UrtheCast Reports Second Quarter 2017 Financial Results

VANCOUVER, Aug. 14, 2017 /CNW/ - UrtheCast Corp. (TSX:UR) ("UrtheCast" or the "Company") today announces financial results for the three and six months ended June 30, 2017.

(in millions of Canadian dollars)

Q2 2017

Q2 2016

YTD 2017

YTD 2016

Revenue excluding non-cash revenue (1)

$

11.9

$

15.9

$

21.3

$

22.7

Revenue    

11.9

21.0

21.3

33.1

Operating costs

16.4

22.4

32.0

46.4

Net loss

(3.9)

(0.3)

(9.0)

(11.4)

Adjusted EBITDA(1)

0.9

5.0

(0.4)

(1.0)


 1 Non-IFRS earnings measure. See reconciliation to Revenue and Net Loss later in this press release

 

Excluding the non-cash revenue related to the ISS cameras of $5.1 million recorded in the second quarter of 2016, revenues decreased by $4.0 million in the second quarter of 2017. While EO imagery sales increased by $0.2 million compared to the prior year, engineering services revenue was $4.2 million lower, primarily due to an adjustment in the second quarter of 2016 to record $8.0 million of engineering services revenue from a contract amendment, which included some services performed in the first quarter of 2016.

Operating costs of $16.4 million in the second quarter were $6.0 million lower than the prior year. When excluding the $5.1 million of depreciation and non-cash costs related to the ISS cameras, operating costs were $0.9 million lower than the same period last year, mainly due to lower salary and benefit expenses resulting from the consolidation of certain software development activities and lower cloud storage costs.

The net loss of $3.9 million in the second quarter of 2017 increased by $3.6 million when compared to the prior year, primarily due to the lower engineering services revenues, which was also the main factor in the $4.1 million decrease in Adjusted EBITDA compared to the prior year.

Business Highlights

Earth Observation ("EO")

  • EO revenues of $3.3 million grew by 5%, compared to $3.1 million in the same period in 2016 (excluding non-cash revenues) and were 104% higher than in the first quarter of this year.

Government Funding

  • As previously announced, during the first quarter of 2017 the Company was awarded approximately $17.6 million in funding from Innovation, Science and Economic Development Canada's Industrial Technologies Office as part of its Strategic Aerospace & Defense Initiative program to support the development of the OptiSAR Constellation. The agreement is structured as a repayable contribution that management anticipates will be disbursed in quarterly installments, on a cost-reimbursement basis, over the next four years and repaid by the Company in annual installments over 15 years. Subsequent to the quarter end, the Company submitted its first claims for reimbursement of eligible costs of $5,178 for the period from April 2016 to June 2017.

  • During the first quarter of 2017, the Company was also awarded three non-repayable grants from the Government of Canada's Defense Innovation Research Program to reimburse up to approximately $2.2 million of eligible OptiSAR development costs. The Company has submitted claims of $0.6 million with respect to eligible costs incurred in the second quarter ($0.9 million for the six months ending June 30, 2017).

Financing and Liquidity

  • As previously announced, the Company obtained a new C$10 million revolving demand credit facility from the Royal Bank of Canada (RBC) in the first quarter of 2017, which was originally intended to be used to finance up to 90% of bank-approved accounts receivable. The agreement was amended during the second quarter to enable the Company to have unrestricted access to the facility by providing security in the amount of $10 million through a combination of bank-approved accounts receivable and cash. The interest rate on this facility is RBC's prime rate plus 2% and borrowings are repayable on demand. At June 30, 2017, $3 million had been drawn under this facility.

  • In April 2017, the Company obtained an additional credit facility to finance up to 1 million Euros of trade accounts receivables. At June 30, 2017, $0.3 million (or 0.2 million Euros) had been drawn under this facility.

Update on OptiSAR Constellation and UrtheDaily Constellation

  • In June 2015, the Company announced its plans to build, launch and operate the OptiSAR Constellation and, in March 2016, the Company announced its plans to build, launch and operate the UrtheDaily Constellation. 

