exactEarth Reports Fiscal 2016 Financial Results

CAMBRIDGE, ON, Jan. 19, 2017 /CNW/ - exactEarth Ltd. ("the Company"), a leading provider of Satellite AIS ("S-AIS") data services, announces its financial results for the three- and twelve-month periods ended October 31, 2016. All financial figures are in Canadian dollars unless otherwise stated.

2016 Financial Highlights

  • Revenue was $18.9 million
  • Subscription-based revenue was 80% of total revenue
  • Subscription-based revenue in the Commercial market increased 30% from 2015
  • Order Bookings were $27.2 million compared to $10.0M in 2015
  • Adjusted EBITDA* was $0.52 million
  • Cash balance was $13.7 million at October 31, 2016

2016 Operational Highlights

  • Formed partnership with EV Image Inc. for distribution of exactEarth's S-AIS solutions in China
  • Renewed contract with the Government of Canada to be their provider of S-AIS services
  • Awarded four-year contract with the French Navy for S-AIS services
  • Entered into an alliance with Larus Technologies to develop Big Data analytics applications for the broader maritime market
  • Established partnership with DigitalGlobe to combat illegal and unreported fishing
  • Signed initial Small-Vessel Tracking contract with the Government of Ghana
  • Expanded collaboration with Genscape for S-AIS and Maritime Data services
  • Increased satellite constellation to nine with the launch of the M3MSat

"In 2016 we achieved a number of milestones on our long-term growth plan to build on our position as Satellite AIS market leaders and to expand our presence in the fast-growing Maritime Information Market," said Peter Mabson, CEO of exactEarth. "We became a publicly listed company, entered the small vessel tracking market, launched the ninth satellite in our first generation constellation and continued to invest in the business to achieve greater diversification in our product offering, customer base and geographic footprint.

"Through our strategic alliance with Larus Technologies, we have begun to roll-out new analytics-based products that take advantage of our Big Data processing capabilities. These products serve-up actionable information to customers and will be enhanced further with the real-time capability that is expected to come with the deployment of our second generation exactView RT constellation, powered by Iridium NEXT. The deployment began with the successful launch on January 14, 2017, of four Iridium NEXT satellites carrying our hosted AIS payload. We also had success this past year with our small vessel tracking service. We signed our initial contract in Ghana, which was followed by a second small vessel project in South Africa, announced just after our year-end.

"In 2016, we continued our push into new geographic and vertical markets. Our commercial business grew 30% year-over-year, we entered into a five-year agreement with a partner in China to sell our services into that promising market and we launched new initiatives with industry leaders such as DigitalGlobe and Genscape. Shortly after year-end, we signed a three-year agreement to provide our services to the Indian Navy. In the case of both China and India, we see the potential to penetrate other government agencies and commercial organizations in those countries for additional sales activity in the coming years."

Financial Review

Total revenue for the three and twelve months ended October 31, 2016 was $3.3 million and $18.9 million compared to $7.5 million and $26.6 million in the respective periods of 2015.  On May 5, 2016, exactEarth announced that it had won the contract to be the provider of S-AIS services to the Government of Canada ("GoC"); however, the service levels subscribed for, and the revenue generated by the contract renewal, are well below the previous levels that the Company had with the GoC. The difference between the renewal contract and the original contract accounted for $3.2 million of the revenue change in Q4 and $7.5 million for the full year.

Subscription Services, the Company's primary growth and focus area, revenue for the three and twelve months ended October 31, 2016 was $2.8 million and $15.1 million compared to $5.3 million and $20.6 million in the respective periods of 2015. Excluding the impact of the subscription services provided to the GoC, subscription revenue grew by $0.5 million and $0.9 million in the three and twelve-month periods ended October 31, 2016.

Subscription Services revenue for the three and twelve months ended October 31, 2016 represented 85% and 80% of total revenue compared to 71% and 77% in the respective periods of 2015. Subscription Services revenue from commercial customers for the three and twelve months ended October 31, 2016 rose 24% and 30% compared to the respective periods of 2015.

