exactEarth Announces Q2 Fiscal 2018 Financial Results

CAMBRIDGE, ON, June 14, 2018 /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, 2018. All financial figures are in Canadian dollars unless otherwise stated.

exactEarth Ltd. (CNW Group/exactEarth Ltd.)

Q2 2018 Financial Highlights

  • Revenue was $3.2 million
  • Subscription-based revenue was 77% of total revenue
  • Subscription-based revenue in the Commercial market increased 7% from Q2 2017
  • Revenue backlog was $25.9 million at quarter-end
  • Order Bookings were $2.6 million
  • Adjusted EBITDA* was $(1.6) million
  • Net loss was $(2.0) million, or $(0.09) per share  
  • Cash balance was $5.8 million at quarter-end

 

"We made great progress in Q2 with the ongoing roll-out of our second-generation real-time satellite AIS system, exactView RT, adding eleven more payloads to the system," said Peter Mabson, CEO of exactEarth. "Just last week another ten payloads went live, so we now have 39 exactView RT payloads in operation, which means we are now capable of providing the positional data for more than 250,000 vessels in real-time."

"In Q2 we also launched our EV-8 AIS payload onboard the Spanish radar satellite, Paz, operated by Hisdesat. This payload provides an opportunity to develop new applications in the maritime surveillance industry by uniquely combining a high-performance satellite AIS payload with radar satellite images. Finally, in Q2, our investee company, Myriota Pty Ltd, closed an AUD $20.0 million 'up-round' of financing to advance the development of their exciting satellite Internet-of-Things business. exactEarth made an AUD $2.0 million investment in Myriota in November 2015, and following completion of this recent financing, we have retained an 18% ownership in this promising company."

Financial Review

Total revenue in the three-month period ended April 30, 2018 ("Q2 2018") was $3.2 million compared to $3.7 million in the three-month period ended April 30, 2017 ("Q2 2017"). Total revenue in the six-month period ended April 30, 2018 ("YTD 2018") was $6.0 million compared to $7.0 million in the six-month period ended April 30, 2017 ("YTD 2017").

Order bookings in Q2 and YTD 2018 were $2.6 million and $4.9 million compared to $3.5 million and $12.6 million in Q2 and YTD 2017. Order bookings will fluctuate on a quarter-to-quarter basis reflecting the timing to complete new customer agreements. Revenue backlog at April 30, 2018 was $25.9 million compared to $25.5 million at the end of Q1 2018.

Subscription Services revenue in Q2 2018 was $2.5 million compared to $2.3 million in the same period last year. Subscription Services revenue in Q2 2018 included $0.05 million of non-cash revenue resulting from the trade of AIS subscription data, which is not licensed for commercial use, for data processing services. Excluding that non-cash revenue, Subscription Services revenue increased 4% year-over-year in Q2 2018. Subscription Services revenue for the YTD 2018 period was $5.0 million compared to $5.4 million in the same period last year. Excluding the Q2 2018 non-cash revenue described above and the Q1 2017 non-cash revenue associated with an Asset Transfer Agreement (whereby we provided in-kind datasets, not licensed for commercial use to Communitech, in exchange for title to the EV-9 satellite), Subscription Services revenue increased by 3.5% for the YTD 2018 period.

Subscription Services revenue in Q1 2018 represented 77% of total revenue (YTD 2018: 83%) compared to 63% in the same period last year (YTD 2017: 76%). Excluding the $0.05 million of non-cash revenue in Q1 2018, Subscription Services revenue from commercial customers rose 7% in Q2 2018 and 6.5% YTD 2018 compared to the same periods last year. Excluding the non-cash revenue generated in Q1 2017 associated with the Asset Transfer Agreement, Subscription Services revenue from government customers would have risen slightly for both the three- and six-month periods ended April 30, 2018.

Data Products revenue in Q2 2018 was $0.59 million compared to $0.34 million in the same period last year. Data Products revenue for the YTD 2018 period was $0.68 million compared to $0.55 million in the same period last year. The quarterly and year-to-date increases are primarily due to $0.16 million of non-cash revenue resulting from the exchange of AIS subscription data, which is not licensed for commercial use, for data processing services.

