Attached files

file filename
8-K - FORM 8-K - Goodman Networks Incd171174d8k.htm

Exhibit 99.1

 

LOGO

Goodman Networks Reports Annual Revenue

and Earnings for Fiscal Year 2015

•   Annual Revenue $725.1 million

•   Annual Net Loss $66.5 million

•   Annual Adjusted EBITDA of $5.9 million

FRISCO, TX, March 28, 2016 – Goodman Networks Incorporated today announced financial results for fiscal year ended December 31, 2015.

Revenue was $725.1 million for the year ended December 31, 2015 compared to $1,199.2 million for the year ended December 31, 2014. The Company reported Adjusted EBITDA of $5.9 million and net loss of $66.5 million for the year ended December 31, 2015 compared to Adjusted EBITDA of $69.7 million and net loss of $14.9 million for 2014.

“2015 was a challenging year, but we are incredibly optimistic about our future as we head into 2016 and beyond,” stated Ron Hill, Goodman Networks’ executive chairman and chief executive officer. “We are looking at a number of initiatives to diversify our business. We will capitalize on new opportunities using our deep industry knowledge and experience along with our ability to quickly ramp and scale the business. We look forward to growth and diversification through new business as we target wireline carriers, cable companies, and enterprise customers for significant growth opportunities.”

Gross margin decreased to 11.9% for the year ended December 31, 2015 from 14.5% for the same period in 2014, a decrease of 2.6%. Overall margin declined primarily due to the performance of our Infrastructure Services segment. The decline in margin in our Infrastructure Services segment was driven by the reduction in revenue, lower margins on our project mix, the completion of higher cost AT&T deferred 2014 projects, and reduce pricing in our AT&T Turf 3.0 contract. Our Professional Services margin increased to 11.2% for the year ended December 31, 2015 from 7.5% for the year ended December 31, 2014. Field Services margin also increased from 13.7% for the year ended December 31, 2014 to 17.7% for the year ended December 31, 2015. The Professional Services and Field Services margins continue to improve due to our initiatives to align costs with revenue and innovate and automate business processes.

Summary financial statements for the year ended December 31, 2015 are included in Exhibit A to this earnings announcement.


Summary results are presented below.

Results for the Years ended December 31, 2014 and 2015 (dollars in thousands)

 

     Years Ended December 31,        
     2014     2015        
     Amount     Amount     Change ($)  

Revenues:

      

Infrastructure Services

   $ 837,982      $ 391,796      $ (446,186

Field Services

     261,326        261,581        255   

Professional Services

     99,880        71,679        (28,201
  

 

 

   

 

 

   

 

 

 

Total revenues

     1,199,188        725,056        (474,132

Cost of revenues:

      

Infrastructure Services

     707,616        359,603        (348,013

Field Services

     225,441        215,378        (10,063

Professional Services

     92,380        63,617        (28,763
  

 

 

   

 

 

   

 

 

 

Total cost of revenues

     1,025,437        638,598        (386,839

Gross profit:

      

Infrastructure Services

     130,366        32,193        (98,173

Field Services

     35,885        46,203        10,318   

Professional Services

     7,500        8,062        562   
  

 

 

   

 

 

   

 

 

 

Total gross profit

     173,751        86,458        (87,293

Gross margin as percent of segment revenues:

      

Infrastructure Services

     15.6     8.2  

Field Services

     13.7     17.7  

Professional Services

     7.5     11.2  
  

 

 

   

 

 

   

Total gross margin

     14.5     11.9  

Selling, general and administrative expenses

     122,792        92,993        (29,799

Restructuring expense

     9,998        11,653        1,655   

Impairment expense

     3,254        3,336        82   

Other operating (income) expense

     (3,285     —          3,285   
  

 

 

   

 

 

   

 

 

 

Operating income (loss)

     40,992        (21,524     (62,516

Other (income) loss

     (71     —          71   

Interest income

     —          (169     (169

Interest expense

     46,694        44,094        (2,600
  

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (5,631     (65,449     (59,818

Income tax expense

     9,293        1,052        (8,241
  

 

 

   

 

 

   

 

 

 

Net loss from continuing operations

   $ (14,924   $ (66,501   $ (51,577
  

 

 

   

 

 

   

 

 

 

SG&A expense of $93.0 million for the year ended December 31, 2015 decreased $29.8 million from 2014 primarily due to a reduction in headcount and other employee related costs. SG&A expense for the year ended December 31, 2014 included a $9.5 million gain recorded for the adjustment in fair value of a contingent liability. SG&A expense as a percentage of revenue for the year ended December 31, 2015 was 12.8%, an increase from 10.2% for 2014.


Adjusted EBITDA was $5.9 million for the year ended December 31, 2015, a decrease from $69.7 million from 2014, which was driven primarily by the decline in operating income.

