Global Eagle Entertainment Reports Fourth Quarter and Full Year 2013 Results
06 Mar, 2014
- Strong Sequential Revenue and Q4 Adjusted EBITDA* Growth
- Q4 Adjusted EBITDA* Increased to
$8.6 million, a 91% Improvement over Q3 2013
- Entered into agreement with Air China for Connectivity Trial on B777 Aircraft
- Initiated Connectivity Coverage and Service to Passengers over
Transatlantic Regionand Russia
- Selected by Etihad Airways To Enter Into Multi-Year Contract as Primary Content Service Provider
- Launched Gate-to-Gate Wi-Fi and Messaging Services on Southwest
- 523 Connectivity Systems Installed at End of Q4; 40 Additional Orders Received Since End of Q3 2013
$190.0 millionfollow on offering; $262.0 millionin Cash at Quarter End
"Our strong fourth quarter operating and financial performance capped off a very productive year for our company," said
"We delivered another significant increase in our revenue and Adjusted EBITDA* during the fourth quarter," commented
The summary consolidated financial information for the three and twelve months ended
For the fourth quarter of 2013, revenues were
Capital expenditures for the twelve month period of 2013 totaled approximately
Quarterly Financial Information
The table below presents our actual financial results for the three-month periods ended
|Revenue, Contribution Margin, and Adjusted EBITDA* Continue to Improve (1)
(In millions, except %)
Q1 '13 (2),(3)
|Total Connectivity Revenue||15.3||18.8||21.1||22.7|
|Total Content Revenue||40.3||44.1||53.4||57.2|
|Total Revenue||$ 55.6||$ 62.9||$ 74.5||$ 79.9|
|Cost of Sales ($ millions)|
|Total Cost of Sales||(45.6)||(49.8)||(54.0)||(58.3)|
|Contribution Profit ($ millions)|
|Total Contribution Profit||10.0||13.1||20.5||21.6|
|Contribution Margin (%)|
|Total Contribution Margin||18%||21%||28%||27%|
|Adjusted EBITDA*||$ (0.5)||$ 1.2||$ 4.5|
|(1) Reflects 100% of AIA's results; GEE owns approximately 94% of AIA's outstanding shares.|
|(2) Actual Contribution Profit for the Content segment for the period
|(3) In Q2 2013, the Company revised Q1 2013 financial statements to correct for immaterial errors related to the statements of operations and balance sheets for this period. For further details, refer to our Quarterly Report on Form 10Q for the quarter ended
|(4) Represents sales of satellite based connectivity equipment.|
|(5) Represents Wi-Fi, live television, video on demand ("VOD"), shopping and travel-related revenue sold through our Connectivity platform.|
|(6) Represents revenue principally generated through the sale or license of media content, video and music programming, applications, and video games to customers.|
|(7) Content services revenue includes various services generally billed on a time and materials basis such as encoding and editing of media content.|
Consolidated revenue for Q4 2013 was
The increase in Content segment revenue in Q4 2013 of
The increase in Connectivity segment revenue in Q4 2013 of
- Continued progress in expanding into
Asiamarket through partnership with Air China Limited, China'sflag carrier. The airline expects to launch a trial of Global Eagle's high-speed, Ku-band satellite-based connectivity service in 2014. The trial will commence aboard a 777-200 aircraft and will enable Air China's passengers to access the Internet and stored content on approved handheld devices, in accordance with applicable Chinese regulations.
- Selected by
Etihad Airwaysas its content services provider, Etihad is one of the world's premier air carriers with over 200 aircraft on order. Pursuant to a multi-year agreement Global Eagle will provide movie, television, and audio content to Etihad and its key subsidiary airlines. Final contract sign-off is expected in the coming weeks.
- Expanded global connectivity footprint through major platform expansion with UTair, the fastest growing airline in the
Russian Federation. UTair has expanded its contract for connectivity services by 60 aircraft, bringing the total to 69 aircraft to be installed with Global Eagle's satellite connectivity solution.
