pdvWireless, Inc. :PDVW-US: Earnings Analysis: Q4, 2016 By the Numbers : June 17, 2016

pdvWireless, Inc. reports financial results for the quarter ended March 31, 2016.

We analyze the earnings along side the following peers of pdvWireless, Inc. – SBA Communications Corporation, T-Mobile US, Inc., Gogo Inc. and United States Cellular Corporation (SBAC-US, TMUS-US, GOGO-US and USM-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 0.95 million, Net Earnings of USD -6.77 million.
  • Gross margins narrowed from 61.48% to -82.60% compared to the same period last year, operating (EBITDA) margins now -686.66% from -681.25%.
  • Year-on-year change in operating cash flow of -1,219.43% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2015-03-31 2015-06-30 2015-09-30 2015-12-31 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 0.82 0.84 0.81 0.94 0.95
Revenue Growth (%YOY) N/A -6.68 30.98 12.54 16.61
Earnings (mil) -5.58 -4.35 -5.46 -5.24 -6.77
Earnings Growth (%YOY) N/A -68.15 -80.8 -48.72 -21.37
Net Margin (%) -684.52 -517.45 -672.69 -557.62 -712.49
EPS -0.44 -0.32 -0.38 -0.36 -0.47
Return on Equity (%) -10.38 -7.1 -7.97 -7.78 -10.23
Return on Assets (%) -9.84 -6.78 -7.69 -7.47 -9.8

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Market Share Versus Profits

Revenues History
Earnings History

PDVW-US‘s change in revenue this period compared to the same period last year of 16.61% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that PDVW-US is holding onto its market share. Also, for comparison purposes, revenues changed by 1.11% and earnings by -29.19% compared to the immediate last period.

Revenues Growth Versus Earnings Growth


Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 61.48% to -82.60%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from -681.25% to -686.66% in this time frame. For comparison, gross margins were 0.05% and EBITDA margins were -543.45% in the previous period.

Gross Margin Versus EBITDA Margin


Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

PDVW-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 14,685.05 days, compared to last year’s level of 13,061.50 days.

Gross Margin Versus Working Capital Days


Cash Versus Earnings – Sustainable Performance?

PDVW-US‘s change in operating cash flow of -1,219.43% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth


Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from -686.36% to -714.99% and (2) one-time items that contributed to a decrease in pretax margins from -684.52% to -712.49%

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for pdvWireless, Inc.


Company Profile

pdvWireless, Inc. provides mobile workforce communications and location based solutions that increase the productivity of field-based workers and the efficiency of their dispatch and call center operations. Its patented and industry-validated technology improves team communication and field documentation across a wide array of industries including transportation, distribution, construction, hospitality, waste management and field service. The company is run by Brian McAuley, Morgan O’Brien and John Pescatore and is headquartered in Woodland Park, NJ.

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