EX-99.1 2 d465847dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

GLOBAL EAGLE ANNOUNCES FOURTH QUARTER AND FULL YEAR 2016 RESULTS

LOS ANGELES, CA, October 18, 2017—Global Eagle Entertainment Inc. (NASDAQ: ENT) (“Global Eagle” or the “Company”), a leading provider of media, content and connectivity to markets across air, sea and land, today announced unaudited financial results for the fourth quarter and full year ended December 31, 2016. For the fourth quarter of 2016, Global Eagle posted revenue of $165 million, up 45.5% compared to the prior-year period; incurred net loss of $91.7 million; and generated Adjusted EBITDA* of $19.4 million, up 24.9% compared to the prior-year period. For the full year 2016, Global Eagle posted revenue of $538 million, up 26.2% compared to the prior year; incurred net loss of $112.9 million; and generated Adjusted EBITDA of $57.5 million, up 15.0% compared to the prior year.

“2017 has been a year of transition for Global Eagle, and we are building a solid foundation to position our company for future growth,” reiterated Jeff Leddy, CEO of Global Eagle. “Importantly, we have strengthened key areas in our finance and other shared service functions and continue to integrate past acquisitions across our business lines.”

Under its new leadership, Global Eagle is further strengthening its talent. This includes many new hires as well as adding new leadership positions within our finance, Media & Content and Connectivity teams. The Company is also implementing new software tools designed to enhance operations, improve the timeliness of our financial reporting and reduce future extraordinary expenses, such as audit, professional services and legal fees.

“Our Media & Content and Connectivity teams are winning new business and major renewals, with both businesses benefiting from strong secular growth within their industries,” continued Mr. Leddy. “We have a number of opportunities in front of us and are poised to execute on them in the coming months. As we near the completion of the 2016 audit, we are focused on driving growth in 2018.”

“We have made significant enhancements to our finance department in the last six months as we improve both our processes and controls,” reiterated Paul Rainey, CFO of Global Eagle. “We are already seeing these benefits as we near the close of our audit process. In addition, we are taking tremendous steps forward across our businesses to improve customer relations and make better informed decisions to enhance performance.”

Fourth Quarter 2016 Results Summary

 

   

Total revenue increased to $165 million in the fourth quarter of 2016, which was a 45.5% increase versus the prior year period, driven largely by the acquisition of Emerging Market Communications (“EMC”) in July 2016 and continued growth in our Aviation Connectivity business. Our fourth quarter 2016 results include a full quarter of operating results for EMC.

 

   

Net loss was $91.7 million in the fourth quarter of 2016. During the quarter, the Company recorded a non-cash goodwill impairment charge of $64.0 million related to our Maritime & Land Connectivity business acquired with EMC. In addition, during the first quarter 2017, due to a significant decline in our stock price and changes in our management during the that quarter, we again tested our goodwill for impairment. As such, we preliminarily estimate having to record an additional non-cash charge ranging from $75 million to $80 million for that quarter related to the impairment of goodwill associated with the Maritime & Land Connectivity business in that quarter. We do not anticipate further impairments in goodwill for this business in the second or third quarters of 2017.


   

Adjusted EBITDA was $19.4 million in the fourth quarter of 2016, which was a 24.9% increase versus the prior year period. The increase was driven by contributions from the EMC acquisition and growth in our Aviation Connectivity business. This was partially offset by a decline in the Media & Content segment due to our previously disclosed loss of our content services business with American Airlines and harmonization of our accounting policies. This loss was related to our litigation with American Airlines that we have since resolved.

Connectivity Segment Results

 

   

Connectivity revenue increased to $88.4 million in the fourth quarter of 2016, which was an increase of 175% versus the prior year period. This increase was primarily driven by the EMC acquisition and growth in our Aviation Connectivity business.

Media & Content Segment Results

 

   

Media and Content revenue was $76.4 million in the fourth quarter of 2016, which was a 5.8% decline versus the prior year period. This decline was primarily due to the loss of our content services business with American Airlines, as described above.

Our fourth quarter 2016 and full year 2016 financial statements are unaudited. Our unaudited financial information should not be viewed as a substitute for audited financial statements prepared in accordance with accounting principles generally accepted in the United States.

Note that our revenue and Adjusted EBITDA results have changed relative to the estimates provided in the Business Update press release issued on September 14, 2017. Revenue increased by $7.8 million and Adjusted EBITDA increased by $0.7 million for the fourth quarter and the full year ended December 31, 2016. The changes were primarily due to the harmonization of accounting policies for bundled hardware, service and content contracts. This harmonization required the release of historical contract balances from our consolidated balance sheet.

About Global Eagle

Global Eagle is a leading provider of media, content and connectivity 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 1,500 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.

