exactEarth Announces Fiscal 2017 Financial Results

William "Mac" Evans, former President of the Canadian Space Agency, to join Board

Board forms Special Committee to explore and evaluate potential strategic alternatives focused on maximizing shareholder value

CAMBRIDGE, ON, Jan. 25, 2018 /CNW/ - exactEarth Ltd. ("the Company"), a leading provider of Satellite AIS ("S-AIS") data services, announces its financial results for the three- and twelve-month periods ended October 31, 2017. All financial figures are in Canadian dollars unless otherwise stated.

exactEarth Ltd. (CNW Group/exactEarth Ltd.)

2017 Financial Highlights

  • Revenue was $12.8 million
  • Revenue in the Commercial market increased 14% from 2016
  • Revenue backlog was $26.0 million at year-end
  • Order Bookings were $17.3 million in 2017
  • Adjusted EBITDA* was ($4.5) million
  • Net loss was ($33.8) million, which included a $26.9 million non-cash charge related to the impairment and write-down of certain assets
  • Cash balance was $8.1 million at October 31, 2017

"Our major milestone in 2017 was the formal launch our second-generation satellite constellation capability, exactView RT Powered by Harris, which will make us the first provider capable of delivering global S-AIS vessel data in real-time," said Peter Mabson, CEO of exactEarth. "This constellation will ultimately consist of 58 satellite payloads hosted onboard the Iridium NEXT constellation, and as of today, 18 are already in operation.

Powered by its real-time capability, exactView RT is a premium S-AIS service, which we believe when fully deployed will appeal to all AIS users, but in particular, to those involved in security, surveillance and search-and-rescue. Superior vessel detection, rapid update rate, longevity and reliability, and continuous innovation, are all features of exactView RT that we believe will be unrivaled in the market. In 2018 we will focus on capitalizing on this evolving service advantage as well as seeking new opportunities to monetize the data that we are collecting daily on a population of more than 250,000 vessels."

Financial Review

Total revenue for the three- and twelve-month periods ended October 31, 2017 ("Q4 2017" and "full-year") was $2.9 million and $12.8 million compared to $3.3 million and $18.9 million in the same periods last year. The change in revenue for Q4 2017 was primarily due to $0.68 million of non-cash revenue generated in Q4 2016 from an Asset Transfer Agreement with Communitech ("Asset Transfer Agreement") related to the EV9 satellite transfer. There was no revenue related to the Asset Transfer Agreement recognized in Q4 2017. The change in revenue for the full-year 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 $2.4 million of the difference year-over-year. Excluding the loss of revenue associated with the GoC contract and the Asset Transfer Agreement, total revenue would have increased 8% in Q4 2017 and would have increased 14% year-over-year.

Order bookings for Q4 2017 were $3.0 million compared to $6.1 million in Q4 2016. For the full-year, Order Bookings were $17.3 million compared to $27.0 million last year. Revenue backlog at October 31, 2017 was $26.0 million compared to $22.6 million at October 31, 2016.

Subscription Services revenue for Q4 2017 and full-year periods was $2.7 million and $10.6 million compared to $2.8 million and $15.1 million in the same periods last year. For Q4 2017 and the full-year, exactEarth generated nil and $0.62 million in non-cash Subscription Services revenue, from the Asset Transfer Agreement, compared to $0.68 million and $1.4 million in the same periods last year. Excluding the loss of revenue associated with the GoC contract and the Asset Transfer Agreement, Subscription Services revenue would have increased by 25% in Q4 2017 and 18% for the full-year.

Subscription Services revenue for the Q4 2017 and full-year periods represented 94% and 83% of total revenue compared to 85% and 80% in the same periods last year. Subscription Services revenue from commercial customers rose 2% in Q4 2017 and 12% for the full-year, compared to the same periods last year.

Data Products revenue for the Q4 2017 and full-year periods was $0.13 million and $1.0 million compared to $0.17 million and $2.4 million in the same periods last year. The comparative periods in 2016 include non-cash Data Products revenue of nil and $1.6 million, respectively, related to the Asset Transfer Agreement. 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 for the Q4 2017 and full-year periods was $0.04 million and $1.2 million compared to $0.32 million and $1.4 million in the same periods last year. 