Goodman Networks Conference Call Information

Goodman Networks will host a conference call to discuss its financial and operational results at 8:00 AM Central Time (CT) on Tuesday, March 29, 2016. Dial-in information for the conference call is as follows:

 

Date:    Tuesday, March 29, 2016
Time:    8:00 AM CT
Call-in number:    (855) 548-8663 or (412) 455-6154
Participant Passcode:    75214508

Please plan on accessing the conference call 5 minutes prior to the scheduled start time. A replay of the call will be available within two hours of completion of the call and accessible for seven days. To listen to a replay of the call, please dial (855) 859-2056 or (404) 537-3406 and use passcode 75214508 prior to 10:59 PM CT on Tuesday, April 5, 2016.

About Goodman Networks Incorporated

Goodman Networks is a leading provider of end-to-end network infrastructure, field and professional services to the wireless telecommunications and satellite television industries. Since its founding in 2000, Goodman Networks has grown to become one of the largest multi-vendor network and infrastructure service providers to the telecommunications industry in the United States. Additional information can be found at www.goodmannetworks.com.


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 management’s 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 one customer for the vast majority of our revenues, our ability to maintain a level of service quality satisfactory to this customer 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; (iv) impairment charges recognized on our long-lived assets; and (v) fees and expenses related to the issuance of equity.

 

     Year Ended December 31,  
     2014      2015  

EBITDA and Adjusted EBITDA:

     

Net loss

   $ (14,924    $ (66,501

Income tax expense

     9,293         1,052   

Interest expense, net

     46,694         43,925   

Depreciation and amortization

     11,499         10,556   
  

 

 

    

 

 

 

EBITDA from continuing operations

     52,562         (10,968

Share-based compensation

     6,043         5,458   

Restructuring expense

     9,998         11,653   

Amortization of debt issuance costs

     (3,482      (3,594

Asset impairments

     3,254         3,336   

Equity issuance costs

     1,360         —     
  

 

 

    

 

 

 

Adjusted EBITDA

   $ 69,735       $ 5,885   
  

 

 

    

 

 

 

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 Company’s estimated 18-month backlog as of December 31, 2015 was $1.1 billion.

Goodman Networks Contact:

 

Investor Relations:    Joy L. Brawner
   Chief Financial Officer
   jbrawner@goodmannetworks.com
   (972) 421-5739


Goodman Networks Incorporated

Consolidated Balance Sheets

(In Thousands, Except Share Amounts and Par Value)

 

     December 31, 2014     December 31, 2015  

Assets

    

Current Assets

    

Cash

   $ 76,703      $ 39,832   

Accounts receivable, net of allowances for doubtful accounts of $877 at December 31, 2014 and $107 at December 31, 2015, respectively

     66,354        28,812   

Unbilled revenue on completed projects

     16,780        11,755   

Costs in excess of billings on uncompleted projects

     81,410        21,060   

Inventories

     18,638        15,352   

Prepaid expenses and other current assets

     6,727        3,394   

Assets held for sale

     4,000        —     

Income tax receivable

     513        204   
  

 

 

   

 

 

 

Total current assets

     271,125        120,409   

Property and equipment, net of accumulated depreciation of $29,776 at December 31, 2014 and $33,862 at December 31, 2015, respectively

     24,638        21,089   

Deferred financing costs, net

     14,491        10,415   

Deposits and other assets

     2,821        2,553   

Insurance collateral

     12,249        15,035   

Intangible assets, net of accumulated amortization of $9,361 at December 31, 2014 and $14,508 at December 31, 2015, respectively

     19,558        14,412   

Goodwill

     69,178        69,178   
  

 

 

   

 

 

 

Total assets

   $ 414,060      $ 253,091   
  

 

 

   

 

 

 

Liabilities and Shareholders’ Deficit

    

Current Liabilities

    

Accounts payable

   $ 94,851      $ 45,886   

Accrued expenses

     73,574        57,194   

Income taxes payable

     1,783        311   

Billings in excess of costs on uncompleted projects

     36,316        6,061   

Deferred revenue

     426        2,295   

Liabilities related to assets held for sale

     3,646        —     

Deferred rent

     188        115   

Current portion of capital lease and notes payable obligations

     1,366        775   
  

 

 

   

 

 

 

Total current liabilities

     212,150        112,637   

Notes payable, net of deferred financing cost

     326,648        326,163   

Capital lease obligations

     1,045        400   

Accrued expenses, non-current

     8,484        6,921   

Deferred revenue, non-current

     8,874        8,973   

Deferred tax liability, non-current

     1,428        1,714   

Deferred rent, non-current

     454        414   
  

 

 

   

 

 

 

Total liabilities

     559,083        457,222   

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 December 31, 2015

     10        10   

Treasury stock, at cost, 116,318 shares at December 31, 2014 and December 31, 2015

     (11,756     (11,756

Additional paid-in capital

     18,525        25,914   

Accumulated other comprehensive income

     14        18   

Accumulated deficit

     (151,816     (218,317
  

 

 

   

 

 

 

Total shareholders’ deficit

     (145,023     (204,131
  

 

 

   

 

 

 

