exactEarth Announces Q2 Fiscal 2019 Financial Results

CAMBRIDGE, ON, June 13, 2019 /CNW/ - exactEarth Ltd. ("the Company"), a leading provider of Satellite-AIS data services, announces its financial results for the three- and six-month periods ended April 30, 2019. All financial figures are in Canadian dollars unless otherwise stated.

Q2 Fiscal 2019 Highlights:

  • Revenue was $3.9 million in Q2 2019, up 23% compared to $3.2 million in Q2 2018;
  • Subscription-based revenue was 81% of total revenue in Q2 2019 and Q2 2018;
  • Subscription-based revenue increased 24% in Q2 2019 compared to Q2 2018;
  • Order bookings were $6.0 million in Q2 2019 compared to $2.6 million in Q2 2018;
  • Revenue backlog was $24.6 million at the end of Q2 2019 compared to $25.9 million at the end of Q2 2018;
  • Adjusted EBITDA* was ($1.6) million in Q2 2019 compared to ($1.6) million in Q2 2018;
  • Cash and cash equivalents and short-term investments were $13.5 million at the end of Q2 2019 compared to $4.8 million at the end of Fiscal 2018;
  • Completed the roll-out of exactView RT with all 58 payloads in orbit, creating the world's first global, real-time Satellite-AIS service;
  • Expanded channel partner relationships with a three-year agreement with MarineTraffic, a global ship tracking and maritime intelligence provider; and
  • Subsequent to quarter-end, exactEarth celebrated its 10th Anniversary, having created the Satellite-AIS market and officially launched its commercial operations in June 2009.

"In Q2, the deployment of exactView RT was completed and we now have 58 satellite payloads providing Satellite-AIS data, making us the only fully-global real-time Satellite-AIS service on the market," said Peter Mabson, CEO of exactEarth. "This unique functionality continues to drive demand for our services, which is reflected in our strong orders and revenue growth numbers for the quarter and the year-to-date period. In particular, we continue to make deeper inroads in the commercial market through our own direct sales efforts and through the expansion of our channel partner relationships, such as the one we signed at quarter-end with MarineTraffic and the one we signed with IHSMarkit last year. As a result of these efforts, our sales in the commercial market in Q2 were up 51% year-over-year, which is a clear indication of the importance of real-time data in a market where participants face a strong competitive dynamic."

"Subsequent to quarter-end, we celebrated the 10th Anniversary of the formation of exactEarth. Over a decade ago, we realized that AIS transmissions could potentially be received from space and we proved our thesis with the launch of the world's first commercial AIS satellite in April 2008 utilising the patented Satellite-AIS detection technology developed by our founding team. From those humble beginnings, we pioneered the growth of a new market that gave the maritime community a completely new and innovative way to view the world's shipping industry. With the deployment of exactView RT now completed, we continue to pioneer new capabilities and applications in the Satellite-AIS market, setting the standard for real-time data delivery, superior vessel detection and rapid update rate, among other things. I want to thank the entire team – past and present – for their efforts in creating a market, and a market leader, and we look forward to capitalizing on our potential in the coming decade and beyond."

Q2 and Year-to-Date Fiscal 2019 Financial Review

Total revenue in the three-month period ended April 30, 2019 ("Q2 2019") was $3.9 million, up 23% compared to $3.2 million in the three-month period ended April 30, 2018 ("Q2 2018"). Total revenue in the six-month period ended April 30, 2019 ("YTD 2019") was $7.4 million, up 24% compared to $6.0 million in the six-month period ended April 30, 2018 ("YTD 2018").

Revenue from commercial customers for the Q2 2019 and YTD 2019 periods was $2.9 million and $5.3 million, up 51% and 44% from the same periods last year. The increases reflect growing market interest in the Company's real-time Satellite-AIS service, exactView RT and expansion of the Company's channel partner strategy. Revenue from government customers for the Q2 2019 and YTD 2019 periods was $1.1 million and $2.1 million, down 19% and 9% from the same periods last year.

Order bookings for the Q2 2019 and YTD 2019 periods were $6.0 million and $9.0 million, compared to $2.6 million and $6.0 million in the same periods last year. Order bookings will fluctuate on a quarter-to-quarter basis reflecting the timing to complete new customer agreements. Revenue backlog at April 30, 2019 was $24.6 million compared to $25.9 million at the end of Q2 2018. Revenue backlog was impacted in Q2 2019 due to the renegotiation of a long-term customer contract. The Company believes that the renegotiation positions it to generate greater levels of revenue on a variable basis over time as compared to a fixed payment schedule.

Subscription Services revenue for the Q2 2019 and YTD 2019 periods was $3.2 million and $6.3 million, up 24% and 25% from the same periods last year. Subscription Services revenue for the Q2 2019 and YTD 2019 periods represented 81% and 85% of total revenue compared to 81% and 84% in the same periods last year.

