exactEarth Reports Q3 Fiscal 2017 Financial Results

CAMBRIDGE, ON, Sept. 14, 2017 /CNW/ - exactEarth Ltd. ("the Company"), a leading provider of Satellite AIS ("S-AIS") data services, announces its financial results for the three- and nine-month periods ended July 31, 2017. All financial figures are in Canadian dollars unless otherwise stated.

exactEarth announces Q3 2017 financial results (CNW Group/exactEarth Ltd.)

Q3 2017 Highlights

  • Revenue was $2.9 million
  • Revenue in the Commercial market increased 26% from Q3 2016
  • Revenue backlog was $25.8 million at quarter-end
  • Order Bookings were $1.7 million in Q3 2016
  • Adjusted EBITDA* was $(1.2) million
  • Cash balance was $10.1 million at July 31, 2017

"The key event of the quarter was the official service launch of exactView RT, our second-generation satellite constellation service," said Peter Mabson, CEO of exactEarth. "Hosted onboard the Iridium NEXT satellite constellation, exactView RT is a system of more than 60 maritime satellite payloads that we believe will be the only offering on the market capable of delivering high performance high reliability real-time global vessel tracking for a population of more than 250,000 vessels."

Mr. Mabson added, "As of today, our 16-satellite constellation includes nine exactView RT payloads in service, with additional launches expected through the end of this year and into 2018. Already we are receiving positive feedback from the market on the utility of this new capability in core application markets such as surveillance, vessel tracking and commodity flows. We believe that the real time exactViewRT capability will be a significant driver for the business going forward." 

Financial Review

Total revenue for the three- and nine-month periods ended July 31, 2017 ("Q3 2017" and "year-to-date") was $2.9 million and $10.0 million compared to $4.0 million and $15.6 million in the same periods last year. The change in revenue for Q3 2017 was primarily due to $1.5 million of non-cash revenue generated in Q3 2016 from an Asset Transfer Agreement with Communitech related to the EV9 satellite transfer. There was no revenue related to the Asset Transfer Agreement recognized in Q3 2017. The change in revenue for the year-to-date period was primarily due to lower revenue generated by the Government of Canada ("GoC") contract in 2017, which accounted for $5.3 million of the difference year-over-year, and lower non-cash revenue related to the Asset Transfer Agreement in 2017, which accounted for $1.7 million of the difference year-over-year. Excluding the impact of the GoC contract and the Asset Transfer Agreement, revenue would have increased by $0.4 million (18%) in Q3 2017 and $1.4 million (18%) year-to-date.

Order bookings for Q3 2017 were $1.7 million compared to $16.0 million in Q3 2016. For the year-to-date period, Order Bookings are $14.3 million compared to $21.1 million in the same period last year. Revenue backlog at July 31, 2017 was $25.8 million compared to $20.6 million at July 31, 2016.

Subscription Services revenue for Q3 2017 and year-to-date was $2.6 million and $8.0 million compared to $2.8 million and $12.3 million in the same periods last year. For Q3 2017 and the year-to-date period, exactEarth generated nil and $0.62 million in non-cash Subscription Services revenue, from the Asset Transfer Agreement with Communitech, compared to $0.68 million and $0.75 million in the same periods last year. Excluding the impact of the GoC contract and the Asset Transfer Agreement, Subscription Services revenue would have increased by $0.46 million (22%) in Q3 2017 and $1.0 million (17%) year-to-date.

Subscription Services revenue in Q3 2017 and year-to-date represented 88% and 80% of total revenue compared to 70% and 78% in the same periods last year. Subscription Services revenue from commercial customers rose 21% in Q3 2017 and 16% year-to-date compared to the same periods last year.

Data Products revenue in Q3 2017 and year-to-date was $0.31 million and $0.86 million compared to $1.0 million and $2.3 million in the same periods last year. The comparative periods in 2016 include $0.81 million and $1.6 million, respectively, in non-cash Data Products revenue related to the Asset Transfer Agreement with Communitech. Excluding non-cash revenue from the Asset Transfer Agreement, Data Products revenue would have increased year-over-year. 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 Q3 2017 and year-to-date was $0.05 million and $1.2 million compared to $0.17 million and $1.1 million in the same periods last year. The increase for the year-to-date period, is primarily due to recognition in Q2 2017 of revenue from the Company's small vessel contract with the government of Ghana, which has now been completed.

Gross margin in Q3 2017 and year-to-date was 44.5% and 37% compared to 51% and 54% in the same periods last year. Gross margin decreased year-over-year due primarily to lower Subscription Services and Data Products revenue. This was offset, in part, by lower operating expenses for the year-to-date period and the reimbursement of costs related to the Company's Technology Demonstration Program Collaboration Agreement ("TDP Agreement") with MacDonald Dettwiler and Associates Ltd. TDP Agreement funding recognized as an offset to cost of revenue in Q3 2017 and year-to-date was $0.13 million and $0.28 million compared to $0.55 million in the same periods last year (TDP agreement funding only started in the Company's Q3 2016).

