exactEarth Reports Q2 Fiscal 2017 Financial Results

CAMBRIDGE, ON, June 8, 2017 /CNW/ - exactEarth Ltd. ("the Company"), a leading provider of Satellite AIS ("S-AIS") data services, announces its financial results for the three- and six-month periods ended April 30, 2017. All financial figures are in Canadian dollars unless otherwise stated.

exactEarth Announces Second Quarter 2017 Financial Results (CNW Group/exactEarth Ltd.)

Q2 2017 Highlights

  • Revenue was $3.7 million
  • Revenue in the Commercial market increased 17% from Q2 2016
  • Order Bookings were $4.5 million compared to $1.7 million in Q2 2016
  • Adjusted EBITDA* was $(1.0) million
  • Cash balance was $11.7 million at April 30, 2017

"Our order book was up again in Q2, led by a large renewal agreement with a key commercial customer and more than 30 new orders," said Peter Mabson, CEO of exactEarth. "We continue to build our sales pipeline in both the government and commercial markets while maintaining a close eye on expenses throughout the organization.

"The major milestone on our horizon, which we expect will further boost our pipeline opportunities, is achieving real-time global vessel tracking via our second-generation satellite constellation service, exactView RT. exactView RT is a system of more than 60 maritime satellite payloads, being deployed under our strategic agreement with Harris Corporation, which is hosted onboard the Iridium NEXT satellite constellation.

"Subsequent to quarter-end, we officially launched the exactView RT service with four satellite payloads now providing global real-time Satellite AIS data feeds alongside our first-generation constellation. With additional Iridium NEXT launches scheduled for 2017, the pace with which we are moving towards a continuous real-time vessel tracking capability is expected to accelerate through the remainder of the year."

Financial Review

Total revenue for the three- and six-month periods ended April 30, 2017 ("Q2 2017" and "year-to-date") was $3.7 million and $7.0 million compared to $5.2 million and $11.6 million in the same periods last year. The year-over-year change in revenue was primarily due to lower revenue generated by the Government of Canada ("GoC") contract, which accounted for $2.1 million of the difference in Q2 2017 and $5.3 million in the year-to-date period. Sales for Q2 2017 increased year-over-year with Order Bookings of $4.5 million compared to $1.7 million in Q2 2016. For the year-to-date period, Order Bookings are $13.4 million compared to $5.9 million in the same period last year.

Subscription Services revenue (as defined below) for Q2 2017 and year-to-date was $2.3 million and $5.4 million compared to $4.1 million and $9.4 million in the same periods last year. For the year-to-date period, exactEarth generated $0.62 million in non-cash Subscription Services revenue, from an Asset Transfer Agreement with Communitech related to the EV9 satellite transfer. Excluding the impact of the GoC contract and the non-cash revenue just described, Subscription Services revenue would have increased by $0.38 million (16.5%) in Q2 2017 and $0.59 million (17%) year-to-date.

Subscription Services revenue in Q2 2017 and year-to-date represented 63% and 76% of total revenue compared to 78% and 81% in the same periods last year. Subscription Services revenue from commercial customers rose 9% in Q2 2017 and 10% year-to-date compared to the same periods last year.

Data Products revenue in Q2 2017 and year-to-date was $0.34 million and $0.55 million compared to $0.96 million and $1.3 million in the same periods last year. The comparative periods in 2016 include $0.82 million in non-cash Data Products revenue related to the Asset Transfer Agreement with Communitech. 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.

Other Products & Services revenue in Q2 2017 and year-to-date was $1.0 million and $1.1 million compared to $0.21 million and $0.91 million in the same periods last year. The increase is primarily due to recognition in Q2 2017 of revenue from the Company's small vessel contract with the government of Ghana.

Gross margin in Q2 2017 and year-to-date was 23% and 34% compared to 51% and 55% in the same periods last year. Gross margin decreased year-over-year due primarily to lower revenue and the impact of lower margin hardware revenue generated from the Company's small vessel contract with the government of Ghana. This was offset, in part, by lower operating expenses 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 in Q2 2017 and YTD was $51,000 and $150,000 compared to $nil and $nil in the same periods last year because the TDP agreement funding only started in the Company's third quarter of fiscal 2016.

Selling, general and administrative ("SG&A") expenses for Q2 2017 and year-to-date were $1.5 million and $3.4 million compared to $2.1 million and $4.1 million in the same periods last year. SG&A decreased in Q2 2017 and year-to-date due primarily to lower headcount, which was offset, in part, by higher sales and marketing expenses related to Order Bookings, which are up significantly from the same periods last year.

