exactEarth Announces Q2 Fiscal 2020 Financial Results

CAMBRIDGE, ON, June 11, 2020 /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, 2020. All financial figures are in Canadian dollars unless otherwise stated.

Q2 Fiscal 2020 Highlights:

  • Revenue was $4.4 million, up 13% compared to $3.9 million in Q2 Fiscal 2019; Year-to-date, revenue was $8.5 million, up 15% compared to $7.4 million in the same period last year
  • Subscription Services revenue was $3.9 million, up 22% compared to $3.2 million in Q2 Fiscal 2019; Year-to-date, Subscription Services revenue was $7.7 million, up 23% compared to $6.3 million in the same period last year
  • New Order Bookings were $3.5 million, down 41% compared to $6.0 million in Q2 Fiscal 2019; Year-to-date, new Order Bookings were $10.6 million, up 17% compared to $9.0 million in the same period last year
  • Order Bookings backlog at the end of Q2 2020 was $24.9 million compared to $24.6 million at the end of Q2 2019
  • Gross margin was 32.3%, compared to 8.4% in Q2 Fiscal 2019; Year-to-date, gross margin was 40.9% compared to 23.0% in the same period last year
  • Adjusted EBITDA* was ($0.55) million compared to ($1.6) million in Q2 Fiscal 2019; Year-to-date Adjusted EBITDA was ($0.3) million compared to ($2.5) million in the same period last year
  • Cash and short-term investments were $6.9 million at the end of Q2 Fiscal 2020 compared to $10.2 million at the end of Fiscal 2019
  • Announced strategic divestiture of select first-generation satellite assets to Myriota, which, upon closing, is expected to strengthen the Company's financial position and cash flow

"Q2 saw continued progress on our objectives to drive subscription revenue growth and margin expansion," said Peter Mabson, President and CEO of exactEarth. "The broader onset of the COVID-19 pandemic took place during the quarter and in response, we implemented measures to protect our employees, customers and others from the spread of the virus. Working remotely, we continue to execute on existing customer mandates, while also working to identify and complete new sales and partner opportunities. So far we have had just one customer delay payment citing issues related to COVID-19, but beyond that, the fundamental operating prospects for exactEarth remain sound and importantly, with the recent measures we have undertaken to reduce our expense base, we believe that our outlook for the business is now stronger than it has been at any time in the past few years."

"Looking forward, in the second half of this year, we expect a significant reduction in our quarterly cash burn and to trend closer to becoming cash flow and Adjusted EBITDA positive. In Q2 we announced the sale of select satellites and assets to Myriota Pty Ltd that, upon closing, would generate annual cash savings of approximately $1.0 million and help push us even closer to our objectives. We expect that transaction to close by the end of our fiscal year."

"In addition to our Q2 transaction with Myriota, we are also an investor in that company, having made our initial investment in November 2015. In Q2, Myriota completed a Series B funding round, raising US$19.3 million. exactEarth did not participate in this funding round and while our ownership stake is lower now on a percentage basis, the value of our holding has increased in each of their successive financings, and we also continue to have a seat on the Board. This is an exciting company to watch and their latest financing gives them further opportunity to scale globally and execute on their growth plan."

Q2 Fiscal 2020 Financial Review
Total revenue in the three-month period ended April 30, 2020 ("Q2 2020") was $4.4 million, up 13% compared to $3.9 million in the three-month period ended April 30, 2019 ("Q2 2019"). Total revenue in the six-month period ended April 30, 2020 ("YTD 2020") was $8.5 million, up 15% compared to $7.4 million in the six-month period ended April 30, 2019 ("YTD 2019").

Revenue rose primarily due to the increase in Subscription Services revenue, which was $3.9 million (88% of total revenue) in Q2 2020, up 22% from $3.2 million (81% of total revenue) in Q2 2019. Subscription Services revenue in the YTD 2020 period was $7.7 million, up 23% compared to $6.3 million in the YTD 2019 period.

