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SAExploration Announces Third Quarter 2016 Financial Results

HOUSTON, Nov 03, 2016 (GLOBE NEWSWIRE via COMTEX) --

SAExploration Holdings, Inc. SAEX, -28.49% ("SAE" or the "Company") today announced its consolidated financial results for the third quarter ("Q3") and nine months ended September 30, 2016.

Third Quarter 2016 Summary

  • Revenue of $33.0 million, compared to $57.9 million in the same period last year
  • Gross profit of $1.4 million, or 4.2% of revenues, compared to $13.8 million, or 23.7% of revenues, in the same period last year
  • Adjusted gross profit of $5.5 million, or 16.7% of revenues, compared to $18.2 million, or 31.5% of revenues, in Q3 2015
  • Net loss attributable to the Corporation of $(17.4) million, compared to $(0.1) million in Q3 2015
  • Adjusted EBITDA of $(0.4) million, or (1.1)% of revenues, compared to $10.5 million, or 18.1% of revenues, in the same period last year
  • Contracted backlog of $67.5 million through 2017 and $502.7 million of bids outstanding
  • Received $24.4 million in Alaskan tax credit certificates, with another $60.5 million expected within next twelve months
  • Granted access to remaining $15.0 million of funding under $30.0 million Senior Term Loan Facility

Jeff Hastings, Chairman and Chief Executive Officer of SAE, commented, "While our third quarter results were challenged compared to our first half performance, we are encouraged with how SAE is positioned in this current market environment. Total revenues in the third quarter, excluding Alaska tax credit projects, increased to $32.7 million from $3.0 million in Q3 2015. Our execution in the field remains well above industry norms, and we continue to realize the positive impact of our previously implemented cost reduction initiatives. While we expect similar activity levels in the fourth quarter of 2016 to what we experienced in the fourth quarter of last year, we are optimistic that SAE has entered its trough and activity should begin to improve in 2017."

Mr. Hastings continued, "As illustrated by the growth in our bids outstanding, we are seeing more and more customers developing plans to return to work. We are encouraged by the numerous discussions we're currently having, which cover diversified opportunities, including onshore and ocean-bottom marine bids, and near-term and multi-year projects. We expect to remain focused throughout the balance of the year and into the beginning of 2017 on converting these opportunities into signed contracts. Most encouraging, however, is our lack of dependence on current activity levels to support our business until our anticipated return to growth in 2017. While difficult to make, the recent decision to recapitalize and restructure the company has given SAE ample liquidity and financial flexibility to provide for our future longevity. With the restructuring behind us, our management team can now focus on ensuring we are optimally positioned to capture and convert the opportunities in front of us. During a very turbulent and volatile period in our industry, we have the ability to maintain a strategic and disciplined focus on the future growth of this company."

Mr. Hastings further commented, "In addition to now having access to the remaining $15 million of funding available under our senior term loan facility, we expect the cash flows generated by monetizing the Alaskan tax credit certificates to replace what otherwise would have been cash flow generated by operations in a stronger market. This is supported by our ability to quickly begin the monetization process shortly after receiving the $24.4 million of initial tax credit certificates, as evidenced by the $2.7 million in proceeds received during the third quarter, and the further $6.5 million in proceeds received in October 2016. As we continue to monetize these initial certificates during the fourth quarter, we look forward to receiving the remaining $60.5 million of tax credit certificates in 2017. Ultimately, we anticipate that the cash flow that can be generated with these tax credit certificates will surpass any level of operating cash flow we've produced in prior periods."

Mr. Hastings concluded, "While our hitting the bottom of the cycle may have been delayed somewhat compared to other oil and gas service companies, we are not immune from the sharp and sudden pullback in exploration activity. Our reliable and diversified backlog supported our operational strategy for the last six quarters, and allowed us to flex our strengths and produce strong financial performances, despite lower revenue over the periods. With a sustainable level of revenue generation, supported by a more robust backlog, we are confident in our ability to replicate those performances again once we emerge from our trough. I believe SAE has the correct formula for long-term growth and success. With ample liquidity, a de-levered balance sheet, significantly reduced cash interest expense, and a flexible, asset-light business model that requires minimal capital expenditures to generate revenue, I firmly believe the long-term future is bright for SAE and its stockholders."

Third Quarter 2016 Financial Results

Revenues decreased 43.1% to $33.0 million from $57.9 million in Q3 2015, primarily due to a significant decrease in activity in Alaska compared to the same period last year. In the third quarter of 2016, there were no active projects performed in Alaska, compared to multiple projects in the same period last year. However, total revenues excluding Alaska tax credit projects in the third quarter increased substantially to $32.7 million from a comparable figure of $3.0 million in Q3 2015, largely due to the completion of a major project in Bolivia and the progression of smaller projects in Colombia. During the same period in 2015, South America had minimal activity.