  • Today, the Company announced that it had entered into a contract with a value in excess of one hundred million Canadian dollars with a confidential customer for the development and delivery of a dual-frequency stand-alone SAR operational-class satellite as an accelerator mission for the OptiSAR Constellation. This contract will allow the Company to accelerate both the operationalization of the SAR technology and the start of the SAR data services business.

  • The Company believes that the sale of one or more accelerator SAR satellites mitigates some of the technical risks associated with the OptiSAR Constellation and assists in demonstrating the advantages of the SAR technology to the market. The accelerator program also allows the Company to continue to work closely with its current and prospective OptiSAR customers to refine the technical specifications. Selling one or more stand-alone SAR satellites provides a means to finance a significant portion of the ongoing development costs of the OptiSAR Constellation.

  • While the Company continues to work towards consummating deals with potential OptiSAR customers, it is now believed that the OptiSAR Constellation will not begin operations prior to 2023, or approximately 12 months later than previously expected.  The primary reason for this delay is a result of the challenges involved in converting customer interest into binding contracts.

  • The development of the UrtheDaily Constellation continues to progress and, subject to financing the UrtheDaily Constellation before the end of 2017, management believes that the UrtheDaily Constellation remains on schedule to commence operations in 2020.  The Company continues to validate market interest in data and services derived from the UrtheDaily constellation as evidenced by the previously announced strategic partnerships with OmniEarth, Inc. in July 2016, the advance data subscription agreement with GEOSYS, a subsidiary of Land O'Lakes, Inc., announced in February 2017. The Company continues to engage in negotiations with additional prospective UrtheDaily data purchasers, as well as potential lenders and financing partners for the financing of the UrtheDaily Constellation.

  • Although the above statements reflect the Company's current views on the OptiSAR Constellation and the UrtheDaily Constellation, the completion of the Constellations are inherently subject to significant business, economic, competitive, political, timing and social uncertainties and contingencies and there can be no guarantee that the Constellations will be completed on the expected time frame or at all.

"The results this quarter are in line with our expectations and our guidance for the year, which we are maintaining," said Wade Larson, UrtheCast's President and CEO. "Our focus has been on progressing our strategic initiatives for long-term shareholder value, and we're really pleased with the progress we're making."

SELECTED FINANCIAL INFORMATION

The following table provides selected financial information of the Company, which was derived from, and should be read in conjunction with, the unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2017.

(in thousands of Canadian dollars)

Three Months Ended June 30,

Six Months Ended June 30,



2017


2016


2017


2016

Revenue    

$

11,854

$

20,973

$

21,250

$

33,125

Other operating income


61


695


111


695



11,915


21,668


21,361


33,820

Operating costs









Direct costs, selling, general and administrative expenses


10,894


13,915


21,403


29,042

Research expenditures


112


1,493


388


3,229

Depreciation and amortization


4,188


6,392


8,662


12,956

Asset impairment


309


-


309


-

Share-based payments


878


565


1,211


1,123



16,381


22,365


31,973


46,350

Operating loss


(4,466)


(697)


(10,612)


(12,530)

Net finance costs


(436)


(580)


(878)


(1,101)

Gain on derivative financial instruments


681


-


923


-

Foreign exchange loss


(986)


(210)


(1,205)


(402)

Loss before income taxes


(5,207)


(1,487)


(11,772)


(14,033)

Income tax recovery


1,302


1,210


2,788


2,656

Net loss


(3,905)


(277)


(8,984)


(11,377)

Other comprehensive income (loss)


2,463


(1,498)


3,004


(3,457)

Comprehensive loss

$

(1,442)

$

(1,775)

$

(5,980)

$

(14,834)

Net loss per share – basic and diluted

$

(0.03)

$

(0.00)

$

(0.08)

$

(0.11)

 

NON-IFRS EARNINGS MEASURES

(in thousands of Canadian dollars)

Three Months Ended June 30,

Six Months Ended June 30,



2017


2016


2017


2016

REVENUE EXCLUDING NON-CASH REVENUE:









