| Schedule of Quarterly Financial Information |
December 31, 2017 and 2016 are unaudited, and have been prepared on a basis consistent with our audited consolidated annual financial statements, and include, in the opinion of management, all normal recurring adjustments necessary for the fair statement of the financial information contained in those statements. The results of operations of any quarter are not necessarily indicative of the results that may be expected for any future period (in thousands, except per share amounts).
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Quarter Ended |
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Mar. 31, 2016 |
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June 30, 2016 |
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Sept. 30, 2016(1)
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Dec. 31, 2016 |
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Mar. 31, 2017 |
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June 30, 2017 |
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Sept. 30, 2017 |
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Dec. 31, 2017 |
Revenue |
$ |
113,817 |
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$ |
112,265 |
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$ |
146,909 |
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$ |
156,764 |
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$ |
152,592 |
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$ |
155,742 |
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$ |
151,537 |
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$ |
159,598 |
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Cost of sales |
76,768 |
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75,086 |
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103,348 |
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110,268 |
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110,540 |
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118,090 |
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112,951 |
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120,539 |
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Gross margin |
37,049 |
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37,179 |
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43,561 |
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46,496 |
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42,052 |
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37,652 |
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38,586 |
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39,059 |
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Operating expenses: |
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Sales and marketing |
4,672 |
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6,491 |
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8,390 |
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11,388 |
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11,012 |
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10,029 |
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9,332 |
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10,565 |
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Product development (6)
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8,746 |
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8,416 |
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7,916 |
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12,640 |
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7,649 |
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7,942 |
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11,328 |
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8,689 |
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General and administrative (1) (2)
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19,220 |
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18,447 |
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44,728 |
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32,800 |
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35,321 |
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34,929 |
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39,129 |
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38,842 |
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Provision for legal settlements (2)
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2,001 |
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38,142 |
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1,545 |
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1,758 |
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475 |
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— |
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310 |
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650 |
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Amortization of intangible assets |
7,403 |
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7,486 |
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9,166 |
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11,593 |
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11,008 |
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10,860 |
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10,981 |
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11,106 |
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Goodwill impairment (7)
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— |
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— |
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— |
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64,000 |
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78,000 |
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— |
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— |
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89,000 |
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Total operating expenses |
42,042 |
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78,982 |
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71,745 |
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134,179 |
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143,465 |
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63,760 |
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71,080 |
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158,852 |
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Income (loss) from operations |
(4,993 |
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(41,803 |
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(28,184 |
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(87,683 |
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(101,413 |
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(26,108 |
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(32,494 |
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(119,793 |
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Interest expense, net |
(804 |
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(613 |
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(6,412 |
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(10,369 |
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(10,964 |
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(14,807 |
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(18,164 |
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(14,519 |
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Loss from extinguishment of debt |
— |
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— |
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— |
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— |
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(14,389 |
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— |
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— |
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— |
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Income from equity method investments (1) (9)
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— |
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— |
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2,065 |
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1,764 |
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1,539 |
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601 |
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1,770 |
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(16,334 |
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Change in fair value of derivatives |
5,865 |
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10,926 |
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1,191 |
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7,533 |
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2,920 |
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(445 |
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196 |
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839 |
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Other income (expense), net (3)
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680 |
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(5,934 |
