exactEarth Announces Q1 Fiscal 2020 Financial Results

• Subscription Services revenue increases 23% to $3.8 million
• Order Bookings increase 134% to $7.1 million
• Completed updated Satellite-AIS Business Agreement with L3Harris that substantially reduces expenses

CAMBRIDGE, ON, March 12, 2020 /CNW/ - exactEarth Ltd. ("the Company"), a leading provider of Satellite-AIS data services, announces its financial results for the three-month period ended January 31, 2020. All financial figures are in Canadian dollars unless otherwise stated.

Q1 Fiscal 2020 Highlights:

• Revenue was $4.1 million, up 17% compared to $3.5 million in Q1 Fiscal 2019
• Subscription Services revenue was $3.8 million, up 23% compared to $3.1 million in Q1 Fiscal 2019
• Order Bookings were $7.1 million compared to $3.0 million in Q1 Fiscal 2019
• Adjusted EBITDA* was $0.3 million compared to ($0.9) million in Q1 Fiscal 2019
• Cash and short-term investments were $8.7 million at the end of Q1 Fiscal 2020 compared to $10.2 million at the end of Fiscal 2019
• Completed updated Satellite-AIS Business Agreement ("A&R SABA") with L3Harris Technologies, Inc. ("L3Harris") that substantially reduces the Company's operating expenses
• In partnership with Hisdesat, selected by the European Maritime Safety Agency ("EMSA") to provide Satellite-AIS data services for estimated revenues of $5.0-$7.0 million over a four-year period
• Renewed agreement with Antrix Corporation to provide the Indian Navy with exactView RT Satellite-AIS data services for $1.6 million over two years

"With its broad coverage, true reliability and unique real-time capabilities, exactView RT has gained acceptance in the market as the leading Satellite-AIS data service available. This is reflected in our Q1 results with strong Subscription Services revenue growth of 23% and with the 134% increase in our Order Bookings, which will contribute to top-line performance in future quarters," said Peter Mabson, President and CEO of exactEarth.

"Operationally, the key achievement in the quarter was the completion of our updated Satellite-AIS Business Agreement - the A&R SABA - with L3Harris. This is a very positive development for exactEarth, and its impact is reflected favourably in our Q1 margins. The updated agreement provides us with a reduced, simplified and relatively-fixed cost structure for the foreseeable future, it accelerates our timeline to achieve positive cash flow and it further shifts our revenue model towards that of a Software-as-a-Service business."

Q1 Fiscal 2020 Financial Review
Total revenue in the three-month period ended January 31, 2020 ("Q1 2020") was $4.1 million, up 17% compared to $3.5 million in the three-month period ended January 31, 2019 ("Q1 2019"). Revenue rose primarily due to the increase in Subscription Services revenue, which was $3.8 million (93% of total revenue) in Q1 2020, up 23% from $3.1 million (89% of total revenue) in Q1 2019.

Data Products revenue for Q1 2020 was $0.15 million compared to $0.1 million in Q1 2019. 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 Q1 2020 was $0.15 million compared to $0.31 million in Q1 2019.

Revenue from commercial customers for Q1 2020 was $3.3 million, up 35% from Q1 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 Q1 2020 was $0.8 million, down 25% from Q1 2019. The Company expects performance in the government vertical to improve in Fiscal 2020, due in part to new customer contracts signed in Q1 2020, such as that with EMSA.

Order bookings for Q1 2020 were $7.1 million, compared to $3.0 million in Q1 2019. The improvement was due to orders received in Q1 2020 from a number of customers including, India, EMSA and Denmark. Order bookings will fluctuate on a quarter-to-quarter basis reflecting the timing to complete new customer agreements. Revenue backlog at January 31, 2020 was $25.6 million compared to $22.4 million at the end of Fiscal 2019. Revenue of $10.8 million from the current revenue backlog is forecasted to be earned over the remainder of 2020.

Gross Margin for Q1 2020 was 50% compared to 39% in Q1 2019. Gross margin improved due to higher revenue and lower cost of revenue. Cost of revenue decreased primarily due to lower satellite operating costs related to the Second-Generation Constellation and $648,000 of one-time net adjustments related to the A&R SABA with L3Harris.

"Excluding the $648,000 of one-time net adjustments related to the A&R SABA provides a clearer view of what our rough cost base will look like in the coming quarters," said Sean Maybee, CFO of exactEarth. "Doing so also helps to indicate where we stand in terms of working towards our goal of generating sustainable positive Adjusted EBITDA and cash from operations."

Selling, general and administrative ("SG&A") expense for Q1 2020 was $1.8 million compared to $2.0 million in Q1 2019. Lower SG&A was primarily due to a decrease in bad debt expense and legal fees, partially offset by an increase in long-term incentive plan expense.

Product development and research and development ("R&D") expense for Q1 2020 was $0.3 million compared to $0.3 million in Q1 2019. 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 Q1 2020 was $0.3 million compared to ($0.9) million in Q1 2019. Adjusted EBITDA improved year-over-year due to higher revenue, lower cost of revenue and, lower SG&A. Cost of revenue, and in turn, Adjusted EBITDA, benefited in Q1 2020 from the one-time net adjustments related to the A&R SABA. (Adjusted EBITDA is a non-IFRS measure and is defined below)

Net loss for Q1 2020 was ($0.6) million, or ($0.03) per share, compared to ($1.2) million, or ($0.06) per share, in Q1 2019. Net loss in Q1 2020 benefited from the factors noted above in the section on Adjusted EBITDA, offset in part by higher interest expense of $0.4 million compared to $0.2 million in Q1 2019.

