UrtheCast Reports First Quarter 2018 Financial Results and Provides Update on US$142 Million Credit Facility

Company Also Provides Update on Financial Condition

VANCOUVER, May 15, 2018 /CNW/ - UrtheCast Corp. (TSX:UR) ("UrtheCast" or the "Company") today announces financial results for the three months ended on March 31, 2018 and provides an update on its financial condition.

Q1 2018 Financial Results

(in millions of Canadian dollars)

Q1 2018

Q1 2017

Revenue

$

4.3

$

9.4

Operating costs

(15.4)

(15.6)

Net loss

(11.1)

(5.1)

Adjusted EBITDA(1)

(6.1)

(1.3)



1

Non-IFRS earnings measure. See reconciliation to Net Loss later in this press release

 

Revenue was $4.3 million in the first quarter of 2018 compared to $9.4 million in the first quarter of 2017, due to lower revenues from engineering services and EO imagery sales.

Engineering services revenue of $3.3 million in the first quarter of 2018, compared to $7.8 million in the first quarter of 2017, decreased mainly due to a change in the expected completion date of one of our engineering services contracts, which resulted in remaining revenue being recognized over a longer period, and also due to a stronger Canadian dollar as our engineering contracts are denominated in US dollars. Earth Observation ("EO") imagery revenue of $1.0 million in Q1 2018, compared to $1.6 million in Q1 2017, was lower due to an ongoing delay in securing a major contract award.

The net loss of $11.1 million and negative adjusted EBITDA of $6.1 million in the first quarter of 2018 increased when compared to the net loss of $5.1 million and negative adjusted EBITDA of $1.3 million in the prior year, primarily as a result of the lower revenues.

Outlook and Going Concern

The Company continues to face significant liquidity challenges with recurring operating losses and negative cash flows.

As at April 30, 2018, the Company had (i) approximately $4.8 million in cash on hand, a decrease of $2.7 million from its cash position of $7.5 million as at March 31, 2018, and a decrease of $18.4 million since December 31, 2017; and (ii) $16.2 million in restricted cash. Based on the Company's forecasted cash flows for the next twelve months, given an ongoing delay to secure a major contract award and the required principal repayments of its long-term debt in 2018, 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 will need to meet certain conditions precedent to draw on the UrtheDaily Financing, which is substantially finalized and is further described below, in order to pay for its ongoing costs of operations as well as service its working capital deficiency, meet its commitments to lenders and fund the development of the UrtheDaily Constellation. There can be no assurance that any such financing will be completed on the terms described below or at all.

Management for the Company has concluded that material uncertainties regarding the Company's ability to secure adequate financing to fund its working capital deficiency and meet its commitments to lenders raise significant doubt as to the ability of Urthecast to continue as a going concern and therefore has included notice of such in the Company's interim consolidated financial statements. Please refer to Note 1 of the Company's interim consolidated financial statements for the three months ended March 31, 2018 for more information.

Notwithstanding the foregoing, the Company's interim financial statements 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 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.

Business Highlights

UrtheDaily Financing

(i) Update on UrtheDaily Senior Secured Facility

On May 14, 2018, the Company announced that it has substantially finalized the definitive documentation for the credit agreement (the "Credit Agreement") and related documentation for the previously announced US$142 million senior secured credit facility (the "UrtheDaily Senior Secured Facility") with the senior lenders. Subject to entering into the Credit Agreement and satisfaction of the drawdown conditions under the Credit Agreement, the proceeds from the UrtheDaily Senior Secured Facility will be used to finance the construction, launch and deployment of the UrtheDaily Constellation, and for related working capital and general corporate purposes. The loan will make available to the Company US$142 million in two equal drawdowns upon satisfaction of the conditions precedent described below.

On May 3, 2018, the Company announced the closing of an approximately $34 million (or approximately US$27 million) private placement of subscription receipts (the "Subordinated Capital Financing", together with the UrtheDaily Senior Secured Facility, the "UrtheDaily Financing") previously announced on April 3, 2018 and April 10, 2018. The Subordinated Capital Financing, as further described below, exceeds the requirement under a condition precedent to the UrtheDaily Senior Secured Facility to raise a minimum of US$25 million. Under the terms of the Credit Agreement described above, the Company will also be required to refinance an existing credit facility and may therefore need to raise up to an additional US$25 million of subordinated capital acceptable to the Senior Lenders. Altogether, the UrtheDaily Financing is expected to substantially fund the UrtheDaily Constellation.

(ii) Update on Subordinated Capital Financing

The proceeds of the Subordinated Capital Financing were deposited in escrow and, following the expected execution of the Credit Agreement, approximately $5 million from the proceeds of the private placement will be released from escrow to the Company. The Company expects that approximately $21.7 million of the approximately $34.4 million in proceeds from the Subordinated Capital Financing will be available during the month of May 2018, although there can be no assurance that all of these conditions will be met during such time or at all.

Pursuant to the terms of the Subordinated Capital Financing, there are restrictions on the use proceeds, where at least 50% of such proceeds are to be applied to the UrtheDaily Constellation. Please see the announcement dated May 3, 2018 for further details regarding the terms of the Subordinated Capital Financing.

SELECTED FINANCIAL INFORMATION

The following table provides selected financial information of the Company, which was derived from, and should be read in conjunction with, the unaudited condensed interim consolidated financial statements for the three months ended March 31, 2018. All financial information is in thousands of Canadian dollars, unless otherwise noted, and except for number of shares and per share amounts.