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631 |
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(1,703 |
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(488 |
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653 |
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(123 |
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(478 |
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Income (loss) before income taxes |
748 |
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(37,424 |
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(30,709 |
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(90,458 |
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(122,795 |
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(40,106 |
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(48,815 |
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(150,285 |
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Income tax expense (benefit) (1)
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3,160 |
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736 |
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(50,063 |
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1,256 |
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2,816 |
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4,024 |
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4,153 |
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(15,880 |
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Net income (loss) |
$ |
(2,412 |
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$ |
(38,160 |
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$ |
19,354 |
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$ |
(91,714 |
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$ |
(125,611 |
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$ |
(44,130 |
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$ |
(52,968 |
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$ |
(134,405 |
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Net income (loss) per share (4):
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Basic |
$ |
(0.03 |
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$ |
(0.49 |
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$ |
0.23 |
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$ |
(1.07 |
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$ |
(1.47 |
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$ |
(0.52 |
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$ |
(0.59 |
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$ |
(1.51 |
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Diluted |
$ |
(0.03 |
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$ |
(0.49 |
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$ |
0.23 |
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$ |
(1.07 |
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$ |
(1.47 |
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$ |
(0.52 |
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$ |
(0.59 |
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$ |
(1.51 |
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Weighted average shares outstanding (5):
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Basic |
78,643 |
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78,127 |
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82,874 |
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85,369 |
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85,440 |
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85,496 |
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89,194 |
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89,222 |
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Diluted |
78,643 |
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78,127 |
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85,081 |
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85,369 |
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85,440 |
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85,496 |
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89,194 |
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89,222 |
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(1) |
On July 27, 2016, the Company acquired EMC (Maritime & Land Connectivity segment). The financial data for the quarter ended September 30, 2016 includes the operating results of EMC from the acquisition date through September 30, 2016. In connection with this acquisition, the Company released the valuation allowance due to the deferred tax liabilities created of $53.9 million, offset by foreign income taxes of $4.8 million resulting from the foreign subsidiaries’ contribution to pretax income, withholding taxes of $2.7 million and effects of permanent differences. Also, in connection with this acquisition, the Company acquired interests in two equity method investments. The related transaction and integration expenses of $12.7 million, $1.9 million and $0.8 million were incurred during the quarters ended September 30, 2016, June 30, 2016 and March 31, 2016, respectively, in General and administrative in the quarterly Consolidated Statements of Operations.
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(2) |
During the quarter ended June 30, 2016, the Company recorded a one-time charge of $38.1 million to settle sound recording liabilities under the Sound Recording Settlements. The Company also engaged in settlement negotiations with airlines regarding related liabilities. The presentation of the Provision for legal settlements for applicable prior quarters have been reclassified from General and administrative to conform with this presentation.
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(3) |
Other income (expense), net, for the quarter ended June 30, 2016 includes a one-time $4.4 million write-off of a related party note receivable and accrued interest and a $0.9 million impairment of internally developed software.
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(4) |
Quarterly and year-to-date computations of net income (loss) per common share amounts are calculated independently. Therefore, the sum of the per share amounts for the quarters may not agree with the per share amounts for the year. |
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(5) |
During the quarter ended June 30, 2016, the Company repurchased 0.6 million shares of its common stock for consideration of $5.2 million in the aggregate under the stock repurchase program authorized by the Board of Directors in March 2016. In connection with the EMC Acquisition on July 27, 2016, the Company issued approximately 5.5 million shares of its common stock at the closing as part of the purchase price. On the first anniversary of the EMC Acquisition, on July 27, 2017, the Company issued to the EMC seller approximately 5.1 million additional shares of the Company’s common stock. Pursuant to the EMC purchase agreement, 50% of the newly issued shares were valued at $8.40 per share, and the other 50% was valued at the volume-weighted average price of a share of Company common stock measured two days prior to the first anniversary date. In addition, as a result of the Sound Recording Settlements entered into with major record labels and publishers in 2016, including UMG, the Company issued 1.8 million shares of its common stock during the quarter ended September 30, 2016 as part of the settlement payments.
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(6) |
Product development for the quarter ended December 31, 2016 includes an impairment of internally developed software of $3.2 million.
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(7) |
During the quarter ended December 31, 2017 we determined that goodwill relating to our Maritime & Land Connectivity and Aviation Connectivity reporting units was impaired and we recognized an impairment loss of $45.0 million and $44.0 million, respectively. Additionally, during the quarter ended March 31, 2017 we recorded a goodwill impairment loss of $78.0 million in our Maritime & Land Connectivity reporting unit. During the quarter ended December 31, 2016 we recorded an impairment loss of $64.0 million to our Maritime & Land Connectivity reporting unit. See Note 5. Goodwill.
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(8) |
In January 2017 we entered into a new credit agreement consisting of a $500 million senior secured term loan facility and a five-year $85 million senior secured revolving credit facility and concurrently paid-off in full the indebtedness assumed upon the EMC Acquisition of $412.4 million. In connection with this refinancing transaction we incurred a loss on extinguishment of debt of $14.4 million recorded in the statement of operations during the quarter ended March 31, 2017. See Note 9. Financing Arrangements.
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(9) |
During the fourth quarter of 2017 we completed an assessment of the recoverability of our equity method investments and determined that the carrying value of our interest in WMS exceeded the estimated fair value of our interest and accordingly we recorded an impairment loss of $16.7 million. See Note 7. Equity Method Investments.
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