Gross margin for the Q4 2017 and full-year periods was 30% and 33% compared to 21% and 48% in the same periods last year. Gross margin increased quarter-over-quarter due to a greater percentage of revenue generated from higher margin Subscription Services. Gross margin decreased in the full-year period 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 for 2017 was $0.38 million compared to $0.68 million in 2016 (TDP agreement funding started in the Company's Q3 2016).

Selling, general and administrative ("SG&A") expense for the Q4 2017 and full-year periods was $1.9 million and $7.0 million compared to $1.7 million and $7.5 million in the same periods last year. SG&A decreased year-over-year due primarily to lower payroll expenses resulting from the restructuring undertaken in October 2016. Commission expenses may cause SG&A may fluctuate from quarter-to-quarter depending on the volume of new subscriptions versus renewals and the timing of renewals.

Product development and research and development ("R&D") expense for the Q4 2017 and full-year periods was $0.36 million and $1.7 million compared to $0.51 million and $2.0 million in the same periods last year. exactEarth generated $0.24 million in R&D expense in 2017. The R&D expense was incurred on Project VESTA, which is a proof-of-concept related to VHF data exchange technology.

Adjusted EBITDA for the Q4 2017 and full-year periods was ($1.5) million and ($4.5) million compared to $(0.96) million and $0.52 million in the same periods last year. The quarter-over-quarter decrease in Adjusted EBITDA is due to an increased unrealized foreign exchange loss and a restructuring expense recovery, offset in part by a greater percentage of revenue being generated from higher margin Subscription Services and lower operating expenses resulting from the restructuring in October 2016. 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 the Q4 2017 and full-year periods was ($29.0) million, or ($1.34) per share, and ($33.8) million, or ($1.57) per share, compared to ($4.1) million, or ($0.19) per share, and ($36.0) million, or ($1.90) per share, in the same periods last year. Net loss for the Q4 2017 and full-year periods includes a $26.9 million non-cash charge related to the impairment and write-down of certain assets. Net loss for the 2016 full-year period includes a $28.0 million non-cash impairment charge related to the write-down of certain assets on the balance sheet.

Net loss for fiscal 2017 excluding the non-cash impairment of $26.9 million, other income of $1.5 million and the restructuring reversal of $0.1 million, was ($8.5) million. Net loss for fiscal 2016 excluding the non-cash impairment of $28.0 million and the restructuring charge of $1.7 million, was ($6.2) million. Excluding those items, the fiscal 2017 net loss is higher than the fiscal 2016 net loss primarily due to lower revenue, which was partially offset by decreases in cost of revenue, SG&A expense, product development expense and interest expense.

exactEarth used $1.6 million of cash in operations in Q4 2017 compared with $1.4 million of cash used in operations in Q4 2016. For the full-year period, exactEarth used $7.7 million of cash in operations compared with $2.9 million of cash used in operations in fiscal 2016. The Company's cash balance at October 31, 2017 was $8.1 million compared to $13.7 million at October 31, 2016.

As at October 31, 2017, the Company had 21,614,120 shares outstanding. 

Change to Board of Directors

exactEarth is pleased to announce upcoming proposed changes to its board of directors (the "Board") through the addition to its Board of William "Mac" EvansMr. Evans is expected to be appointed to the Board effective January 25, 2018.

Mr. Evans has more than 35 years of experience in the Canadian Space Program, and served as President of the Canadian Space Agency from 1994 to 2001. Mr. Evans also led the development of the Canadian Astronaut and RADARSAT programs and negotiated Canada's role in the ISS and a number of international agreements that are the foundation of Canada's international space partnerships. In 2004, Mr. Evans was Chief of Staff for the Minister of National Defence (Canada). He is currently of Chair of the Defence Advisory Board, which provides advice to the Chief of the Defence Staff and the Deputy Minister of National Defence. In 2016, Mr. Evans was appointed to the Order of Canada and in 2017, he was appointed to Canada's Space Advisory Board, which advises the Minister of Industry, Science and Economic Development.

"We are very pleased that Mac Evans has agreed to join our Board," said Eric Zahler, Chairman of the Board of exactEarth. "He brings a wealth of experience and knowledge about Canadian space policy, and we look forward to his counsel and guidance as we continue to roll out our enhanced maritime surveillance capabilities and advanced analytics, through our next generation, real-time, satellite-AIS constellation."

