Attached files

file filename
8-K - FORM 8-K - Goodman Networks Incd191810d8k.htm

Exhibit 99.1

 

LOGO

Goodman Networks Reports First Quarter 2016

Revenue and Earnings

FRISCO, TX, May 16, 2016 – Goodman Networks Incorporated today announced financial results for the three months ended March 31, 2016.

Revenue was $129.9 million for the three months ended March 31, 2016 compared to $213.4 million for the three months ended March 31, 2015. The Company reported Adjusted EBITDA of $2.7 million and net loss of $11.0 million for the three months ended March 31, 2016 compared to Adjusted EBITDA of ($4.8) million and net loss of $28.5 million for the three months ended March 31, 2015.

“We saw a great start to the year as margins increased across each of our business segments,” stated Ron Hill, Goodman Networks’ executive chairman and chief executive officer. “Our efforts to right-size the business and innovate our business processes are starting to have a significant impact on our business.”

Gross margin increased to 16.2% for the three months ended March 31, 2016 from 9.2% for the same period in 2015, an increase of 7.0%. Overall margin increase is primarily due to the performance of our Professional Services and Infrastructure Services segment. Even with the decline in revenue, our restructuring efforts have caused our costs to better align with demand allowing us to improve margins for the three months ended March 31, 2016.

Our Infrastructure Services margin increased to 11.6% for the three months ended March 31, 2016 from 6.2% in 2015 primarily due to the change in our project mix to projects with higher margins and our cost cutting initiatives implemented through the 2014 Restructuring Plan. Field Services margin also increased to 19.3% for the three months ended March 31, 2016 from 18.8% for the three months ended March 31, 2015 primarily due to the impact of operational improvement initiatives focused on training and quality. Operational improvements in our Field Services segment were offset by on-boarding costs for technicians to support revenue growth and perform newly awarded Digital Life work for AT&T. Our Professional Services margin increased to 14.5% for the three months ended March 31, 2016 from negative 1.7% during the same period in 2015. The increase was due to the completion of projects with higher margins coupled with our cost cutting initiatives. 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 three months ended March 31, 2016 are included in Exhibit A to this earnings announcement.


Summary results are presented below.

Results for the three months ended March 31, 2015 and 2016 (dollars in thousands)

 

     Three Months Ended March 31,        
     2015     2016        
     (Unaudited)        
     Amount     Amount     Change ($)  

Revenues:

      

Infrastructure Services

   $ 140,591      $ 42,948      $ (97,643

Field Services

     58,859        72,536        13,677   

Professional Services

     13,921        14,387        466   
  

 

 

   

 

 

   

 

 

 

Total revenues

     213,371        129,871        (83,500

Cost of revenues:

      

Infrastructure Services

     131,881        37,980        (93,901

Field Services

     47,796        58,565        10,769   

Professional Services

     14,163        12,301        (1,862
  

 

 

   

 

 

   

 

 

 

Total cost of revenues

     193,840        108,846        (84,994

Gross profit:

      

Infrastructure Services

     8,710        4,968        (3,742

Field Services

     11,063        13,971        2,908   

Professional Services

     (242     2,086        2,328   
  

 

 

   

 

 

   

 

 

 

Total gross profit

     19,531        21,025        1,494   

Gross margin as percent of segment revenues:

      

Infrastructure Services

     6.2     11.6  

Field Services

     18.8     19.3  

Professional Services

     (1.7 )%      14.5  
  

 

 

   

 

 

   

Total gross margin

     9.2     16.2  

Selling, general and administrative expenses

     28,293        19,667        (8,626

Restructuring expense

     6,338        955        (5,383

Impairment expense

     2,275        361        (1,914
  

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (17,375     42        17,417   

Interest income

     (36     (39     (3

Interest expense

     10,855        11,017        162   
  

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (28,194     (10,936     17,258   

Income tax expense

     331        51        (280
  

 

 

   

 

 

   

 

 

 

Net loss from continuing operations

   $ (28,525   $ (10,987   $ 17,538   
  

 

 

   

 

 

   

 

 

 

Selling, general and administrative expense of $19.7 million for the three months ended March 31, 2016 decreased $8.6 million from 2015 primarily due to decreases in headcount and other employee related costs, in depreciation and amortization expense, and in stock compensation expense for the three months ended March 31, 2016. Selling, general and administrative expense as a percentage of revenue increased to 15.1% for the three months ended March 31, 2016 from 13.3% for same period in 2015 due primarily to the decline in revenue.

