exactEarth Announces Q3 Fiscal 2020 Financial Results

Subscription Services revenue increases 29%

New Order Bookings increase more than three-fold

Positive cash generated from operations

CAMBRIDGE, ON, Sept. 10, 2020 /CNW/ - exactEarth Ltd. ("the Company"), a leading provider of Satellite-AIS data services, announces its financial results for the three- and nine-month periods ended July 31, 2020. All financial figures are in Canadian dollars unless otherwise stated.

Q3 Fiscal 2020 Highlights:

  • Revenue was $4.8 million, up 19% compared to $4.0 million in Q3 Fiscal 2019; Year-to-date, revenue was $13.3 million, up 17% compared to $11.4 million in the same period last year
  • Subscription Services revenue was $4.5 million, up 29% compared to $3.5 million in Q3 Fiscal 2019; Year-to-date, Subscription Services revenue was $12.2 million, up 25% compared to $9.8 million in the same period last year
  • New Order Bookings were $10.5 million compared to $3.0 million in Q3 Fiscal 2019; Year-to-date, new Order Bookings were $20.7 million compared to $12.0 million in the same period last year
  • Order Bookings backlog at the end of Q3 2020 was $30.8 million compared to $25.4 million at the end of Q4 2019
  • Adjusted EBITDA* was ($130) thousand compared to ($1.7) million in Q3 Fiscal 2019; Year-to-date, Adjusted EBITDA was ($429) thousand compared to ($4.2) million in the same period last year
  • Cash from operations was $134 thousand compared to $1.5 million in Q3 Fiscal 2019; Year-to-date, cash used in operations was ($3.0) million compared to ($1.6) million in the same period last year
  • Cash and short-term investments were $6.8 million at the end of Q3 Fiscal 2020 compared to $6.9 million at the end of Q2 Fiscal 2020 and $10.2 million at the end of Fiscal 2019
  • Announced an expanded alliance agreement with an existing channel partner that will generate incremental revenue of $2.0 million per year above the prior agreement level
  • Completed the strategic divestiture of select first-generation satellite assets to Myriota, which is expected to strengthen the Company's margins and cash flow

"exactEarth has continued to perform well during the COVID-19 pandemic, which reflects the resilience of our business model, the interest in our premium Satellite-AIS data service exactView RT and the importance of our data set to our global base of commercial and government users," said Peter Mabson, President and CEO of exactEarth. "In Q3 we made strong gains on our strategy to further increase our top-line and deliver margin expansion in order to capitalize on the compelling growth opportunity in front of us and to achieve positive Adjusted EBITDA and cash flow on a sustainable basis."

"In terms of growing the top-line in future periods, in Q3 we announced the expansion of an existing customer agreement, which over a three-and-a-half-year period is valued at $7.0 million more than the prior agreement. This agreement helped contribute to continued strong growth in new order bookings and in our closing order bookings backlog at quarter-end. On the cost side, at quarter-end we completed the sale of select satellites and assets to Myriota, which will reduce annual costs to the business of approximately $1.0 million per year and will contribute to margin expansion going forward."

Q3 Fiscal 2020 Financial Review
Total revenue in the three-month period ended July 31, 2020 ("Q3 2020") was $4.8 million, up 19% compared to $4.0 million in the three-month period ended July 31, 2019 ("Q3 2019"). Total revenue in the nine-month period ended July 31, 2020 ("YTD 2020") was $13.3 million, up 17% compared to $11.4 million in the nine-month period ended July 31, 2019 ("YTD 2019").

Revenue rose primarily due to the increase in Subscription Services revenue, which was $4.5 million (93% of total revenue) in Q3 2020, up 29% from $3.5 million (86% of total revenue) in Q3 2019. Subscription Services revenue in the YTD 2020 period was $12.2 million (92% of total revenue), up 25% compared to $9.8 million (85% of total revenue) in the YTD 2019 period.

Total revenue and Subscription Services revenue growth for Q3 2020 and YTD 2020 was driven primarily by customer growth in the commercial market segment. Revenue from commercial customers for Q3 2020 and YTD 2020 was $3.9 million and $10.6 million, respectively, which was up 23% and 24% 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 Q3 2020 and YTD 2020 was $844 thousand and $2.7 million, respectively, which was up 4% and down 7% from the respective comparison periods in 2019.