Data Products revenue for the three and twelve months ended October 31, 2016 was $0.17 million and $2.4 million compared to $1.7 million and $3.9 million in the respective periods of 2015. In Q4 2015, exactEarth generated $1.6 million in one-time Data Products revenue from the sale of its historical S-AIS data to Harris Corporation ("Harris").

For the three and twelve months ended October 31, 2016, exactEarth generated $0.0 million and $1.62 million, respectively, in non-cash Data Products revenue, and $0.68 million and $1.43 million, respectively, in non-cash Subscription Services revenue, from an Asset Transfer Agreement with Communitech related to the EV9 satellite. Under the agreement, the Company will provide in‑kind datasets at a value of $3.7 million, not licensed for commercial use, in exchange for title to the EV9 satellite, subject to certain restrictions. The Company expects to recognize non-cash revenue from the remaining $0.62 million of in-kind data sets in Q1 2017.  

Other Products & Services revenue for the three and twelve months ended October 31, 2016 was $0.32 million and $1.4 million compared to $0.48 million and $2.1 million in the respective periods of 2015.  This revenue tends to fluctuate from quarter to quarter as it is generated from on-demand customer requests and long-term percentage-of-completion contracts.

Gross margin for the three and twelve months ended October 31, 2016 was 21.2% and 48.3% compared to 70.4% and 62.0% in the respective periods of 2015. Gross margin decreased quarter-over-quarter and year-over-year due primarily to lower Subscription Services and Data Products revenue, offset in part by a decrease in operational costs for the Company's satellite constellation and the reimbursement of costs related to the Company's Technology Demonstration Program Collaboration Agreement ("TDP Agreement") with MDA Systems. TDP Agreement funding recognized as an offset to cost of revenue for the three and twelve months ended October 31, 2016 was $0.12 million and $0.67 million, respectively.

Selling, general and administrative expenses for the three and twelve months ended October 31, 2016 were $1.7 million and $7.5 million compared to $2.8 million and $9.0 million in the respective periods of 2015. The decrease in SG&A expense for 2016 reflects the Company's ongoing focus on cost control, IPO-related costs incurred in Q4 2015 and costs related to investment in growth-oriented initiatives that were made in 2015. Lower expenses in 2016 were offset, in part, due to collection issues related to one customer and higher administrative costs related to the Company's public listing. Prior to year-end, exactEarth took steps to streamline and re-organize its business, which will reduce ongoing SG&A expenses in future periods. The re-organization resulted in the termination of 14 employees effective October 13, 2016, and was a necessary step in the Company's efforts to reduce its satellite infrastructure costs and transition the business to that of an information and intelligence data services company.

Product development expense for the three and twelve months ended October 31, 2016 was $0.53 million and $1.9 million compared to $0.38 million and $1.4 million in the respective periods of 2015. The increase primarily reflects investment in the Company's partnership with Larus Technologies to develop its next generation of analytics-based product offerings.

Adjusted EBITDA for the three and twelve months ended October 31, 2016 was ($0.96) million and $0.52 million compared to $3.4 million and $9.0 million in the respective periods of 2015. The year-over-year decrease in Adjusted EBITDA was primarily due to lower revenue from the GoC, the one-time Data Product sale of historical S-AIS data to Harris in 2015, collection issues related to one customer and the introduction of costs related to being a public company. (Adjusted EBITDA is a non-IFRS measure and is defined below.)

Net loss for the three and twelve months ended October 31, 2016 was ($4.1) million, or ($0.19) per share, and ($36.0) million, or ($1.90) per share, compared to net income of $0.44 million, or $0.04 per share, and a net loss of ($1.0) million, or ($0.09) per share, in the respective periods of 2015. For the year ended October 31, 2016, the year-over-year increase in net loss is primarily due to a $28.0 million non-cash charge taken in Q2 2016, related to the impairment and write-down of assets, and a $1.7 million restructuring charge taken in Q4 2016, related to the aforementioned business re-organization. Excluding the non-cash write-down, net loss for the year ended October 31, 2016 was ($7.8) million, or ($0.42) per share. Additional information related to the Q2 2016 non-cash asset impairment and write-down can be found below in this press release.

exactEarth used $2.9 million of cash from operating activities in the year ended October 31, 2016 compared with cash generated from operations of $5.9 million in 2015. exactEarth generated $22.7 million of cash from financing activities in 2016, due primarily to equity investment related to the Company's spinout from COM DEV International and subsequent public listing. exactEarth's cash balance at October 31, 2016 was $13.7 million, up from $2.4 million at October 31, 2015.