Selling, general and administrative ("SG&A") expenses for Q3 2017 and year-to-date were $2.1 million and $5.5 million compared to $1.7 million and $5.7 million in the same periods last year. SG&A increased year-over-year and in the third quarter due primarily to activity related to the launch of exactView RT, the Company's second-generation satellite constellation with real-time S-AIS feeds, and the implementation of a sales and financial software system.

Product development and research and development ("R&D") expenses for Q3 2017 and year-to-date were $0.5 million and $1.3 million compared to $0.51 million and $1.4 million in the same periods last year. exactEarth generated $93 thousand in R&D expense in both Q3 2017 and the year-to-date period. The R&D expense was incurred on Project VESTA, which has an objective to demonstrate a satellite-based, two-way maritime communications system representing initial implementation of VHF Data Exchange System (VDES) technology.

Adjusted EBITDA for Q3 2017 and year-to-date was $(1.2) million and $(2.9) million compared to $(0.29) million and $0.86 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 Q3 2017 and year-to-date was $2.6 million, or $0.12 per share, and $4.9 million, or $0.23 per share, compared to $1.2 million, or $0.06 per share, and $31.6 million, or $1.77 per share, in the same periods last year. Net loss for the 2016 year-to-date period includes a $28.0 million non-cash impairment charge related to the write-down of certain assets on the balance sheet. Excluding that item, net loss was greater in the 2017 year-to-date period, primarily due to lower revenue from the GoC contract, offset in part by lower operating expenses.

exactEarth used $1.2 million of cash in operations in Q3 2017 compared with $1.8 million of cash used in operations in Q3 2016. The lower amount of cash used in operations in Q3 2017 reflects the ongoing efforts the Company is taking to closely manage – and reduce where possible – its cost base. For the year-to-date period, exactEarth used $6.0 million of cash in operations compared with $1.4 million of cash used in operations in the same period last year. The Company's cash balance at July 31, 2017 was $10.1 million compared to $13.7 million at October 31, 2016.

As at July 31, 2017, the Company had 21,614,120 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, September 14, 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: http://event.on24.com/r.htm?e=1499597&s=1&k=39CB4AC857B60ECE63932FA62585A905 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: 79474187
Dial-In Replay Availability: 14/09/2017 11:30 ET - 29/09/2017 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, expectations of our exactView RT offering relative to competitors, timing of the achievement of real-time global vessel tracking via our second-generation constellation, timing expectations with respect to launch of satellites, expectations of the exactView RT capabilities driving growth 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 

 Nine months ended 



July 31, 2017


July 31, 2016


July 31, 2017


July 31, 2016

 Net loss 

$

(2,700)

$

(1,315)

$

(4,870)

$

(31,828)

 Interest expense (income) 


10


(3)


42


312

 Income tax expense 


4


-


17


-

 Depreciation and amortization 


969


911


2,875


3,723

 EBITDA  

$

(1,717)

$

(407)

$

(1,936)

$

(27,793)

 Unrealized foreign exchange (gain) loss 


403


(73)


56


215

 Share-based compensation 


177


188


451


454

 Impairment losses 


-


-


-


27,987

 Restructuring costs 


(79)


-


(87)


-

 Other Income 


-


-


(1,455)


-

 Adjusted EBITDA 

$

(1,216)

$

(292)

$

(2,971)

$

863

  

exactEarth™ Ltd.

Interim Condensed Consolidated Statements of Financial Position

(in thousands of Canadian Dollars)

Unaudited



As at
July 31,


As at
October 31,



2017


2016



$


$


ASSETS




Current assets





Cash

10,057


13,680


Trade accounts receivable

2,138


1,778


Inventory

630


425


Unbilled revenue

354


794


Prepaid expenses and other assets

612


867

Total current assets

13,791


17,544






Property, plant and equipment

31,954


31,423

Intangible assets

13,724


18,855

Total assets

59,469


67,822







LIABILITIES & EQUITY









Current liabilities





Accounts payable and accrued liabilities

3,297


5,409


Deferred revenue

1,758


1,968


Restructuring provision - current

561


1,154


Loans Payable - current

642


716


Incentive plan liability - current

192


86

Total current liabilities

6,450


9,333






Government loan payable

729


1,045

Loans payable

-


143

Long-term incentive plan liability

342


316

Restructuring provision

-


442

Total liabilities

7,521


11,279






Shareholders' equity





Share capital

123,781


123,769


Contributed surplus

981


699


Accumulated other comprehensive loss

26


45


Deficit

(72,840)


(67,970)

Total shareholders' equity

51,948


56,543






Total liabilities and equity

59,469


67,822


 

exactEarth™Ltd.

