Sign in

You're signed outSign in or to get full access.

GE

GlassBridge Enterprises, Inc. (GLAE)·Q4 2017 Earnings Summary

Executive Summary

  • Q4 2017 was mixed: revenue fell 22.1% year over year to $8.8M, but gross margin improved to 47.7%; total operating loss widened to $10.5M due to $6.5M in goodwill/intangible impairments, while Nexsan segment operating loss improved ~36% sequentially, stabilizing revenue .
  • Asset management progressed: GlassBridge secured initial third‑party capital into GBAM’s quantitative strategy during Q4; cumulative proprietary gains since launch reached $1.2M .
  • Management expects Nexsan revenue to grow sequentially and operating results to improve, potentially turning profitable in Q1 2018, and plans 2018 corporate cash spending of ~$3.8M (~30% reduction YoY) .
  • Liquidity stood at $9.5M in cash and short‑term investments at year‑end, aided by a $2.3M AMT tax refund receivable expected in 2019/2020; settlement payments and operating losses reduced Q4 cash by $8.9M .

What Went Well and What Went Wrong

What Went Well

  • Secured third‑party investment for GBAM’s quantitative strategy in Q4, validating platform readiness: “we were able to secure third party investment in Q4 2017” .
  • Nexsan segment operating loss improved ~36% sequentially, with revenue stabilization and cost actions (new leadership, reduced executive comp, cut non‑critical engineering, eliminated money‑losing products) .
  • Gross margin expanded to 47.7% (+260 bps YoY) on production cost improvements and mix, despite revenue decline .

What Went Wrong

  • Consolidated operating loss widened to $10.5M vs. $5.1M in Q4 2016, driven by $3.8M goodwill and $2.7M intangible impairments linked to discontinuing Transporter technology from CDI .
  • Revenue fell 22.1% YoY to $8.8M, reflecting weakness in block HDD and hybrid flash arrays affecting Nexsan product sales .
  • Cash declined by $8.9M in Q4 due to operating losses and ~$5.2M litigation settlement payments (Io‑Engine and CMC), tightening near‑term liquidity .

Financial Results

Consolidated Performance vs Prior Year and Prior Quarter

MetricQ4 2016Q3 2017Q4 2017
Revenue ($USD Millions)$11.3 $9.3 $8.8
Gross Margin (%)45.1% 43.0% 47.7%
Operating Income (Loss) ($USD Millions)$(5.1) $(6.3) $(10.5)
Operating Margin (%)−45.1% −67.7% −119.3%
EPS (Continuing Ops) ($)$(3.22) $0.06 $(0.66)
Net Loss Attributable to GLAE ($USD Millions)$(21.4) $8.0 $(3.5)

Notes:

  • The consolidated operating loss increased QoQ due to non‑cash impairments; Nexsan segment operating loss improved sequentially (see segment table) .

Actual vs Consensus (Q4 2017)

MetricActualConsensusBeat/Miss
Revenue ($USD Millions)$8.8 N/A (S&P Global consensus unavailable)N/A
EPS (Continuing Ops) ($)$(0.66) N/A (S&P Global consensus unavailable)N/A

S&P Global consensus estimates were unavailable for GLAE Q4 2017 due to missing CIQ mapping; estimates comparison cannot be performed.

Segment Breakdown (Q4 2017 vs Q4 2016)

SegmentRevenue Q4 2016 ($M)Revenue Q4 2017 ($M)Operating Income (Loss) Q4 2016 ($M)Operating Income (Loss) Q4 2017 ($M)OI% Q4 2016OI% Q4 2017
Nexsan$11.3 $8.8 $(3.2) $(1.6) −28.3% −18.2%
Asset Management$0.0 $0.0 N/A $(1.4) NM NM
Goodwill Impairment———$(3.8) NM NM
Intangible Impairment———$(2.7) NM NM
Corp/UnallocatedN/AN/A$(1.9) $(1.0) NM NM
Total Operating Loss$(5.1) $(10.5) ——−45.1% −119.3%

KPIs and Operating Metrics

KPIQ4 2016Q3 2017Q4 2017
Days Sales Outstanding (DSO)53 67 60
Days of Inventory Supply83 136 93
Employees (approx.)175 145 120
Cash & Cash Equivalents ($M)$10.0 $15.7 $8.8
Short‑Term Investments ($M)$22.0 $2.7 $0.7
Capital Spending ($M)$0.2 $0.3 $0.2
Depreciation ($M)—$0.4 $0.2
Amortization ($M)$0.3 $0.7 $0.7
Book Value per Share ($)—$(3.92) $(4.68)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Nexsan revenue and operating resultsQ1 2018Not previously guidedRevenue to grow sequentially; operating results to improve, potentially profitable New commentary
Corporate cash spendingFY 2018Not previously guided~$3.8M; ~30% reduction vs prior year New commentary
AMT tax refundFY 2019–2020N/A$2.3M receivable; ~50% in H1’19 and ~50% in H1’20 New information
Legacy legal cost (EU levy)FY 2018+N/AFinalizing financing agreement to eliminate levy legal costs while preserving upside New initiative