As at October 31, 2016, the Company had 21,605,506 shares outstanding. 

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: 

Thursday, January 19, 2017 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/2j4XWES 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: 48338794

 

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.

Asset Impairment and Write-Down

At the end of each reporting period, the Company assesses whether there are events or circumstances indicating that an asset may be impaired. The Company considers the relationship between its market capitalization and the book value of its equity, among other factors, when reviewing for indicators of impairment.

During the second quarter of fiscal 2016, exactEarth's market capitalization was lower than its carrying amount. As a result, an impairment test was performed using a value-in-use ("VIU") model to calculate the recoverable asset amount, as defined by International Accounting Standard ("IAS") 36, using assumptions that represent management's best estimate of future economic and market conditions in line with the Company's target operating model.

No further impairment or reversal of impairment was recorded at October 31, 2016.

*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. 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 

 Year ended 


October 31, 2016

October 31, 2015

October 31, 2016

October 31, 2015

Net loss 

$

(4,135)

$

441

$

(35,963)

$

(1,055)

Interest expense (income) 

$

(8)

$

205

$

304


1,188

Income tax expense 

$

41

$

-

$

41


-

Depreciation and amortization 

$

926

$

1,366

$

4,649


5,476

EBITDA  

$

(3,176)

$

2,012

$

(30,969)

$

5,609

Offering related expenses 

$

-

$

1,290

$

-


2,864

Unrealized foreign exchange (gain) loss 

$

68

$

74

$

906


560

Share-based compensation 

$

401

$

-

$

855


-

Impairment losses 

$

-

$

-

$

27,987


-

Restructuring costs 

$

1,744

$

-

$

1,744


-

Adjusted EBITDA 

$

(963)

$

3,376

$

523

$

9,033


exactEarth™Ltd.

Consolidated Statements of Financial Position

(in thousands of Canadian dollars)




As at
October 31,


As at
October 31,



2016


2015



$


$


ASSETS





Current assets






Cash


13,680


2,365


Trade accounts receivable


1,778


3,865


Inventory


425


-


Unbilled revenue


794


1,954


Prepaid expenses and other assets


867


676

Total current assets


17,544


8,860






Property, plant and equipment


31,423


48,538

Intangible assets


18,855


24,646

Total assets


67,822


82,044







LIABILITIES & SHAREHOLDERS' EQUITY










Current liabilities






Accounts payable and accrued liabilities


5,409


10,966


Due to related parties


-


295


Deferred revenue


1,968


1,037


Restructuring provision - current


1,154


-


Loans payable - current


716


361


Long-term incentive plan liability - current


86


-

Total current liabilities


9,333


12,659






Government loan payable


1,045


1,436

Loans payable


143


-

Due to related parties


-


44,801

Long-term incentive plan liability


316


82

Restructuring provision


442


-

Total liabilities


11,279


58,978






Shareholders' equity






Share capital


123,769


55,120


Contributed surplus


699


249


Accumulated other comprehensive income (loss)


45


(296)


Deficit


(67,970)


(32,007)

Total shareholders' equity


56,543


23,066






Total liabilities and shareholders' equity


67,822


82,044

 


exactEarth™Ltd.

Consolidated Statements of Comprehensive Loss

(in thousands of Canadian dollars)




Three months ended


Twelve months ended



October 31,


October 31,


October 31,


October 31,


For the Year Ended


2016


2015


2016


2015



$


$


$


$




















Revenue


3,308


7,462


18,918


26,600


Cost of revenue


2,607


2,209


9,772


10,114


Gross margin


701


5,253


9,146


16,486










Operating expenses










Research and development


(18)


16


10


62


Selling, general and administrative


1,735


2,759


7,463


8,953


Product development


525


378


1,940


1,424


Depreciation and amortization


926


1,366


4,649


5,476


Impairment loss


-


-


27,987


-

(Loss) income from operations


(2,467)


734


(32,903)


571










Other expenses (income)










Other (income) expense


(210)