Cash as of March 31, 2016 was $14.7 million and availability under the Credit Facility was $16.6 million, yielding net liquidity of $31.3 million compared to cash as of December 31, 2015 of $39.8 million and availability of $22.5 million, yielding net liquidity of $62.3 million.

Adjusted EBITDA was $2.7 million for the three months ended March 31, 2016, an increase of $7.5 million from ($4.8) million from 2015, which was driven primarily by the decline in selling, general and administrative expenses from Q1 2015.


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 Monday, May 16, 2016. Dial-in information for the conference call is as follows:

 

Date:    Monday, May 16, 2016
Time:    8:00 AM CT
Call-in number:    (844) 308-5977 or (408) 427-3705
Participant Passcode:    9504198

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 9504198 prior to 10:59 PM CT on Monday, May 23, 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, our ability to weather business and economic conditions and trends affecting our customers and the cyclical nature of the telecommunications and subscription television service industries, 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,  
     2015      2016  

EBITDA and Adjusted EBITDA:

     

Net loss

   $ (28,525    $ (10,987

Income tax expense

     331         51   

Interest expense, net

     10,819         10,978   

Depreciation and amortization

     2,877         1,672   
  

 

 

    

 

 

 

EBITDA

     (14,498      1,714   

Share-based compensation

     1,963         544   

Restructuring expense

     6,338         955   

Amortization of debt issuance costs

     (873      (894

Asset impairments

     2,275         361   
  

 

 

    

 

 

 

Adjusted EBITDA

   $ (4,795    $ 2,680   
  

 

 

    

 

 

 

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 March 31, 2016 was $1.2 billion.

Goodman Networks Contact:

 

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


Exhibit A

Goodman Networks Incorporated

Consolidated Balance Sheets

(In Thousands, Except Share Amounts and Par Value)

 

     December 31, 2015     March 31, 2016  
           (Unaudited)  

Assets

    

Current Assets

    

Cash

   $ 39,832      $ 14,702   

Accounts receivable, net of allowances for doubtful accounts of $107 at December 31, 2015 and $83 at March 31, 2016

     28,812        34,926   

Unbilled revenue on completed projects

     11,755        11,661   

Costs in excess of billings on uncompleted projects

     21,060        21,600   

Inventories

     15,352        13,480   

Prepaid expenses and other current assets

     3,394        5,567   

Income tax receivable

     204        204   
  

 

 

   

 

 

 

Total current assets

     120,409        102,140   

Property and equipment, net of accumulated depreciation of $33,862 at December 31, 2015 and $34,129 at March 31, 2016

     21,089        20,927   

Deposits and other assets

     2,553        2,514   

Insurance collateral

     15,035        14,735   

Intangible assets, net of accumulated amortization of $14,508 at December 31, 2015 and $15,138 at March 31, 2016

     14,412        13,782   

Goodwill

     69,178        69,178   
  

 

 

   

 

 

 

Total assets

   $ 242,676      $ 223,276   
  

 

 

   

 

 

 

Liabilities and Shareholders’ Deficit

    

Current Liabilities

    

Line of credit

   $  —        $ 573   

Accounts payable

     45,886        50,984   

Accrued expenses

     57,194        45,018   

Income taxes payable

     311        328   

Billings in excess of costs on uncompleted projects

     6,061        4,372   

Deferred revenue

     2,295        1,760   

Deferred rent

     115        93   

Current portion of capital lease and notes payable obligations

     775        966   
  

 

 

   

 

 

 

Total current liabilities

     112,637        104,094   

Notes payable, net of deferred financing cost

     315,748        316,647   

Capital lease obligations

     400        255   

Accrued expenses, non-current

     6,921        6,689   

Deferred revenue, non-current

     8,973        7,995   

Deferred tax liability

     1,714        1,714   

Deferred rent, non-current

     414        447   
  

 

