exactEarth Announces Q1 Fiscal 2018 Financial Results
  • Harvey Rein, former SVP & CFO of Loral Space & Communications, to join Board

CAMBRIDGE, ON, March 8, 2018 /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, 2018. All financial figures are in Canadian dollars unless otherwise stated.

exactEarth Ltd. (CNW Group/exactEarth Ltd.)

Q1 2018 Financial Highlights

  • Revenue was $2.8 million
  • Subscription-based revenue was 88% of total revenue
  • Subscription-based revenue in the Commercial market increased 6% from Q1 2017
  • Revenue backlog was $25.5 million at quarter-end
  • Order Bookings were $2.3 million
  • Adjusted EBITDA* was ($1.1) million
  • Net loss was ($1.6) million, or $(0.07) per share
  • Cash balance was $7.0 million at quarter-end

"Q1 saw continued progress on building-out our second-generation constellation and creating market awareness for exactView RT, our real-time Satellite AIS service," said Peter Mabson, CEO of exactEarth. "Just last week, another nine exactView RT payloads went live, bringing the total number of these high-performance payloads in operation to 27. As we have said in the past, we expect to be at, or very near, real-time capabilities by the time we have 30 exactView RT payloads operational and complemented by our first-generation satellites. With the progress we have seen to-date, we believe that we are on track to reach that milestone by the end of Q2, or early in Q3.

In addition, last week also saw the successful deployment of our EV8 AIS payload onboard the Spanish radar satellite, Paz, operated by Hisdesat. We expect that payload to come into service in Q3 providing a unique opportunity for high-performance Satellite AIS data to be fused with radar satellite images, creating the potential for a number of new advanced maritime surveillance applications."

Financial Review

Total revenue in the three-month period ended January 31, 2018 ("Q1 2018") was $2.8 million compared to $3.3 million in the three-month period ended January 31, 2017 ("Q1 2017"). The year-over-year change in revenue was primarily due to $0.62 million of non-cash revenue generated in Q1 2017 from an Asset Transfer Agreement with Communitech ("Asset Transfer Agreement") related to the EV9 satellite transfer. As of January 31, 2017, the Company had recognized, in full, all of the non-cash revenue from the in-kind sale of these datasets. Excluding the Q1 2017 non-cash revenue associated with the Asset Transfer Agreement, total revenue increased 4% in Q1 2018.

Order bookings in Q1 2018 were $2.3 million compared to $8.9 million in Q1 2017. Order bookings will fluctuate on a quarter-to-quarter basis reflecting the timing to complete new customer agreements. Revenue backlog at January 31, 2018 was $25.5 million compared to $26.0 million at October 31, 2017.

Subscription Services revenue in Q1 2018 was $2.5 million compared to $3.0 million in the same period last year. For Q1 2018, exactEarth generated nil in non-cash Subscription Services revenue, from the Asset Transfer Agreement, compared to $0.62 million in the same period last year. Excluding the Q1 2017 non-cash revenue associated with the Asset Transfer Agreement, Subscription Services revenue increased by 4% in Q1 2018.

Subscription Services revenue in Q1 2018 represented 88% of total revenue compared to 91% in the same period last year. Subscription Services revenue from commercial customers rose 6% in Q1 2018 compared to the same period last year. Excluding the Q1 2017 non-cash revenue associated with the Asset Transfer Agreement, Subscription Services revenue from government customers increased 1% in Q1 2018.

Data Products revenue in Q1 2018 was $0.08 million compared to $0.21 million in the same period last year. Other Products & Services revenue in Q1 2018 was $0.25 million compared to $0.09 million in the same period last year. 

Gross margin in Q1 2018 was 25% compared to 42% in the same period last year. Gross margin was lower in Q1 2018 primarily due to costs related to the second-generation constellation and costs related to the exactTrax small vessel deployment in South Africa. These were offset, in part, by lower satellite leasing and data processing costs.

Selling, general and administrative ("SG&A") expense in Q1 2018 was $1.3 million compared to $1.9 million in the same period last year. SG&A decreased year-over-year due primarily to the reversal of certain bad debt provisions, lower stock option expense, and moving expenses that were incurred in Q1 2017.

Product development and research and development ("R&D") expense in Q1 2018 was $0.5 million compared to $0.4 million in the same period last year. The increase is due primarily to the re-allocation of labour from project-related work to product development.