Data Products revenue and Other Products & Services revenue combined in Q3 2020 was $324 thousand compared to $545 thousand in Q3 2019. For the YTD 2020 period, Data Products revenue and Other Products & Services revenue combined was $1.1 million compared to $1.7 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 Q3 2020 were $10.5 million, compared to $3.0 million in Q3 2019. Order bookings for the YTD 2020 period were $20.7 million, compared to $12.0 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 July 31, 2020 was $30.8 million compared to $25.4 million at the end of Q3 2019. Revenue of $4.8 million from the current revenue backlog is forecasted to be earned in Q4 2020.

Gross margin for Q3 2020 was 37% compared to 12% in Q3 2019. Gross margin for the YTD 2020 period was 40% compared to 19% 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. With the closing of its transaction to sell select first-generation satellite assets to Myriota completed at the end of Q3, gross margin should benefit in future quarters from lower cost of revenues resulting from the sale.

Selling, general and administrative ("SG&A") expense for Q3 2020 was $1.6 million compared to $2.1 million in Q3 2019. SG&A for the YTD 2020 period was $6.0 million compared to $5.9 million in the same period last year. SG&A in Q3 2020 benefited from a partial reversal of a bad debt expense incurred in Q2 2020 related to one customer that has been significantly impacted by COVID-19 developments. In Q3 2020, exactEarth renegotiated its agreement with this customer resulting in a partial reversal of that bad debt expense. SG&A in Q3 2020 also benefited from lower legal fees and travel expense, partially offset by increases in payroll, sales commission and long-term incentive expenses

Product development and research and development ("R&D") expense for Q3 2020 was $116 thousand compared to $264 thousand in Q3 2019. R&D for the YTD 2020 period was $628 thousand compared to $800 thousand 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 Q3 2020 was ($130) thousand compared to ($1.7) million in Q3 2019. Adjusted EBITDA for the YTD 2020 period was ($429) thousand compared to ($4.2) 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 Q3 2020 was ($941) thousand, or ($0.04) per basic and diluted share, compared to ($2.9) million, or ($0.13) per basic and diluted share, in Q3 2019. Net loss for the YTD 2020 period was ($4.4) million, or ($0.20) per basic and diluted share, compared to ($6.3) million, or ($0.29) per basic and diluted share in the same period last year. Net loss for the Q3 2020 and YTD 2020 periods includes a non-cash $450 thousand Share of Equity Investment Loss expense related to 124,864 Class A shares of Myriota that were acquired by exactEarth using a portion of the proceeds generated by the sale of select first-generation satellites and assets completed at the end of Q3 2020.

Cash generated from operations for Q3 2020 was $134 thousand, compared to $1.5 million in Q3 2019. Cash generated from operations in Q3 last year was due primarily to $4.1 million in working capital changes. Cash used in operations for the YTD 2020 period was ($3.0) million, compared to ($1.6) million in the same period last year. YTD 2020 cash used in investing activities includes $0.9 million paid related to the pending launch of the EV-10 satellite. When launched, EV-10 will further enhance the Company's exactView RT service. exactEarth's cash balance at July 31, 2020 was $6.7 million compared to $6.8 million at April 30, 2020 and $10.2 million at October 31, 2019.

As at July 31, 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 July 31

Nine months ended July 31


2020

2019

2020

2019

Net loss

$

(941)

$

(2,877)

$

(4,432)

$

(6,267)

Interest income


(13)


(58)


(67)


(154)

Interest expense


461


398


1,321


990

Income tax expense


-


54


119


116

Depreciation and amortization


178


210


669


565

Unrealized foreign exchange (gain) loss


(72)


356


(440)


143

Share-based compensation


422


198


876


400

COVID-19 allowance for doubtful accounts


(602)


-


250


-

Loss on disposal


(13)


-


825


-

Share of equity investment loss


450


-


450


-

Adjusted EBITDA

$

(130)

$

(1,719)

$

(429)

$

(4,207)

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
July 31,
2020


As at
October 31, 
2019 


$


$

ASSETS




Current assets




      Cash and cash equivalents

6,741


10,188

      Short-term investments

49


49

      Accounts receivable

3,180


3,073

      Unbilled revenue

1,689


2,149

      Prepaid expenses

599


448

      Other current assets

388


209

Total current assets

12,646


16,116





      Property, plant and equipment

4,060


4,398

      Intangible assets

1,392


1,538

      Other long-term assets

604


366

Total assets

18,702


22,418





LIABILITIES & SHAREHOLDERS' EQUITY (DEFICIENCY)




Current liabilities




      Accounts payable and accrued liabilities

4,368


4,840

      Deferred revenue

3,357


3,499

      Loans payable - current

-


202

Total current liabilities

7,725


8,541





      Loans payable

10,876


10,089

      Long-term incentive plan liability

724


203

      Other long-term liabilities

1,539


1,466

Total liabilities

20,864


20,299





Shareholders' equity (deficiency)




