Global Eagle Entertainment Reports First Quarter 2013 Results
09 May, 2013
Row 44 is the world's leading provider of satellite-based Internet connectivity systems to the airline industry. AIA is the leading provider of content and interactive entertainment for use in in-flight entertainment systems at over 130 airlines. Together, this combination creates the only provider of both connectivity and content solutions to Wi-Fi enabled and embedded in-flight entertainment systems.
The Company also announced that it has entered into a definitive agreement to acquire
"Our first quarter results highlight the strength of our content business and our growing connectivity footprint," said
"While our content and services business has been consistently profitable, we have now reached an inflection point in our Internet connectivity business, with our satellite systems now installed on over 480 planes," commented
Our summary consolidated financial information for the three months ended
For the first quarter of 2013, revenues were
The Company finished the first quarter with approximately
Pro Forma Financial Information
The table below presents pro forma financial information for the three-month periods ended
|Q1 2013 Pro Forma Adjusted EBITDA Improved by
|Three Months Ended
||Three Months Ended
|Consolidated Adjusted EBITDA*||$0.0|
|(1) Reflects 100% of AIA's results; GEE owns approximately 94% of AIA's outstanding shares.|
Pro forma revenues were
Pro forma content and services revenue grew from 71% of consolidated revenue in the first quarter of 2012 to 84% of consolidated pro forma revenue in the first quarter of 2013. The Company expects services and content sales to continue to grow as a percentage of overall revenues, leading to expanded margins.
|Equipment vs. Content & Services Revenue Mix|
|Q1 2012||Q4 2012||Q1 2013|
|Content & Services(3)||71%||79%||84%|
|(2) Represents sales of satellite based connectivity system at Row 44 subsidiary.|
|(3) Represents pro forma AIA revenue and Wi-Fi, TV, VOD and portal revenue at our Row 44 subsidiary.|
Pro forma consolidated adjusted EBITDA* during the first quarter of 2013 was approximately break-even, an improvement of
Filing of Quarterly Report on Form 10-Q
As noted above, during the first quarter of 2013, the Company completed its business combination in which it acquired Row 44 and 86% of the shares of AIA, a German public company which presents its financial statements in Euros and in accordance with International Financial Reporting Standards (IFRS) as adopted by the
- Entered into a definitive agreement to acquire
Post Modern Group(PMG), a premiere provider of video production, post-production and digital content delivery services.
- Integration of AIA and Row 44 proceeding in-line with strategic plan and the Company expects significant steady-state annual cost savings.
- Completed tender offer in
Germanyfor purchase of additional shares of AIA. The Company now holds approximately 94% of the total outstanding shares of AIA.
- Solidified board of directors with appointment of key executives from the entertainment, technology and aerospace industries.
Global Eagle Entertainmentboard of directors approved a warrant purchase program, authorizing the Company to repurchase in the aggregate up to $10 millionof our warrants to purchase shares of our common stock. Repurchases may be made by us from time to time opportunistically when prices and availability are attractive in open-market or privately-negotiated transactions as permitted by securities laws and other legal requirements, and subject to market conditions and other factors. Under the repurchase program, there is no time limit for warrant repurchases, nor is there a minimum number of warrants that we may repurchase. The repurchase program may be suspended or discontinued at any time without prior notice.
- Activated satellite-based connectivity system on 44 aircraft in the first quarter. This brings the total number of system installations to over 480 aircraft, representing the world's largest fleet of satellite-based connected entertainment platforms operating over land and sea.
- New long term agreement with Southwest Airlines went into effect on
February 1, 2013, leading to significant improvements in Wi-Fi profitability. Southwest Airlines is ramping up promotion of Wi-Fi and TV availability.
- Expanding live TV offering to add several more channels in early summer followed by additional channels in the fall.
- Launched Video-on-Demand (VOD) including movies and TV episodes on Southwest Airlines and Norwegian Air Shuttle during the first quarter.
- Advertising launched on connectivity portal with
Hampton Inn, HP and Microsoft purchasing advertising space.
