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Classified in: Transportation, Business
Subject: ERN

exactEarth Announces Q3 Fiscal 2019 Financial Results


CAMBRIDGE, ON, Sept. 12, 2019 /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, 2019. All financial figures are in Canadian dollars unless otherwise stated.

Q3 Fiscal 2019 Highlights:

"We celebrated our 10th anniversary in Q3 with strong revenue growth that was driven by commercial market activity and new subscription-services agreements," said Peter Mabson, CEO of exactEarth. "exactView RT's unique and real-time capabilities continue to attract industry attention and customer interest. This led to the expansion of our channel partner network in Q3 with the addition of Airbus and MarineTraffic. Building-out this network has been a prime driver of our recent revenue growth, in particular in the commercial market, and we continue to add new partner opportunities to our pipeline. On the government side of the business, we have a number of promising opportunities in the pipeline and expect to see a rebound in this part of the business over the next 12 months."

"Regarding our margins in Q3 and in the year-to-date period, as mentioned previously, with all 58 exactView RT payloads now in orbit, our agreement with Harris Corporation is now in effect; this has put pressure on our Gross Margin that is expected to remain in place for the short- to mid-term. However, we have several initiatives that we are pursuing to reduce costs related to both our first-and second-generation constellations. When combined with the growing exactView RT opportunities in our pipeline, we believe that over the longer-term we will return to a more traditional Gross Margin profile for the business."

Q3 and Year-to-Date Fiscal 2019 Financial Review

Total revenue in the three-month period ended July 31, 2019 ("Q3 2019") was $4.0 million, up 26% compared to $3.2 million in the three-month period ended July 31, 2018 ("Q3 2018"). Total revenue in the nine-month period ended July 31, 2019 ("YTD 2019") was $11.4 million, up 25% compared to $9.2 million in the nine-month period ended July 31, 2018 ("YTD 2018").

Revenue from commercial customers for the Q3 2019 and YTD 2019 periods was $3.2 million and $8.5 million, up 46% and 45% from the same periods last year. 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 the Q3 2019 and YTD 2019 periods was $0.8 million and $2.9 million, down 17% and 12% from the same periods last year.

Order bookings for the Q3 2019 and YTD 2019 periods were $3.0 million and $12.0 million, compared to $6.7 million and $11.6 million in the same periods last year. Order bookings will fluctuate on a quarter-to-quarter basis reflecting the timing to complete new customer agreements. Revenue backlog at July 31, 2019 was $25.4 million compared to $29.3 million at the end of Q3 2018 and $24.6 million at the end of Q2 2019. Revenue backlog was impacted in Q2 2019 due to the renegotiation of a long-term customer contract. The Company believes that the renegotiation positions it to generate greater levels of revenue on a variable basis over time as compared to a fixed payment schedule.

Subscription Services revenue for the Q3 2019 and YTD 2019 periods was $3.5 million and $9.8 million, up 15% and 22% from the same periods last year. Subscription Services revenue for the Q3 2019 and YTD 2019 periods represented 86% and 85% of total revenue compared to 95% and 87% in the same periods last year.

Data Products revenue for the Q3 2019 and YTD 2019 periods was $0.4 million and $0.9 million compared to $0.1 million and $0.7 million in the same periods last year. Data Products revenue is typically generated from on-demand customer requests, which results in some variability in quarter-to-quarter revenue levels. Other Products & Services revenue for the Q3 2019 and YTD 2019 periods was $0.1 million and $0.8 million compared to $0.1 million and $0.4 million in the same periods last year.

Gross Margin for the Q3 2019 and YTD 2019 periods was 12% and 19% compared to 14% and 23% in the same periods last year. Gross margin decreased for the Q3 2019 and YTD 2019 periods due to the increase in cost of revenue, partially offset by higher revenue. Cost of revenue increased due to higher satellite operating costs related to the Second-Generation Constellation and increased terrestrial data costs, partially offset by lower data processing and project-related costs and the SIF operating grants.   

