,338 | ||||||
Impairment expense |
| 2,275 | ||||||
Amortization of debt issuance costs |
(870 | ) | (873 | ) | ||||
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Adjusted EBITDA |
$ | 4,381 | $ | (4,795 | ) | |||
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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 March 31, 2015 was $1.4 billion.
Goodman Networks Contact:
Investor Relations: | Geoffrey W. Miller | |
Interim Chief Financial Officer gemiller@goodmannetworks.com | ||
(972) 421-5197 |
Exhibit A
Goodman Networks Incorporated
Consolidated Balance Sheets
(In Thousands, Except Share Amounts and Par Value)
December 31, 2014 | March 31, 2015 | |||||||
(Unaudited) | ||||||||
Assets |
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Current Assets |
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Cash |
$ | 76,703 | $ | 35,183 | ||||
Accounts receivable, net of allowances for doubtful accounts of $877 at December 31, 2014 and $460 at March 31, 2015, respectively |
66,354 | 44,834 | ||||||
Unbilled revenue on completed projects |
16,780 | 19,452 | ||||||
Costs in excess of billings on uncompleted projects |
81,410 | 69,559 | ||||||
Inventories |
18,638 | 16,811 | ||||||
Prepaid expenses and other current assets |
6,727 | 6,317 | ||||||
Assets held for sale |
4,000 | 4,000 | ||||||
Income tax receivable |
513 | 91 | ||||||
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Total current assets |
271,125 | 196,247 | ||||||
Property and equipment, net of accumulated depreciation of $29,776 at December 31, 2014 and $31,022 at March 31, 2015, respectively |
24,638 | 22,462 | ||||||
Deferred financing costs, net |
14,491 | 13,508 | ||||||
Deposits and other assets |
2,821 | 2,789 | ||||||
Insurance collateral |
12,249 | 14,076 | ||||||
Intangible assets, net of accumulated amortization of $9,361 at December 31, 2014 and $10,816 at March 31, 2015, respectively |
19,558 | 18,104 | ||||||
Goodwill |
69,178 | 69,178 | ||||||
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Total assets |
$ | 414,060 | $ | 336,364 | ||||
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Liabilities and Shareholders Deficit |
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Current Liabilities |
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Accounts payable |
$ | 94,851 | $ | 75,043 | ||||
Accrued expenses |
73,574 | 58,401 | ||||||
Income taxes payable |
1,783 | 706 | ||||||
Billings in excess of costs on uncompleted projects |
36,316 | 18,202 | ||||||
Deferred revenue |
426 | 681 | ||||||
Liabilities related to assets held for sale |
3,646 | 3,605 | ||||||
Deferred rent - short term |
188 | 136 | ||||||
Current portion of capital lease and notes payable obligations |
1,366 | 1,728 | ||||||
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Total current liabilities |
212,150 | 158,502 | ||||||
Notes payable |
326,648 | 326,524 | ||||||
Capital lease obligations |
1,045 | 952 | ||||||
Accrued expenses, non-current |
8,484 | 9,560 | ||||||
Deferred revenue, non-current |
8,874 | 10,217 | ||||||
Deferred tax liability, non-current |
1,428 | 1,707 | ||||||
Deferred rent |
454 | 487 | ||||||
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Total liabilities |
559,083 | 507,949 | ||||||
Shareholders Deficit |
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Common stock, $0.01 par value, 10,000,000 shares authorized; |
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1,029,072 issued and 912,754 outstanding at December 31, 2014 and March 31, 2015 |
10 | 10 | ||||||
Treasury stock, at cost, 116,318 shares at December 31, 2014 and March 31, 2015 |
(11,756 | ) | (11,756 | ) | ||||
Additional paid-in capital |
18,525 | 20,488 | ||||||
Accumulated other comprehensive income |
14 | 14 | ||||||
Accumulated deficit |
(151,816 | ) | (180,341 | ) | ||||
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Total shareholders deficit |
(145,023 | ) | (171,585 | ) | ||||
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Total liabilities and shareholders deficit |
$ | 414,060 | $ | 336,364 | ||||
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Goodman Networks Incorporated
Consolidated Statements of Operations
(In Thousands)
Three Months Ended | ||||||||
March 31, | ||||||||
2014 | 2015 | |||||||
Revenues |
$ | 256,591 | $ | 213,371 | ||||
