FTNW - Earnings call transcript Q2 2018

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Operator

Greetings, and welcome to the FTE Networks Second Quarter 2018 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Gregory Davis of MZ Group.

Gregory Davis

Thank you, Operator.

Before turning the call over to management, I’d like to remind listeners that during today’s call management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements are based on current expectations, forecasts and assumptions regarding anticipated levels of future performance.

uncertainties results factors those to risks, actual could discussed involve and outcomes differ statements and that other cause today. Forward-looking materially from these the you and SEC. refer to more discussion We a uncertainties filings Company’s of in with the detailed risks be statements light in should of Any factors. considered forward-looking these and conditions update any in these Furthermore, date the presented may undertake not future, as is does outlook market change. projections any today’s as of Management obligation to

These contain the on Additionally, not the measures GAAP our measures. afternoon non-GAAP GAAP should of release, may the considered Reconciliation certain measures discussion non-GAAP for replacements available in website. Company’s earnings be financial this Company’s to are results. provided measures

Lethem, is Palleschi, Michael comments are call On yours. Chief Network’s my the Officer. David Michael FTE complete, the turn Michael, With to pleasure those over and the call Chief to it President is today floor Financial Palleschi. Executive and Officer,

Michael Palleschi

quarterly Gregory, call. coming shared second beginning to and vision we the $X.X the at Thank great and everyone our of second be The more pleased strong Networks the to-date. is year This quarter with highest fruition million and performance of is I adjusted $XX.X in made the during We company's of million FTE welcome quarter. operational to-date you, reflected earnings the cannot to performance revenues, the XXXX quarter EBITDA. progress

$XXX strong use of million flow in our contract generated a respect largely segment July totaling remain cash to new With XXXX. by segment ability our our as of support and and our debt service to XX, highlights further to CrossLayer. $XXX year-to-date backlog infrastructure also both quarter investment wins million This particular business, Technology our in

On-Net in million where networking guidance with year-end. services. nodes and reiterating extend by our building we can of adjusted buildings fiber We to bring $XXX We EBITDA, XXXX XX On-Net our a define revenues, CrossLayer CrossLayer $XX as million a goal Compute-to-the-Edge in are installed

building story, CrossLayer building more of more new and offering to disruptive Technology who segment highly those CrossLayer infrastructure for the brings convenient profitable our in cornerstone a is For solution owners. maybe network an by the more to and efficient, functionality

of the tenants building mercy connectivity. to building effectively service installed, turnkey Building was the connectivity owners maintain of carriers and providers approach Whereas offering owners fourth and decades now outsource can from. is maintenance the reliable can now considered network to Tier at tenants control owners leaving with offer CrossLayer, are highly those X troubleshooting. For which what traditional they profit and new network utility their

our our deal offer and segment expansion. provides necessary growth to resources its great Technology a of segment support potential, the CrossLayer and While core foundation Infrastructure financial

great the Infrastructure build being upon contracts and result to a is in is reputation a Our increasing. upon customers trend continues This of and the is existing and to a specifications. with see our of expanded on-time commitment to projects itself segment frequency deliver

While the to XXXX. month July. year-end on also to solid ramp one to our win evidenced backlog our of pace of continues up to accomplish a based contract contracts year project into our as by while going new puts next business million new laying this ability can foundation and fluctuate timing from This on day to execution, XXX approximately the secured us objectives substantially

it Additionally, our the has and our think of we business. the infrastructure discuss impact I important market elasticity it's the within economic niche to on that believe

the be nature to build-out benefit which and to segment demand Infrastructure service our which have downsize. significant to outperform peers markets the of one to our to from interior A tend grow as periods doing amount of fortunate allow us defensive and high offerings be like are able in are in contraction. We the companies in is business our currently we bull should also expansionary

we that revenue understand segment to in point critical from our of streams a annuity Infrastructure benefit as relatively our and should low footprint have recurring added our CrossLayer like the elasticity economic overtime. it’s Technology segment think I expand

continued We our secured total to $XX Technology segment investment and strong equipment of and Currently equipment leases of support the debt operations in million segments. cash debt revenue will sheet. leases. for in $XX.X favorable form The notes structure. amount balance Technology of We interest that segment outstanding are allow will X% million of operations short-term to flows million believe the $XX.X continue low Infrastructure notes in the from cash payment optimize both the provided into we and utilizing $XX.X term note by in seller the used capital current of flow generation have and the capital the X% million short form and is notes with for senior Infrastructure

are We in structure. and sheet capital opportunities upon refinance opportunistic remain will continue evaluating efforts to constantly and balance our our approving