Concurrent with this new appointment, Pui-Ling Chan informed the Board that he will not stand for re-election at the Company's next shareholder's meeting in order to pursue other personal opportunities. Added Mr. Zahler: "I'd like to thank Pui-Ling for having played an active role on our board since the Company went public in February 2016. We are grateful and appreciative of the contributions he has made, and we wish him continued success in the future."

Review of Strategic Alternatives

The Company also announced today that the Board has commenced a process to explore and evaluate potential strategic alternatives focused on maximizing shareholder value. These alternatives could include, among other things, a financing, a sale of assets, a sale of the Company or a merger or other business combination or other strategic transactions that may be available to the Company.

In conjunction with the strategic review, the Company's Board has formed a special committee of independent directors to oversee the strategic review process (the "Special Committee"). The Special Committee will be chaired by Eric Zahler and includes Maria Izurieta and Mac Evans. It is the intention of the Special Committee to engage a financial advisor in the coming weeks. The Company's Board is committed to fully evaluating appropriate strategic alternatives while concurrently supporting management and employees in their delivery of services and products to customers. The Board believes that this course of action is in the best interests of the Company and its stakeholders.

The Board has not set a timetable for this process nor has it made any decisions related to any strategic alternatives at this time. There can be no assurance that the exploration and review of strategic alternatives will result in a transaction. The Company does not intend to provide announcements or updates unless or until it determines that further disclosure is required by law.

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, January 25, 2018 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=1581294&s=1&k=67C4ABF690C392537C8CE3219D00C671  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: 3249369
Dial-In Replay Availability: 25/01/2018 11:30 ET - 08/02/2018 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, growth opportunities for the Company in the maritime information services market and the outcome of a strategic review process. 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 (000's)


Three months ended October 31

 Year ended October 31



2017


2016


2017


2016

Net loss

$

(28,966)

$

(4,135)

$

(33,834)

$

(35,963)


Interest expense (income)


9


(8)


52


304


Income tax expense


8


41


24


41


Depreciation and amortization


916


926


3,791


4,649

EBITDA 

$

(28,033)

$

(3,176)

$

(29,967)

$

(30,969)


Unrealized foreign exchange loss


(432)


68


(376)


906


Share-based compensation


68


401


519


855


Impairment losses


26,886


-


26,886


27,987


Restructuring costs


(12)


1,744


(99)


1,744


Other income


-


-


(1,455)


-

Adjusted EBITDA

$

(1,523)

$

(963)

$

(4,492)

$

523

 

exactEarthTMLtd.

Consolidated Statements of Financial Position

(in thousands of Canadian dollars)




As at
October  31,


As at
October 31,



2017


2016



$


$

ASSETS




Current assets





Cash

8,117


13,680


Trade accounts receivable

3,171


1,778


Inventory

-


425


Unbilled revenue

425


794


Prepaid expenses and other assets

1,266


867

Total current assets

12,979


17,544







Property, plant and equipment

12,576


31,423


Intangible assets

5,405


18,855


Total assets

30,960


67,822






LIABILITIES & EQUITY




Current liabilities





Accounts payable and accrued liabilities

3,722


5,431


Deferred revenue

2,064


1,968


Restructuring provision - current

388


1,154


Loans payable - current

567


716


Long-term incentive plan liability - current

166


64

Total current liabilities

6,907


9,333







Government loan payable

662


1,045


Loans payable

-


143


Long-term incentive plan liability

343


316


Restructuring provision

-


442


Other long-term liabilities 

45


-

Total liabilities

7,957


11,279






Shareholders' equity





Share capital

123,781


123,769


Contributed surplus

1,070


699


Accumulated other comprehensive income (loss)

(44)


45


Deficit

(101,804)


(67,970)

Total shareholders' equity

23,003


56,543






Total liabilities and shareholders' equity

30,960


67,822

 

exactEarthTMLtd.