Other Products & Services revenue in Q2 2018 was $0.12 million compared to $1.0 million in the same period last year. Other Products & Services revenue for the YTD 2018 period was $0.37 million compared to $1.1 million in the same period last year. The decrease is primarily due to the timing of delivery of services related to the Company's ongoing small-vessel opportunities.

Gross margin in Q2 2018 was 30% compared to 21% in the same period last year. Gross margin for the YTD 2018 period was 28% compared to 31% in the same period last year. Gross margin increased in Q2 2018 compared to Q2 2017 due primarily to lower margin revenue generated in Q2 2017 from one of the Company's small vessel deployments. For the YTD 2018 period, gross margin decreased due to lower revenue, partially offset by decreased cost of revenue. Cost of revenue decreased due to lower satellite lease, data processing and project related costs and the reimbursement of costs related to the TDP Agreement, partially offset by costs related to the Harris Agreement and increased terrestrial data costs.

Selling, general and administrative ("SG&A") expense in Q2 2018 was $2.3 million compared to $1.4 million in the same period last year. SG&A for the YTD 2018 period was $3.6 million, compared to $3.3 million in the same period last year. SG&A increased year-over-year due primarily to a bad debt provision taken in Q2 2018, the recovery of a bad debt provision in Q2 2017, an increase in professional fees, partially offset by lower stock-based compensation. For the remainder of 2018, the Company expects SG&A to normalize to more traditional historic levels.

Product development and research and development ("R&D") expense in Q2 2018 was $0.49 million compared to $0.43 million in the same period last year. Product development and R&D expense for the YTD 2018 period was $1.0 million, compared to $0.84 million in the same period last year. The Company's product development and R&D activities are currently focused primarily on the development of web-based functionality, new analytics-based product offerings, new data processing capabilities and Project VESTA.

Adjusted EBITDA for Q2 2018 was $(1.6) million compared to $(1.0) million in the same period last year. Adjusted EBITDA for the YTD 2018 period was $(2.7) million, compared to $(1.5) million in the same period last year. The decrease in Adjusted EBITDA was primarily due to lower revenue and higher SG&A, offset in part by lower cost of revenue. (Adjusted EBITDA is a non-IFRS measure and is defined below)

Net loss for Q2 2018 was $(2.0) million, or $(0.09) per share, compared to $(0.18) million, or $(0.01) per share, in the same period last year. Net loss for the YTD 2018 period was $(3.6) million, or $(0.17) per share, compared to $(2.2) million, or $(0.10) per share, in the same period last year. Net loss increased year-over-year due primarily to lower revenue and higher operating expenses, which was partially offset by lower cost of revenue.

exactEarth used $0.71 million of cash in operations in Q2 2018 compared with $2.7 million of cash used in operations in Q2 2017. For the YTD 2018 period, exactEarth used $1.6 million of cash in operations, compared to $4.8 million of cash used in operations in the same period last year. The Company's cash balance at April 30, 2018 was $5.8 million compared to $8.1 million at October 31, 2017.

As at April 30, 2018, the Company had 21,626,288 shares outstanding on a non-diluted basis. 

Update on Review of Strategic Alternatives

As previously announced, exactEarth's Board is undertaking 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 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, June 14, 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: https://event.on24.com/wcc/r/1721468/2A3D76BE667CC08A7CED6137EC8E04F4 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: 9138789
Dial-In Replay Availability: 14/06/2018 11:30 ET - 28/06/2018 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 April 30

 Six months ended April 30

 

2018

2017

2018

2017

Net loss

$

(2,049)

$

(176)

$

(3,648)

$

(2,170)

 

Interest expense

 

7

 

17

 

14

 

32

 

Income tax expense

 

4

 

8

 

9

 

13

 

Depreciation and amortization

 

407

 

961

 

811

 

1,906

 

Unrealized foreign exchange gain

 

(127)

 

(333)

 

(217)

 

(347)

 

Share-based compensation

 

180

 

2

 

349

 

569

 

Restructuring expense (recovery)

 

5

 

(40)

 

(2)

 

(8)

 

Other income

 

-

 

(1,455)

 

-

 

(1,455)

Adjusted EBITDA

$

(1,573)

$

(1,016)

$

(2,684)

$

(1,460)

 

exactEarthTM Ltd.