Cost of revenues |
223,204 | 193,840 | ||||||
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Gross profit (exclusive of depreciation and amortization included in selling, general and administrative expense shown below) |
33,387 | 19,531 | ||||||
Selling, general and administrative expenses |
32,070 | 28,293 | ||||||
Restructuring expense |
| 6,338 | ||||||
Impairment expense |
| 2,275 | ||||||
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Operating income (loss) |
1,317 | (17,375 | ) | |||||
Other income |
(31 | ) | | |||||
Interest expense, net |
11,687 | 10,819 | ||||||
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Loss before income taxes |
(10,339 | ) | (28,194 | ) | ||||
Income tax expense (benefit) |
(51 | ) | 331 | |||||
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Net loss |
$ | (10,288 | ) | $ | (28,525 | ) | ||
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Other comprehensive income: |
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Comprehensive loss |
$ | (10,288 | ) | $ | (28,525 | ) | ||
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Goodman Networks Incorporated
Consolidated Statements of Cash Flows
(In Thousands)
Three Months Ended March 31, | ||||||||
2014 | 2015 | |||||||
Operating Activities |
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Net loss |
$ | (10,288 | ) | $ | (28,525 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization of property and equipment |
1,492 | 1,423 | ||||||
Amortization of intangible assets |
1,376 | 1,454 | ||||||
Amortization of debt discounts and deferred financing costs |
840 | 859 | ||||||
Impairment charges |
| 2,275 | ||||||
Provision of doubtful accounts |
187 | 575 | ||||||
Deferred tax expense |
(146 | ) | 278 | |||||
Share-based compensation expense |
1,035 | 1,963 | ||||||
Accretion of contingent consideration |
250 | | ||||||
Change in fair value of contingent consideration |
(294 | ) | (726 | ) | ||||
Loss on sale of property and equipment |
14 | | ||||||
Changes in: |
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Accounts receivable |
42,082 | 21,409 | ||||||
Unbilled revenue |
8,279 | (3,138 | ) | |||||
Costs in excess of billings on uncompleted projects |
(28,726 | ) | 11,850 | |||||
Inventories |
(6,095 | ) | 1,827 | |||||
Prepaid expenses and other assets |
147 | (1,422 | ) | |||||
Accounts payable and other liabilities |
(35,753 | ) | (28,848 | ) | ||||
Income taxes payable / receivable |
13,146 | (701 | ) | |||||
Billings in excess of costs on uncompleted projects |
(18,179 | ) | (18,123 | ) | ||||
Deferred revenue |
| 1,598 | ||||||
Deferred rent |
| (18 | ) | |||||
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Net cash used in operating activities |
(30,633 | ) | (35,990 | ) | ||||
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Investing Activities |
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Purchases of property and equipment |
(2,024 | ) | (1,324 | ) | ||||
Proceeds from the sale of property and equipment |
21 | | ||||||
Change in due from shareholders |
1 | 1 | ||||||
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Net cash used in investing activities |
(2,002 | ) | (1,323 | ) | ||||
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Financing Activities |
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Bank overdrafts |
5,977 | | ||||||
Proceeds from lines of credit |
225,225 | 199,157 | ||||||
Payments on lines of credit |
(221,807 | ) | (199,157 | ) | ||||
Payments on capital lease and notes payable obligations |
(1,911 | ) | (206 | ) | ||||
Payments on contingent arrangements |
(141 | ) | | |||||
Payments on guarantee arrangements |
| (4,000 | ) | |||||
Payments for deferred financing costs |
(374 | ) | | |||||
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Net cash provided by (used in) financing activities |
6,969 | (4,206 | ) | |||||
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Effect of exchange rate changes on cash |
| (1 | ) | |||||
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Decrease in cash |
(25,666 | ) | (41,520 | ) | ||||
Cash, Beginning of Period |
59,439 | 76,703 | ||||||
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Cash, End of Period |
$ | 33,773 | $ | 35,183 | ||||
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