Contact:

Peter A. Lopez

Vice President, Investor Relations

+1 310-740-8624

investor.relations@geemedia.com

pr@geemedia.com


* About Non-GAAP Financial Measure

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. For more information on this non-GAAP financial measure, please see the table entitled “Reconciliation of GAAP to Non-GAAP Measure” at the end of this 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 and executives. 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 management in its 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) income tax expense (benefit), (b) interest income (expense), (c) change in fair value of financial instruments, (d) other (income) expense, net, including primarily, when applicable, (gains) losses from investments, and foreign-currency transactions (gains) losses, (e) goodwill impairment expense, (f) depreciation and amortization (including relating to equity-method investments) and loss on disposal and impairment of fixed assets, (g) stock-based compensation, (h) acquisition, integration and realignment expenses, including acquisition-related expenses and transaction costs and legal, accounting and other professional fees attributable to acquisition and corporate realignment activities, (i) extraordinary professional accounting fees relating to our 2016 audit, (j) operation realignment set-up fees, (k) employee severance and termination benefits as well as employee retention and relocation costs, (l) settlement fees and expenses (and related third-party professional fees) and loss-contingency reserves for actual or threatened litigation pertaining to liabilities (that existed prior to their acquisition date) at companies or businesses that we acquired through our M&A activities, (m) non-cash GAAP purchase accounting adjustments for certain deferred revenue and costs and (n) restructuring expenses pursuant to our integration plan announced on September 23, 2014. Management does not consider these items to be indicative of our core operating results.

Cautionary Note Concerning Forward-Looking Statements

We make “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including with respect to our expected goodwill impairment in the first quarter 2017 and the absence of potential goodwill impairments in our second and third quarter of 2017. These forward-looking statements are based on information available to us as of the date hereof and on our current expectations, forecasts and assumptions, and involve substantial risks and uncertainties. The financial performance information included in this release for the fourth quarter and full year ended December 31, 2016 is unaudited. In addition, actual results may vary materially from those expressed or implied by the forward looking statements herein due to a variety of other factors, including: our ability to remediate material weaknesses in our internal control over financial reporting and to complete such remediation in a timely manner, and the effect of those weaknesses on our ability to forecast our operations and financial performance; our ability to maintain effective internal control over financial reporting; our ability to maintain sufficient cash flow and liquidity to operate our business; our ability to integrate businesses or technologies we acquire; our dependence on the travel industry; future acts or threats of terrorism; our ability to renew agreements with existing customers; our ability to recruit, train and retain highly skilled technical employees, including finance and accounting professionals; our ability to retain and effectively integrate and train key members of senior management, including our finance and accounting professionals; our dependence on our existing relationship and agreement with Southwest Airlines; our dependence on our investment in and development of new broadband technologies and advanced communications and secure networking systems, products and services, as well as their market acceptance; increased demand by customers for greater bandwidth, speed and performance and increased competition from new technologies and market entrants; customer attrition due to direct arrangements between satellite providers and customers; our reliance on sole service providers and other third parties for key components and services that are integral to our product and service offerings; the potential need to materially increase our investments in product development and equipment; limitations on our ability to grow our operations or


