exactEarth Reports Q1 Fiscal 2017 Financial Results

CAMBRIDGE, ON, March 8, 2017 /CNW/ - exactEarth Ltd. ("the Company"), a leading provider of Satellite AIS ("S-AIS") data services, announces its financial results for the three-month period ended January 31, 2017. All financial figures are in Canadian dollars unless otherwise stated.

Q1 2017 Financial Highlights

  • Revenue was $3.3 million
  • Subscription-based revenue was 89% of total revenue
  • Subscription-based revenue in the Commercial market increased 11% from Q1 2016
  • Order Bookings were $8.9 million compared to $4.2 million in Q1 2016
  • Adjusted EBITDA* was $(0.64) million
  • Cash balance was $11.2 million at January 31, 2017

Q1 2017 Operational Highlights

  • Announced the successful launch of four hosted payloads for the next generation constellation, exactView™ RT, powered by Harris Corporation
  • Signed a four-year CDN $2.7 million contract with MacDonald, Dettwiler and Associates Ltd. ("MDA") to provide AIS data processing services for the Canadian Department of National Defense's Polar Epsilon 2 project
  • Entered into a five-year USD $2.0 million partnership agreement to provide S-AIS services to another large country in Asia
  • Signed a three-year USD $1.75 million contract with the Indian Navy for S-AIS services
  • Awarded a £1.1 million grant from the UK Space Agency to provide small-vessel tracking services for South Africa's small boat owners and operators

"Q1 saw significant new additions to our order book and the successful launch of the first four payloads of our next generation constellation, exactView RT," said Peter Mabson, CEO of exactEarth. "Subsequent launches for exactView RT are set for 2017 and will be major events for us. These satellites will enhance our service level and create the potential for new revenue streams from a host of new products. As the various satellites become operational in 2017, it will mark the beginning of our move towards a continuous real-time global vessel tracking service capability in 2018."

Financial Review

Total revenue for the three months ended January 31, 2017 ("Q1 2017") was $3.3 million compared to $6.4 million in Q1 2016.  The year-over-year change in revenue was primarily due to lower revenue generated by the Government of Canada ("GoC") contract, which accounted for $3.2 million of the difference. Sales for Q1 2017 were strong with Order Bookings of $8.9 million compared to $4.2 million in Q1 2016.

Subscription Services revenue (as defined below) for Q1 2017 was $3.0 million compared to $5.4 million in Q1 2016. Excluding the impact of the GoC contract, Subscription Services revenue would have increased by $0.8 million in Q1 2017.

Subscription Services revenue in Q1 2017 represented 89% of total revenue compared to 84% in Q1 2016. Subscription Services revenue from commercial customers in Q1 2017 rose 11% compared to Q1 2016.

For Q1 2017, exactEarth generated $0.62 million in non-cash Subscription Services revenue, from an Asset Transfer Agreement with Communitech related to the EV9 satellite. Under the agreement, the Company will provide in kind datasets at a value of $3.7 million, not licensed for commercial use, in exchange for title to the EV9 satellite, subject to certain restrictions. As of January 31, 2017, the Company has recognized, in full, all of the non-cash revenue from the in-kind sale of these datasets. The complete datasets have been delivered to Communitech and title to the EV9 satellite has transferred to exactEarth. 

Data Products revenue for Q1 2017 was $0.28 million compared to $0.3 million in Q1 2016. Other Products & Services revenue for Q1 2017 was $0.1 million compared to $0.69 million in Q1 2016.  This revenue tends to fluctuate from quarter to quarter as it is generated from on-demand customer requests and long-term percentage-of-completion contracts.

Gross margin for Q1 2017 was 45% compared to 59% in Q1 2016. Gross margin decreased year-over-year due primarily to lower revenue, and was offset, in part, by a decrease in operational costs for the Company's satellite constellation and the reimbursement of costs related to the Company's Technology Demonstration Program Collaboration Agreement ("TDP Agreement") with MDA. TDP Agreement funding recognized as an offset to cost of revenue for Q1 2017 was $0.1 million.

Prior to the end of fiscal 2016, the Company took steps to streamline and re-organize its business, which is expected to reduce ongoing expenses in future periods. The re-organization resulted in the termination of 14 employees effective October 13, 2016, and was a necessary step in the Company's efforts to reduce its satellite infrastructure costs and transition the business to that of an information and intelligence data services company.

Selling, general and administrative expenses for Q1 2017 were $1.9 million compared to $1.9 million in Q1 2016. Unlike in Q1 2016, SG&A for Q1 2017 includes public company-related costs as well as costs related to the move of the Company's headquarters. SG&A for Q1 2017 also reflects expenses related to order bookings, which were up more than 100% from Q1 2016.

Product development expense for Q1 2017 was $0.41 million compared to $0.45 million in Q1 2016. The decrease primarily reflects the cost-savings initiatives described above.