Product development and research and development ("R&D") expenses for Q2 2017 and year-to-date were $0.43 million and $0.84 million compared to $0.47 million and $0.93 million in the same periods last year. The decrease primarily reflects the Company's ongoing efforts to closely manage costs. We did not incur any expense for R&D in Q2 2017 and the year-to-date period. R&D is no longer a focus as the technology used to receive and de‑collide S-AIS signals has matured and resources are now being allocated toward customer-facing product development.

Adjusted EBITDA for Q2 2017 and year-to-date was $(1.0) million and $(1.5) million compared to $(0.2) million and $1.2 million in the same periods last year. The year-over-year decrease in Adjusted EBITDA was primarily due to lower revenue from the GoC contract, offset in part by lower operating expenses. (Adjusted EBITDA is a non-IFRS measure and is defined below.)

Net loss for Q2 2017 and year-to-date was $0.2 million, or $0.02 diluted per share, and $2.2 million, or $0.10 diluted per share, compared to $29.5 million, or $1.39 per share, and $30.5 million, or $1.89 per share, in the same periods last year. Results for the Q2 2017 and year-to-date periods include $1.5 million in Other Income related to the net proceeds from the EV5 insurance claim, which was announced on April 5, 2017. The $1.5 million in Other Income is a result of the difference between the $3.5 million settlement amount and the carrying value of the EV5 asset, which was $2.0 million. Results for the Q2 2016 and year-to-date periods include a $28.0 million non-cash impairment charge related to the write-down of certain assets on the balance sheet. Excluding those items, net loss was greater in Q2 2017 and year-to-date, primarily due to lower revenue from the GoC, offset in part by lower operating expenses.

exactEarth used $2.7 million of cash from operating activities in Q2 2017 compared with cash generated from operations of $1.6 million in Q2 2016. For the year-to-date period, exactEarth used $4.8 million of cash from operating activities compared with cash generated from operations of $1.2 million in the same period last year. The Company received $3.5 million in cash from investing activities in Q2 2017 resulting from the insurance claim related to its EV5 satellite. The Company's cash balance at April 30, 2017 was $11.7 million compared to $13.7 million at October 31, 2016.

As at April 30, 2017, the Company had 21,611,572 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: 

Thursday, June 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/2rRIv8f 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: 30486546
Dial-In Replay Availability: 08/06/2017 11:30 ET - 22/06/2017 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 of the achievement of real-time global vessel tracking via our second-generation constellation, timing expectations with respect to launch of satellites and growth opportunities for the Company in the maritime information services market. 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 and gains from insurance settlements. 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.

Adjusted EBITDA


Three months ended

Six months ended

(in thousands of dollars)

April 30, 2017

April 30, 2016

April 30, 2017

April 30, 2016

Net loss

$

(176)

$

(29,512)

$

(2,170)

$

(30,513)

Interest expense


17


21


32


315

Income tax expense


8


-


13


-

Depreciation and amortization


961


1,435


1,906


2,812

EBITDA

$

810

$

(28,056)

$

(219)

$

(27,386)

Unrealized foreign exchange loss (gain)


(333)


(401)


(347)


288

Share-based compensation


2


266


569


266

Restructuring Costs


(40)


-


(8)


-

Other income


(1,455)


-


(1,455)


-

Impairment losses


-


27,987


-


27,987

Adjusted EBITDA

$

(1,016)

$

(204)

$

(1,460)

$

1,155

 

exactEarthTM Ltd.

Interim  Condensed Consolidated Statements of Financial Position

(in thousands of Canadian Dollars)

Unaudited



As at
April 30,


As at
October 31,



2017


2016



$


$


ASSETS




Current assets





Cash

11,706


13,680


Trade accounts receivable

2,604


1,778


Inventory

-


425


Unbilled revenue

245


794


Prepaid expenses and other assets

1,629


867

Total current assets

16,184


17,544






Property, plant and equipment

32,665


31,423

Intangible assets

13,970


18,855

Total assets

62,819


67,822







LIABILITIES & EQUITY









Current liabilities





Accounts payable and accrued liabilities

3,428


5,409


Deferred revenue

2,169


1,968


Restructuring provision - current

670


1,154


Loans Payable - current

716


716


Incentive plan liability - current

179


86

Total current liabilities

7,162


9,333






Government loan payable

836


1,045

Loans payable

-


143

Long-term incentive plan liability

285


316

Restructuring provision

106


442

Total liabilities

8,389


11,279






Shareholders' equity





Share capital

123,769


123,769


Contributed surplus

889


699


Accumulated other comprehensive loss

(88)


45


Deficit

(70,140)


(67,970)

Total shareholders' equity

54,430


56,543






Total liabilities and equity

62,819


67,822

 

exactEarthTM Ltd.

