exactEarth Announces Q3 Fiscal 2018 Financial Results

CAMBRIDGE, ON, Sept. 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 nine-month periods ended July 31, 2018. All financial figures are in Canadian dollars unless otherwise stated.

exactEarth Ltd. (CNW Group/exactEarth Ltd.)

Q3 2018 Financial Highlights

  • Revenue was $3.2 million
  • Subscription-based revenue was 92% of total revenue
  • Subscription-based revenue increased 14% from Q3 2017
  • Revenue backlog was $29.3 million at quarter-end
  • Order Bookings were $6.7 million
  • Adjusted EBITDA* was ($1.5) million
  • Net loss was ($2.3) million, or ($0.10) per share
  • Cash balance was $3.5 million at quarter-end

"With the deployment of our real-time service, exactView RT, nearly complete, we are beginning to see it positively reflected in our revenue line and we had a strong order bookings quarter," said Peter Mabson, President & CEO of exactEarth. "Q3 subscription revenue grew, both year-over-year and sequentially, as some real-time service trials have converted to new contracts and as overall awareness and interest in exactView RT continues to grow. We signed a significant partnership agreement in Q3 with IHS Markit, a world leader in information services, who view our real-time functionality as a significant differentiator in the market. Looking forward, we believe that this, along with other partnership agreements that we are working on, will help to increase momentum with our real-time service throughout the maritime market."

"Finally, the growth in our order book and backlog in the quarter was also due, in part, to a multi-year agreement signed with Myriota, a developer of technology for the space-based Internet-of-Things industry that we also hold a minority ownership position in. With this agreement we are supplying satellite services to them from our first-generation constellation to support their satellite Internet-of-Things growth initiatives, enabling us to unlock additional value from our legacy constellation."

Financial Review

Total revenue in the three-month period ended July 31, 2018 ("Q3 2018") was $3.2 million compared to $2.9 million in the three-month period ended July 31, 2017 ("Q3 2017"). Total revenue in the nine-month period ended July 31, 2018 ("YTD 2018") was $9.2 million compared to $10.0 million in the nine-month period ended July 31, 2017 ("YTD 2017").

Order bookings in Q3 and YTD 2018 were $6.7 million and $11.6 million compared to $1.7 million and $14.3 million in Q3 and YTD 2017. Order bookings will fluctuate on a quarter-to-quarter basis reflecting the timing to complete new customer agreements. Revenue backlog at July 31, 2018 increased to $29.3 million compared to $25.9 million at the end of Q2 2018.

Subscription Services revenue in Q3 2018 was $2.9 million, up 14% compared to $2.6 million in the same period last year. Subscription Services revenue for the YTD 2018 period was $7.9 million compared to $7.9 million in the same period last year. Excluding $0.07 million of non-cash revenue in the YTD 2018 period that resulted from the trade of AIS subscription data for data processing services and the $0.62 million in 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 7% for the YTD 2018 period.

Subscription Services revenue in Q3 2018 represented 92% of total revenue (YTD 2018: 86%) compared to 88% in the same period last year (YTD 2017: 80%). Subscription Services revenue from commercial customers rose 12% in Q3 2018 and, excluding the non-cash revenue generated in Q2 2018, 9% YTD 2018 compared to the same periods last year. Excluding the non-cash revenue generated in Q1 2017, Subscription Services revenue from government customers would have risen 14% and 5%, respectively, for the three- and nine-month periods ended July 31, 2018.

Data Products revenue in Q3 2018 was $0.03 million compared to $0.31 million in the same period last year. Data Products revenue for the YTD 2018 period was $0.71 million compared to $0.86 million in the same period 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 in Q3 2018 was $0.22 million compared to $0.05 million in the same period last year. Other Products & Services revenue for the YTD 2018 period was $0.59 million compared to $1.2 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 Q3 2018 was 12% compared to 41.5% in the same period last year. Gross margin for the YTD 2018 period was 22% compared to 34% in the same period last year. Cost of revenue increased due to higher satellite operating costs related to the Second-Generation Constellation and increased terrestrial data costs, partially offset by decreased data processing and project-related costs and the reimbursement of costs related to the TDP Agreement.