maintain or grow our revenue; our ability to expand our international operations and the risks inherent in our international operations; our ability to develop and deploy new global antenna technologies; service interruptions or delays, technology failures, damage to equipment or software defects or errors and the resulting impact on our reputation and ability to attract, retain and serve our customers; equipment failures or software defects or errors which damage our reputation or result in claims in excess of our insurance coverage; satellite failures or degradations in satellite performance; our use of fixed-price contracts for satellite bandwidth and potential contract cost differentials as and if the market price for that service declines relative to our committed cost; our ability to receive the anticipated cash distributions or other benefits from our investment in the Wireless Maritime Services joint venture; pricing pressure from suppliers and customers in our Media & Content segment and a reduction in the industry’s use of intermediary content service providers (such as us); a reduction or elimination of the time between our receipt of content and it being made available to the rental or home viewing market (i.e., the “early release window”); a reduction in the volume or quality of content produced by studios, distributors or other content providers; increased on-board use of personal electronic devices and content accessed and downloaded prior to travel; our ability to compete as a content provider against “over the top” download services and other companies that offer in-flight entertainment systems; our ability to plan expenses and forecast revenue due to the long sales cycle of many of our Media & Content segment’s products; our ability to develop new products or enhance those we currently provide in our Media & Content segment; a reduction or elimination of the use of our Media & Content segment’s services by competitors who consume our content services but may elect to discontinue that use given that we sometimes compete with some of their own content businesses; the result of ongoing tax audits that could result in additional tax payments or a reduction in tax loss carryforwards; our ability to continue to be able to make claims for investment tax credits in Canada; our exposure to foreign currency risks and a lack of a formalized hedging strategy; our ability to mitigate the business and reputational harm of any data or privacy breaches, data or privacy theft, unauthorized access to our internal systems of Connectivity or Media & Content systems or hacking; the costs to defend and/or settle current and potential future civil intellectual property lawsuits (including relating to music and other content infringement) and related claims for indemnification; costs associated with shareholder litigation and our indemnification obligations with respect to current and former executive officers and directors; changes in regulations and our ability to obtain regulatory approvals to provide our services or to operate our business in particular countries or territorial waters; compliance with U.S. and foreign regulatory agencies, including the Federal Aviation Administration (“FAA”) and Federal Communications Commission (“FCC”) and their foreign equivalents in the jurisdictions in which we and our customers operate; changes in government regulation of the Internet, including e-commerce or online video distribution; our ability to comply with trade, export, anti-money laundering and foreign corrupt practices and anti-bribery laws, especially where many of our airline customers may be considered foreign officials under the Foreign Corrupt Practices Act; limitations on our cash flow available to make investments due to our substantial indebtedness and our ability to generate sufficient cash flow to make payments thereon; our ability to timely file our periodic reports required by the SEC; our ability to maintain our relationships with our credit-agreement lenders and other sources of capital; our ability to remain in compliance with the reporting and financial covenants in our credit agreement; our ability to repay the principal amount of our bank debt and/or convertible notes at maturity, raise the funds necessary to settle conversions of our convertible notes or repurchase our convertible notes upon a fundamental change or on specified repurchase dates or due to future indebtedness; the conditional conversion of our convertible notes; the effect on our reported financial results of the accounting method for our convertible notes; the impact of the fundamental change repurchase feature of the indenture governing our convertible notes on our price or potential as a takeover target; the dilution or price depression of our common stock that may occur as a result of the conversion of our convertible notes, the exercise of outstanding warrants or the issuance of additional equity or debt securities; conflicts between our interests and the interests of our largest stockholders; our ability to meet the continued listing requirements of NASDAQ, in particular given our recent history of delinquent SEC filings; the dilution of our common stock that may occur as a result of the exercise of outstanding warrants; our ability to use common stock as consideration for future acquisitions; anti-takeover provisions contained in our charter and bylaws; our ability to continue to successfully transition the chief executive officer and chief financial officer roles; and other risks and uncertainties set forth herein and in our most recent Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q.

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.


Financial Information

The table below presents financial results for the three months and years ended December 31, 2016 and 2015.

Global Eagle Entertainment Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended
December 31,
    Year Ended
December 31,
 
     2016     2015     2016     2015  

Revenue

   $ 164,791     $ 113,235     $ 537,782     $ 426,030  

Operating expenses:

        

Cost of sales

     118,295       72,191       373,497       279,156  

Sales and marketing

     11,392       4,647       30,945       17,705  

Product development

     12,644       7,163       37,722       28,610  

General and administrative

     32,451       23,418       114,846       77,715  

Provision for legal settlements

     2,099       —         43,787       4,250  

Amortization of intangible assets

     11,593       7,720       35,648       26,994  

Goodwill impairment

     64,000       —         64,000       —    

Restructuring charges

     —         43       —         411  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     252,474       115,182       700,445       434,841  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (87,683     (1,947     (162,663     (8,811

Other income (expense), net:

        

Interest expense, net

     (10,369     (861     (18,198     (2,492

Income from equity method investments

     1,764       —         3,829       —    

Change in fair value of derivatives

     7,533       (1,928     25,515       11,938  

Other (expense) income, net

     (1,703     675       (6,326     (1,140
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (90,458     (4,061     (157,843     (505

Income tax expense (benefit)

     1,256       749       (44,911     1,621  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (91,714   $ (4,810   $ (112,932   $ (2,126
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share

        

Basic

   $ (1.07   $ (0.06   $ (1.39   $ (0.03
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ (1.07   $ (0.06   $ (1.39   $ (0.18
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     85,369       78,476       81,269       77,558  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     85,369       78,476       81,269       78,394  
  

 

 

   

 

 

   

 

 

   

 

 

 


Global Eagle Entertainment Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

 

     December 31,  
     2016     2015  

Assets:

    

Cash and cash equivalents

   $ 50,686     $ 223,552  

Accounts receivable, net

     120,492       93,449  

Inventories

     25,986       14,998  

Prepaid expenses and other current assets

     56,436       27,209  

Property, plant and equipment, net

     166,049       39,066  

Goodwill

     327,836       93,796  

Intangible assets, net

     166,720       117,684  

Equity method investments

     156,527       —    

Other non-current assets

     28,703       28,107  
  

 

 

   

 

 

 

Total Assets

   $ 1,099,435     $ 637,861  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Liabilities:

    