Interim  Condensed Consolidated Statements of Loss and  Comprehensive Loss

(in thousands of Canadian Dollars)

Unaudited



Three months ended 


Six months ended 


April 30,


April 30,


April 30,


April 30,


2017


2016


2017


2016


$


$


$


$


















Revenue

3,711


5,222


7,047


11,602


Cost of revenue

2,830


2,554


4,669


5,182


Gross margin

881


2,668


2,378


6,420









Operating expenses









Selling, general and administrative

1,472


2,133


3,435


4,074


Product development & R&D

426


467


836


930


Depreciation and amortization

961


1,435


1,906


2,812


Impairment losses

-


27,987


-


27,987

Loss from operations

(1,978)


(29,354)


(3,799)


(29,383)










Other income and expense









Other income

(1,455)


-


(1,455)


-


Other expense

45


80


48


80


Restructuring gain

(40)


-


(8)


-


Foreign exchange loss

(377)


57


(259)


735


Interest expense

17


21


32


315

Total other expense

(1,810)


158


(1,642)


1,130


Income tax expense

8


-


13


-

Net loss


(176)


(29,512)


(2,170)


(30,513)










Other comprehensive loss









Items that may be subsequently reclassified to net income:









Foreign currency translation, net of income tax expense of nil

(138)


154


(133)


166

Total other comprehensive (loss)/income

(138)


154


(133)


166










Comprehensive loss

(314)


(29,358)


(2,303)


(30,347)










Loss per share








Basic loss per share

(0.01)


(1.39)


(0.10)


(1.89)

Diluted loss per share

(0.02)


(1.39)


(0.10)


(1.89)

 

exactEarthTM Ltd.

Interim Condensed Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)

Unaudited



Three months ended 


Six months ended 



April 30,


April 30,


April 30,


April 30,



2017


2016


2017


2016



$


$


$


$










Net loss


(176)


(29,512)


(2,170)


(30,513)

Add (deduct) items not involving cash









Non-monetary transaction

-


(882)


(618)


(882)


Non-cash interest

34


33


71


69


Impairment losses

-


27,987


-


27,987


Depreciation and amortization

961


1,435


1,906


2,812


Loss on disposal of assets

-


-


3


-


Long-term incentive plan expense

(91)


45


174


65


Gain on insurance settlement

(1,455)


-


(1,455)


-


Stock-based compensation

87


119


190


119


Technology demonstration program recovery

(51)


-


(150)


-

Net change in non-cash working capital balances

(1,488)


2,385


(2,335)


1,573

Other operating cash flows









Restructuring provision - payment of salary continuance

(418)


-


(820)


-


Settlement of RSU units

(112)


-


(112)


-


Technology demonstration program funding

-


-


552


-

Cash flows from (used in) operations

(2,709)


1,610


(4,764)


1,230









Investing activities









Acquisition of property, plant and equipment

(100)


(301)


(423)


(1,288)


Reimbursement of acquisition costs of property, plant and equipment

-


120


224


120


Insurance recovery

3,500


-


3,500


-


Acquisition of intangible assets

(137)


(1,620)


(192)


(3,940)

Cash flows from (used in) investing activities

3,263


(1,801)


3,109


(5,108)









Financing activities









Government loan repayment

(123)


(123)


(246)


(246)


Long-term debt repayment

(88)


(29)


(176)


(29)


Shares issued

-


20,440


-


20,440


Shareholder loan advances

-


-


-


3,000

Cash flows from (used in) financing activities

(211)


20,288


(422)


23,165









Effect of exchange rate changes on cash

209


(192)


103


(71)









Net increase (decrease) in cash

552


19,905


(1,974)


19,216

Cash, beginning of the period

11,154


1,676


13,680


2,365

Cash, end of the period

11,706


21,581


11,706


21,581









Supplemental cash flow information









Interest paid

-


-


-


334


Interest received

-


30


-


34


Taxes paid

8


-


13


-

 

exactEarthTM Ltd.

Interim Condensed Consolidated Statements of Changes in Equity

(in thousands of Canadian Dollars)

Unaudited

For the Six Months Ended April 30, 2017

Total

Deficit

Accumulated
Other
Comprehensive
Loss

Share
Capital

Contributed
Surplus


$

$

$

$

$

Balance October 31, 2016

56,543

(67,970)

45

123,769

699


Stock option expense

190

-

-

-

190


Comprehensive loss

(2,303)

(2,170)

(133)

-

-

Balance April 30, 2017

54,430

(70,140)

(88)

123,769

889







For the Six Months Ended April 30, 2016












Balance October 31, 2015

23,066

(32,007)

(296)

55,120

249


Stock Option expense

119

-

-

-

119


Comprehensive loss

(30,347)

(30,513)

166

-

-


7,349,780 common shares issued on conversion of debt

48,209

-

-

48,209

-


3,144,615 common shares issued for cash

20,440

-

-

20,440

-

Balance April 30, 2016

61,487

(62,520)

(130)

123,769

368

 

SOURCE exactEarth Ltd.

For further information: Contact 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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