Selling, general and administrative ("SG&A") expense for the Q3 2019 and YTD 2019 periods was $2.1 million and $5.9 million compared to $1.7 million and $5.4 million in the same periods last year. The year-over-year increases in SG&A are due primarily to higher bad debt expense, an increase in legal fees, management incentive compensation and long-term incentive plan expense, partially offset by reductions in sales commission, insurance, consulting fees and travel expenses.

Product development and research and development ("R&D") expense for the Q3 2019 and YTD 2019 periods was $0.3 million and $0.8 million compared to $0.3 million and $1.2 million in the same periods last year. The Company's product development and R&D activities continue to be focused primarily on the development of web-based functionality, data processing capabilities and analytics-based product offerings.

Adjusted EBITDA for the Q3 2019 and YTD 2019 periods was ($1.7) million and ($4.2) million compared to ($1.5) million and ($4.2) million in the same periods last year.  For the quarter and year-to-date periods, Adjusted EBITDA was impacted by higher cost of revenue and SG&A expense, partially offset by higher revenue and the SIF operating grant. (Adjusted EBITDA is a non-IFRS measure and is defined below)

Net loss for the Q3 2019 and YTD 2019 periods was ($2.9) million, or ($0.13) per share, and ($6.3) million, or ($0.29) per share, compared to ($2.2) million, or ($0.10) per share, and ($5.9) million, or ($0.27) per share, in the same periods last year. For the quarter and year-to-date periods, net loss increased primarily due to the higher cost of revenue, SG&A expense and interest expense, partially offset by an increase in revenue and lower depreciation and amortization expenses.

Cash generated in operations for the Q3 2019 period was $1.5 million, compared to cash used in operations of ($1.6) million in Q3 2018. Positive cash from operations in Q3 2019 was primarily due to working capital changes. For the YTD 2019 period, cash used in operations was ($1.6) million compared to ($3.3) million in the same period last year. The Company's cash balance at July 31, 2019 was $14.7 million compared to $4.8 million at October 31, 2018. The increase was due primarily to the completion of a Convertible Debenture financing in Q1 2019.

As at July 31, 2019, the Company had 21,743,288 shares outstanding on a non-diluted basis. 

*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


2019

2018


2019

2018

Net loss

$

(2,877)

$

(2,253)


$

(6,267)

$

(5,901)

Interest income


(58)


(5)



(154)


(33)

Interest expense


398


16



990


58

Income tax expense


54


113



116


122

Depreciation and amortization


210


437



565


1,248

Unrealized foreign exchange loss (gain)


356


92



143


(125)

Share-based compensation


198


116



400


465

Restructuring recovery


-


-



-


(2)

Adjusted EBITDA

$

(1,719)

$

(1,484)


$

(4,207)

$

(4,168)

 

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 Harris Corporation 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, 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 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 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.

exactEarthtm Ltd.
Interim Condensed Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
unaudited



As at
July 31,

2019


As at
October 31,

2018



$


$

ASSETS





Current assets





Cash and cash equivalents


14,694


4,774

Short-term investments


49


49

Accounts receivable


3,347


3,491

Unbilled revenue


2,029


911

Prepaid expenses


456


307

Other assets


229


347

Total current assets


20,804


9,879






Property, plant and equipment


4,390


4,009

Intangible assets


1,587


1,720

Other long-term assets


334


16

Total assets


27,115


15,624






LIABILITIES & SHAREHOLDERS' EQUITY





Current liabilities





Accounts payable and accrued liabilities


8,382


4,780

Deferred revenue


2,517


2,412

Loans payable - current


320


459

Long-term incentive plan liability - current


4


11

Total current liabilities


11,223


7,662






Loans payable


9,896


498

Long-term incentive plan liability


207


162

Other long-term liabilities


1,302


95

Total liabilities


22,628


8,417






Shareholders' equity





Share capital


123,823


123,794

Contributed surplus


4,624


1,451

Accumulated other comprehensive income (loss)


62


(11)

Deficit


(124,022)


(118,027)

Total shareholders' equity


4,487


7,207






Total liabilities and shareholders' equity


27,115


15,624


 

