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 $5.4 million 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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