Accounts payable and accrued liabilities

   $ 240,344     $ 118,224  

Deferred revenue

     8,506       16,794  

Warrant liabilities

     433       24,076  

Notes payable

     470,300       71,154  

Deferred tax liabilities

     33,205       22,324  

Other liabilities

     47,650       31,528  
  

 

 

   

 

 

 

Total Liabilities

     800,438       284,100  
  

 

 

   

 

 

 

Stockholders’ Equity:

    

Common stock, treasury stock and additional paid-in capital

     716,355       658,045  

Subscriptions receivable

     (553     (528

Accumulated deficit

     (416,389     (303,457

Accumulated other comprehensive loss

     (416     (299
  

 

 

   

 

 

 

Total Stockholders’ Equity

     298,997       353,761  
  

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 1,099,435     $ 637,861  
  

 

 

   

 

 

 


Global Eagle Entertainment Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

     Year Ended
December 31,
 
     2016     2015  

CASH FLOWS FROM OPERATING ACTIVITIES:

    

Net loss

   $ (112,932   $ (2,126

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

    

Depreciation and amortization

     57,158       36,592  

Non-cash interest expense, net

     1,916       903  

Stock-based compensation

     10,747       8,235  

Issuance of common stock for legal settlements

     13,705       —    

Impairment of goodwill

     64,000       —    

Impairment of internally developed software

     4,069       —    

Impairment of related party loan

     4,353       —    

Income from equity method investments

     (3,829     —    

Change in fair value of derivatives

     (25,515     (11,938

Provision for bad debt

     2,624       797  

Deferred income taxes

     (60,369     (6,452

Changes in operating assets and liabilities

     8,961       (4,252

Other

     (1,488     96  
  

 

 

   

 

 

 

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

     (36,600     21,855  
  

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

    

Acquisitions of businesses, net of cash acquired

     (92,246     (60,242

Purchases of property and equipment

     (54,173     (20,653

Issuance of loan to related party

     (4,400     —    
  

 

 

   

 

 

 

NET CASH USED IN INVESTING ACTIVITIES

     (150,819     (80,895
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

    

Proceeds from borrowings

     27,500       81,250  

Repayment of notes payable

     (3,806     (1,126

Repurchase of common stock warrants

     (5,219     —    

Proceeds from exercise of common stock options and warrants

     (450     5,604  

Convertible senior note issuance fees

     —         (831

Other financing activities, net

     (4,127     (339
  

 

 

   

 

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

     13,898       84,558  
  

 

 

   

 

 

 

Effects of exchange rate changes on cash and cash equivalents

     655       386  

Net (decrease) increase in cash and cash equivalents

     (172,866     25,904  

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

     223,552       197,648  
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

   $ 50,686     $ 223,552  
  

 

 

   

 

 

 


Reconciliation of GAAP to Non-GAAP Measure

(In thousands)

(Unaudited)

 

     Three Months Ended
December 31,
    Year Ended
December 31,
 
     2016     2015     2016     2015  

Net loss

   $ (91,714   $ (4,810   $ (112,932   $ (2,126

Adjustments to reconcile net loss to Adjusted EBITDA:

        

Income tax expense (benefit)

     1,256       749       (44,911     1,621  

Interest expense

     10,369       861       18,198       2,492  

Change in fair value of derivatives

     (7,533     1,928       (25,515     (11,938

Other (income) expense, net (1)

     1,708       (675     5,406       1,140  

Depreciation and amortization (including depreciation and amortization relating to equity method investments) and loss on disposal and impairment of fixed assets

     26,119       10,734       65,215       36,592  

Impairment of goodwill

     64,000       —         64,000       —    

Stock-based compensation

     2,686       1,987       10,747       8,235  

Acquisition, integration and realignment expenses (2)

     12,466       4,680       77,335       13,598  

Restructuring charges (3)

     —         43       —         411  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 19,357     $ 15,497     $ 57,543     $ 50,025  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Other (income) expense, net, includes primarily, when applicable, (gains) losses from investments and foreign-currency transactions (gains) losses. Management does not consider these costs to be indicative of our core operating results.

(2)

Acquisition, integration and realignment expenses include (a) acquisition-related expenses and transaction costs and legal, accounting and other professional fees attributable to acquisition and corporate realignment activities, (b) extraordinary professional accounting fees relating to our 2016 audit, (c) operation realignment set-up fees, (d) employee severance and termination benefits as well as employee retention and relocation costs, (e) settlement fees and expenses (and related third-party professional fees) and loss-contingency reserves for actual or threatened litigation pertaining to liabilities (that existed prior to their acquisition date) at companies or businesses that we acquired through our M&A activities and (f) non-cash GAAP purchase accounting adjustments for certain deferred revenue and costs. Management does not consider these costs to be indicative of our core operating results.

(3)

Restructuring charges include restructuring expenses pursuant to our integration plan announced on September 23, 2014. Management does not consider these costs to be indicative of our core operating results.