exactEarth Reports Q1 2016 Financial Results

-  Subsequent to quarter-end, exactEarth begins trading on the Toronto Stock Exchange
-  Balance sheet strengthened significantly in conjunction with public listing

CAMBRIDGE, ON, March 9, 2016  /CNW/ - exactEarth Ltd. ("the Company"), the leading provider of Satellite AIS data services, announces its financial results for the three months ended January 31, 2016. All amounts are stated in Canadian dollars unless otherwise noted.

Summary of Results

   

Three months ended 

 

In thousands of dollars, except % figures

January 31, 2016

 

January 30, 2015

% Change

Total revenue

$

6,380

 

$

5,418

17.8%

Subscription services revenue*

$

5,382

 

$

5,055

6.5%

Gross margin

 

58.8%

   

52.3%

n/a

Net income

$

(1,001)

 

$

(954)

4.9%

Adjusted EBITDA*

$

1,456

 

$

866

68.1%

 

 

"The demand drivers for S-AIS and other maritime information applications remain firmly in place. As our product offerings expand, we are growing our addressable market and long-term revenue growth potential.  We continue to progress on our growth plan to capitalize on these new and emerging market opportunities," said Peter Mabson, CEO of exactEarth.  "Q1 results were in-line with our expectations as we delivered both revenue and adjusted EBITDA growth. With more than $21.0 million in cash today, we have a solid balance sheet to support our growth initiatives. We are confident that the investments we are making today in our data services and analytics capabilities, will set the foundation to drive compelling long-term growth rates for the business."

Financial Review

Total revenue was $6.4 million for the three months ended January 31, 2016 ("Q1 F2016"), an increase of 17.8% compared to $5.4million for the same period last year.  The increase in revenue is primarily a result of the growing number of subscription-based revenue customers and greater sales of the Company's expanded product offerings.

Subscription services revenue was $5.4 million for Q1 F2016, an increase of 6.5% compared to $5.1 million for the same period last year.  Subscription services revenue represented 84% of total revenue in Q1 F2016 compared to 93% in Q1 F2015. Subscription services revenue from commercial customers in Q1 F2016 rose 33% compared to Q1 F2015.

Data Products revenue was $0.3 million for Q1 F2016, compared to $0.05 million for the same period last year. 

Other Products & Services contributed $0.7 million of revenue for Q1 F2016 compared to $0.3 million for the same period last year.  This revenue tends to be unpredictable as it is generated from on-demand customer requests.

Gross profit was $3.8 million and gross margin was 58.8% for Q1 F2016 compared to gross profit of $2.8 million and gross margin of 52.3% for the same period last year.  The increase reflects the growing customer base, offset in part by the increased operational costs of the Company's expanded, and largely completed, satellite constellation and ground station network.

Total operating expenses were $3.8 million for Q1 F2016 compared to $3.3 million from the same period last year.  The majority of the increase was attributable to selling, general and administrative expenses ("SG&A") which grew by $0.4 million to $1.94 million.  The increase in SG&A expense reflects the volume of new subscriptions and the Company's investment in sales and marketing activity as it executes on its strategic plan.

Adjusted EBITDA was $1.5 million for Q1 F2016, an increase of 68% compared to $0.9 million the same period last year.  (Adjusted EBITDA is a non-IFRS measure, which is defined below.)

Net loss was $1.0 million for Q1 F2016 compared to a net loss of $0.95 million for the same period last year.  The Company's revenue increase was greater than the increase in its operating expenses, however, net loss increased due to foreign exchange loss, which grew to $0.68 million in Q1 F2016 compared to $0.15 million in Q1 F2015. Foreign exchange gains or losses arise from the translation of foreign denominated balances on the Company's financial statements and are impacted by global currency fluctuations, not operations.

The Company used $0.4 million of cash from operating activities in Q1 F2016 compared with cash used in operations of $1.5 million in the same period last year. exactEarth ended the period with $1.7 million in cash, compared with $2.4 million at October 31, 2015. 