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

For the nine  months ended July 31, 2019


Total


Deficit


Accumulated
Other
Comprehensive
Income (Loss)


Share
Capital


Contributed
Surplus



$


$


$


$


$

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












For the nine months ended July 31, 2018






















Balance at October 31, 2017


23,003


(101,804)


(44)


123,781


1,070

Stock-based compensation expense


193


-


-


-


193

Transfer RSUs to contributed surplus


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

 

exactEarthtm 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,

2019


July 31,

2018


July 31,

2019


July 31,

2018



$


$


$


$



















Revenue


4,011


3,171


11,439


9,186

Cost of revenue


3,530


2,713


9,252


7,101

Gross profit


481


458


2,187


2,085










Operating expenses









Selling, general and administrative


2,103


1,729


5,917


5,351

Product development and research and development


264


252


800


1,211

Depreciation and amortization


210


437


565


1,248

Loss from operations


(2,096)


(1,960)


(5,095)


(5,725)










Other expenses









Other expense


-


61


-


61

Restructuring recovery


-


-


-


(2)

Foreign exchange loss (gain)


387


108


220


(30)

Interest income


(58)


(5)


(154)


(33)

Interest expense


398


16


990


58

Total other expenses


727


180


1,056


54

Income tax expense


54


113


116


122

Net loss


(2,877)


(2,253)


(6,267)


(5,901)










Other comprehensive income (loss)









Item that may be subsequently reclassified to net loss:









Foreign currency translation, net of income tax expense of nil


190


64


73


(13)

Total other comprehensive income (loss)


190


64


73


(13)










Comprehensive loss


(2,687)


(2,189)


(6,194)


(5,914)










Loss per share









Basic and diluted loss per share


(0.13)


(0.10)


(0.29)


(0.27)

 

exactEarthtm Ltd.
Interim Condensed Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)
unaudited



Three months ended


Nine months ended 



July 31,

2019


July 31,

2018


July 31,

2019


July 31,

2018



$


$


$


$










Net loss


(2,877)


(2,253)


(6,267)


(5,901)

Add (deduct) items not involving cash









Non-monetary transaction


-


15


-


(15)

Non-cash interest


97


16


239


57

Depreciation and amortization


210


437


565


1,248

Operating grant recognized on SIF loan


(258)


-


(1,136)


-

Technology demonstration program recovery


-


(26)


-


(202)

Long-term incentive plan expense


154


65


237


272

Stock-based compensation


44


50


163


193

Restructuring reserve - revaluation


-


-


-


(2)

Net change in non-cash working capital balances


4,097


57


4,683


1,297

Other operating cash flows









Technology demonstration program funding received


-


81


26


407

Settlement of share units


(1)


-


(63)


(238)

Restructuring provision - payment of salary continuance


-


(10)


-


(386)

Cash flows from (used in) operations


1,466


(1,568)


(1,553)


(3,270)










Investing activities









Acquisition of property, plant and equipment


(782)


(641)


(1,086)


(1,133)

Reimbursement of acquisition costs of property, plant and equipment


-


-


288


252

Acquisition of intangible assets


(6)


-


(10)


(28)

Cash flows used in investing activities


(788)


(641)


(808)


(909)










Financing activities









Government loan repayment


(123)


(164)


(328)


(410)

Government loan advance


881


-


881


-

Long-term debt repayment


-


-


-


(146)

Convertible debenture advance


-


-


13,000


-

Convertible debenture issue costs


-


-


(1,146)


-

Cash flows from (used in) financing activities


758


(164)


12,407


(556)










Effect of exchange rate changes on cash


(214)


(22)


(126)


71










Net increase (decrease) in cash


1,222


(2,395)


9,920


(4,664)

Cash, beginning of the period


13,472


5,848


4,774


8,117

Cash, end of the period


14,694


3,453


14,694


3,453










Supplemental cash flow information









Interest Paid


195


-


195


-

Interest received


52


5


142


33

Income taxes paid


54


113


116


122

 

SOURCE exactEarth Ltd.


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