      Share capital

123,923


123,823

      Contributed surplus

4,815


4,647

      Accumulated other comprehensive loss

(230)


(113)

      Deficit

(130,670)


(126,238)

Total shareholders' equity (deficiency)

(2,162)


2,119





Total liabilities and shareholders' equity (deficiency)

18,702


22,418

 

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

(in thousands of Canadian dollars)
(unaudited)

For the nine months ended July 31, 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

117

-

-

-

117

      Restricted share unit expense

151

-

-

-

151

      Issuance of common shares

-

-

-

100

(100)

      Comprehensive loss

(4,549)

(4,432)

(117)

-

-

Balance at July 31, 2020

(2,162)

(130,670)

(230)

123,923

4,815







For the nine months ended July 31, 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

163

-

-

-

163

      Restricted share unit expense

122

-

-

-

122

      Convertible debenture

2,917

-

-

-

2,917

      Issuance of common shares

-

-

-

29

(29)

      Comprehensive (loss) income

(6,194)

(6,267)

73

-

-

Balance at July 31, 2019

4,487

(124,022)

62

123,823

4,624

 

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, 



2020


2019


2020


2019



$


$


$


$










      Revenue


4,789


4,011


13,329


11,439

      Cost of revenue


3,005


3,530


8,048


9,252

      Gross profit


1,784


481


5,281


2,187










      Selling, general and administrative


1,617


2,103


5,957


5,917

      Product development and research and development


116


264


628


800

      Depreciation and amortization


178


210


669


565

      Loss (recovery) on disposal


(13)


-


825


-

Loss from operations


(114)


(2,096)


(2,798)


(5,095)










Other expenses









      Foreign exchange (gain) loss


(71)


387


(189)


220

      Share of equity investment loss


450


-


450


-

      Interest income


(13)


(58)


(67)


(154)

      Interest expense


461


398


1,321


990

Total other expenses


827


727


1,515


1,056

      Income tax expense


-


54


119


116

Net loss


(941)


(2,877)


(4,432)


(6,267)










Other comprehensive income (loss)









      Item that may be subsequently reclassified to net loss:









         Foreign currency translation, net of income tax expense of nil


(53)


190


(117)


73

Total other comprehensive income (loss)


(53)


190


(117)


73










Comprehensive loss


(994)


(2,687)


(4,549)


(6,194)










Loss per share









         Basic and diluted loss per share


(0.04)


(0.13)


(0.20)


(0.29)

 

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,



2020


2019


2020


2019



$


$


$


$

Operating activities









      Net loss


(941)


(2,877)


(4,432)


(6,267)

Add (deduct) items not involving cash









      Non-cash interest


151


97


400


239

      Depreciation and amortization


178


210


669


565

      Loss on disposal


(13)


-


825


-

      Share of equity investment loss


450


-


450


-

      Operating grant recognized on SIF loan


(237)


(258)


(598)


(1,136)

      Long-term incentive plan expense


373


154


759


237

      Stock-based compensation


49


44


117


163

      Net change in non-cash balances


124


4,097


(1,207)


4,683

Other operating cash flows









      Technology demonstration program funding received


-


-


-


26

      Settlement of share units


-


(1)


-


(63)

Cash flows from (used in) operating activities


134


1,466


(3,017)


(1,553)










Investing activities









      Acquisition of property, plant and equipment


(213)


(782)


(1,786)


(1,086)

      Reimbursement of acquisition costs of property,









      plant and equipment


-


-


331


288

      Net change in non-cash working capital related









         to investing activities


(450)


-


(450)


-

      Acquisition of intangible assets


-


(6)


-


(10)

Cash flows used in investing activities


(663)


(788)


(1,905)


(808)










Financing activities









      Government loan repayment


-


(123)


(205)


(328)

      Government loan advance


439


881


1,647


881

      Payment of principal portion of lease obligations


(37)


-


(110)


-

      Convertible debenture advance


-


-


-


13,000

      Convertible debenture issue costs


-


-


-


(1,146)

Cash flows from financing activities


402


758


1,332


12,407










Effect of exchange rate changes on cash


32


(214)


143


(126)










Net (decrease) increase in cash


(95)


1,222


(3,447)


9,920

Cash, beginning of the period


6,836


13,472


10,188


4,774

Cash, end of the period


6,741


14,694


6,741


14,694










Supplemental cash flow information









      Interest paid


198


195


401


195

      Interest received


-


52


32


142

      Income taxes paid


-


54


119


116

 

SOURCE exactEarth Ltd.

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