Data Products revenue for the Q2 2019 and YTD 2019 periods was $0.3 million and $0.4 million compared to $0.6 million and $0.7 million in the same periods last year. Data Products revenue is generated from on-demand customer requests, which results in some variability in quarter-to-quarter revenue levels. Other Products & Services revenue for the Q2 2019 and YTD 2019 periods was $0.4 million and $0.7 million compared to $0.03 million and $0.3 million in the same periods last year.

Gross Margin for the Q2 2019 and YTD 2019 periods was 8% and 23% compared to 27% and 27% in the same periods last year. Gross margin decreased for the Q2 2019 and YTD 2019 periods due to the increase in cost of revenue, partially offset by higher revenue. Cost of revenue increased due to higher satellite operating costs related to the Second-Generation Constellation and increased terrestrial data costs, partially offset by lower data processing and project related costs and the SIF operating grants.

"As mentioned in our Q1 2019 earnings release, with all 58 exactView RT payloads now in orbit, certain elements of our agreement with Harris Corporation came into effect in the second quarter; this has put pressure on our Gross Margin that is expected to remain in place for the short- to mid-term," said Sean Maybee, CFO of exactEarth. "However, over the longer-term, we expect to return to more traditional Gross Margin levels, which we believe will be driven by capitalizing on the growing exactView RT opportunities in our sales pipeline and through a number of initiatives we are pursuing to reduce costs related to both our first-and second-generation constellations."

Selling, general and administrative ("SG&A") expense for the Q2 2019 and YTD 2019 periods was $1.8 million and $3.8 million compared to $2.2 million and $3.6 million in the same periods last year. The decrease in Q2 2019 was primarily due to lower payroll-related expense, lower valuation of outstanding deferred share units and reductions in insurance, legal and consulting fees and travel expenses, partially offset by an increase in bad debt expense of $0.1 million. The increase in SG&A expense for the YTD 2019 period was primarily due to an increase in bad debt expense of $0.6 million, partially offset by lower payroll-related expense, lower valuation of outstanding deferred share units and reductions in insurance, legal and consulting fees and travel expenses.

Product development and research and development ("R&D") expense for the Q2 2019 and YTD 2019 periods was $0.2 million and $0.5 million compared to $0.5 million and $1.0 million in the same periods last year. The Company's product development and R&D activities continue to be focused primarily on the development of web-based functionality, data processing capabilities and analytics-based product offerings.

Adjusted EBITDA for the Q2 2019 and YTD 2019 periods was ($1.6) million and ($2.5) million compared to ($1.6) million and ($2.7) million in the same periods last year.  Adjusted EBITDA for Q2 2019 was impacted by higher cost of revenue, partially offset by higher revenue, the SIF operating grant, and lower SG&A, product development and R&D expenses. The improvement in Adjusted EBITDA for the YTD 2019 period was due to higher revenue, the SIF operating grant and lower product development and R&D, partially offset by higher cost of revenue and SG&A expense. (Adjusted EBITDA is a non-IFRS measure and is defined below)

Net loss for the Q2 2019 and YTD 2019 periods was ($2.2) million, or ($0.10) per share, and ($3.4) million, or ($0.16) per share, compared to ($2.0) million, or ($0.09) per share, and ($3.6) million, or ($0.17) per share, in the same periods last year. Net loss for Q2 2019 increased primarily due to the higher cost of revenue and interest expense, partially offset by an increase in revenue and lower product development and R&D, and depreciation and amortization expenses.

Cash used in operations for the Q2 2019 and YTD 2019 periods was $0.8 million and $3.0 million compared to $0.7 million and $1.6 million of cash used in operations in the same periods last year. The increase in cash used in operations was primarily due to working capital changes. The Company's cash balance at January 31, 2019 was $13.5 million compared to $4.8 million at October 31, 2018. The increase was due primarily to the completion of a Convertible Debenture financing in Q1 2019.

As at April 30, 2019, the Company had 21,728,654 shares outstanding on a non-diluted basis.

*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


2019

2018

2019

2018

Net loss

$

(2,155)

$

(2,049)

$

(3,390)

$

(3,648)

Interest income


(70)


(11)


(96)


(27)

Interest expense


369


18


592


41

Income tax expense


2


4


62


9

Depreciation and amortization


187


407


355


811

Unrealized foreign exchange gain


(114)


(127)


(225)


(217)

Share-based compensation


135


180


202


349

Restructuring expense (recovery)


-


5


-


(2)

Adjusted EBITDA

$

(1,646)

$

(1,573)

$

(2,500)

$

(2,684)

 

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, our ability to continue as a going concern, 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 cost and revenue share in connection with the Harris Agreement. 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.

exactEarth™ Ltd.

