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Contact:
Bruce
Widener, CEO
502-657-3507
investors@askbeacon.com
Porter,
LeVay & Rose, Inc.
Marlon
Nurse, V.P. – Investor Relations
212-564-4700
Halliburton
Investor Relations
Geralyn
DeBusk, President, or Hala
Elsherbini,
COO
972-458-8000
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Beacon
Enterprise Solutions Discusses Outlook for 2011
—Focus
Will Be On Higher Margin ITS Infrastructure Engagements—
—Net
Sales Growth Projected to Resume—
—SG&A
Projected to Remain Stable—
LOUISVILLE, KY, August 26, 2010 —
Beacon Enterprise Solutions Group, Inc. (OTC BB: BEAC) (www.askbeacon.com)
an emerging global leader in the design, implementation and management of high
performance Information Technology Systems (ITS) infrastructure solutions, today
discussed recent developments and outlook for 2011.
“We are
more committed and confident today than ever before that we are on the right
path to build Beacon into an internationally recognized brand in ITS
infrastructure services,” stated Bruce Widener, CEO of Beacon
Solutions. “The decisions made this past quarter represented a course
correction necessary to adequately realize the opportunities within the $70
billion global ITS infrastructure market. By eliminating the
distractions and complexities of non-core, lower margin general contracting
business and renewing the focus on our four core segments of professional
services, we believe that Beacon is better positioned for growth and
profitability in 2011 and beyond. We are acutely focused on the
growth of our core professional services business by pursuing additional new
engagements with numerous existing customers. Additionally, we’re
pursuing new customers by leveraging relationships with manufacturers and
distributors of ITS infrastructure equipment and materials as well as technology
and trade partners in related industries.”
“Beacon’s
core business is solving our customers’ problems with the design, construction
and management of their information technology systems,” commented Jerry Bowman,
Chief Operating Officer of Beacon Solutions. “By providing ITS
professional services on a managed services platform, our core business responds
to an unmet market need, strengthens our competitive position and creates a
win-win situation where we can provide substantial savings to our
clients. The types of problems and solutions may change depending on
the economy and the business objectives of the client, but the continuum that
runs the gamut from downsizing to growth contains roughly equal amounts of work
with very different drivers. In response, we have expanded the breadth of
services offered within the ITS sector, due primarily to reduced internal
resources and strategic sourcing efforts seen within our clients. As
evidenced by client feedback and the aggregate future value of our project
backlog, currently at $76 million, there is ample demand for our service
offering and as a result we are preparing for our core business with existing
clients to double in 2011.”
Bowman
continued, “The size of a company’s project backlog only tells part of the
story. A large backlog stacked with low-margin or difficult business
can be a vanguard of challenges to come. We’ve spent the last quarter evaluating
the backlog and deciding which business was consistent with our strategies and
played to our core business capabilities. Our current core technical
business units leverage the highest revenue streams and margin while providing
the least risk.”
“Rapid
expansion of a services business requires some effort to scale. Even
when a discontinued line of business is replaced by business more closely
aligned with core strengths, there can be challenges. Services
revenue is a balancing act between the ability to market capabilities and the
capacity to adapt and scale to new client needs. We believe that the
enhanced focus on our higher margin, core ITS business spread across
Engineering, Service Delivery Management, Contract Services and Construction
Management, will support a net sales level of $40 million or more in fiscal
2011. This is not a commentary on the growth potential of the
business. We believe it is a realistic assessment of our ability to
continue to focus sales and operations on our core business. We are
also beginning to integrate empirical data into the projected distribution of
net sales from quarter-to-quarter. Even managed services revenue is
impacted by the peaks and valleys that are prevalent in the ITS project
business, influencing the timing of new client intake and other
factors. We believe that these factors will result in a ramping
effect on the quarter-to-quarter net sales as we continue to scale our core
business in fiscal 2011, with 35-40% of the annual net sales coming in the first
half of fiscal 2011 and the balance in the last two quarters,” concluded
Bowman.
“In order
to fund working capital for the continued planned growth of the Company, Beacon
announced on August 17, 2010, that it had secured a new $4 million credit
facility from a member of the Company’s Board of Directors,” stated Michael
Grendi, Chief Financial Officer of Beacon Solutions. “The combination
of the new credit facility and effective management of accounts receivable
should be sufficient to provide for the Company’s projected growth and liquidity
needs throughout fiscal 2011.”