Total revenue and Subscription Services revenue growth for Q2 2020 and YTD 2020 was driven primarily by customer growth in the commercial market segment. Revenue from commercial customers for Q2 2020 and YTD 2020 was $3.3 million and $6.6 million, respectively, which was up 16% and 25% from the respective comparison periods in 2019. 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 Q2 2020 and YTD 2020 was $1.1 million and $1.9 million, respectively, which was up 4% and down 11% from the respective comparison periods in 2019. As shown in Q2, the Company expects performance in the government vertical to continue to trend favourably in Fiscal 2020, due in part to new customer contracts signed so far this year, such as that with EMSA.

Data Products revenue and Other Products & Services revenue combined in Q2 2020 was $0.5 million compared to $0.7 million in Q2 2019. For the YTD 2020 period, Data Products revenue and Other Products & Services revenue combined was $0.8 million compared to $1.1 million in the same period last year. Data Products revenue and Other Products & Services revenue is typically generated from on-demand customer requests and/or projects, which results in some variability in quarter-to-quarter revenue levels from these segments.

Order Bookings for Q2 2020 were $3.5 million, compared to $6.0 million in Q2 2019. Order bookings for the YTD 2020 period were $10.6 million, compared to $9.0 million in the same period last year. Order Bookings will fluctuate on a quarter-to-quarter basis reflecting the timing to complete new customer agreements. The increase year-to-date reflects strong new and renewal order activity with customers in both the commercial and government markets. Order Bookings backlog at April 30, 2020 was $24.9 million compared to $22.4 million at the end of Fiscal 2019 and $24.6 million at the end of Q2 2019. Revenue of $7.7 million from the current revenue backlog is forecasted to be earned over the remainder of 2020.

Gross margin for Q2 2020 was 32.3% compared to 8.4% in Q2 2019. Gross margin for the YTD 2020 period was 40.9% compared to 23% in the same period last year. Gross margin improved in both periods year-over-year due to revenue growth and a lower cost of revenue. Cost of revenue decreased primarily due to lower satellite operating costs related to the Company's Second-Generation Constellation.

Selling, general and administrative ("SG&A") expense for Q2 2020 was $2.6 million compared to $1.8 million in Q2 2019. SG&A for the YTD 2020 period was $4.3 million compared to $3.8 million in the same period last year. The increase in SG&A year-over-year is due primarily to an increase in bad debt expense of $0.9 million related to one customer that has been significantly impacted by COVID-19 developments. While exactEarth and this customer are in discussions to negotiate a revised payment and/or service arrangement, the Company has conservatively taken an allowance on the full amount owing.

Product development and research and development ("R&D") expense for Q2 2020 was $0.21 million compared to $0.24 million in Q2 2019. R&D for the YTD 2020 period was $0.51 million compared to $0.54 million in the same period last year. The Company's product development and R&D activities continue to be focused primarily on the development of web-based functionality and new analytics-based product offerings.

Adjusted EBITDA for Q2 2020 was ($0.55) million compared to ($1.6) million in Q2 2019. Adjusted EBITDA for the YTD 2020 period was ($0.3) million compared to ($2.5) million in the same period last year. Adjusted EBITDA improved year-over-year due primarily to higher revenue and lower cost of revenue. (Adjusted EBITDA is a non-IFRS measure and is defined below.)

Net loss for Q2 2020 was ($2.9) million, or ($0.13) per basic and diluted share, compared to ($2.2) million, or ($0.10) per basic and diluted share, in Q2 2019. Net loss for the YTD 2020 period was ($3.5) million, or ($0.16) per basic and diluted share, compared to ($3.4) million, or ($0.16) per basic and diluted share in the same period last year. Net loss increased year-over-year due to a $0.84 million non-cash impairment charge related to the sale of assets to Myriota and higher SG&A, offset in part by higher revenue and a lower cost of revenue. Upon closing of the Myriota transaction, the Company expects that a non-cash expense of approximately $0.5 million will be recognized related to the transaction.