(27)


(55)


28


Restructuring charge


1,744


-


1,744


-


Foreign exchange loss


101


115


1,026


410


Interest (income) expense


(8)


205


304


1,188

Total other expenses


1,627


293


3,019


1,626


Income tax expense


41


-


41


-

Net Loss


(4,135)


441


(35,963)


(1,055)










Other comprehensive income (loss)










Items that may be subsequently reclassified to net income:










Foreign currency translation, net of income tax expense of nil


75


18


341


(234)

Total other comprehensive income (loss)


75


18


341


(234)










Comprehensive loss


(4,060)


459


(35,622)


(1,289)










Basic and diluted loss per share


(0.19)


0.04


(1.90)


(0.09)










 

exactEarth™Ltd.

Consolidated Statements of Cash Flows

(in thousands of Canadian dollars)




Three months ended


Twelve months ended



October 31,


October 31,


October 31,


October 31,


For the Year Ended


2016


2015


2016


2015



$


$


$


$










Net (loss) income


(4,135)


441


(35,963)


(1,055)

Add (deduct) items not involving cash










Non-monetary transaction


(680)


-


(3,048)


-


Impairment loss


-


-


27,987


-


Non-cash interest


40


38


153


156


Depreciation and amortization


926


1,366


4,649


5,476


Settlement of long-term incentive plan


-


-


-


(1)


Foreign exchange loss on revaluation of
   foreign currency shareholder loans


452


-


452


327


Long-term incentive plan


248


(704)


320


(95)


Restructuring provision


1,596


-


1,596


-


Stock-based compensation


150


-


450


-


Technology Demonstration Program Funding


(667)


-


(667)


-


Long-term profit sharing plan liability


-


-


-


-


Net change in non-cash working capital balances


638


483


1,214


1,059

Cash flows (used in) from operations


(1,432)


1,624


(2,857)


5,867



















Investing activities










Acquisition of property, plant and equipment


(255)


(1,578)


(2,372)


(6,761)


Reimbursement of acquisition costs of
   property, plant and equipment


-


101


120


472


Acquisition of intangible assets


478


(901)


(6,307)


(7,906)

Cash flows used in investing activities


223


(2,378)


(8,559)


(14,195)










Financing activities










Government loan repayment


(123)


(123)


(492)


(328)


Long-term debt repayment


(87)


-


(204)


-


Shares issued


-


-


20,440


-


Shareholder loan advances


-


(0)


3,000


8,516

Cash flows from financing activities


(210)


(123)


22,744


8,188





-





Effect of exchange rate changes on cash


12


(291)


(13)


102










Net increase (decrease) in cash


(1,407)


(1,168)


11,315


(38)

Cash, beginning of the period


15,087


3,533


2,365


2,403

Cash, end of the year


13,680


2,365


13,680


2,365










 

exactEarth™Ltd.

Consolidated Statements of Changes in Equity

(in thousands of Canadian dollars)


For the Year Ended October 31, 2016


Total


Deficit

Accumulated
Other
Comprehensive
Income (Loss)

Share
Capital


Contributed
Surplus



$


$


$

$


$

Balance,October 31, 2015


23,066


(32,007)


(296)


55,120


249


Stock-based compensation expense


450


-


-


-


450


Comprehensive (loss) income


(35,622)


(35,963)


341


-


-


7,349,780 common shares issued on conversion of debt

48,209


-


-


48,209


-


3,144,615 common shares issued for cash


20,440


-


-


20,440


-

Balance,October 31, 2016


56,543


(67,970)


45


123,769


699























For the Year Ended October 31, 2015



















Balance,October 31, 2014


24,356


(30,952)


(62)


55,120


250


Settlement of long-term incentive plans


(1)


-


-


-


(1)


Comprehensive loss


(1,289)


(1,055)


(234)


-


-

Balance, October 31, 2015


23,066


(32,007)


(296)


55,120


249












 

SOURCE exactEarth Ltd.

For further information: INVESTORS: Dave Mason, Investor Relations, Tel: +1 416-247-9652, investors@exactearth.com; MEDIA: Nicole Schill, Marketing Communications Manager, Tel: +1 519-620-5890, nicole.schill@exactearth.com

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