Consolidated Statements of Loss and Comprehensive Loss

(in thousands of Canadian dollars)




Three months ended


For the Year Ended



October 31,


October 31,


October 31,


October 31,


2017


2016


2017


2016



$


$


$


$




















Revenue

2,852


3,308


12,833


18,918


Cost of revenue

1,998


2,607


8,618


9,772


Gross margin

854


701


4,215


9,146










Operating expenses









Selling, general and administrative

1,924


1,735


7,004


7,463


Product development and R&D

364


507


1,692


1,950


Depreciation and amortization

916


926


3,791


4,649


Impairment losses

26,886


-


26,886


27,987

Loss from operations

(29,236)


(2,467)


(35,158)


(32,903)










Other expenses (income)









Other income

-


(210)


(1,455)


(55)


Other expense

-


-


197


-


Restructuring expense (recovery)

(12)


1,744


(99)


1,744


Foreign exchange loss (gain)

(275)


101


(43)


1,026


Interest expense

9


(8)


52


304

Total other expenses (income)

(278)


1,627


(1,348)


3,019


Income tax expense

8


41


24


41

Net loss


(28,966)


(4,135)


(33,834)


(35,963)










Other comprehensive income (loss)









Items that may be subsequently reclassified to net income:









Foreign currency translation, net of income tax expense of nil

(69)


(221)


(89)


341

Total other comprehensive income (loss)

(69)


(221)


(89)


341










Comprehensive loss

(29,035)


(4,356)


(33,923)


(35,622)










Loss per share








Basic and diluted loss per share

(1.34)


(0.19)


(1.57)


(1.90)










 

exactEarth™ Ltd.

Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)





Three months ended


Year ended



October 31,


October 31,


October 31,


October 31,



2017


2016


2017


2016



$


$


$


$











Net loss

(28,966)


(4,135)


(33,834)


(35,963)

Add (deduct) items not involving cash









Non-monetary transaction

-


(680)


(618)


(3,048)


Non-cash interest

27


40


126


153


Impairment losses

26,886


-


26,886


27,987


Depreciation and amortization

928


926


3,791


4,649


Loss on disposal of assets

-


-


3


-


Foreign exchange loss on revaluation of foreign currency shareholder loans

-


452


-


452


Long-term incentive plan expense

1


248


245


320


Gain on insurance settlement

-


-


(1,455)


-


Stock-based compensation

90


150


380


450


Technology demonstration program recovery

(99)


(667)


(381)


(667)


Restructuring reserve - revaluation/cancellation of units

-


-


(99)


-


Net change in non-cash working capital balances

(360)


638


(2,347)


1,214

Other operating cash flows









Restructuring provision - payment of salary continuance

(174)


1,596


(1,109)


1,596


Settlement of RSU units

-


-


(112)


-


Technology demonstration program funding received

99


-


817


-

Cash flows used in operations

(1,568)


(1,432)


(7,707)


(2,857)










Investing activities









Acquisition of property, plant and equipment

(344)


(255)


(780)


(2,372)


Reimbursement of acquisition costs of property, plant and equipment

-


-


396


120


Insurance recovery

-


-


3,500


-


Acquisition of intangible assets

58


478


(121)


(6,307)

Cash flows from (used in) investing activities

(286)


223


2,995


(8,559)










Financing activities









Government loan repayment

(82)


(123)


(451)


(492)


Long-term debt repayment

(88)


(87)


(350)


(204)


Shares issued

-


-


-


20,440


Shareholder loan advances

-


-


-


3,000

Cash flows from (used in) financing activities

(170)


(210)


(801)


22,744










Effect of exchange rate changes on cash

80


12


(50)


(13)










Net increase (decrease) in cash

(1,944)


(1,407)


(5,563)


11,315

Cash, beginning of the period

10,057


15,087


13,680


2,365

Cash, end of the period

8,113


13,680


8,117


13,680

 

exactEarth™ Ltd.

 Consolidated Statements of Changes in Equity

(in thousands of Canadian dollars)


For the Year Ended October 31, 2017

Total


Deficit

Accumulated
Other
Comprehensive
Income (Loss)

Share
Capital


Contributed
Surplus



$


$


$

$


$

Balance at October 31, 2016

56,543


(67,970)


45


123,769


699


Stock-based compensation expense

380


-


-


-


380


Issuance of common shares

3


-


-


12


(9)


Comprehensive loss

(33,923)


(33,834)


(89)


-


-

Balance at October 31, 2017

23,003


(101,804)


(44)


123,781


1,070












For the Year Ended October 31, 2016





















Balance, October 31, 2015

23,066


(32,007)


(296)


55,120


249


Stock-based compensation expense

450


-


-


-


450


Comprehensive income (loss)

(35,622)


(35,963)


341


-


-


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 at October 31, 2016

56,543


(67,970)


45


123,769


699












 

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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