FTE Networks, Inc. CEO Letter to
Shareholders
Company Provides Corporate Update
NAPLES, Fla. -- October 17, 2017 -- InvestorsHub NewsWire
-- FTE Networks, Inc. (OTCQX:
FTNW) ("FTE" or the "Company"), a leading provider of
innovative technology-oriented solutions for smart platforms,
network infrastructure and buildings, today provided a shareholder
update on its business outlook.
Dear Shareholders:
We would like to take this opportunity to update you on the
advances that we have made in the nine months ending 9/30/17, and
provide management's
outlook for the remainder of this year and into 2018. In 2017,
we have made considerable progress in delivering on our growth
initiatives and on our goal to become a "One-Stop Shop" for
technology, telecommunications, and general contracting. Following
the Company's April 2017 transaction with Benchmark Builders, Inc.,
("Benchmark"), a company with $389 million in revenue and $32.8
million in pro forma adjusted EBITDA in 2016, we believe we are an
undervalued technology company compared to our peers. Our combined
companies provide a platform for significant growth as we leverage
the market opportunities that each subsidiary provides to our
overall expansion strategy.
The company continues its upward growth trajectory into third
quarter with tremendous improvement over second quarter 2017.
Third Quarter Financial Highlights
- Anticipate revenues in excess of $75 million with an increase
in gross margin due to operational efficiencies, successful
integration of Benchmark Builders and operating leverage as we grow
top line revenues
- Combined backlog in excess of $325 million
- Refining our brand - FTE operates three distinct and
synergistic entities with eight lines of business through our
wholly owned subsidiaries
- FTE Network Services Telecom and Technology Infrastructure
Services
- CrossLayer Managed Network Services and Technology
Solutions
- Benchmark Builders General Contracting
- Company continues to invest in its cutting edge disruptive
technology offered through CrossLayer, Inc. and has invested over
$4 million to date
Recent Business Highlights
- Won three new projects that include infrastructure and
technology expansion
- These announced new contracts are valued at a combined
$61.6MM
- Continuing to expand footprint and services to Fortune 100/500
clients
- Continuing efforts to list on major stock exchange
As part of its ongoing commitment to strengthen its
communication with its shareholder base, the Company plans to
continue engaging stakeholders in meaningful dialogue via investor
conferences and other communication channels.
What we do - FTE Network Services provides network
infrastructure solutions for the telecom and technology sectors.
CrossLayer, Inc. offers managed network services with a
first-of-its-kind advanced network and cloud platform. Benchmark is
a premier, full-service interior and general contracting company.
We offer general contract management, and provide end-to-end
design, build and support solutions for state-of-the-art networks
and commercial properties, to create the most transformative smart
platforms and buildings. Overall, we operate eight lines of
business, including Data Center Infrastructure, Fiber Optics,
Wireless Integration, Network Engineering, Internet Service
Provider, General Contracting Management, and General
Contracting.
We are excited about the opportunities ahead of us, and we want
to highlight some of them for you, beginning with five fast-growing
markets estimated to reach $576 billion by 2021. According to Cisco
Systems, demand for increased internet speed will grow by 300% over
the next four years. Our three businesses complement and enhance
one another to provide end-to-end solutions to clients facing these
increasing demands for bandwidth. All three subsidiaries are
profitable. In the first half of 2017, the Company recorded $10.5
million in one-time non-recurring cash and non-cash expenses,
primarily related to the closing of the Benchmark transaction. On
an adjusted basis, net income was $1.5 million. Moreover, the
Company has Invested $4.0 million in CrossLayer to-date.
Our businesses are predicated on smart design and consistent
standards that reduce deployment costs and accelerate delivery of
innovative projects and services. We work with Fortune 100 and 500
companies, including some of the world's leading communications
services providers. Clients include AIG, Credit Suisse, Dow Jones,
ESPN, FINRA, Google, Morgan Stanley, and the NYSE, to name a few.
Clients have responded enthusiastically to our One-Stop Shop
concept. We have strong market share in key markets such as New
York City, and are aggressively pursuing and opening new
markets.
Fast-Growing Markets
We currently service five markets anticipated to grow to $576B
by 2021. The In-Building Wireless Market is
forecasted to grow at 28% from $4.8 billion in 2015 to $16 billion
in 2020, according to market research firm, Markets and Markets.