Total liabilities and shareholders’ deficit

   $ 414,060      $ 253,091   
  

 

 

   

 

 

 


Goodman Networks Incorporated

Consolidated Statements of Operations

(In Thousands)

 

     2013     2014     2015  

Revenues

   $ 931,745      $ 1,199,188      $ 725,056   

Cost of revenues

     806,109        1,025,437        638,598   
  

 

 

   

 

 

   

 

 

 

Gross profit (exclusive of depreciation and amortization included in selling, general and administrative expense shown below)

     125,636        173,751        86,458   

Selling, general and administrative expenses

     121,106        122,792        92,993   

Restructuring expense

     —          9,998        11,653   

Impairment expense

     —          3,254        3,336   

Other operating income

     —          (3,285     —     
  

 

 

   

 

 

   

 

 

 

Operating income (loss)

     4,530        40,992        (21,524

Other income

     (25     (71     —     

Interest expense, net

     40,287        46,694        43,925   
  

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (35,732     (5,631     (65,449

Income tax expense

     7,506        9,293        1,052   
  

 

 

   

 

 

   

 

 

 

Net loss

   $ (43,238   $ (14,924   $ (66,501
  

 

 

   

 

 

   

 

 

 

Other comprehensive income:

      

Foreign currency translation adjustments

     —          14        4   
  

 

 

   

 

 

   

 

 

 

Comprehensive loss

   $ (43,238   $ (14,910   $ (66,497
  

 

 

   

 

 

   

 

 

 


Goodman Networks Incorporated

Consolidated Statements of Cash Flows

(In Thousands)

 

     2013     2014     2015  

Operating Activities

      

Net income (loss)

   $ (43,238   $ (14,924   $ (66,501

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

      

Depreciation and amortization of property and equipment

     4,522        5,806        5,410   

Amortization of intangible assets

     5,236        5,694        5,146   

Amortization of debt discounts and deferred financing costs

     2,509        4,527        3,594   

Impairment charges

     —          7,158        3,336   

Change in estimate of doubtful accounts

     337        1,626        (153

Deferred tax expense

     5,715        11,415        286   

Share-based compensation expense

     4,453        6,668        5,889   

Accretion of contingent consideration

     846        515        —     

Change in fair value of contingent consideration

     (200     (9,519     (726

Change in fair value of guarantee of indebtedness

     —          (1,500     —     

Loss on sale of property and equipment

     111        292        215   

Gain on sale of MDU assets

     (1,472     —          —     

Changes in:

      

Accounts receivable

     (6,728     41,726        37,697   

Unbilled revenue

     (1,679     3,554        5,025   

Costs in excess of billings on uncompleted projects

     (63,975     18,371        60,350   

Inventories

     9,186        4,245        3,286   

Prepaid expenses and other assets

     7,880        8,807        681   

Accounts payable and other liabilities

     43,796        (66,767     (62,493

Income taxes payable / receivable

     1,934        18,053        (1,164

Billings in excess of costs on uncompleted projects

     (1,861     (10,375     (30,255

Deferred revenue

     —          9,289        1,968   

Deferred rent

     —          —          (164
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (32,628     44,661        (28,573
  

 

 

   

 

 

   

 

 

 

Investing Activities

      

Purchases of property and equipment

     (4,019     (17,615     (4,720

Payments for intangible assets

     (8     —          —     

Proceeds from the sale of MDU Assets

     12,500        —          —     

Proceeds from the sale of property and equipment

     76        275        3,511   

Purchase of Cellular Specialties, Inc.

     (18,000     —          —     

Purchase of Multiband

     (101,092     —          —     

Purchase of Design Build Technologies

     (1,306     —          —     

Checks issued in excess of bank balance with the purchase of subsidiaries

     (254     —          —     

Change in due from shareholders

     138        3        —     
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (111,965     (17,337     (1,209
  

 

 

   

 

 

   

 

 

 

Financing Activities

      

Proceeds from lines of credit

     517,516        1,095,560        764,879   

Payments on lines of credit

     (517,516     (1,095,560     (764,879

Proceeds from issuance of the Tack-On Notes

     105,000        —          —     

Payments on capital lease and notes payable obligations

     (4,112     (8,096     (4,607

Payments on contingent arrangements

     —          (670     (2,500

Payments for deferred financing costs

     (12,865     (1,360     —     

Proceeds from the issuance of common stock

     13        —          —     

Proceeds from exercise of warrants and stock options

     —          43        —     

Purchase of treasury stock

     (4,995     —          —     
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     83,041        (10,083     (7,107
  

 

 

   

 

 

   

 

 

 

Effect of exchange rate changes on cash

     —          23        18   
  

 

 

   

 

 

   

 

 

 

Increase (Decrease) in cash

     (61,552     17,264        (36,871

Cash, Beginning of Period

     120,991        59,439        76,703   
  

 

 

   

 

 

   

 

 

 

Cash, End of Period

   $ 59,439      $ 76,703      $ 39,832