Interim Condensed Consolidated Statements of Financial Position

(in thousands of Canadian dollars)

unaudited

             
       

As at
April 30,

 

As at
October 31,

       

2018

 

2017

       

$

 

$

ASSETS

         

Current assets

         
 

Cash

   

5,848

 

8,117

 

Trade accounts receivable

   

3,187

 

3,171

 

Unbilled revenue

   

594

 

425

 

Prepaid expenses and other assets

   

971

 

1,266

Total current assets

   

10,600

 

12,979

             
 

Property, plant and equipment

   

12,285

 

12,576

 

Intangible assets

   

5,239

 

5,405

Total assets

   

28,124

 

30,960

             

LIABILITIES & SHAREHOLDERS' EQUITY

         

Current liabilities

         
 

Accounts payable and accrued liabilities

   

5,024

 

3,722

 

Deferred revenue

   

2,299

 

2,064

 

Restructuring provision

   

10

 

388

 

Loans payable - current

   

441

 

567

 

Long-term incentive plan liability - current

   

-

 

166

Total current liabilities

   

7,774

 

6,907

             
 

Loans payable

   

436

 

662

 

Long-term incentive plan liability

   

318

 

343

 

Other long-term liabilities 

   

53

 

45

Total liabilities

   

8,145

 

7,957

             

Shareholders' equity

         
 

Share capital

   

123,794

 

123,781

 

Contributed surplus

   

1,322

 

1,070

 

Accumulated other comprehensive loss

   

(121)

 

(44)

 

Deficit

   

(105,452)

 

(101,804)

Total shareholders' equity

   

19,543

 

23,003

             

Total liabilities and shareholders' equity

   

28,124

 

30,960

 

exactEarthTMLtd.

 Interim Condensed Consolidated Statements of Loss and Comprehensive Loss

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

Unaudited

         
   

Three months ended 

 

Six months ended 

   

April 30,

 

April 30,

 

April 30,

 

April 30,

   

2018

 

2017

 

2018

 

2017

   

$

 

$

 

$

 

$

                 
                 
 

Revenue

 

3,179

 

3,711

 

6,015

 

7,047

 

Cost of revenue

 

2,232

 

2,920

 

4,347

 

4,850

 

Gross profit

 

947

 

791

 

1,668

 

2,197

                 

Operating expenses

               
 

Selling, general and administrative

 

2,316

 

1,382

 

3,636

 

3,254

 

Product development and R&D

 

487

 

426

 

986

 

836

 

Depreciation and amortization

 

407

 

961

 

811

 

1,906

Loss from operations

 

(2,263)

 

(1,978)

 

(3,765)

 

(3,799)

                 

Other expenses (income)

               
 

Other income

 

-

 

(1,455)

 

-

 

(1,455)

 

Other expense

 

-

 

45

 

-

 

48

 

Restructuring expense (recovery)

 

5

 

(40)

 

(2)

 

(8)

 

Foreign exchange gain

 

(230)

 

(377)

 

(138)

 

(259)

 

Interest expense

 

7

 

17

 

14

 

32

Total other expenses (income)

 

(218)

 

(1,810)

 

(126)

 

(1,642)

 

Income tax expense

 

4

 

8

 

9

 

13

Net loss

 

(2,049)

 

(176)

 

(3,648)

 

(2,170)

                 

Other comprehensive loss

               
 

Item that may be subsequently reclassified to net loss:

               
 

Foreign currency translation, net of income tax expense of nil

 

(36)

 

(138)

 

(77)

 

(133)

Total other comprehensive loss

 

(36)

 

(138)

 

(77)

 

(133)

                 

Comprehensive loss

 

(2,085)

 

(314)

 

(3,725)

 

(2,303)

                 

Loss per share

               
 

Basic loss per share

 

(0.09)

 

(0.01)

 

(0.17)

 

(0.10)