Interim  Condensed Consolidated Statements of Loss and  Comprehensive Loss

(in thousands of Canadian Dollars)

Unaudited



Three months ended 


Nine months ended 



July 31,


July 31,


July 31,


July 31,



2017


2016


2017


2016



$


$


$


$




















Revenue

2,934


4,008


9,981


15,610


Cost of revenue

1,627


1,983


6,296


7,165


Gross margin

1,307


2,025


3,685


8,445










Operating expenses









Selling, general and administrative

2,078


1,654


5,513


5,728


Product development & R&D

497


513


1,333


1,443


Depreciation and amortization

969


911


2,875


3,723


Impairment losses

-


-


-


27,987

Loss from operations

(2,237)


(1,053)


(6,036)


(30,436)










Other income and expense









Other income

-


-


(1,455)


-


Other expense

37


75


85


155


Restructuring gain

(79)


-


(87)


-


Foreign exchange loss

491


190


232


925


Interest expense

10


(3)


42


312

Total other expense

459


262


(1,183)


1,392


Income tax expense

4


-


17


-

Net loss


(2,700)


(1,315)


(4,870)


(31,828)










Other comprehensive loss









Items that may be subsequently reclassified to net income:









Foreign currency translation, net of income tax expense of nil

114


99


(19)


266

Total other comprehensive income/(loss)

114


99


(19)


266










Comprehensive loss

(2,586)


(1,216)


(4,889)


(31,562)










Loss per share








Basic loss per share

(0.12)


(0.06)


(0.23)


(1.77)

Diluted loss per share

(0.12)


(0.06)


(0.23)


(1.77)


 

exactEarth™Ltd.

Interim Condensed Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)

Unaudited



Three months ended 


Nine months ended 



July 31,


July 31,


July 31,


July 31,



2017


2016


2017


2016



$


$


$


$










Net loss


(2,700)


(1,315)


(4,870)


(31,828)

Add (deduct) items not involving cash









Non-monetary transaction

-


(1,486)


(618)


(2,368)


Non-cash interest

31


44


101


113


Impairment losses

-


-


-


27,987


Depreciation and amortization

969


911


2,875


3,723


Loss on disposal of assets

-


-


3


-


Long-term incentive plan expense

76


7


250


72


Gain on insurance settlement

-


-


(1,455)


-


Stock-based compensation

91


181


282


300


Technology demonstration program recovery

(132)


(552)


(282)


(552)

Net change in non-cash working capital balances

377


441


(1,965)


1,128

Other operating cash flows









Restructuring provision - payment of salary continuance

(128)


-


(948)


-


Settlement of RSU units

(6)


-


(112)


-


Technology demonstration program funding

214


-


766


-

Cash flows used in operations

(1,208)


(1,769)


(5,973)


(1,425)










Investing activities









Acquisition of property, plant and equipment

(196)


(829)


(619)


(2,117)


Reimbursement of acquisition costs of property, plant and equipment

172


-


396


120


Insurance recovery

-


-


3,500


-


Acquisition of intangible assets

15


(3,731)


(178)


(6,785)

Cash flows from investing activities

(9)


(4,560)


3,099


(8,782)










Financing activities









Government loan repayment

(123)


(123)


(368)


(369)


Long-term debt repayment

(87)


(88)


(262)


(117)


Shares issued

12


-


12


20,440


Shareholder loan advances

-


-


-


3,000

Cash flows used in financing activities

(198)


(211)


(618)


22,954










Effect of exchange rate changes on cash

(234)


46


(131)


(25)










Net decrease in cash

(1,649)


(6,494)


(3,623)


12,722

Cash, beginning of the period

11,706


21,581


13,680


2,365

Cash, end of the period

10,057


15,087


10,057


15,087










Supplemental cash flow information









Interest paid

-


-


-


334


Interest received

20


30


59


81


Income taxes paid

3


-


16


-

 

exactEarth™Ltd.

Interim Condensed  Consolidated Statements of Changes in Equity

(in thousands of Canadian Dollars)

Unaudited

For the Nine Months Ended July 31, 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


282


-


-


-


282


Issue of common shares


12


-


-


12


-


Comprehensive loss


(4,889)


(4,870)


(19)


-


-

Balance July 31, 2017


51,948


(72,840)


26


123,781


981













For the Nine Months Ended July 31, 2016























Balance October 31, 2015


23,066


(32,007)


(296)


55,120


249


Stock Option expense


300


-


-


-


300


Comprehensive loss


(31,562)


(31,828)


266


-


-


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

48,166


-


-


48,166


-


3,144,615 common shares issued for cash


20,440


-


-


20,440


-

Balance July 31, 2016


60,410


(63,835)


(30)


123,726


549













 

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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