Globe Newswire 8-Nov-2018 4:11 PM
Strong revenue growth in both Media & Content and Connectivity segments
Operating expense savings initiative remains on track
Initial Air France installations have been completed
LOS ANGELES, Nov. 08, 2018 (GLOBE NEWSWIRE) -- Global Eagle Entertainment Inc. (NASDAQ:ENT) ("Global Eagle," the "Company" or "we"), a leading provider of media, content, connectivity and data analytics to markets across air, sea and land, today announced financial results for the third quarter ended September 30, 2018. For the third quarter of 2018, Global Eagle recorded revenue of $164 million; incurred a net loss of $43.2 million; and generated Adjusted EBITDA* of $18.4 million.
During the third quarter, Global Eagle's market-leading Media & Content segment continued to benefit from strong growth in revenue and healthy gross margins. Media & Content segment revenue grew 13% in the third quarter of 2018 versus the prior year period, with a gross margin of 29.7%. This growth was primarily attributable to content programming for previously announced new customer contracts as well as expanded content programming for several of our existing partners. Our Media & Content segment recently secured key wins with United Airlines and two additional leading global airlines. We expect these new wins to have a positive impact on Media & Content revenue growth in 2019.
Global Eagle's Connectivity segment is the leading provider of satellite-based passenger connectivity for single-aisle airliners and the leading broadcaster of live television to the aviation and maritime markets. During the third quarter, an existing customer awarded us more than 50 additional aircraft above our projected aircraft growth with that customer. We increased investment in satellite network capacity and working capital during 2018 to support aircraft activations and expect our Connectivity segment's gross margin to recover in 2019 as these retrofit and linefit aircraft are activated. In addition, we finalized our Air France contract during the third quarter and commenced installations on Air France with our newly certified three-axis antenna capable of more than 400 Mbps throughput to each aircraft. Our cruise-and-ferry business experienced double-digit growth versus the prior-year quarter and secured three-year contract renewals with two of our largest cruise-and-ferry customers, and our government and Brazil businesses continue to build both revenue and backlog.
"We are focused on running a healthy core business, driving profitable growth and continuing our transformation," commented Josh Marks, CEO of Global Eagle. "Our healthy core business is evident in expanded relationships with existing customers across our business. We are driving profitable growth through key wins that will reinforce our growth in 2019 and beyond. Our transformation continues through planned global footprint consolidation, simplification of our management structure, IT programs that will increase efficiency and automation, and operating expense reductions."
"Our operating expense savings initiative is on track to achieve our targeted run rate reduction of 10-15% as we exit the year," said Paul Rainey, CFO of Global Eagle. "In addition to lowering operating expenses, we have been successful in lowering our non-core cash expenses as reflected in our Adjusted EBITDA reconciliation, which is a critical component to improving our cash generation."
Third Quarter Summary
We will host a live webcast on Thursday, November 8, 2018 at 5:00 p.m. EDT (2:00 p.m. PDT). We will make the webcast and accompanying slide presentation available on the Investor Relations section of our website at http://investors.geemedia.com/events-and-presentations. We will maintain an archive of the webcast on our website for 30 days following the event.
About Global Eagle
Global Eagle is a leading provider of media, content, connectivity and data analytics to markets across air, sea and land. Global Eagle offers a fully integrated suite of rich media content and seamless connectivity solutions to airlines, cruise lines, commercial ships, high-end yachts, ferries and land locations worldwide. With approximately 1,400 employees and 50 offices on six continents, the Company delivers exceptional service and rapid support to a diverse customer base. Find out more at: www.GlobalEagle.com.
* About Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in the United States, or GAAP, we present Adjusted EBITDA, which is a non-GAAP financial measure, as a measure of our performance. The presentation of Adjusted EBITDA is not intended to be considered in isolation from, or as a substitute for, or superior to, net income (loss) or any other performance measures derived in accordance with GAAP or as an alternative to net cash provided by operating activities or any other measures of our cash flows or liquidity. Further, we note that Adjusted EBITDA as presented herein is defined and calculated differently than the "Consolidated EBITDA" definition in our senior secured credit agreement and in our second lien notes, which Consolidated EBITDA definition we use for financial-covenant-compliance purposes and as a measure of our liquidity. For a reconciliation of Adjusted EBITDA to its most comparable measure under GAAP, please see the table entitled "Reconciliation of GAAP to Non-GAAP Measure" at the end of this press release.