 Interim Condensed Consolidated Statements of Financial Position

(in thousands of Canadian dollars)

unaudited




As at
April 30,


As at
October 31,




2019


2018




$


$

ASSETS





Current assets






Cash and cash equivalents


13,472


4,774


Short-term investments


49


49


Trade accounts receivable


5,059


3,491


Unbilled revenue


1,222


911


Prepaid expenses


629


307


Other assets


248


347

Total current assets


20,679


9,879








Property, plant and equipment


4,402


4,009


Intangible assets


1,636


1,720


Other long-term assets


242


16

Total assets


26,959


15,624







LIABILITIES & SHAREHOLDERS' EQUITY





Current liabilities






Accounts payable and accrued liabilities


6,258


4,780


Deferred revenue


2,273


2,412


Loans payable - current


436


459


Long-term incentive plan liability - current


2


11

Total current liabilities


8,969


7,662








Loans payable


9,710


498


Long-term incentive plan liability


143


162


Other long-term liabilities 


1,094


95

Total liabilities


19,916


8,417







Shareholders' equity






Share capital


123,808


123,794


Contributed surplus


4,508


1,451


Accumulated other comprehensive loss


(128)


(11)


Deficit


(121,145)


(118,027)

Total shareholders' equity


7,043


7,207







Total liabilities and shareholders' equity


26,959


15,624







 

exactEarth™ Ltd.

Interim Condensed Consolidated Statements of Changes in Shareholders' Equity

(in thousands of Canadian dollars)

unaudited

For the six months ended April 30, 2019

Total


Deficit

Accumulated
Other
Comprehensive
Loss

Share
Capital


Contributed
Surplus



$


$

$

$


$

Balance at October 31, 2018

7,207


(118,027)


(11)


123,794


1,451


Impact of change in accounting policy

272


272


-


-


-

Adjusted balance at October 31, 2018

7,479


(117,755)


(11)


123,794


1,451


Stock-based compensation expense

119


-


-


-


119


Restricted share unit expense

21


-


-


-


21


Convertible debenture

2,917


-


-


-


2,917


Issuance of common shares

14


-


-


14


-


Comprehensive loss

(3,507)


(3,390)


(117)


-


-

Balance at April 30, 2019

7,043


(121,145)


(128)


123,808


4,508












For the six months ended April 30, 2018





















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












 

exactEarth™ Ltd.

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,




2019


2018


2019


2018




$


$


$


$






















Revenue


3,906


3,179


7,428


6,015


Cost of revenue


3,578


2,323


5,722


4,401


Gross profit


328


856


1,706


1,614











Operating expenses










Selling, general and administrative


1,818


2,170


3,814


3,609


Product development and research and development


243


542


536


959


Depreciation and amortization


187


407


355


811

Loss from operations


(1,920)


(2,263)


(2,999)


(3,765)











Other expenses










Restructuring expense (recovery)


-


5


-


(2)


Foreign exchange gain


(66)


(230)


(167)


(138)


Interest income


(70)


(11)


(96)


(27)


Interest expense


369


18


592


41

Total other expenses


233


(218)


329


(126)


Income tax expense


2


4


62


9

Net loss


(2,155)


(2,049)


(3,390)


(3,648)











Other comprehensive loss










Item that may be subsequently reclassified to net loss:










Foreign currency translation, net of income tax expense of nil

(38)


(36)


(117)


(77)

Total other comprehensive loss


(38)


(36)


(117)


(77)











Comprehensive loss


(2,193)


(2,085)


(3,507)


(3,725)











Loss per share










Basic and diluted loss per share


(0.10)


(0.09)


(0.16)


(0.17)











 


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,




2019


2018


2019


2018




$


$


$


$












Net loss


(2,155)


(2,049)


(3,390)


(3,648)

Add (deduct) items not involving cash










Non-monetary transaction


-


(30)


-


(30)


Non-cash interest


121


18


142


41


Depreciation and amortization


187


407


355


811


Operating grant recognized on SIF loan


(186)


-


(878)


-


Technology demonstration program recovery


-


(81)


-


(176)


Long-term incentive plan expense


74


128


83


207


Stock-based compensation


61


38


119


130


Restructuring reserve - revaluation


-


5


-


(2)


Net change in non-cash working capital balances


1,081


1,116


586


1,337

Other operating cash flows










Technology demonstration program funding received


26


194


26


326


Settlement of share units


(38)


(238)


(62)


(238)


Restructuring provision - payment of salary continuance


-


(216)


-


(376)

Cash flows used in operations


(829)


(708)


(3,019)


(1,618)











Investing activities










Acquisition of property, plant and equipment


(137)


(359)


(304)


(587)


Reimbursement of acquisition costs of property, plant and equipment


-


21


288


252


Acquisition of intangible assets


(4)


(13)


(4)


(17)

Cash flows used in investing activities


(141)


(351)


(20)


(352)











Financing activities










Government loan repayment


(82)


(123)


(205)


(246)


Long-term debt repayment


-


(58)


-


(146)


Convertible debenture advance


-


-


13,000


-


Issue costs


-


-


(1,146)


-

Cash flows (used in) from financing activities


(82)


(181)


11,649


(392)











Effect of exchange rate changes on cash


55


90


88


93











Net increase (decrease) in cash


(997)


(1,150)


8,698


(2,269)

Cash, beginning of the period


14,469


6,998


4,774


8,117

Cash, end of the period


13,472


5,848


13,472


5,848











Supplemental cash flow information










Interest received


66


11


90


27


Income taxes paid


2


4


62


9












 

SOURCE exactEarth Ltd.

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

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