Cash used in operations for Q2 2020 was ($1.3) million, compared to ($0.8) million in Q2 2019. Cash used in operations for the YTD 2020 period was ($3.2) million, compared to ($3.0) million in the same period last year. The year-over-year increase in cash used from operations in Q2 2020 was primarily due to working capital changes. Q2 2020 cash used in investing activities included $0.9 million paid related to the launch of the EV-10 satellite, which is expected to be launched this month and when in orbit will further enhance the Company's exactView RT service. exactEarth's cash balance at April 30, 2020 was $6.8 million compared to $10.2 million at October 31, 2019.

As at June 11, 2020, the Company had 22,048,640 shares outstanding on a non-diluted basis. 

*Non-IFRS Measures
We measure Adjusted EBITDA as earnings before interest expense, taxes, depreciation and amortization ("EBITDA"), plus unrealized foreign exchange losses, share-based compensation costs, impairment losses and COVID-19 related allowances for doubtful accounts, less interest income and unrealized foreign exchange gains. 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


2020

2019

2020

2019

Net loss

$

(2,878)

$

(2,155)

$

(3,491)

$

(3,390)

Interest income


(20)


(70)


(54)


(96)

Interest expense


434


369


860


592

Income tax expense


45


2


119


62

Depreciation and amortization


237


187


491


355

Unrealized foreign exchange gain


(201)


(114)


(368)


(225)

Share-based compensation


145


135


454


202

Impairment loss


838


-


838


-

COVID-19 allowance for doubtful accounts


852


-


852


-

Adjusted EBITDA

$

(548)

$

(1,646)

$

(299)

$

(2,500)

About exactEarth Ltd.
exactEarth is a leading provider of global maritime vessel data for ship tracking and maritime situational awareness solutions. Since its formation in 2009, exactEarth has pioneered a powerful new method of maritime surveillance called Satellite 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's second-generation constellation, exactView RT, securely relays satellite-detected AIS vessel signals from any location on the earth's surface to the ground in seconds – thus enabling global real-time vessel tracking. This unique capability consists of 58 advanced satellite payloads designed and built by L3Harris Technologies, Inc. under agreement with exactEarth and that are hosted onboard the Iridium NEXT constellation of satellites. www.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, financial impact of the Myriota transaction, 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 anticipated benefits of the A&R SABA; the financial impact of the Myriota transaction; the impact of the COVID-19 pandemic on customers and the market generally, 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,
2020


As at
October 31,
2019


$


$

ASSETS




Current assets




Cash and cash equivalents

6,836


10,188

Short-term investments

49


49

Accounts receivable

3,205


3,073

Unbilled revenue

780


2,149

Prepaid expenses

711


448

Other current assets

520


209

Assets held for sale

427


-

Total current assets

12,528


16,116





Property, plant and equipment

4,027


4,398

Intangible assets

1,441


1,538

Other long-term assets

590


366

Total assets

18,586


22,418





LIABILITIES & SHAREHOLDERS' EQUITY (DEFICIENCY)




Current liabilities




Accounts payable and accrued liabilities

4,468


4,840

Deferred revenue

2,973


3,499

Loans payable - current

-


202

Total current liabilities

7,441


8,541





Loans payable

10,597


10,089

Long-term incentive plan liability

412


203

Other long-term liabilities

1,413


1,466

Total liabilities

19,863


20,299





Shareholders' equity (deficiency)




Share capital

123,923


123,823

Contributed surplus

4,706


4,647

Accumulated other comprehensive loss

(177)


(113)

Deficit

(129,729)


(126,238)

Total shareholders' equity (deficiency)

(1,277)


2,119





Total liabilities and shareholders' equity (deficiency)

18,586


22,418

 

 

exactEarth™ Ltd.
Interim Condensed Consolidated Statements of Changes in Shareholders' Equity (Deficiency)
(in thousands of Canadian dollars)
(unaudited)