The Global Smart Buildings Market is forecasted to grow at 30% from
$7 billion in 2014 to $36 billion in 2020. The Network
Infrastructure (Fiber) Market is forecasted to grow from $130
billion in 2017 to $150 billion in 2021. The Data Center Market is
forecasted to grow from $130 billion in 2017 to $170 billion in
2021. Our fifth and largest market, US Commercial Construction, is
a $204 billion market forecasted to grow at 10% per year.
Benchmark Complements and Enhances Our Consolidated Business
The addition of Benchmark has catapulted us to a new level of
visibility and opportunity. Benchmark was ranked No. 6 among the
top general contractors for alteration and renovation projects,
based on initial estimated costs listed in New York City Department
of Building permits filed between January 2012 and March 2017. The
ranking appears in the May 2017 issue of The Real Deal, considered the
leading source of New York real estate news.
To date in 2017, Benchmark has won eight new interior projects,
augmenting the combined backlog of $346.7 million that FTE and
Benchmark had as of June 30, 2017. Benchmark continues to expand
its reach in the New York City market. In total, the new projects
represent approximately 820,000 square feet of build-outs. All
eight projects are located in New York City and its
surrounding boroughs, and are expected to be completed by year-end
2017.
Demand for Smart Buildings Drives Demand for Our Services
Crosslayer is the Key
We are focused on a big problem in the market. A 2015 study by
Wired Score found that, for
office workers, "reliable connectivity is the #1 most important
influencing factor in selecting office space, ahead of
transportation, location, amenities, views, and environmental
sustainability." The technology for delivering this immediate
access has become known as "Edge Computing." Edge Computing
technology enables the cost-effective development of in-building
and on-campus networks that commercial property developers can own,
operate, and monetize. Edge Computing technology is efficient,
flexible, scalable, and secure.
We believe that new imperatives for smart building networks will
continue to drive demand for our horizontally integrated services.
These imperatives include:
That the real estate sector
has been challenged to evolve in an increasingly networked world,
with tenants expecting rapid broadband and Wi-Fi, as businesses
become more data-driven, and as consumers depend on
internet-delivered entertainment and other applications.
There is no clear
"blueprint" for building owners to implement a cost-effective and
future-proof smart building.
Our Edge Computing
solution, CrossLayer, efficiently uses low-cost commodity servers
that enable new capabilities and scaling through upgradable, open
source software releases in a way that is similar to visiting the
App Store to select new features.
CrossLayer can occupy a
small space and still enable network, cloud, content and data to
converge into a single network platform in an environment that
evolves with technology.
Our Edge Computing
architectures are flexible and able to support a wide range of
applications to address the needs of many diverse industries.
Large commercial buildings
can use CrossLayer for a wide range of smart building applications
and security, ranging from HD video monitoring to power, HVAC
control and locally secure IoT (the internet of things) device
gateways.
Our Edge Computing
solution, CrossLayer, allows property managers to optimize
efficiency.
Many Opportunities for our Inside Plant and Outside Plant
Businesses
At the parent company level, FTE Networks is leveraging its
technology expertise and Benchmark's position in the New York City
market to maintain its strong growth momentum and realize synergies
among and across the three entities. Specifically, to drive organic
growth, we remain focused on high-growth markets such as New York
City and Denver, where we have already developed a strong presence.
At the same time, we continue to see opportunities in new markets,
as more companies recognize the benefits of our One-Stop Shop
concept, as well as our strength in Edge Computing. Our momentum
continues as we expand our footprint in the Midwest and South, for
instance.
One example of this is within our Inside Plant operating group
at FTE Network Services. We have been awarded a new contract by a
Fortune 2016 Global 500 telecom company for Inside Plant work. This
client is a company we've worked with previously and they've chosen
to work with us again because of their first-hand experience with
the peerless quality of our services, our performance, our
transparency, and our commitment to deadlines.
We also secured two new master services agreements (MSAs) with
new local exchange carriers (LECs) earlier this year. The new MSAs
expand our footprint in the Midwest and South and add to our
Outside Plant (OSP) line of business. Work on the projects is
expected to commence in the last quarter of 2017, with revenue
expected to be recognized during the final 2017 quarter, as work is
completed.
These new agreements cover projects in Michigan, Oklahoma,
Tennessee and Wisconsin, among other states. Michigan, Oklahoma,
Tennessee and Wisconsin are all new markets for us, as we continue
to focus on expanding our footprint. One of the LECs ranks among
the top ten LECs in the country, providing 1.2 million connections
to high-speed internet, phone and TV entertainment services in
nearly 900 metropolitan, rural and suburban communities. The other
is a leading provider of data, video and voice services to
commercial and consumer customers in 29 states, a Fortune 500
company and a member of the S&P MidCap 400.