“As a
public Company, Beacon has had to invest in and maintain a certain level of
SG&A expense. Since most of Beacon’s SG&A expense is relatively fixed,
Beacon expects SG&A to remain relatively constant near term during the
expected net sales growth. The only expected significant increase in SG&A
expense is sales commission’s expense due to the continued growth,” continued
Grendi.
“As
previously discussed in Beacon’s Form 8-K on August 20, 2010, Beacon has
reported Beacon Solutions AG as a discontinued operation for financial reporting
purposes. Beacon Solutions AG (a stand-alone corporation, which is
100% owned by BESG Ireland Ltd.) has no current operating activities or
employees. Beacon is currently engaged in discussions and is pursuing
various avenues to reach a satisfactory conclusion relating to a dispute
regarding the data center construction project in Zurich, Switzerland and does
not expect the outcome to have a material impact on its financial condition or
future operating results,” concluded Grendi.
“Gross
margin for the company’s core professional services business is targeted to
blend at 40% or higher,” added Widener. “Historically, gross margin
for the core professional services business has been in line with these
expectations. Over the past two quarters however, the general
contracting business in the company’s Swiss subsidiary (Beacon Solutions AG)
blended margins down to the low-to-mid twenty percent range. With the
renewed focus on the Company’s core professional services business, we expect to
once again consistently realize gross margins that have historically ranged from
37 percent to 58 percent. As the Company continues to grow net sales
in its core business units while achieving its targeted gross margins over the
next several quarters, the expectation is that we will achieve sustainable
profitability in the near future.”
“The
difficult decisions we made this past quarter were necessary to ensure that the
Company is set on a course for continued, sustained success. As we
conclude fiscal 2010 and rapidly approach fiscal 2011, we are employing a
renewed, disciplined approach to signing new business that upholds our mission
of building Beacon into an internationally recognized brand in ITS
infrastructure services by focusing on the pursuit of quality projects, with
quality clients, which include some of the largest corporations in the
world.”
Aggregate
Future Value of Project Backlog:
Aggregate
Future Value of Project Backlog reflects the projected revenue impact of
existing engagements over a one to four year period and is subject to change as
work is completed and/or the scope of various engagements changes over time.
This number includes the projected value of previously announced, multi-year ITS
managed services engagements as well as short-term projects for which the
Company has been engaged to provide network design, engineering, implementation
and/or project management services.
About
Beacon Enterprise Solutions Group, Inc.
Beacon
Enterprise Solutions Group is an emerging global leader in the design,
implementation and management of high performance Information Technology Systems
(“ITS”) infrastructure solutions. Beacon offers fully integrated,
turnkey IT infrastructure solutions capable of fully servicing the largest
companies in the world as they increasingly outsource to reduce costs while
optimizing critical IT design and infrastructure management. Through an
integrated team approach, Beacon offers a broad range of products and services
including IT infrastructure design, implementation and management, application
development and voice/data/security system integration, installation and
maintenance. Beacon’s client roster includes state and local
agencies, educational institutions, and over 4,000 companies ranging in size
from mid-sized companies to the Fortune 500. Beacon is headquartered
in Louisville, Kentucky, with a regional headquarters in Dublin, Ireland and
personnel located throughout the United States and Europe.
For
additional information, please visit Beacon’s corporate website: www.askbeacon.com
This press release
may contain “forward looking statements.” Expressions of future goals and
similar expressions reflecting something other than historical fact are intended
to identify forward-looking statements, but are not the exclusive means of
identifying such statements. These forward-looking statements may
include, without limitation, statements about our market opportunity,
strategies, competition, expected activities and expenditures as we pursue our
business plan. Although we believe that the expectations reflected in
any forward looking statements are reasonable, we cannot predict the effect that
market conditions, customer acceptance of products, regulatory issues,
competitive factors, or other business circumstances and factors described in
our filings with the Securities and Exchange Commission may have on our
results. The company undertakes no obligation to revise or update any
forward-looking statements in order to reflect events or circumstances that may
arise after the date of this press release.
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