Selling, general and administrative ("SG&A") expense in Q3 2018 was $1.7 million compared to $2.0 million in the same period last year. SG&A for the YTD 2018 period was $5.3 million, compared to $5.2 million in the same period last year. For Q3 2018, SG&A decreased year-over-year due primarily to lower stock-based compensation, lower sales and marketing expenses and the substantial recovery of a bad debt expense incurred in Q2 2018. For the YTD period, lower stock-based compensation and lower spending on travel and conferences, was offset by the recovery of a bad debt provision in Q2 2017.

Product development and research and development ("R&D") expense in Q3 2018 was $0.25 million compared to $0.5 million in the same period last year. Product development and R&D expense for the YTD 2018 period was $1.2 million, compared to $1.3 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 and new analytics-based product offerings.

Adjusted EBITDA for Q2 2018 was ($1.5) million compared to ($1.2) million in the same period last year. Adjusted EBITDA for the YTD 2018 period was ($4.2) million, compared to ($3.0) million in the same period last year. The decrease in Adjusted EBITDA in Q3 2018 was primarily due to higher cost of revenue, offset in part by lower SG&A and product development. For the YTD period, lower Adjusted EBITDA revenue was due primarily to lower revenue and higher cost of revenue. (Adjusted EBITDA is a non-IFRS measure and is defined below)

Net loss for Q3 2018 was ($2.3) million, or ($0.10) per share, compared to ($2.7) million, or ($0.12) per share, in the same period last year. Net loss for the YTD 2018 period was ($5.9) million, or ($0.27) per share, compared to ($4.9) million, or ($0.23) per share, in the same period last year. The net loss in Q3 2018 improved primarily due to higher revenue and lower operating and other expenses, partially offset by the increase in cost of revenue. The net loss for the YTD period increased primarily due to lower revenue, other income and foreign exchange gains, and increased cost of revenue and, SG&A, partially offset by decreases in depreciation and amortization, product development and R&D and other expenses.

exactEarth used $1.6 million of cash in operations in Q3 2018 compared with $1.2 million of cash used in operations in Q3 2017. For the YTD 2018 period, exactEarth used $3.3 million of cash in operations, compared to $6.0 million of cash used in operations in the same period last year. The Company's cash balance at July 31, 2018 was $3.5 million compared to $8.1 million at October 31, 2017.

As at July 31, 2018, the Company had 21,626,288 shares outstanding on a non-diluted basis. 

Outlook & Going Concern

The Company faces significant liquidity challenges with recurring operating losses and negative cash flows. As at August 31, 2018, the Company had approximately $3.7 million in cash on hand, an increase of $0.2 million from its cash position of $3.5 million as at July 31, 2018, and a decrease of approximately $4.5 million since October 31, 2017. The Company has a history of operating losses and generating insufficient cash flows from operations to fund its activities. Based on the Company's forecasted cash flows for the next twelve months, the Company's current cash flow from operations may not be sufficient to cover its commitments, obligations and operating costs for at least the next twelve months, which could have a negative impact on its ability to continue as a going concern.

The Company monitors its risk of shortage of funds by monitoring forecasted and actual cash flows and maturity dates of existing financial liabilities and commitments and is actively managing its capital to ensure a sufficient liquidity position to finance its operations, including cost of revenue, general and administrative expenses, working capital and capital expenditures. The Company's ability to continue as a going concern is dependent upon its ability to generate cash flows from operations, equity financings or through other arrangements. Management for the Company has concluded that these conditions indicate the existence of material uncertainties that may cast significant doubt as to the ability of exactEarth to continue as a going concern and therefore has included notice of such in the Company's condensed interim consolidated financial statements for the three and nine months ended July 31, 2018. Notwithstanding the foregoing, the Company's condensed interim consolidated financial statements for the three and nine months ended July 31, 2018 have been prepared on a going concern basis, assuming that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations. The interim financial statements do not reflect adjustments that would be necessary if the going concern assumption was not appropriate. If the going concern assumption was not appropriate for these financial statements, adjustments to the carrying value of the assets and liabilities, reported expenses and statement of financial position classifications would be necessary. Such adjustments could be material.