Our streams XXX,XXX the implementation expected Each primary nine status its and to generating period revenues begin $XXX,XXX. long-term that average customer minimal the feet with size shortly averages after square peak rate of six relatively sticky approximately reason an we up approximately remain is building disrupt quo of and a is into FTE. that On-Net so revenue to for implementation to cost This translates for recurring CrossLayer investment ramp optimistic XXX,XXX to potential the about are and months. payback to

XX to by buildings A one our setting New logistical a and rollout total revenue necessary In we resources, CrossLayer to only million with strong to revenue support market. have the I'll the drive is is it. higher second in but of of how combined cylinders necessary segment the comes profit to-date financial models in strong largest firing expertise cash we and and been over Industry development is are of that the The leverage to technology which City segment disclose now CrossLayer. call CrossLayer turn have seen our the services The and believe expect the growth real-world operational proposition David implementation do a Infrastructure users. has reputation the we over all in in position internet, undertaking quarter been our Over Infrastructure Infrastructure built. of Wi-Fi. margins our IP interim, customer Wi-Fi the XX deployments it we decades Brooklyn provide time Not early now are of addition services providing XXXX. validating voice help great review adoption. next-generation the to the stimulate operational also and invested great with the our $X Overall, in bulk York. With recurring of approximately be our CrossLayer guest telecom a CFO bring Lethem, - that into in have Industry building flow the to and generating end technical we country business for and traditional our to was with value substantial of to tenant designed the example modernize with segment services continued are the infrastructure not where On-Net can with buildings, continue We will to margins we in central of cost CrossLayer results the be to CrossLayer the of of we R&D. one early perform with and support streams associated performance we believe now believe line and to internet, effort backbone connected who at that, to as of financial utilizing mix. CrossLayer, will bring City in software business campuses consists While

David Lethem

quarter I ended afternoon will our good Thank you, the now everyone. XX, and June Michael XXXX. of summary you for with results the provide financial

detailed Exchange Company’s along more Commission. Form the please earnings the For quarterly to and refer on results, the report with Securities with filed XX-Q release our

was in XXXX acquisition $XX.X in second In XX.X%. a of the with ended driven early of million was which Benchmark $XX.X quarter XX, million gross of margin on cost revenue the pro of representing $XX.X the same same XX.X% million forma margin pro in quarter $XX.X pro of This with XXXX. forma a the period compares cost XXXX. forma largely June This by the quarter XXXX. the second of of the million closed in period sales gross the sales basis totaled of in For a for compared increase XXXX

expense compared increase $XX.X operating forma of in quarter again pro in expenses XXXX Excluding attributable a $X.X which second were XXXX expense prior profit quarter $XX.X to were largely largely and million operating over have result of for $X.X XXXX. to to for showed SG&A XX.X% $X.X been quarter the expenses. same attributable included second million in was mix. in one-time Total increase the Benchmark. of XXXX margin second income operating forma in quarter the which the period $X.X increased project the XX.X% non-cash pro intangibles, basis second approximately is of million in per forma $X.X $X for an of expenses. with the a non-cash financing three of Adjusted Gross for expenses of million XXXX the XXXX basis, with was ended in or expenses approximately forma primarily same representing of general the of net million would prior months expenses amortization in Operating higher or included compared indicative of million for costs. XXXX. million increase of an was pro The for EBITDA amortization for to of the the cost QX's of year year pro $X.X one-time same primarily period June quarter the second quarter the the loss million of to which acquisition gross compensation business, increase in to expenses basis the share The for and expenses of net $X.X million million On of of a approximately associated quarter for $X.X attributable XXXX debt million an expenses of is adjusted million XXXX. an period. the on in $X.X as the of margin million good financing the corresponding more profit expenses we Selling, improvement million $X.X over Other increased costs, administrative $X.XX approximately value net XXXX. on loss This was the other in net other $X.XX increase generated compared adjusted period pro adjusted On GAAP same the share a EBITDA compares loss to with a deferred XXXX is XX, million period. basis. in of economic period which $X.X forma and $XX.X XXXX. from a discounts forma million second million per adjusted to attributable the for $XX $X.X was believe amortization the a of the pro Again we compared

of as and June XX, million. of million July As XXXX approximately combined backlog totaled XXXX, XX, $XXX $XXX

As of June million from XX, XXXX $XX.X increase XX, cash, of an million $X.X March in FTE had XXXX.