- Secured multi-year contract to become exclusive supplier of in-flight entertainment content to Thai Airways International, becoming the airline's exclusive supplier of regional and international movies, TV programming and audio across its entire fleet comprised of over 80 aircraft.
- Extended existing multi-year agreement with Japan Airlines to provide a full suite of content services including local and international movies, TV programming, Audio-and-Video-on-Demand (AVOD) and additional emerging services across the airline's entire fleet.
- Entered into exclusive agreement with Condé Nast Mexico &
Latin Americato deliver in-flight digital versions of the most popular magazines in Latin Americaincluding Glamour, Vogue and GQ.
- Extended existing multi-year game licensing agreement with Disney to continue to provide a portfolio of popular Disney titles from GEE's product catalog and some of the most popular games in the in-flight entertainment market.
- Signed an agreement with casual gaming brand Big Fish Games to license some of the world's most popular mobile games for in-flight Android-based tablets. Big Fish has an online catalog of more than 3,000 PC and Mac games and more than 300 unique mobile games.
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* Non-GAAP Financial Information
We define adjusted EBITDA as net income before interest expense, income taxes, depreciation and amortization plus transaction related fees associated with the business combination, the impact of non-cash changes in the value of derivative instruments, expenses related to stock options and other non-recurring costs. Adjusted EBITDA is a non-GAAP financial measure commonly used by financial analysts, investors, rating agencies and other interested parties in evaluating companies. Accordingly, management believes that adjusted EBITDA may be useful in assessing our operating performance. In addition, adjusted EBITDA is used by management to measure and analyze our operating performance and, along with other data, as our internal measure for setting annual operating budgets, assessing financial performance of business segments and as performance criteria for incentive compensation. Additionally, because of management's focus on generating shareholder value, of which profitability is a primary driver, management believes adjusted EBITDA, as defined above, provides an important measure of our results of operations. However, adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation from, or as an alternative to, operating income, cash flow, EPS or other income or cash flow data prepared in accordance with GAAP.
For a reconciliation of adjusted EBITDA to net income, its most directly comparable GAAP measure, please see the information provided at the end of this press release.
With respect to 2013 projected adjusted EBITDA of PMG, we define adjusted EBITDA as net earnings before interest expense, income taxes, depreciation and amortization, plus costs incurred at the company that will no longer be incurred after the transaction has closed. A quantitative reconciliation is not available without unreasonable efforts.
Cautionary Note Concerning Forward-Looking Statements
We make forward-looking statements in this earnings release within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations or forecasts for future events, including without limitation our earnings, revenues, expenses or other future financial or business performance or strategies, or the impact of legal or regulatory matters on our business, results of operations or financial condition. These statements may be preceded by, followed by or include the words "may," "might," "will," "will likely result," "should," "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "continue," "target" or similar expressions. These forward-looking statements are based on information available to us as of the date of this earnings release, and involve substantial risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements as a result of new information, future events or developments or otherwise.
Among the factors that could cause actual results to differ materially from past results and future plans and projected future results are the following: our ability to integrate the Row 44 and AIA businesses, the ability of the combined business to grow, including through acquisitions which we are able to successfully integrate, and the ability of our executive officers to manage growth profitably; the outcome of any legal proceedings pending or that may be instituted against us, Row 44 or AIA; changes in laws or regulations that apply to us or our industry; our ability to recognize and timely implement future technologies in the satellite connectivity space, including Ka-band system development and deployment; our ability to deliver end-to-end network performance sufficient to meet increasing airline customer and passenger demand; our ability to obtain and maintain international authorizations to operate our service over the airspace of foreign jurisdictions our customers utilize; our ability to expand our service offerings and deliver on our service roadmap; our ability to timely and cost-effectively identify and license television and media content that passengers will purchase; general economic and technological circumstances in the satellite transponder market, including access to transponder space in capacity limited regions and successful launch of replacement transponder capacity where applicable; our ability to obtain and maintain licenses for content used on legacy installed in-flight entertainment systems; the loss of, or failure to realize benefits from, agreements with our airline partners; the loss of relationships with original equipment manufacturers or dealers; unfavorable economic conditions in the airline industry and economy as a whole; our ability to expand our domestic or international operations, including our ability to grow our business with current and potential future airline partners or successfully partner with satellite service providers, including Hughes Network Systems; our reliance on third-party satellite service providers and equipment and other suppliers, including single source providers and suppliers; the effects of service interruptions or delays, technology failures, material defects or errors in our software, damage to our equipment or geopolitical restrictions; the limited operating history of our connectivity and in-flight television and media products; costs associated with defending pending or future intellectual property infringement actions and other litigation or claims; increases in our projected capital expenditures due to, among other things, unexpected costs incurred in connection with the roll out of our technology roadmap or our international plan of expansion; fluctuation in our operating results; the demand for in-flight broadband internet access services and market acceptance for our products and services; and other risks and uncertainties set forth in this earnings release and in our most recent Annual Report on Form 10-K and any subsequently filed Quarterly Reports on Form 10-Q.
|UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS|
||Three Months Ended
|Cost of goods and services||35.2||18.6|
|Gross profit (loss)||7.0||1.1|
|Salaries and wages, SG&A||5.6||1.9|
|Selling, general and administrative||19.8||2.3|
|Other operating expense||3.5||0.6|
|Total operating expenses||28.9||4.9|
|Income (loss) from operations||(21.9)||(3.7)|
|Other income (expense):|
|Interest income (expense)||(0.2)||(3.3)|
|Change in value of derivative financial instruments||(4.4)||--|
|Other income (expense)||(0.2)||--|
|Income (loss) before income taxes||(
|Pro forma Revenue Reconciliation of GAAP to non-GAAP measures|
|Q1 '13 Revenue||January '13 Revenue||Pro forma Revenue|
|Row 44||Included in Q1 '13 revenues|
|Pro forma EBITDA Reconciliation of GAAP to non-GAAP measures - Q1 2013|
|Pretax Income / (Loss) As Reported||(26.7)|
|January AIA Pretax Income / (Loss)||1.3|
|January GEAC Pretax Income / (Loss)||(22.1)|
|Q1 '13 Proforma pretax Income / (Loss)||(47.5)|
|Reconciliation to EBITDA|
|Add Back Interest Expense / (Income) as Reported||0.2|
|Add Back Depreciation & Amortization As Reported||4.6|
|Add Back January AIA & GEAC Interest Expense / (Income)||0.1|
|Add Back January AIA & GEAC Depreciation & Amortization Expense||0.6|
|Q1 '13 Proforma EBITDA||(42.0)|
|Add Back Adjustments|
|Merger Related Transactional and Professional Fees||22.5|
|Change in Derivative Instruments||16.1|
|Stock options, tax withholding and acceleration related expenses||1.6|
|FX loss on Intercompany Loan||1.4|
|Other Transaction items||0.4|
|Q1 '13 Adjusted EBITDA|
|Pro forma EBITDA Reconciliation of GAAP to non-GAAP measures — Q4 2012|
|Pretax Net Income / (Loss) As Reported||(16.6)|
|Add Back AIA Q4 2012 Pretax Income||2.1|
|Q4 '12 Proforma Pretax Income / (Loss)||(28.8)|
|Reconciliation to EBITDA|
|Add Back AIA Interest Expense / (Income)||0.2|
|Add Back AIA Depreciation & Amortization||1.3|
|Q4 '12 Proforma EBITDA||(26.9)|
|Add Back Adjustments|
|Change in Derivative Instruments||15.0|
|Merger Related Items||5.5|
|Stock Options Related Expense||0.9|
|Q4 '12 Adjusted EBITDA||(
CONTACT: For Investors
Dave DavisChief Financial Officer Global Eagle Entertainment(818) 706-3111 email@example.com -or- Chris Plunkettor Brad Edwards Brainerd Communicators, Inc.(212) 986-6667 firstname.lastname@example.org email@example.com For Press Nancy Zakharyor Kathleen Hopkins Brainerd Communicators, Inc.(212) 986-6667 firstname.lastname@example.org email@example.com
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