Adjusted EBITDA for Q1 2017 was $(0.64) million compared to $1.5 million in Q1 2016. The year-over-year decrease in Adjusted EBITDA was primarily due to lower revenue from the GoC, offset in part by lower cost of revenue and lower operating expenses. (Adjusted EBITDA is a non-IFRS measure and is defined below.)

Net loss for Q1 2017 was $(2.0) million, or $(0.09) per share, compared to net loss of $(1.0) million, or $(0.09) per share, in Q1 2016. Net loss was greater in Q1 2017 primarily due to lower revenue from the GoC, offset in part by lower cost of revenue and lower operating expenses.

exactEarth used $2.1 million of cash from operating activities in Q1 2017 compared with cash used in operations of $0.38 million in Q1 2016. The Company's cash balance at January 31, 2017 was $11.2 million.

As at January 31, 2017, the Company had 21,605,506 shares outstanding. 

Conference Call

The management of exactEarth will host an investor conference call to discuss these results in greater detail.  All interested investors and analysts are invited to participate.

Date:

Wednesday, March 8, 2017 at 8:30 a.m. E.S.T.



Dial-in:

647-427-7450 or 1-888-231-8191



Webcast:

To access the live webcast, please go to http://bit.ly/2mbzuXS or visit the exactEarth website for more details. The webcast will be archived for 30 days.



Replay:

Encore Toll Free Dial-In Number: (855) 859-2056
Encore Password: 68477710
Dial-In Replay Availability: 08/03/2017 11:30 ET - 22/03/2017 23:59 ET

 

About exactEarth Ltd.

exactEarth is a leading provider of global maritime vessel data for ship tracking and maritime situational awareness solutions. Since its establishment in 2009, exactEarth has pioneered a powerful new method of maritime surveillance called Satellite AIS ("S-AIS") and has delivered to its clients a view of maritime behaviours across all regions of the world's oceans unrestricted by terrestrial limitations. exactEarth has deployed an operational data processing supply chain involving a constellation of satellites, receiving ground stations, patented decoding algorithms and advanced "big data" processing and distribution facilities. This ground-breaking system provides a comprehensive picture of the location of AIS equipped maritime vessels throughout the world and allows exactEarth to deliver data and information services characterized by high performance, reliability, security and simplicity to large international markets.  For more information, visit exactearth.com.

Forward-Looking Statements

This news release contains statements that, to the extent they are not recitations of historical fact, may constitute "forward-looking statements" within the meaning of applicable Canadian securities laws. Forward-looking statements may include financial and other projections, as well as statements regarding exactEarth's future plans, objectives or economic performance, or the assumptions underlying any of the foregoing, including statements regarding, among other things, timing expectations with respect to launch of satellites, growth opportunities for the Company in the maritime information services market and the impact of the loss of revenue. exactEarth uses words such as "may", "would", "could", "will", "likely", "expect", "anticipate", "believe", "intend", "plan", "forecast", "project", "estimate" and similar expressions to identify forward-looking statements. Any such forward-looking statements are based on assumptions and analyses made by exactEarth in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors exactEarth believes are appropriate under the relevant circumstances. However, whether actual results and developments will conform to exactEarth's expectations and predictions is subject to any number of risks, assumptions and uncertainties. Many factors could cause exactEarth's actual results, historical financial statements, or future events to differ materially from those expressed or implied by the forward-looking statements contained in this news release. These factors include, without limitation: uncertainty in the global economic environment; fluctuations in currency exchange rates; delays in the purchasing decisions of exactEarth's customers; the competition exactEarth faces in its industry and/or marketplace; the further delayed launch of satellites; the reduced scope of significant existing contracts; and the possibility of technical, logistical or planning issues in connection with the deployment of exactEarth's products or services.

*Non-IFRS Measures

We measure Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization ("EBITDA"), plus offering related expenses, unrealized foreign exchange losses, share-based compensation costs, restructuring costs and impairment losses, less unrealized foreign exchange gains. We believe that Adjusted EBITDA provides useful supplemental information as it provides an indication of the income generated by our main business activities before taking into consideration how they are financed or taxed and exclude the impact of items that are considered by management to be outside of the Company's ongoing operating results. Adjusted EBITDA should not be construed as an alternative to net income (loss) determined in accordance with IFRS as an indicator of our performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows.

We define Subscription Revenue as the dollar sum of fully executed contracts for our products and/or services to our customers that are subscription-based, typically sold with a one-year period of service and recognized in our "Subscription Services" segmented revenue.


Three months ended


January 31, 2017


January 30, 2016

Net loss

$

(1,994)


$

(1,001)

Interest expense (income)

$

15


$

294

Income tax expense

$

5


$

-

Depreciation and amortization

$

945


$

1,377

EBITDA

$

(1,029)


$

670

Offering related expenses

$

-


$

-

Unrealized foreign exchange (gain) loss

$

(14)


$

786

Share-based compensation

$

375


$

-

Impairment losses

$

-


$

-

Restructuring costs

$

32


$

-

Adjusted EBITDA

$

(636)


$

1,456

 


exactEarthTM Ltd.

