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8-K - FORM 8-K - Goodman Networks Inc | d191810d8k.htm |
Exhibit 99.1
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: |
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Infrastructure Services |
$ | 140,591 | $ | 42,948 | $ | (97,643 | ) | |||||
Field Services |
58,859 | 72,536 | 13,677 | |||||||||
Professional Services |
13,921 | 14,387 | 466 | |||||||||
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Total revenues |
213,371 | 129,871 | (83,500 | ) | ||||||||
Cost of revenues: |
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Infrastructure Services |
131,881 | 37,980 | (93,901 | ) | ||||||||
Field Services |
47,796 | 58,565 | 10,769 | |||||||||
Professional Services |
14,163 | 12,301 | (1,862 | ) | ||||||||
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Total cost of revenues |
193,840 | 108,846 | (84,994 | ) | ||||||||
Gross profit: |
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Infrastructure Services |
8,710 | 4,968 | (3,742 | ) | ||||||||
Field Services |
11,063 | 13,971 | 2,908 | |||||||||
Professional Services |
(242 | ) | 2,086 | 2,328 | ||||||||
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Total gross profit |
19,531 | 21,025 | 1,494 | |||||||||
Gross margin as percent of segment revenues: |
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Infrastructure Services |
6.2 | % | 11.6 | % | ||||||||
Field Services |
18.8 | % | 19.3 | % | ||||||||
Professional Services |
(1.7 | )% | 14.5 | % | ||||||||
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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 | ) | ||||||||
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Operating income (loss) |
(17,375 | ) | 42 | 17,417 | ||||||||
Interest income |
(36 | ) | (39 | ) | (3 | ) | ||||||
Interest expense |
10,855 | 11,017 | 162 | |||||||||
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Loss before income taxes |
(28,194 | ) | (10,936 | ) | 17,258 | |||||||
Income tax expense |
331 | 51 | (280 | ) | ||||||||
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Net loss from continuing operations |
$ | (28,525 | ) | $ | (10,987 | ) | $ | 17,538 | ||||
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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 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 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: |
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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 | ||||||
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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 | ||||||
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Adjusted EBITDA |
$ | (4,795 | ) | $ | 2,680 | |||
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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, 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 |
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Current Assets |
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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 | ||||||
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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 | ||||||
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Total assets |
$ | 242,676 | $ | 223,276 | ||||
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Liabilities and Shareholders Deficit |
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Current Liabilities |
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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 | ||||||
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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 | ||||||
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Total liabilities |
446,807 | 437,841 | ||||||
Shareholders Deficit |
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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 | ) | ||||
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Total shareholders deficit |
(204,131 | ) | (214,565 | ) | ||||
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Total liabilities and shareholders deficit |
$ | 242,676 | $ | 223,276 | ||||
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Goodman Networks Incorporated
Consolidated Statements of Operations
(In Thousands)
(Unaudited)
Three Months Ended March 31, |
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2015 | 2016 | |||||||
Revenues |
$ | 213,371 | $ | 129,871 | ||||
Cost of revenues |
193,840 | 108,846 | ||||||
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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 | ||||||
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Operating (loss) income |
(17,375 | ) | 42 | |||||
Interest expense, net |
10,819 | 10,978 | ||||||
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Loss before income taxes |
(28,194 | ) | (10,936 | ) | ||||
Income tax expense |
331 | 51 | ||||||
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Net loss |
$ | (28,525 | ) | $ | (10,987 | ) | ||
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Other comprehensive income: |
| 9 | ||||||
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Comprehensive loss |
$ | (28,525 | ) | $ | (10,978 | ) | ||
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Goodman Networks Incorporated
Consolidated Statements of Cash Flows
(In Thousands)
Three Months Ended March 31, | ||||||||
2015 | 2016 | |||||||
Operating Activities |
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Net loss |
$ | (28,525 | ) | $ | (10,987 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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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: |
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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 | |||||
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Net cash used in operating activities |
(35,990 | ) | (24,120 | ) | ||||
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Investing Activities |
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Purchases of property and equipment |
(1,324 | ) | (1,364 | ) | ||||
Change in due from shareholders |
1 | | ||||||
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Net cash used in investing activities |
(1,323 | ) | (1,364 | ) | ||||
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Financing Activities |
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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 | ) | | |||||
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Net cash provided by (used in) financing activities |
(4,206 | ) | 351 | |||||
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Effect of exchange rate changes on cash |
(1 | ) | 3 | |||||
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Decrease in cash |
(41,520 | ) | (25,130 | ) | ||||
Cash, Beginning of Period |
76,703 | 39,832 | ||||||
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Cash, End of Period |
$ | 35,183 | $ | 14,702 | ||||
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