Adjusted EBITDA for Q1 2018 was $(1.1) million compared to $(0.6) million in the same period last year. The decrease in Adjusted EBITDA was primarily due to lower revenue and higher cost of sales, offset in part by lower SG&A expense. (Adjusted EBITDA is a non-IFRS measure and is defined below)

Net loss for Q1 2018 was ($1.6) million, or ($0.07) per share, compared to ($2.0) million, or ($0.09) per share, in the same period last year. Net loss improved in Q1 2018 due primarily to lower SG&A and depreciation and amortization expense, which was offset in part by lower revenue and higher cost of sales.

exactEarth used $0.9 million of cash in operations in Q1 2018 compared with $2.1 million of cash used in operations in Q1 2017. The Company's cash balance at January 31, 2018 was $7.0 million compared to $8.1 million at October 31, 2017.

As at January 31, 2018, the Company had 21,614,120 shares outstanding. 

Nominees for Board of Directors

exactEarth is pleased to announce that the nominees for the Board of Directors (the "Board") to be elected at the Corporation's shareholders' meeting on April 26, 2018 will include Eric Zahler, Dennis Kloske, Mac Evans, Miguel Angel Panduro Panadero, Migual Angel Garcia Primo, Peter Mabson and Harvey Rein. Maria Izurieta will not be standing for re-election to the Board and as announced on January 25, 2018, Pui-Ling Chan will also not be standing for re-election. All of the proposed nominees for the Board are currently on the Board other than Harvey Rein.

Mr. Rein has over 30 years of experience in the defense and space industries. From 2008 to 2013, Mr. Rein was the Senior Vice President and Chief Financial Officer of Loral Space & Communications Inc., a global satellite communications services provider and a manufacturer of commercial satellites. From 1979 to 2008, Mr. Rein held varying senior level management positions at Loral and its predecessor companies. Prior to 1979, Mr. Rein was an audit supervisor for a public accounting firm. Mr. Rein holds a Graduate Diploma in Public Accountancy from McGill University and a Bachelor of Commerce from Concordia University. Mr. Rein is also a Certified Public Accountant in New York and Canada. Mr. Rein currently provides consulting services, assisting clients in accounting, financial and SEC reporting, and business issues. It is expected that Mr. Rein will be the chair of the audit committee upon his election to the Board.

"We are very pleased that Harvey Rein has agreed to join our Board," said Eric Zahler, Chairman of the Board of exactEarth. "He brings a wealth of experience and knowledge about both the space industry and financial reporting, 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. I'd like to thank Maria 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 she has made, including her work as chair of the audit committee, and we wish her continued success in the future."

Update on Review of Strategic Alternatives

As previously announced on January 25, 2018, exactEarth's Board has commenced a process to explore and evaluate potential strategic alternatives focused on maximizing shareholder value and has formed a Special Committee of the Board to explore these alternatives. The Special Committee has engaged National Bank Financial to provide financial advice in connection with the strategic review. In addition, the Special Committee is now comprised of Eric Zahler (Chair), Mac Evans and Dennis Kloske, with Mr. Kloske having replaced Maria Izurieta.

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, March 8, 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=1618115&s=1&k=9FF3B851216EC8A21249C3DE93D80078 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: 1458899
Dial-In Replay Availability: 08/03/2018 11:30 ET - 22/03/2018 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, the outcome of the election of directors 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 January 31


2018

2017

Net loss

$

(1,599)

$

(1,994)


Interest expense


7


15


Income tax expense


5


5


Depreciation and amortization


404


945


Unrealized foreign exchange gain


(90)


(14)


Share-based compensation


169


375


Restructuring expense (recovery)


(7)


32

Adjusted EBITDA

$

(1,111)

$

(636)

 

exactEarth™Ltd.