Adjusted EBITDA is one of the primary measures used by our management and Board of Directors to understand and evaluate our financial performance and operating trends, including period to period comparisons, to prepare and approve our annual budget and to develop short and long term operational plans. Additionally, Adjusted EBITDA is one of the primary measures used by the Compensation Committee of our Board of Directors to establish the funding targets for (and subsequent funding of) our Annual Incentive Plan bonuses for our employees. We believe our presentation of Adjusted EBITDA is useful to investors both because it allows for greater transparency with respect to key metrics used by our management in their financial and operational decision-making and because our management frequently uses it in discussions with investors, commercial bankers, securities analysts and other users of our financial statements.
We define Adjusted EBITDA as net income (loss) before (a) interest expense (income), (b) income tax expense (benefit) and (c) depreciation and amortization (including relating to equity-method investments) and (gain) loss on disposal and impairment of fixed assets, and we then further adjust that result to exclude (when applicable in the period) (1) change in fair value of financial instruments, (2) other (income) expense, including primarily, (gains) losses from investments and foreign-currency-transaction (gains) losses, (3) goodwill impairment expense, (4) stock-based compensation expense, (5) strategic-transaction, integration and realignment expenses (as described below), (6) auditor and third-party professional fees and expenses related to our internal-control deficiencies (and the remediation thereof) and complications in our audit process relating to our control environment, (7) excess content expenses (as described below), (8) non-ordinary-course legal expenses (as described below), (9) losses on significant customer bankruptcies (as described below) and (10) restructuring expenses pursuant to our September 2014 integration plan. Management does not consider these items to be indicative of our core operating results.
"Excess content expenses" includes the additional purchasing costs that we incurred in 2017 to procure movie content for our customers, notwithstanding that we could have procured equivalent content under our (preferential-pricing) output arrangements with major studios. We incurred these additional costs because we could not timely identify and measure our movie-content expenditures and procurement during the period due to weaknesses in our control environment.
"Losses on significant customer bankruptcies" includes (1) our provision for bad debt associated with the bankruptcies of Air Berlin and Alitalia (two of our Media & Content customers) in 2017, together with (2) the costs (e.g., content acquisition fees) that we incurred to maintain service to those customers during their bankruptcy proceedings in order to preserve the customer relationship.
"Non-ordinary-course legal expenses" includes third-party professional fees and expenses associated with the securities class-action lawsuits filed against us in 2017 and non-ordinary-course employment and intellectual-property-infringement disputes.
"Strategic-transaction, integration and realignment expenses" includes (1) transaction- and procurement-related expenses and costs (including third-party professional fees) attributable to acquisition, financing, investment and other strategic-transaction activities (including for new product and proof-of-concept testing), (2) integration and realignment expenses and allowances, (3) employee-severance, -retention and -relocation expenses, (4) purchase-accounting adjustments for deferred revenue, costs and credits associated with companies and businesses that we have acquired through our M&A activities, (5) service-level-agreement penalties incurred during our Eagle-1 migration and setup in its new orbital slot in 2017, and (6) claims at companies or businesses that we acquired through our M&A activities for underlying liabilities that pre-dated our acquisition of those companies or businesses. In respect of clause (6) in this definition, we include (i.e., exclude from net income (loss)) any estimated loss contingencies and provisions for legal settlements relating to those liabilities.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this press release may constitute "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements with respect to our expected Adjusted EBITDA, revenue and margin growth in future periods, our aviation-connectivity installations in future periods, our business and financial-performance outlook, industry, business strategy, plans, business and M&A integration activities, operating-expense and cost-structure improvements and reductions, international expansion, future technologies, future operations, margins, profitability, future efficiencies, ability to generate positive cash flow from operating activities, and other financial and operating information. The words "anticipate," "assume," "believe," "budget," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "will," "future" and the negative of these or similar terms and phrases are intended to identify forward-looking statements in this press release.
Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance these expectations will prove to have been correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following:
The forward-looking statements herein speak only as of the date the statements are made (which is the date of this press release). You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
The table below presents financial results for the three and nine months ended September 30, 2018 and 2017.
|Global Eagle Entertainment Inc.|
|Condensed Consolidated Statements of Operations|
|(In thousands, except per share amounts)|
|Three Months Ended September 30,||Nine Months Ended September 30,|
|Licensing and services||157,604||143,610||460,560||433,400|
|Cost of sales:|
|Licensing and services||123,126||105,830||357,523||317,624|
|Total cost of sales||128,569||112,951||373,382||341,580|
|Sales and marketing||8,989||9,332||29,499||30,376|
|General and administrative||31,620||39,129||100,384||109,372|
|Provision for legal settlements||(509||)||310||(134||)||785|
|Amortization of intangible assets||9,447||10,981||30,367||32,849|
|Total operating expenses||57,024||71,080||185,652||278,303|
|Loss from operations||(21,566||)||(32,494||)||(72,547||)||(160,012||)|
|Other income (expense):|
|Interest expense, net||(20,048||)||(18,164||)||(55,399||)||(43,935||)|
|Loss on extinguishment of debt||-||-||-||(14,389||)|
|Income from equity method investments||2,022||1,770||3,611||3,911|
|Change in fair value of derivatives||(196||)||196||(287||)||2,672|
|Other (expense) income, net||(588||)||(123||)||(936||)||38|
|Loss before income taxes||(40,376||)||(48,815||)||(125,558||)||(211,715||)|
|Income tax expense||2,852||4,153||1,865||10,993|
|Net loss per share – basic and diluted||(0.47||)||(0.59||)||(1.40||)||(2.57||)|
|Weighted average shares outstanding – basic and diluted||91,408||89,194||91,101||86,710|
|Global Eagle Entertainment Inc.|
|Condensed Consolidated Balance Sheets|
|September 30,||December 31,|
|Cash and cash equivalents||$||31,731||$||48,260|
|Accounts receivable, net||99,678||113,545|
|Other current assets||17,261||20,923|
|TOTAL CURRENT ASSETS:||203,993||228,174|
|Property, plant and equipment, net||182,777||195,029|
|Intangible assets, net||92,210||122,582|
|Equity method investments||135,975||137,299|
|Other non-current assets||12,439||9,118|
|Liabilities and Stockholders' Equity|
|Accounts payable and accrued liabilities||167,135||205,036|
|Current portion of long-term debt||20,946||20,106|
|Other current liabilities||9,137||7,785|
|TOTAL CURRENT LIABILITIES:||208,110||239,435|
|Deferred revenue, non-current||1,116||1,079|
|Deferred tax liabilities||7,776||16,247|
|Other non-current liabilities||30,573||30,340|
|Additional paid-in capital||811,906||779,565|
|Accumulated other comprehensive loss||(300||)||(22||)|
|Total Stockholder's Deficit||(119,921||)||(25,475||)|
|Total Liabilties and Stockholders' Equity||$||794,147||$||860,584|
|Global Eagle Entertainment Inc.|
|Reconciliation of GAAP to Non-GAAP Measure|
|Three Months Ended
|Net loss to Adjusted EBITDA reconciliation||2018||2017|
|Interest expense, net||20,048||18,164|
|Income tax expense||2,852||4,153|
| Depreciation and amortization and loss on disposal and
impairment of fixed assets
|Change in fair value of financial instruments||196||(196||)|
|Other (income) expense||588||123|
|Goodwill impairment expense||-||-|
|Stock-based compensation expense||3,918||1,158|
|Strategic-transaction, integration and realignment expenses||4,259||6,322|
|Internal-control and delayed audit expenses||2,057||11,662|
|Excess content expenses||-||631|
|Non-ordinary-course legal expenses||409||701|
|Losses on significant customer bankruptcies||-||-|
See "About Non-GAAP Financial Measures" above, including our definition of Adjusted EBITDA described therein.
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