The Company's balance sheet strengthened subsequent to quarter-end, when the spinout of exactEarth from COM DEV International was completed. More details on the Spinout Transaction are provided below. A pro forma balance sheet showing exactEarth's improved financial condition post-closing of the Spinout Transaction is also included below. 

Subsequent to quarter-end: Spinout Transaction

exactEarth's previous majority shareholder, COM DEV, completed a Spinout Transaction under which COM DEV distributed its shareholdings in exactEarth to its own shareholders and exactEarth became a publicly traded company. exactEarth shares started trading on the Toronto Stock Exchange ("TSX") on February 9, 2016 under the symbol XCT.

Following the completion of the Spinout Transaction, the Company has 21,605,506 shares outstanding. 

 

Selected Items from the Pro Forma Consolidated Statement of Financial Position

Immediately prior to the completion of the Spinout Transaction, exactEarth's existing shareholders converted all of exactEarth's shareholder debt to equity, and invested an additional $20.0 million of cash in equity.  As a result, exactEarth's balance sheet has been significantly strengthened. The following is a pro forma view of the Company's balance sheet, assuming the Spinout Transaction had closed on January 31, 2016.

   

Pro forma as of 
January 31, 2016
(unaudited)

Current assets

 
 

Cash

21,676

 

Other Current Assets

7,120

Total current assets

28,796

     
 

Property, plant and equipment

48,484

 

Intangible assets

26,622

     

Total assets

103,902

     

Total current liabilities

11,345

Total Long Term Liabilities

1,444

Total liabilities

12,789

     

Share capital

124,156

All Other Shareholders' Equity Items

(33,043)

Total shareholders' equity

91,113

     

Total liabilities and equity

103,902

 

 

Conference Call

The management of exactEarth will host an investor conference call on Wednesday, March 9, 2016 at 8:30 a.m. to discuss these results in greater detail.  All interested investors and analysts are invited to participate.

Date: 

Wednesday, March 9, 2016 at 8:30 a.m. E.S.T.

Dial-in: 

647-427-7450 or 1-888-231-8191

Webcast:  

To access the live webcast, please go to http://bit.ly/1mY9qLx or visit the exactEarth website for more details.

 

The webcast will be archived for 30 days.

   

Replay: 

Replay Toll Free Dial-In Number: 1-855-859-2056 
Replay Password: 58360315

 

 

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, objectives or economic performance, or the assumptions underlying any of the foregoing, including statements regarding, among other things, the intentions of the parties, the use of any intellectual property, further investments that may be made by exactEarth and new markets that may be exploited by either party. 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 and share-based compensation costs, less 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.

A reconciliation of Adjusted EBITDA to net income determined in accordance with IFRS, is provided below.

 

 Three months ended 

   

January 31, 2016

 

January 30, 2015

 Net income (loss)  

$

(1,001)

$

(954)

 Interest expense (income) 

 

294

 

320

 Income tax expense 

 

-

 

-

 Depreciation and amortization 

 

1,377

 

1,369

 EBITDA  

$

670

$

735

 Offering related expenses 

 

-

 

-

 Unrealized foreign exchange loss 

786

 

131

 Share-based compensation 

 

-

 

-

 Adjusted EBITDA 

$

1,456

$

866

 

 

exactEarth Ltd.

Interim Consolidated Statement of Financial Position

(in thousands of Canadian Dollars)

Unaudited

       

As at
January 31,

 

As at 
October 31,

       

2016

 

2015

       

$

 

$

 

ASSETS

         

Current assets

         
 

Cash

   

1,676

 

2,365

 

Trade accounts receivable

   

4,581

 

3,865

 

Due from related party

   

62

 

-

 

Unbilled revenue

   

1,590

 

1,954

 

Prepaid expenses and other assets

   

887

 

676

Total current assets

   

8,796

 

8,860

             

Property, plant and equipment

   

48,484

 

48,538

Intangible assets

   

26,622

 

24,646

Total assets

   

83,902

 

82,044

             
 

LIABILITIES & EQUITY

         
             

Current liabilities

         
 

Accounts payable and accrued liabilities

   

9,672

 

10,966

 

Due to related parties

   

49,036

 

295

 

Deferred revenue

   