Interim Condensed Consolidated Statements of Financial Position

(in thousands of Canadian dollars)

unaudited


As at
January 31,


As at
October 31,


2018


2017


$


$

ASSETS




Current assets





Cash

6,998


8,117


Trade accounts receivable

2,943


3,171


Unbilled revenue

626


425


Prepaid expenses and other assets

980


1,266

Total current assets

11,547


12,979






Property, plant and equipment

12,256


12,576


Intangible assets

5,322


5,405

Total assets

29,125


30,960





LIABILITIES & EQUITY




Current liabilities





Accounts payable and accrued liabilities

3,708


3,722


Deferred revenue

2,067


2,064


Restructuring provision

221


388


Loans payable - current

491


567


Long-term incentive plan liability - current

185


166

Total current liabilities

6,672


6,907






Government loan payable

550


662


Long-term incentive plan liability

403


343


Other long-term liabilities 

45


45

Total liabilities

7,670


7,957





Shareholders' equity





Share capital

123,781


123,781


Contributed surplus

1,162


1,070


Accumulated other comprehensive income (loss)

(85)


(44)


Deficit

(103,403)


(101,804)

Total shareholders' equity

21,455


23,003





Total liabilities and shareholders' equity

29,125


30,960

 

exactEarth™Ltd.

 Interim Condensed Consolidated Statements of Loss and Comprehensive Loss

(in thousands of Canadian dollars except for per share figures)

Unaudited



January  31,


January  31,

For the three months ended

2018


2017


$


$










Revenue

2,836


3,336


Cost of revenue

2,115


1,929


Gross margin

721


1,407





Operating expenses





Selling, general and administrative

1,320


1,873


Product development and R&D

499


410


Depreciation and amortization

404


945

Loss from operations

(1,502)


(1,821)





Other expenses (income)





Other expense

-


3


Restructuring expense (recovery)

(7)


32


Foreign exchange loss

92


118


Interest expense

7


15

Total other expenses (income)

92


168


Income tax expense

5


5

Net loss

(1,599)


(1,994)





Other comprehensive income (loss)





Items that may be subsequently reclassified to net income:




Foreign currency translation, net of income tax expense of nil

(41)


5

Total other comprehensive income (loss)

(41)


5





Comprehensive loss

(1,640)


(1,989)





Loss per share




Basic and diluted loss per share

(0.07)


(0.09)

 

exactEarth™ Ltd.

Interim Condensed Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)

unaudited




January 31,


January 31,

For the three months ended

2018


2017


$


$






Net loss

(1,599)


(1,994)

Add (deduct) items not involving cash





Non-monetary transaction

-


(618)


Non-cash interest

23


37


Depreciation and amortization

404


945


Loss on disposal of assets

-


3


Long-term incentive plan expense

79


262


Stock-based compensation

92


103


Technology demonstration program recovery

(95)


(99)


Restructuring reserve - revaluation

(7)


32


Net change in non-cash working capital balances

221


(876)

Other operating cash flows





Restructuring provision - payment of salary continuance

(160)


(402)


Technology demonstration program funding received

132


552

Cash flows used in operations

(910)


(2,055)





Investing activities





Acquisition of property, plant and equipment

(228)


(323)


Reimbursement of acquisition costs of property, plant and equipment

231


224


Acquisition of intangible assets

(4)


(55)

Cash flows used in investing activities

(1)


(154)





Financing activities





Government loan repayment

(123)


(123)


Long-term debt repayment

(88)


(88)

Cash flows used in financing activities

(211)


(211)





Effect of exchange rate changes on cash

3


(106)





Net decrease in cash

(1,119)


(2,526)

Cash, beginning of the period

8,117


13,680

Cash, end of the period

6,998


11,154





Supplemental cash flow information





Interest received

16


22


Income taxes paid

5


5

 

exactEarth™ Ltd.

 Interim Condensed Consolidated Statements of Changes in Equity

(in thousands of Canadian dollars)

unaudited

For the three months  Ended January 31, 2018

Total

Deficit

Accumulated
Other
Comprehensive
Income (Loss)

Share
Capital

Contributed
Surplus



$

$

$

$

$

Balance at October 31, 2017

23,003

(101,804)

(44)

123,781

1,070


Stock-based compensation expense

92

-

-

-

92


Comprehensive loss

(1,640)

(1,599)

(41)

-

-

Balance at January 31,2018

21,455

(103,403)

(85)

123,781

1,162







For the three months  Ended January 31, 2017












Balance at October 31, 2016

56,543

(67,970)

45

123,769

699


Stock-based compensation expense

103

-

-

-

103


Comprehensive income (loss)

(1,989)

(1,994)

5

-

-

Balance at January 31, 2017

54,657

(69,964)

50

123,769

802

 

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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