- Announced, in partnership with DISH, the continuation of "TV Flies Free" on Southwest Airlines through 2014. The 'TV Flies Free' program enables Southwest customers to watch free live TV and on-demand programming streamed directly to their personal devices, courtesy of DISH. As a result of 'TV Flies Free,' millions of passengers have had access to nearly 20 live TV channels and up to 75 on-demand shows on Southwest's more than 440 Wi-Fi-enabled aircraft.
- Continued installations of satellite-based Connectivity systems, bringing the total number of system installations to 523 aircraft, representing the world's largest fleet of satellite-based connectivity platforms. Since the end of Q3, the Company has received orders for an additional 40 systems.
- Launched a number of Gate-to-Gate services on Southwest Airlines flights including Wi-Fi and messaging. The new messaging service is designed to work in all stages of flight and allows passengers with Apple devices operating on iOS 5 or later the ability to iMessage from gate-to-gate.
- Continued to win new business from international clients across the Content services sector, including Singapore Airlines for supplying both movies and TV. Further consolidating its position in the fast-growing
Middle Eastregion, the Company also won contracts with Iraqi Airwaysand Kuwait Airlines. The Kuwait Airlinescontract is for full client services and the Iraqi Airwayscontract covers a selection of Hollywoodand Arabic movies, Kurdish music and drama, comedy and documentary TV shows. The content on Iraqi Airwaysis available in both Arabic and English.
- Continued to make important progress in moving forward with the full integration of AIA into Global Eagle. At the
Advanced Inflight Alliance(AIA) extraordinary general meeting held on February 21, 2014in Munich, Germany, a resolution to approve Global Eagle's purchase of the remaining 6.05% of the outstanding shares of AIA that Global Eagle does not now own was approved with over 99% of the vote. The approved purchase price is €7.63 per AIA share.
- Strengthened financial position through
$190 millionpublic offering. Net proceeds of $183.3 millionwill be used for working capital and general corporate purposes, which may include potential acquisitions, debt repayment, purchases of outstanding warrants and capital expenditures.
Q1 2014 Outlook
In 2014, Global Eagle expects to continue the trend of strong improvement in revenue and Adjusted EBITDA. We expect the drivers of 2014 improvement to include new customer acquisitions, growth in revenue from connectivity services, integration synergies, and the full year benefit of acquisitions made in 2013.
If you cannot listen to the teleconference at its scheduled time, there will be a replay available through
Revisions to Previously Issued Financial Statements
As previously disclosed in the
* About Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with accounting principles generally accepted in
Adjusted EBITDA is the primary measure used by the Company's management and board of directors to understand and evaluate its financial performance and operating trends, including period to period comparisons, to prepare and approve its annual budget and to develop short and long term operational plans. Additionally, Adjusted EBITDA is the primary measure used by the compensation committee of the Company's board of directors to establish the funding targets for and fund its annual bonus pool for the Company's employees and executives. We believe our presentation of Adjusted EBITDA is useful to investors both because (1) it allows for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) management frequently uses it in its discussions with investors, commercial bankers, securities analysts and other users of its financial statements.
We define Adjusted EBITDA as net income (loss) before income tax expense, other income (expense), interest expense (income), depreciation and amortization, stock-based compensation, acquisition and realignment costs, F/X gain (loss) on intercompany loans and any gains or losses on certain asset sales or dispositions. Acquisition and realignment costs include such items, when applicable, as (a) non-cash GAAP purchase accounting adjustments for certain deferred revenue and costs, (b) legal, accounting and other professional fees directly attributable to acquisition activity, (c) employee severance payments attributable to acquisition or corporate realignment activities, (d) true-ups of conversions of IFRS to US GAAP results, and (e) expenditures related to the
With respect to projected first quarter 2014 Adjusted EBITDA*, a quantitative reconciliation is not available without unreasonable efforts, and we are unable to address the probable significance of the unavailable information.