Gross profit was $1.4 million, or 4.2% of revenues, compared to $13.8 million, or 23.7% of revenues, in Q3 2015. Gross profit for Q3 2016 and Q3 2015 included depreciation expense of $4.1 million and $4.5 million, respectively. Gross profit, excluding depreciation expense, or adjusted gross profit, for Q3 2016 was $5.5 million, or 16.7% of revenues, compared to $18.2 million, or 31.5% of revenues, in Q3 2015. The decrease in gross profit, both in amount and as a percentage of revenue, was largely attributable to the overall reduction in revenue for the period, compounded by fixed-rate depreciation expense on unutilized equipment. Additionally, the third quarter of 2016 included summer maintenance expenses in Alaska, which were not present in the same period last year, and a higher concentration of projects that exhibited customer pricing pressure in South America, compared to projects during Q3 2015 in North America that carried more favorable pricing terms.

Selling, general and administrative ("SG&A") expenses during the quarter were $6.9 million, or 21.0% of revenues, compared to $8.8 million, or 15.2% of revenues, in Q3 2015. The decrease in the amount of SG&A expenses was primarily due to headcount reductions and cost controls implemented in 2015 and additional measures undertaken in 2016. During Q3 2016 and Q3 2015, there were approximately $1.3 million and $1.0 million, respectively, of non-recurring or non-cash expenses included in SG&A.

Loss before income taxes was $(16.3) million during the quarter, compared to income before income taxes of $0.2 million in Q3 2015. The decrease in income before income taxes was largely due to lower gross profit and much higher other expense. During Q3 2016, other expense included, among other items, approximately $2.9 million of costs incurred on debt restructuring and approximately $7.5 million of interest expense, of which, approximately $4.4 million was amortization of loan issuance costs. While the costs incurred on debt restructuring are attributable to the restructuring that closed on July 27, 2016, the $4.4 million of amortization of loan issuance costs is expected to continue to impact income before income taxes until the senior term loan facility is repaid in full or matures in January 2018.

Net loss attributable to the Corporation for the quarter was $(17.4) million, or $(2.62) per diluted share, compared to $(0.1) million, or $(0.93) per diluted share, in Q3 2015. Net loss was impacted by a number of factors during Q3 2016, including:

  • Decreased revenues resulting in a narrowing gross profit margin;
  • Costs incurred for the debt restructuring and related increase in interest expense for amortization of loan issuance costs; and
  • Proportionately higher provision for income taxes; partially offset by
  • Lower SG&A expenses; and
  • Lower unrealized losses on foreign currency transactions.

Adjusted EBITDA, which is defined and calculated below, was $(0.4) million during the quarter, or (1.1)% of revenues, compared to $10.5 million, or 18.1% of revenues, in Q3 2015.

Capital expenditures for the quarter were $0.1 million, compared to $0.7 million in Q3 2015. The low level of capital expenditures in both periods was primarily due to the deteriorating conditions in the oil and gas industry, which presented limited to no growth opportunities requiring capital expenditures.

Year-to-Date 2016 Financial Results

Revenues decreased 11.9% to $180.2 million from $204.5 million in the first nine months of 2015. Year-to-date revenues in 2016 were close to evenly split between North America and South America, with revenue contribution during the same period in 2015 much more weighted towards North America. During the first nine months of 2016, South America experienced an increase in the overall amount and size of projects performed, compared to the same period in 2015, while activity levels in North America decreased year-over-year, primarily due to a decline in project opportunities during the second and third quarters of 2016, compared to robust activity levels in the same period last year. Aside from residual revenue related to data processing associated with a major deep water ocean bottom marine project performed in the first half of 2015, Southeast Asia had no active land or marine projects during the first nine months of 2016.

Gross profit decreased 13.3% to $44.2 million, or 24.5% of revenues, from $50.9 million, or 24.9% of revenues, in the first nine months of 2015. Gross profit for the first nine months of 2016 and 2015 included depreciation expense of $12.5 million and $13.7 million, respectively. Excluding depreciation expense, adjusted gross profit for the first nine months of 2016 was $56.7 million, or 31.5% of revenues, compared to $64.6 million, or 31.6% of revenues, in the first nine months of 2015. The decrease in gross profit was primarily related to the reduction in active projects, primarily in the third quarter of 2016, while the gross profit, as a percentage of revenue, during the first nine months of 2016 was comparable to the same period in 2015 due to increased cost controls and operational improvements.

SG&A expenses during the first nine months decreased 20.9% to $20.9 million, or 11.6% of revenues, from $26.4 million, or 12.9% of revenues, in the same period in 2015. The decrease in SG&A expenses, both in amount and as a percentage of revenue, was primarily due to headcount reductions and cost controls implemented in 2015 and additional measures undertaken in 2016. During the first nine months of 2016 and 2015, there were approximately $2.4 million and $3.3 million, respectively, of non-recurring or non-cash expenses included in SG&A.

Income before income taxes was $4.7 million year-to-date, compared to $8.8 million in the first nine months of 2015. The decrease in income before income taxes was largely due to lower gross profit and higher other expense. During the first nine months of 2016, other expense included, among other items, approximately $5.2 million of costs incurred on debt restructuring and approximately $15.6 million of interest expense, of which, approximately $5.2 million was amortization of loan issuance costs. Also included in other...


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