Three Months Ended March 31,


2018

2017

Revenue    

$

4,267

$

9,396

Other operating income

195

50


4,462

9,446

Operating costs



Direct costs, selling, general and administrative expenses

10,220

10,509

Research expenditures

306

276

Depreciation and amortization

4,368

4,474

Share-based payments

529

333


15,423

15,592

Operating loss

(10,961)

(6,146)

Net finance costs

(544)

(442)

Gain on derivative financial instruments

202

242

Foreign exchange gain (loss)

162

(219)

Loss before income taxes

(11,141)

(6,565)

Income tax recovery

83

1,486

Net loss

(11,058)

(5,079)

Other comprehensive income

2,256

542

Comprehensive loss

$

(8,802)

$

(4,537)

Net loss per share – basic and diluted

$

(0.09)

$

(0.05)

 

NON-IFRS EARNINGS MEASURES

The following table reconciles our Non-IFRS earnings measures to Revenue and Net Loss prepared in accordance with IFRS.


Three Months Ended March 31,


2018

2017

ADJUSTED EBITDA:



Net loss

$

(11,058)

$

(5,079)

Add back (subtract):



Depreciation and amortization

4,368

4,474

Net finance costs

544

442

Income tax recovery

(83)

(1,486)

EBITDA

(6,229)

(1,649)

Share-based payments expense

529

333

Gain on derivative financial instruments

(202)

(242)

Foreign exchange (gain) loss

(162)

219

ADJUSTED EBITDA

$

(6,064)

$

(1,339)

 

Urthecast Corp. Update on US$142 Million Credit Facility

With respect to the Credit Agreement, and related documentation for the previously announced UrtheDaily Senior Secured Facility with the senior lenders (the "Senior Lenders"), UrtheCast and the Senior Lenders have substantially agreed on the principal documents for the financing transaction. The Company and the Senior Lenders currently plan on signing and closing the transaction on May 18, 2018.

UrtheCast has also received confirmation that all funds currently held in escrow pursuant to the previously announced Subordinated Capital Financing, will remain in escrow until applicable release conditions have been satisfied or waived and, in any event, at least until May 18, 2018.  Further details on the $34 million private placement were disclosed in UrtheCast's press release of May 3, 2018.

ABOUT URTHECAST CORP.

UrtheCast Corp. is a Vancouver-based technology company that serves the rapidly evolving geospatial and geoanalytics markets with a wide range of information-rich products and services. The Company operates Earth Observation (EO) sensors in space, through its subsidiary Deimos Imaging, S.L.U., including two satellites, Deimos-1 and Deimos-2, to produce imagery data for partners and customers in multiple markets. UrtheCast processes and distributes imagery data and value-added products on behalf of the PanGeo Alliance, a network of seven satellite operators with a combined 13 medium- and high-resolution EO sensors. UrtheCast is developing a satellite constellation designed to capture high-quality, medium resolution optical imagery of the Earth's entire landmass (excluding Antarctica) every day, called UrtheDaily™. UrtheCast is also developing the world's first fully-integrated constellation of sixteen multispectral optical and SAR satellites, called OptiSAR™. Common shares of UrtheCast trade on the Toronto Stock Exchange as ticker "UR".

For more information, visit UrtheCast's website at www.urthecast.com.

Non-IFRS Financial Measures

The Company prepares its financial statements in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board. This release includes certain non-IFRS financial measures, such as EBITDA and adjusted EBITDA. The Company uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS or considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-IFRS financial measures should be read in conjunction with the Company's financial statements and accompanying MD&A.

Forward Looking Information

This release contains certain information which, as presented, constitutes "forward-looking information" or "forward-oriented financial information" within the meaning of applicable Canadian securities laws. Forward-looking information involves statements that relate to future events and often addresses expected future business and financial performance, containing words such as "anticipate", "believe", "plan", "estimate", "expect" and "guidance", statements that an action or event "may", "might", "could" or "will" be taken or occur, or other similar expressions and includes, but is not limited to, statements relating to:

UrtheCast's expectations with respect to: UrtheCast's expected entering into of the Credit Agreement, closing of the UrtheDaily  Financing and beginning of the UrtheDaily build phase; UrtheCast's expected satisfaction of the escrow release conditions in respect of the proceeds from the Subordinated Capital Financing; UrtheCast's expectations with respect to its ability to raise proceeds from a subordinated debt or equity offering, achieve the required leverage and contracted revenue ratios and otherwise satisfy the first drawdown conditions and the final drawdown conditions under the Credit Agreement in a timely manner; opportunities to renegotiate current and future customer contracts;  and the Company's ability to continue as a going concern. Such statements reflect UrtheCast's current views with respect to future events. Such statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by UrtheCast, are inherently subject to significant uncertainties and contingencies. Many factors could cause UrtheCast's actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements, including, among others: UrtheCast's inability to enter into the Credit Agreement on the terms described in this release or at all; UrtheCast's inability to satisfy the escrow release conditions in respect of the proceeds from the Subordinated Capital Financing; UrtheCast's inability to raise proceeds from a subordinated debt or equity offering, achieve the required leverage and contracted revenue ratios or otherwise satisfy the first drawdown conditions or the final drawdown conditions under the Credit Agreement in a timely manner or at all; and uncertainty about UrtheCast's ability to continue as a going concern; as well as those factors and assumptions discussed in UrtheCast's annual information form dated April 2, 2018 (the "AIF"), which is available under UrtheCast's SEDAR profile at www.sedar.com. UrtheCast undertakes no obligation to update forward-looking statements except as required by Canadian securities laws. Readers are cautioned against attributing undue certainty to forward-looking statements.

SOURCE UrtheCast Corp.

View original content: http://www.newswire.ca/en/releases/archive/May2018/15/c3135.html

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