 

   

 

 

 

Total liabilities

     446,807        437,841   

Shareholders’ Deficit

    

Common stock, $0.01 par value, 10,000,000 shares authorized; 1,029,072 issued and 912,754 outstanding at December 31, 2015 and March 31, 2016

     10        10   

Treasury stock, at cost, 116,318 shares at December 31, 2015 and March 31, 2016

     (11,756     (11,756

Additional paid-in capital

     25,914        26,458   

Accumulated other comprehensive income

     18        27   

Accumulated deficit

     (218,317     (229,304
  

 

 

   

 

 

 

Total shareholders’ deficit

     (204,131     (214,565
  

 

 

   

 

 

 

Total liabilities and shareholders’ deficit

   $ 242,676      $ 223,276   
  

 

 

   

 

 

 


Goodman Networks Incorporated

Consolidated Statements of Operations

(In Thousands)

(Unaudited)

 

     Three Months Ended
March 31,
 
     2015     2016  

Revenues

   $ 213,371      $ 129,871   

Cost of revenues

     193,840        108,846   
  

 

 

   

 

 

 

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

     19,531        21,025   

Selling, general and administrative expenses

     28,293        19,667   

Restructuring expense

     6,338        955   

Impairment expense

     2,275        361   
  

 

 

   

 

 

 

Operating (loss) income

     (17,375     42   

Interest expense, net

     10,819        10,978   
  

 

 

   

 

 

 

Loss before income taxes

     (28,194     (10,936

Income tax expense

     331        51   
  

 

 

   

 

 

 

Net loss

   $ (28,525   $ (10,987
  

 

 

   

 

 

 

Other comprehensive income:

     —          9   
  

 

 

   

 

 

 

Comprehensive loss

   $ (28,525   $ (10,978
  

 

 

   

 

 

 


Goodman Networks Incorporated

Consolidated Statements of Cash Flows

(In Thousands)

 

     Three Months Ended March 31,  
     2015     2016  

Operating Activities

    

Net loss

   $ (28,525   $ (10,987

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation and amortization of property and equipment

     1,423        1,042   

Amortization of intangible assets

     1,454        630   

Amortization of debt discounts and deferred financing costs

     859        899   

Impairment charges

     2,275        361   

Change in estimate of doubtful accounts

     575        90   

Deferred tax expense

     278        —     

Share-based compensation expense

     1,963        544   

Change in fair value of contingent consideration

     (726     —     

Loss of disposal of property and equipment

     —          121   

Changes in:

    

Accounts receivable

     21,409        (6,205

Unbilled revenue

     (3,138     94   

Costs in excess of billings on uncompleted projects

     11,850        (540

Inventories

     1,827        1,872   

Prepaid expenses and other assets

     (1,422     (1,831

Accounts payable and other liabilities

     (28,848     (7,037

Income taxes payable / receivable

     (701     17   

Billings in excess of costs on uncompleted projects

     (18,123     (1,689

Deferred revenue

     1,598        (1,513

Deferred rent

     (18     12   
  

 

 

   

 

 

 

Net cash used in operating activities

     (35,990     (24,120
  

 

 

   

 

 

 

Investing Activities

    

Purchases of property and equipment

     (1,324     (1,364

Change in due from shareholders

     1        —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (1,323     (1,364
  

 

 

   

 

 

 

Financing Activities

    

Proceeds from lines of credit

     199,157        149,372   

Payments on lines of credit

     (199,157     (148,799

Payments on capital leases, notes payable

     (206     (222

Payments on guarantee arrangements

     (4,000     —     
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (4,206     351   
  

 

 

   

 

 

 

Effect of exchange rate changes on cash

     (1     3   
  

 

 

   

 

 

 

Decrease in cash

     (41,520     (25,130

Cash, Beginning of Period

     76,703        39,832   
  

 

 

   

 

 

 

Cash, End of Period

   $ 35,183      $ 14,702