1,305

 

1,037

 

Current portion of government loan

   

368

 

361

Total current liabilities

   

60,381

 

12,659

             

Government loan

   

1,342

 

1,436

Due to related parties

   

-

 

44,801

Long-term profit sharing plan liability

   

102

 

82

Total liabilities

   

61,825

 

58,978

             

Shareholders' equity

         
 

Share capital

   

55,120

 

55,120

 

Contributed surplus

   

249

 

249

 

Accumulated other comprehensive loss

   

(284)

 

(296)

 

Deficit

   

(33,008)

 

(32,007)

Total shareholders' equity

   

22,077

 

23,066

             

Total liabilities and equity

   

83,902

 

82,044

             
 

 

 

exactEarth Ltd.

Interim Consolidated Statement of Comprehensive Loss

(in thousands of Canadian Dollars)

Unaudited

     

January 31,

 

January 30,

 

For the three months ended 

   

2016

 

2015

     

$

 

$

           
           

Revenue

   

6,380

 

5,418

 

Cost of revenue

   

2,628

 

2,583

 

Gross margin

   

3,752

 

2,835

           

Operating expenses

         
 

Research and development

   

10

 

15

 

Selling, general and administrative

   

1,941

 

1,551

 

Product development

   

453

 

329

 

Depreciation and amortization

   

1,377

 

1,369

Loss from operations

   

(29)

 

(429)

           

Other (income) expense

         
 

Other expense

   

-

 

56

 

Foreign exchange loss

   

678

 

149

 

Interest expense

   

294

 

320

Total other expense

   

972

 

525

 

Income tax expense

   

-

 

-

Net loss

   

(1,001)

 

(954)

             

Other comprehensive loss

         
 

Items that may be subsequently reclassified to net income:

       
 

Foreign currency translation, net of income tax expense

 

12

 

(124)

Total other comprehensive loss

   

12

 

(124)

             

Comprehensive loss

   

(989)

 

(1,078)

             

Basic and diluted loss per share

   

(0.09)

 

(0.09)

 

 

 

exactEarth Ltd.

Interim Consolidated Statement of Cash Flows

(in thousands of Canadian Dollars)

Unaudited

     

January 31,

 

January 30,

 

For the three months ended 

   

2016

 

2015

     

$

 

$

           

Net loss

   

(1,001)

 

(954)

Add (deduct) items not involving cash

         
 

Imputed interest on government loan

   

36

 

40

 

Depreciation and amortization

   

1,377

 

1,369

 

Settlement of long term incentive plan

   

-

 

(1)

 

Foreign exchange loss on revaluation of 
   foreign currency shareholder loans

   

224

 

204

 

Long-term profit sharing plan liability

   

20

 

203

 

Change in non-cash working capital balances

   

(1,036)

 

(2,330)

Cash flows used in operations

   

(380)

 

(1,469)

           
           

Investing activities

         
 

Acquisition of property, plant, and equipment

   

(987)

 

(3,577)

 

Acquisition of intangible assets

   

(2,320)

 

(197)

Cash flows used in investing activities

   

(3,307)

 

(3,774)

           

Financing activities

         
 

Government loan repayment

   

(123)

 

-

 

Shareholder loan advances

   

3,000

 

4,000

Cash flows from financing activities

   

2,877

 

4,000

           

Effect of exchange rate changes on cash

   

121

 

15

           

Net decrease in cash

   

(689)

 

(1,228)

Cash, beginning of the period

   

2,365

 

2,403

Cash, end of the period

   

1,676

 

1,175

           

Supplemental cash flow information

         
 

Interest paid

   

334

 

802

 

Interest received

   

4

 

18

 

Taxes paid

   

-

 

-

 

 

SOURCE exactEarth Ltd.

Image with caption: "exactEarth announces first quarter fiscal 2016 financial results (CNW Group/exactEarth Ltd.)". Image available at:http://photos.newswire.ca/images/download/20160309_C4306_PHOTO_EN_638796.jpg  

For further information: Dave Mason, Investor Relations, Tel: +1 416-985-3647, investors@exactearth.com
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