 

exactEarth™ 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,

     

2018

 

2017

 

2018

 

2017

     

$

 

$

 

$

 

$

                   
 

Net loss

 

(2,049)

 

(176)

 

(3,648)

 

(2,170)

Add (deduct) items not involving cash

               
 

Non-monetary transaction

 

(30)

 

-

 

(30)

 

(618)

 

Non-cash interest

 

18

 

34

 

41

 

71

 

Depreciation and amortization

 

407

 

961

 

811

 

1,906

 

Loss on disposal of assets

 

-

 

-

 

-

 

3

 

Long-term incentive plan expense

 

128

 

(91)

 

207

 

174

 

Gain on insurance settlement

 

-

 

(1,455)

 

-

 

(1,455)

 

Stock-based compensation

 

38

 

87

 

130

 

190

 

Technology demonstration program recovery

 

(81)

 

(51)

 

(176)

 

(150)

 

Restructuring reserve - revaluation

 

5

 

-

 

(2)

 

-

 

Net change in non-cash working capital balances

 

1,116

 

(1,488)

 

1,337

 

(2,335)

Other operating cash flows

               
 

Restructuring provision - payment of salary continuance

 

(216)

 

(418)

 

(376)

 

(820)

 

Settlement of RSUs

 

(238)

 

(112)

 

(238)

 

(112)

 

Technology demonstration program funding received

 

194

 

-

 

326

 

552

Cash flows used in operations

 

(708)

 

(2,709)

 

(1,618)

 

(4,764)

                   

Investing activities

               
 

Acquisition of property, plant and equipment

 

(359)

 

(100)

 

(587)

 

(423)

 

Reimbursement of acquisition costs of property, plant and equipment

 

21

 

-

 

252

 

224

 

Insurance Recovery

 

-

 

3,500

 

-

 

3,500

 

Acquisition of intangible assets

 

(13)

 

(137)

 

(17)

 

(192)

Cash flows used in investing activities

 

(351)

 

3,263

 

(352)

 

3,109

                   

Financing activities

               
 

Government loan repayment

 

(123)

 

(123)

 

(246)

 

(246)

 

Long-term debt repayment

 

(58)

 

(88)

 

(146)

 

(176)

Cash flows used in financing activities

 

(181)

 

(211)

 

(392)

 

(422)

                   

Effect of exchange rate changes on cash

 

90

 

209

 

93

 

103

                   

Net decrease in cash

 

(1,150)

 

552

 

(2,269)

 

(1,974)

Cash, beginning of the period

 

6,998

 

11,154

 

8,117

 

13,680

Cash, end of the period

 

5,848

 

11,706

 

5,848

 

11,706

                   

Supplemental cash flow information

               
 

Interest received

 

11

 

-

 

27

 

-

 

Income taxes paid

 

4

 

8

 

9

 

13

 

exactEarth™ Ltd.

 Interim Condensed Consolidated Statements of Changes in Shareholders' Equity

(in thousands of Canadian dollars)

unaudited

                 

For the six months ended April 30, 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

 

130

 

-

 

-

 

-

 

130

 

Transfer RSUs to contributed surplus

 

122

 

-

 

-

 

-

 

122

 

Issuance of common shares

 

13

 

-

 

-

 

13

 

-

 

Comprehensive loss

 

(3,725)

 

(3,648)

 

(77)

 

-

 

-

Balance at  April 30, 2018

 

19,543

 

(105,452)

 

(121)

 

123,794

 

1,322

                       

For the six months ended April 30, 2017

                   
                       

Balance at October 31, 2016

 

56,543

 

(67,970)

 

45

 

123,769

 

699

 

Stock-based compensation expense

 

190

 

-

 

-

 

-

 

190

 

Comprehensive loss

 

(2,303)

 

(2,170)

 

(133)

 

-

 

-

Balance at April 30, 2017

 

54,430

 

(70,140)

 

(88)

 

123,769

 

889

 

 

SOURCE exactEarth Ltd.

For further information: INVESTORS: Dave Mason, Investor Relations, Tel: +1 416-247-9652, investors@exactearth.com

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