In January 2018 the Board commenced a process to explore and evaluate potential strategic alternatives focused on maximizing shareholder value, including 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 Board formed a special committee of independent directors to oversee the strategic review process (the "Special Committee"). The Special Committee continues to review possible strategic alternatives, however there can be no guarantee that the review will result in a transaction or satisfy any liquidity concerns relating to the Company's ability to continue as a going concern. The Company does not intend to provide announcements or updates on the strategic review process 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: 

Friday, September 14, 2018 at 8:30 a.m. E.S.T.



Dial-in: 

(416) 764-8609 or toll-free (888) 390-0605



Webcast:  

To access the live webcast: https://event.on24.com/wcc/r/1822192/7116FBDB5335C5B5D8DD1386EAEF109D or visit the exactEarth website for more details. The webcast will be archived for 90 days.



Replay: 

Replay Toll Free Dial-In Number: (888) 390-0541
Replay Password: 263354
Dial-In Replay Availability: 14/09/2018 11:30 ET - 28/09/2018 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, 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, 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 July 31

 Nine months ended July 31


2018

2017

2018

2017

Net loss

$

(2,253)

$

(2,700)

$

(5,901)

$

(4,870)


Interest expense


11


10


25


42


Income tax expense


113


4


122


17


Depreciation and amortization


437


969


1,248


2,875


Unrealized foreign exchange gain


92


403


(125)


56


Share-based compensation


116


177


465


451


Restructuring expense (recovery)


-


(79)


(2)


(87)


Other income


-


-


-


(1,455)

Adjusted EBITDA

$

(1,484)

$

(1,216)

$

(4,168)

$

(2,971)

 

exactEarth™ Ltd.

Interim Condensed Consolidated Statements of Financial Position

(in thousands of Canadian dollars)

unaudited










As at
July 31,

2018


As at

October 31,

2017








$


$

ASSETS





Current assets






Cash


3,453


8,117


Trade accounts receivable


3,295


3,171


Unbilled revenue


733


425


Prepaid expenses and other assets


950


1,266

Total current assets


8,431


12,979








Property, plant and equipment


12,080


12,576


Intangible assets


5,121


5,405

Total assets


25,632


30,960







LIABILITIES & SHAREHOLDERS' EQUITY





Current liabilities






Accounts payable and accrued liabilities


4,436


3,722


Deferred revenue


2,528


2,064


Restructuring provision


-


388


Loans payable - current


450


567


Long-term incentive plan liability - current


31


166

Total current liabilities


7,445


6,907








Loans payable


280


662


Long-term incentive plan liability


382


343


Other long-term liabilities 


113


45

Total liabilities


8,220


7,957







Shareholders' equity






Share capital


123,794


123,781


Contributed surplus


1,380


1,070


Accumulated other comprehensive loss


(57)


(44)


Deficit


(107,705)


(101,804)

Total shareholders' equity


17,412


23,003







Total liabilities and shareholders' equity


25,632


30,960

 

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 


Nine months ended 










July 31,


July 31,


July 31,


July 31,




2018


2017


2018


2017




$


$


$


$












Revenue


3,171


2,934


9,186


9,981


Cost of revenue


2,789


1,717


7,136


6,567


Gross profit


382


1,217


2,050


3,414











Operating expenses










Selling, general and administrative


1,653


1,988


5,289


5,242


Product development and research and development


252


497


1,238


1,333


Depreciation and amortization


437


969


1,248


2,875

Loss from operations


(1,960)