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.
Actual results may vary materially from those expressed or implied by the forward looking statements herein due to a variety of factors, including our ability to integrate our recently acquired 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 ability of our customer Southwest Airlines to maintain a sponsor for its "TV Flies Free" offering and our ability to replicate this model through other sponsorship alliances; 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. We do not undertake any obligation to update forward-looking statements as a result of as a result of new information, future events or developments or otherwise.
Unaudited Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
|Three Months Ended
|Cost of sales||58,366||21,119||197,938||79,987|
|Sales and marketing||1,871||5,066||10,314||8,113|
|General and administrative||16,784||1,262||70,645||10,365|
|Amortization of intangible assets||8,811||12||17,281||36|
|Total operating expenses||88,954||27,848||305,246||101,147|
|Loss from operations||(9,094)||(13,286)||(45,524)||(31,937)|
|Other income (expense), net:|
|Interest income (expense, net)||(1,691)||(3,586)||(2,417)||—|
|Change in fair value of financial instruments||(56,854)||(248)||(63,961)||—|
|Other income (expense), net||(1,571)||275||(1,000)||(13,968)|
|Loss before income taxes (1)||(69,210)||(16,845)||(112,902)||(45,905)|
|(1) The Company's income tax expense for the quarter and year ended
|Reconciliations of Non-GAAP Measures to Unaudited Consolidated Statements of Operations
|Three months ended
||Three months ended
||Three months ended
||Three months ended
||Twelve months ended
|Loss before income taxes|
|Other income (expense) (1)||4,835||4,994||(1,722)||60,116||68,223|
|Depreciation and amortization||4,702||6,977||8,686||11,026||31,391|
|Stock-based compensation (2)||1,647||880||(625)||1,108||3,010|
|Acquisition and realignment and other costs (3)||12,210||1,360||3,247||5,541||22,358|
|F/X gain (loss) on intercompany loan (4)||1,378||(533)||(845)||—||—|
|Adjusted EBITDA||$ (2,215)||$ 1,208||$ 4,507||$ 12,081|
|Pro-forma Adjusted EBITDA||$ (532)||$ 1,208||$ 4,507||$ 13,764|
|(1) Other income (expense) principally includes the change in fair value of the Company's derivative financial instruments.|
|(2) Included in stock-based compensation for the three months ended
|(3) Acquisition and realignment costs include such items, when applicable, as (a) non-cash GAAP purchase accounting adjustments for certain deferred revenue and costs, (b) legal, accounting and other professional fees directly attributable to acquisition activity and corporate realignment activities, (c) employee severance payments attributable to acquisition or corporate realignment activities, (d) true-ups of conversions of IFRS to US GAAP results and (e) expenditures related to the
|(4) F/X gain (loss) on intercompany loan includes the unrealized foreign exchange gains and losses in the value of certain intercompany loans that are included in the Company's operating results.|
|(5) Comprises formation expenses directly related to the Company's business combination in 2013 that did not generate associated revenue in Q1 of 2013.|
Unaudited Segment Revenue and Contribution Profit
|Segment revenue, expenses and contribution profit for the three and twelve month periods ended
|Three Months Ended
||Twelve Months Ended
|Licensing||$ —||$ —|
|Cost of Sales||16,331||42,035||58,366||63,732||134,206||197,938|
|Other Operating Expenses||30,588||107,308|
|Loss from Operations|
CONTACT: For Investors
Dave DavisChief Financial Officer Global Eagle Entertainment(818) 706-3111 firstname.lastname@example.org -or- Chris Plunkettor Brad Edwards Brainerd Communicators, Inc.(212) 986-6667 email@example.com firstname.lastname@example.org For Press Nancy Zakhary Brainerd Communicators, Inc.(212) 986-6667 email@example.com
News Provided by Acquire Media