For the six months ended April 30, 2020

Total

Deficit

Accumulated
Other
Comprehensive
Loss

Share
Capital

Contributed
Surplus


$

$

$

$

$

Balance at October 31, 2019

2,119

(126,238)

(113)

123,823

4,647

Stock-based compensation expense

68

-

-

-

68

Restricted share unit expense

91

-

-

-

91

Issuance of common shares

-

-

-

100

(100)

Comprehensive loss

(3,555)

(3,491)

(64)

-

-

Balance at April 30, 2020

(1,277)

(129,729)

(177)

123,923

4,706







For the six months ended April 30, 2019












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

 

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,
2020


April 30,
2019


April 30,
2020


April 30,
2019


$


$


$


$









Revenue

4,407


3,906


8,540


7,428

Cost of revenue

2,984


3,578


5,043


5,722

Gross profit

1,423


328


3,497


1,706









Selling, general and administrative

2,560


1,818


4,340


3,814

Product development and research and development

208


243


512


536

Depreciation and amortization

237


187


491


355

Impairment loss

838


-


838


-

Loss from operations

(2,420)


(1,920)


(2,684)


(2,999)









Other expenses








Foreign exchange gain

(1)


(66)


(118)


(167)

Interest income

(20)


(70)


(54)


(96)

Interest expense

434


369


860


592

Total other expenses

413


233


688


329

Income tax expense

45


2


119


62

Net loss

(2,878)


(2,155)


(3,491)


(3,390)









Other comprehensive loss








Item that may be subsequently reclassified to net loss:








Foreign currency translation, net of income tax expense of nil

(2)


(38)


(64)


(117)

Total other comprehensive loss

(2)


(38)


(64)


(117)









Comprehensive loss

(2,880)


(2,193)


(3,555)


(3,507)









Loss per share








Basic and diluted loss per share

(0.13)


(0.10)


(0.16)


(0.16)

 

exactEarth™ Ltd.
Interim Condensed Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)
(unaudited)






Three Months ended:


Six Months ended:


April 30,
2020


April 30,
2019


April 30,
2020


April 30,
2019


$


$


$


$

Operating activities








Net loss

(2,878)


(2,155)


(3,491)


(3,390)

Add (deduct) items not involving cash








Non-cash interest

131


121


249


142

Depreciation and amortization

237


187


491


355

Impairment loss

838


-


838


-

Operating grant recognized on SIF loan

(152)


(186)


(361)


(878)

Long-term incentive plan expense

119


74


386


83

Stock-based compensation

26


61


68


119

Net change in non-cash balances

343


1,081


(1,331)


586

Other operating cash flows








Technology demonstration program funding received

-


26


-


26

Settlement of share units

-


(38)


-


(62)

Cash flows used in operating activities

(1,336)


(829)


(3,151)


(3,019)









Investing activities








Acquisition of property, plant and equipment

(1,195)


(137)


(1,573)


(304)

Reimbursement of acquisition costs of property, plant and equipment

331


-


331


288

Acquisition of intangible assets

-


(4)


-


(4)

Cash flows used in investing activities

(864)


(141)


(1,242)


(20)









Financing activities








Government loan repayment

(82)


(82)


(205)


(205)

Government loan advance

375


-


1,208


-

Convertible debenture advance

-


-


-


13,000

Convertible debenture issue costs

-


-


-


(1,146)

Payment of principal portion of lease obligations

(36)


-


(73)


-

Cash flows from (used in) financing activities

257


(82)


930


11,649









Effect of exchange rate changes on cash

107


55


111


88









Net (decrease) increase in cash

(1,836)


(997)


(3,352)


8,698

Cash, beginning of the period

8,672


14,469


10,188


4,774

Cash, end of the period

6,836


13,472


6,836


13,472









Supplemental cash flow information








Interest paid

4


-


203


-

Interest received

8


66


32


90

Income taxes paid

45


2


119


62

 

SOURCE exactEarth Ltd.

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

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