(2,237)


(5,725)


(6,036)











Other expenses (income)










Other income


-


-


-


(1,455)


Other expense


61


37


61


85


Restructuring expense recovery


-


(79)


(2)


(87)


Foreign exchange loss (gain)


108


491


(30)


232


Interest expense


11


10


25


42

Total other expenses (income)


180


459


54


(1,183)


Income tax expense


113


4


122


17

Net loss


(2,253)


(2,700)


(5,901)


(4,870)











Other comprehensive income (loss)










Item that may be subsequently reclassified to net loss:










Foreign currency translation, net of income tax expense of nil


64


114


(13)


(19)

Total other comprehensive income (loss)


64


114


(13)


(19)











Comprehensive loss


(2,189)


(2,586)


(5,914)


(4,889)











Loss per share










Basic loss per share


(0.10)


(0.12)


(0.27)


(0.23)











 

exactEarth™ Ltd

Interim Condensed Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)

unaudited










Three months ended


Nine months ended




July 31,


July 31,


July 31,


July 31,




2018


2017


2018


2017




$


$


$


$












Net loss


(2,253)


(2,700)


(5,901)


(4,870)

Add (deduct) items not involving cash










Non-monetary transaction


15


-


(15)


(618)


Non-cash interest


16


31


57


101


Depreciation and amortization


437


969


1,248


2,875


Loss on disposal of assets


-


-


-


3


Gain on insurance settlement


-


-


-


(1,455)


Technology demonstration program recovery


(26)


(132)


(202)


(282)


Long-term incentive plan expense


65


76


272


250


Stock-based compensation


50


93


193


294


Restructuring reserve - revaluation


-


(5)


(2)


(13)


Net change in non-cash working capital balances


57


387


1,297


(1,965)

Other operating cash flows










Technology demonstration program funding received


81


214


407


766


Settlement of restricted share units


-


(6)


(238)


(112)


Restructuring provision - payment of salary continuance


(10)


(123)


(386)


(935)

Cash flows used in operations


(1,568)


(1,196)


(3,270)


(5,961)











Investing activities










Acquisition of property, plant and equipment


(641)


(196)


(1,133)


(619)


Reimbursement of acquisition costs of property, plant and equipment


-


172


252


396


Insurance recovery


-


-


-


3,500


Acquisition of intangible assets


-


15


(28)


(178)

Cash flows (used in) from investing activities


(641)


(9)


(909)


3,099











Financing activities










Government loan repayment


(164)


(123)


(410)


(368)


Long-term debt repayment


-


(87)


(146)


(262)

Cash flows used in financing activities


(164)


(210)


(556)


(630)











Effect of exchange rate changes on cash


(22)


(234)


71


(131)











Net decrease in cash


(2,395)


(1,649)


(4,664)


(3,623)

Cash, beginning of the period


5,848


11,706


8,117


13,680

Cash, end of the period


3,453


10,057


3,453


10,057











Supplemental cash flow information










Interest received


5


20


33


59


Income taxes paid


113


3


122


16

 

exactEarth™ Ltd.

 Interim Condensed Consolidated Statements of Changes in Shareholders' Equity

(in thousands of Canadian dollars)

unaudited

For the nine months ended July 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

193


-


-


-


193


Restricted share unit expense and transfer

130


-


-


-


130


Issuance of common shares

-


-


-


13


(13)


Comprehensive loss

(5,914)


(5,901)


(13)


-


-

Balance at  July 31, 2018

17,412


(107,705)


(57)


123,794


1,380












For the nine months ended July 31, 2017





















Balance at October 31, 2016

56,543


(67,970)


45


123,769


699


Stock-based compensation expense

294


-


-


-


294


Issuance of common shares

-


-


-


12


(12)


Comprehensive loss

(4,889)


(4,870)


(19)


-


-

Balance at July 31, 2017

51,948


(72,840)


26


123,781


981

 

SOURCE exactEarth Ltd.

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