Six Months Ended June 30, 2017
As a result of our initiatives, including our integration with
Benchmark, we reported $50.7 million in consolidated revenues for
the three months ended June 30, 2017, up from $3.2 million reported
for the same period in 2016. We reported gross profit of $8.3
million, compared to $1.2 million recorded in 2016.
The increase in revenues is primarily attributable to the
Benchmark's integration. Specifically, Benchmark generated revenue
of $43.1 million for the period April 21, 2017 through June 30,
2017. As of June 30, 2017, we had a backlog of unfilled contracts
and master service agreements of approximately $346.7 million,
consisting of $195.4 million of Benchmark's backlog.
Laying the Groundwork for an Uplisting to National Exchange
With our stronger operating structure, significantly increased
revenue, and enhanced opportunities, we believe it is time to focus
on listing our shares on a national exchange, and we plan to
initiate efforts in furtherance of this goal. We believe that
listing on a national exchange will enhance our visibility within
the investment community and broaden the base of potential
investors in our common stock. A national uplisting will also
expand our ability to obtain coverage from investment banks and
sell-side analysts. We also believe a national listing will boost
our profile with institutional funds and attract institutional
shareholders, as well as the participation of stock brokers and
financial advisors at many firms that are otherwise restricted from
trading in our common stock because it is not listed on a national
exchange. With the fundamental growth of the Company, coupled with
the vast market we have entered, we believe our common stock will
be attractive to many new investors.
In Conclusion, We Are Optimistic About Our Opportunities
In conclusion, as a result of the groundwork we have laid and
the fact that we have approximately $98 million in revenues and
$1.5 million in adjusted net income in the first half of 2017 and
anticipate a tremendous increase in revenue and profitability in
the second half of 2017, we believe we are well on our way to
becoming a leading small-cap growth and value play. Upon listing on
a national exchange, we are confident that more investors will
recognize, and be able to participate in, our growth.
Finally, we look forward to another exciting year, filled with
many anticipated milestones and achievements. We would like to
remind you that management is dedicated to delivering shareholder
value by growing the Company. Thank you for your continued
commitment to FTE Networks. Please do not hesitate to contact us
directly with any additional questions.
Sincerely,
Michael Palleschi
President and CEO
Media and Investor Relations:
FTE Networks, Inc.
999 Vanderbilt Beach Rd., Suite 601
Naples, FL 23108
(877) 850-4308
ir@ftenet.com
OTCQX:FTNW
Cautionary Note Regarding Forward-Looking Statements
This shareholder update contains "forward-looking statements"
within the meaning of the safe harbor provisions of the U.S.
Private Securities Litigation Reform Act of 1995. Forward-looking
statements can be identified by words such as: "outlook," "intend,"
"plan," "believe," "expect," "strategy," "future," "estimate,"
"anticipate," and similar references to future periods. Examples of
forward-looking statements include, among others, statements we
make regarding our expected operating results, such as revenue
growth and earnings potential as a result of our integration with
Benchmark, new service agreements, and enhanced service offerings;
our strategies for continued growth and accelerated market
expansion; our belief that our suite of services and products,
combined with new business opportunities and market demand, will
meet our anticipated projections and desired results; and our plans
to pursue a listing on a national exchange and that said listing
will result in greater interest and visibility in our common
stock.
Forward-looking statements are neither historical facts nor
assurances of future performance. Instead, they are based only on
our current beliefs, expectations and assumptions regarding the
future of our business, future plans and strategies, projections,
anticipated events and market trends, the economy and other future
conditions. Because forward-looking statements relate to the
future, they are subject to inherent uncertainties, risks and
changes in circumstances that are difficult to predict and many of
which are outside of our control. These risk factors and others are
included from time to time in documents we file with the Securities
and Exchange Commission, including but not limited to, our Form
10-K's, Form 10-Q's and Form 8-K's. Our actual results and
financial condition may differ materially from those indicated in
the forward-looking statements. Accordingly, you should not place
undue reliance on these forward-looking statements. Any
forward-looking statement made by us in this update is based only
on information currently available to us and speaks only as of the
date on which it is made. We undertake no obligation to publicly
update any forward-looking statement, whether as a result of new
information, future developments or otherwise.
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