Interim Condensed Consolidated Statements of Financial Position

(in thousands of Canadian dollars)

unaudited












As at
January 31,


As at
October 31,





2017


2016





$


$


ASSETS






Current assets







Cash



11,154


13,680


Trade accounts receivable



1,870


1,778


Inventory



425


425


Unbilled revenue



470


794


Prepaid expenses and other assets



1,200


867

Total current assets



15,119


17,544








Property, plant and equipment



35,360


31,423

Intangible assets



14,045


18,855

Total assets



64,524


67,822









LIABILITIES & SHAREHOLDERS' EQUITY













Current liabilities







Accounts payable and accrued liabilities



3,875


5,409


Deferred revenue



2,367


1,968


Provision for contract losses



5


-


Restructuring provision - current



754


1,154


Loans payable - current



730


716


Long-term incentive plan liability - current



125


86

Total current liabilities



7,856


9,333








Government loan payable



942


1,045

Loans payable



58


143

Long-term incentive plan liability



539


316

Restructuring provision



472


442

Total liabilities



9,867


11,279








Shareholders' equity







Share capital



123,769


123,769


Contributed surplus



802


699


Accumulated other comprehensive income (loss)

50


45


Deficit



(69,964)


(67,970)

Total shareholders' equity



54,657


56,543








Total liabilities and shareholders' equity



64,524


67,822

 


exactEarthTM Ltd.

Interim Condensed Consolidated Statements of Comprehensive Loss

(in thousands of Canadian dollars)

unaudited












January 31,


January 31,


For the three months ended




2017


2016






$


$


















Revenue




3,336


6,380


Cost of revenue




1,839


2,628


Gross margin




1,497


3,752









Operating expenses








Research and development




-


10


Selling, general and administrative




1,963


1,941


Product development




410


453


Depreciation and amortization




945


1,377

Loss  from operations




(1,821)


(29)









Other expenses








Other  expense




3


-


Restructuring charge




32


-


Foreign exchange loss




118


678


Interest expense




15


294

Total other expenses




168


972


Income tax expense




5


-

Net loss




(1,994)


(1,001)









Other comprehensive income (loss)








Items that may be subsequently reclassified to net income:






Foreign currency translation, net of income tax expense of nil

5


12

Total other comprehensive income 




5


12









Comprehensive loss




(1,989)


(989)









Basic and diluted loss per share




(0.09)


(0.09)

 


exactEarthTM Ltd.

Interim Condensed Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)

unaudited












January 31,


January 31,


For the three months ended




2017


2016






$


$









Net loss




(1,994)


(1,001)

Add (deduct) items not involving cash








Non-monetary transaction




(618)


-


Non-cash interest




37


36


Depreciation and amortization




945


1,377


Foreign exchange loss on revaluation of
   foreign currency shareholder loans




-


224


Loss on disposal of assets




3




Long-term incentive plan




262


20


Stock-based compensation




103


-

Net change in non-cash working capital balances




(844)


(1,036)

Other operating cash flows








Restructuring provision




(402)


-


Technology Demonstration Program Funding




453


-

Cash flows used in operations




(2,055)


(380)

















Investing activities








Acquisition of property, plant and equipment




(323)


(987)


Reimbursement of acquisition costs of
   property, plant and equipment




224


-


Acquisition of intangible assets




(55)


(2,320)

Cash flows used in investing activities




(154)


(3,307)









Financing activities








Government loan repayment




(123)


(123)


Long-term debt repayment




(88)


-


Shareholder loan advances




-


3,000

Cash flows from financing activities




(211)


2,877









Effect of exchange rate changes on cash




(106)


121









Net decrease in cash




(2,526)


(689)

Cash, beginning of the year




13,680


2,365

Cash, end of the year




11,154


1,676

 


exactEarthTM Ltd.

Interim Condensed Consolidated Statements of Changes in Equity

(in thousands of Canadian dollars)

unaudited










For the Three Months Ended January 31, 2017


Total


Deficit

Accumulated
Other
Comprehensive
Income (Loss)

Share
Capital


Contributed
Surplus




$


$


$

$


$

Balance,October 31, 2016


56,543


(67,970)


45


123,769


699


Stock-based compensation expense


103


-


-


-


103


Comprehensive (loss) income


(1,989)


(1,994)


5


-


-

Balance,January 31, 2017


54,657


(69,964)


50


123,769


802

























For the Three Months Ended January 31, 2016




















Balance, October 31, 2015


23,066


(32,007)


(296)


55,120


249


Comprehensive (loss) income


(989)


(1,001)


12


-


-

Balance,January 31, 2016


22,077


(33,008)


(284)


55,120


249

 

SOURCE exactEarth Ltd.

For further information: INVESTORS: Dave Mason, Investor Relations, Tel: +1 416-247-9652, investors@exactearth.com; MEDIA: Nicole Schill, Marketing Communications Manager, Tel: +1 519-620-5890, nicole.schill@exactearth.com

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