payable cash $XX.X $X half and represented allow terms strong seller our of low believe million current interest first in in notes in with operations XX, investment in XXXX. we’re of capitalized CrossLayer on payments of as since will million notes so party are and approximately X% seller million seller debt XXXX approximately June notes equipment related of $X.X notes we debt notes, to leases into $XX half debt million QX debt investments segment continued parties, terms by of notes approximately was and senior in flow Technology party in of over of between of service XXXX obligation XXXX in The per the In payment structure. beginning consisting other our the its of related cost principal have inception. payable. X% total through the $XX.X and the a due The million the We position from related

Going of million anticipate of ongoing approximately support we budget R&D annually in $X forward, CrossLayer.

this sufficient flow Operator, prepared portion investment. to anticipate operations cash my concludes of also financial the proceed please from the call. to commentary. fund Q&A fully We That

Operator

facilitate President Haberfield, Ted will of with the Group MZ question. Q&A. Mr. proceed now the Mr. first Haberfield please

Ted Haberfield

We all which received comments approximately questions you, six questioning sub and of it. Operator. to have lines Thank

increase flow? over on us significant cash question what debt the The please seems apprise financing to the reporting help to restructure to the there a better plans period. you first are debt in Can costs the company be is, with

David Lethem

Sure.

existing support we As said, portion and enough is restructure. to we remarks, that mentioned That from obligations. segment our to to operations debt our generated refinancing by alternatives we would address exploring Infrastructure believe that cash in our strong are prepared current a of future primarily like debt

Ted Haberfield

margins. we the CrossLayer The out results? see is to This technology second we have of does noticed would be line have compression the with the I thought questioning I move not margin forward bearing last to in higher begin as in latest quarter. seem

David Lethem

there period believe, that Benchmark lifecycle as period. contracts, the dollar on from be do increase, revenue fluctuate the from a of value We to contributions margins margins. do on impact Technology will and Depending the however, segment positive

Ted Haberfield

line bids diminishing? overall look? picture the third does for potential or how Have proposals The are through the increased demand is request quarter

Michael Palleschi

Ted take So I’ll that.

the the year. On year the the amount first have half projects in same of Infrastructure the segment in projected we the had that we of second half of

business Additionally more double from pipeline the than has its QX in CrossLayer QX.

Ted Haberfield

Line breakdown four, year. that backlog aside How $XXX to confident convert this backlog $XXX to approach and million backlog that you of is how to does what leaves expected year million, this CrossLayer? that sales much Benchmark and from of relative you’ll

Michael Palleschi

depending just decrease XX, how on of timing clarification backlog for as was of actually increase contracts. just the July the can million XXXX, $XXX or backlog quickly represents our Look which

backlog of Infrastructure backlog is we said progress been as projects and that of large the Our the with have previously consists associated percentage contracted, segment.

Ted Haberfield

on is, is the there business, contribute? little Line and the of did much legacy it five status what's there construction discussion telecom million $XX.X how the

Michael Palleschi

telecom We in do strong contract in increase the as over last however, breakout reporting. revenues legacy to months. report wins construction an announced not, business and the individual several Sure, continues we've subsidiary our segment remained

Ted Haberfield

And entertaining lines. was sorry, it, I’m company of last the - line is idea that there the five were the questioning

back So concludes for turn now that Palleschi I Q&A to will remarks. now Mr. the section. it closing over

Michael Palleschi

to is summary, In XXXX had this expect Ted. we a half trend Thanks continue. great we first and a

a company doing that. that tremendous advanced flows dynamic and potential. exactly deal both great build vision made technologically offered We've was cash to strategic strong of Our growth progress

three, by one, Before of guidance of in R&D the the key and net EBITDA operations million reiterate is service from Number On-Net with near-term. to we CrossLayer cash on XX additional and close, a spec takeaways call sheet. company briefly On-Net strong bringing I two, in performing like revenue, confirming to are four, we CrossLayer. Number $XX to principal few CrossLayer $XXX buildings company continued allow today. regarding associated from of adjusted our anticipate the year-end. flow debt million Number will both interest loss supporting buildings buildings very balance and Number

a sheet contract will opportunistically XXXX. year-to-date operations strong very lastly continue pace wins continue balance We to optimize as million over as brisk from cash And number time increased totaling provide new the flexibility. flows our July five, at $XXX of

Before today, their all taking hard wanted you to concludes for dial the dedication, time call. continued up truly and that and team I thank I wrap support work our in appreciate it. of thank I Operator, for very much our to

Operator

today's concludes conference. This

may participation. time. Thank this lines for at you your You your disconnect

FTE Networks (FTNW) 21 Aug 182018 Q2 Earnings call transcript