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:

• Revenue was $4.0 million, up 26% compared to $3.2 million in Q3 2018;
• Subscription-based revenue was 86% of total revenue compared to 95% in Q3 2018;
• Subscription-based revenue increased 15% compared to Q3 2018;
• Commercial market revenue increased 46% compared to Q3 2018, and Government market revenue declined 17% compared to Q3 2018;
• Order bookings were $3.0 million compared to $6.7 million in Q3 2018;
• Revenue backlog was $25.4 million at the end of Q3 2019 compared to $29.3 million at the end of Q3 2018 and $24.6 million at the end of Q2 2019;
• Adjusted EBITDA* was ($1.7) million compared to ($1.5) million in Q3 2018;
• Cash and cash equivalents and short-term investments were $14.7 million at the end of Q3 2019 compared to $4.8 million at the end of Fiscal 2018;
• Expanded channel partner relationships with a three-year agreement with MarineTraffic, a global ship tracking and maritime intelligence provider;
• Selected by Airbus Defence and Space to be their AIS partner to support the launch of their new maritime applications platform, Ocean Finder;
• Announced small vessel tracking initiative in Madagascar; and
• Celebrated the 10^th Anniversary of the formation of exactEarth.

"We celebrated our 10^th 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.

exactEarth™ 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

 

exactEarth™ 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

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				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)

exactEarth™ 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.

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

Related Links

http://www.exactearth.com/