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2017)Previous Mentions (Q3 2017)Current Period (Q4 2017)Trend
Quant strategy performance/GBAMEarly launch; soft start consistent with quant drawdowns; plan to raise seed investors Proprietary gain of $1.0M; continued investor engagement Secured third‑party capital; cumulative proprietary gains $1.2M; continued global investor pipeline Improving execution/traction
ARRIVE VC/PE JVPartnership with Roc Nation/Primary; evaluating deal flow Ongoing investments; strong pipeline 3 investments; 2 raising at higher valuations; ongoing larger transactions Positive validation
Nexsan operating trajectoryCost actions; need capital; exploring options Operating loss $(2.5) in Q3; cost reductions continued Segment OI loss improved; revenue stabilized; aiming for SaaS (Assureon) and niche focus Stabilizing with targeted focus
Litigation/legacy resolutionActive CMC/Io‑Engine cases; strategy to monetize legacy assets Settlements reversed ~$11M accruals; Q3 discontinued ops gain $7.7M Settlement payments in Q4; plan to finance EU levy litigation costs De‑risking; lower future legal spend
Liquidity/capital needsLiquidity plan; potential capital raises; cash ~$16.2M Cash & ST investments $18.4M; down $1.1M Cash & ST investments $9.5M; tax refund receivable $2.3M Tighter near‑term liquidity, identified inflows

Management Commentary

  • “We were able to secure third party investment in Q4 2017… through our capacity agreement with Clinton Group.”
  • “Despite all of the challenges, our Q4 2017 operating loss decreased by approximately 36% from the prior quarter and revenue was stabilized.” (Nexsan segment)
  • “Nexsan… has an opportunity to position itself as a storage solutions provider to the… archival market segment. Assureon… is well suited to Secure Archive Data Management.”
  • “The 2018 corporate cash spending is estimated at $3.8 million, which is approximately a 30% reduction from the prior year.”
  • “We recorded a U.S. tax refund receivable of $2.3 million… expect to receive 50% in the first half of 2019 and the remaining 50% in the first half of 2020.”
  • “Having weathered headwinds in 2017, we believe there are clearer skies ahead… and expect to generate revenue in the coming quarters.”

Q&A Highlights

  • The transcript indicates a Q&A segment but does not include the Q&A content; notable Q&A details are unavailable in the provided transcript .

Estimates Context

  • S&P Global consensus estimates for Q4 2017 EPS and revenue were unavailable for GLAE due to missing company mapping; as a result, we cannot assess beats/misses versus Street for this quarter. We will update comparisons when S&P Global mapping becomes available.
  • Without consensus, investor focus should center on the widening consolidated operating loss from non‑cash impairments versus the improving Nexsan segment OI and gross margin expansion .

Key Takeaways for Investors

  • Asset management has an emerging catalyst: initial third‑party capital secured and cumulative proprietary gains of $1.2M since fund launch; further AUM growth would diversify earnings away from Nexsan .
  • Consolidated operating loss widened on non‑cash impairments; however, Nexsan’s segment OI improved and gross margin expanded, suggesting early benefits of cost rationalization and product focus (Assureon) .
  • Near‑term liquidity tightened to $9.5M at year‑end; expected $2.3M AMT tax refund provides partial relief, but careful cash management and potential additional funding needs at Nexsan remain a watch item .
  • 2018 corporate cash spending targeted at ~$3.8M, a ~30% reduction, and legal cost trajectory improving via settlements and proposed litigation financing — a structural positive for cash burn .
  • Sequential improvement and potential profitability at Nexsan in Q1 2018 are critical stock catalysts; delivery on SaaS‑like Assureon strategy could re‑rate margin profile .
  • With Street estimates unavailable, monitor subsequent disclosures for guidance granularity and AUM inflows; sensitivity to capital raising, litigation resolution, and Nexsan funding remains high .
  • Tactical: near‑term trading could hinge on confirmation of Q1 Nexsan profitability and evidence of additional third‑party AUM; medium‑term thesis depends on executing the asset management build‑out alongside stabilizing Nexsan operations .