Cash used in operations for Q1 2020 was ($1.8) million, compared to ($2.2) million in Q1 2019. Cash used in operations improved in Q1 2020 primarily due to higher revenue. The A&R SABA with L3Harris was completed on January 21, 2020, and the revised terms of that agreement along with 2020 revenue expectations are expected to have a favourable impact on the Company's use of cash in operations during the remainder of 2020.

exactEarth's cash balance at January 31, 2020 was $8.7 million compared to $10.2 million at October 31, 2019.

As at March 11, 2020, the Company had 21,746,264 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 January 31
		2020		2019
Net loss		$	(613)	$	(1,235)
Interest income			(34)		(26)
Interest expense			426		223
Income tax expense			74		60
Depreciation and amortization			254		168
Unrealized foreign exchange gain			(167)		(111)
Share-based compensation			310		66
Adjusted EBITDA		$	250	$	(855)

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 A&R SABA, 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 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 January 31,		As at October 31,
		2020		2019
		$		$
ASSETS
Current assets
Cash and cash equivalents		8,672		10,188
Short-term investments		49		49
Accounts receivable		2,804		3,073
Unbilled revenue		2,945		2,149
Prepaid expenses		459		448
Other assets		198		209
Total current assets		15,127		16,116
Property, plant and equipment		4,572		4,398
Intangible assets		1,492		1,538
Other long-term assets		445		366
Total assets		21,636		22,418
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities		4,009		4,840
Deferred revenue		4,075		3,499
Loans payable - current		82		202
Total current liabilities		8,166		8,541
Loans payable		10,324		10,089
Long-term incentive plan liability		381		203
Other long-term liabilities		1,189		1,466
Total liabilities		20,060		20,299
Shareholders' equity
Share capital		123,823		123,823
Contributed surplus		4,779		4,647
Accumulated other comprehensive loss		(175)		(113)
Deficit		(126,851)		(126,238)
Total shareholders' equity		1,576		2,119
Total liabilities and shareholders' equity		21,636		22,418

exactEarth™ Ltd.
Interim Condensed Consolidated Statements of Changes in Shareholders' Equity
(in thousands of Canadian dollars)
(unaudited)
For the three months ended January 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		42	-	-	-	42
Restricted share unit expense		90	-	-	-	90
Comprehensive loss		(675)	(613)	(62)	-	-
Balance at January 31, 2020		1,576	(126,851)	(175)	123,823	4,779
For the three months ended January 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		58	-	-	-	58
Restricted share unit expense		8	-	-	-	8
Convertible debenture		2,917	-	-	-	2,917
Comprehensive loss		(1,314)	(1,235)	(79)	-	-
Balance at January 31, 2019		9,148	(118,990)	(90)	123,794	4,434

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
		January  31,		January  31,
		2020		2019
		$		$
Revenue		4,133		3,522
Cost of revenue		2,059		2,144
Gross profit		2,074		1,378
Selling, general and administrative		1,780		1,996
Product development and research and development		304		293
Depreciation and amortization		254		168
Loss from operations		(264)		(1,079)
Other expenses
Foreign exchange gain		(117)		(101)
Interest income		(34)		(26)
Interest expense		426		223
Total other expenses		275		96
Income tax expense		74		60
Net loss		(613)		(1,235)
Other comprehensive loss
Item that may be subsequently reclassified to net loss:
Foreign currency translation, net of income tax expense of nil		(62)		(79)
Total other comprehensive loss		(62)		(79)
Comprehensive loss		(675)		(1,314)
Loss per share
Basic and diluted loss per share		(0.03)		(0.06)

exactEarth™ Ltd.
Interim Condensed Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(unaudited)
		Three months ended
		January  31,		January  31,
		2020		2019
		$		$
Operating activities
Net loss		(613)		(1,235)
Add (deduct) items not involving cash
Non-cash interest		118		21
Depreciation and amortization		254		168
Operating grant recognized on SIF loan		(209)		(692)
Long-term incentive plan expense		267		9
Stock-based compensation		42		58
Net change in non-cash working capital balances		(1,674)		(495)
Other operating cash flows
Settlement of share units		-		(24)
Cash flows used in operating activities		(1,815)		(2,190)
Investing activities
Acquisition of property, plant and equipment		(378)		(167)
Reimbursement of acquisition costs of property, plant and		-		288
equipment
Cash flows (used in) from investing activities		(378)		121
Financing activities
Government loan repayment		(123)		(123)
Government loan advance		833		-
Convertible debenture advance		-		13,000
Convertible debenture issue costs		-		(1,146)
Payment of principal poriton of lease obligations		(37)		-
Cash flows from financing activities		673		11,731
Effect of exchange rate changes on cash		4		33
Net (decrease) increase in cash		(1,516)		9,695
Cash, beginning of the period		10,188		4,774
Cash, end of the period		8,672		14,469
Supplemental cash flow information
Interest paid		199		-
Interest received		24		24
Income taxes paid		74		60

SOURCE exactEarth Ltd.

Contact information: INVESTORS: Dave Mason, Investor Relations, Tel: [phone], [email protected]

Related Links

http://www.exactearth.com/