Revenue per income statement

$

11,854

$

20,973

$

21,250

$

33,125

Non-cash revenue


-


(5,079)


-


(10,413)

REVENUE EXCLUDING NON-CASH REVENUE

$

11,854

$

15,894

$

21,250

$

22,712

ADJUSTED EBITDA:









Net loss

$

(3,905)


(277)

$

(8,984)

$

(11,377)

Add back (subtract):









Depreciation and amortization


4,188


6,392


8,662


12,956

Net finance costs


436


580


878


1,101

Income tax recovery


(1,302)


(1,210)


(2,788)


(2,656)

EBITDA


(583)


5,485


(2,232)


24

Non-cash revenue


-


(5,079)


-


(10,413)

Non-cash operating costs


-


3,811


-


7,877

Impairment of assets


309


-


309


-

Share-based payments expense


878


565


1,211


1,123

Gain on derivative financial instruments


(681)


-


(923)


-

Foreign exchange loss


986


210


1,205


402

ADJUSTED EBITDA

$

909

$

4,992

$

(430)

$

(987)

 

As previously announced, UrtheCast will host a conference call regarding its second quarter 2017 financial results at 5:00 p.m. ET (2:00 p.m. PT) on August 14, 2017.  The live conference call will be available by calling toll-free at 1-800-806-5484, or by toll call at +1-416-340-2217. The participant pass code is 5180873#.

An archived version of the conference call will be made available on the Company's investor website (investors.urthecast.com) following the live conference call.

ABOUT URTHECAST CORP.

UrtheCast Corp. is a Vancouver-based technology company that serves the rapidly evolving geospatial and geoanalytics markets with a wide range of information-rich products and services. The Company operates Earth Observation (EO) sensors in space, including two satellites, Deimos-1 and Deimos-2, to produce imagery data that is displayed on UrtheCast's cloud-based web platform and sold to partners and customers. Through its subsidiary Deimos Imaging, UrtheCast processes and distributes imagery data and value-added products on behalf of the PanGeo Alliance, a network of eight satellite operators with a combined 15 medium- and high-resolution EO sensors. UrtheCast is also developing and expects to launch two EO satellite constellations: the world's first fully-integrated constellation of sixteen multispectral optical and SAR satellites, called OptiSAR™, and an eight-satellite constellation designed to capture high-quality, medium-resolution optical imagery of the Earth's entire landmass (excluding Antarctica) every day, called UrtheDaily™. Together, the Company believes these constellations will revolutionize monitoring of our planet with medium- and high-resolution, high-coverage and high-revisit imagery in all weather conditions. Common shares of UrtheCast trade on the Toronto Stock Exchange as ticker 'UR'.

For more information, visit UrtheCast's website at www.urthecast.com.

Non-IFRS Financial Measures

The Company prepares its financial statements in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board. This release includes certain non-IFRS financial measures, such as non-IFRS revenues, EBITDA and adjusted EBITDA. The Company uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS or considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-IFRS financial measures should be read in conjunction with the Company's financial statements and accompanying MD&A.

Forward Looking Information

This release contains certain information which, as presented, constitutes "forward-looking information" or "forward-oriented financial information" within the meaning of applicable Canadian securities laws. Forward-looking information involves statements that relate to future events and often addresses expected future business and financial performance, containing words such as "anticipate", "believe", "plan", "estimate", "expect" and "guidance", statements that an action or event "may", "might", "could" or "will" be taken or occur, or other similar expressions and includes, but is not limited to, statements relating to: UrtheCast's expectations with respect its current sensors and proposed OptiSAR and UrtheDailyTM  constellations; the satisfaction of the financing and other conditions set out in the binding agreement for the purchase of two OptiSAR satellites in order to trigger payment obligations thereunder;  its plans for and timing of expansion of its product offering and value-added services; its future growth and operations plans; expectations regarding government contributions and reimbursement grants; and anticipated trends and challenges in its business and the markets in which the Company operates. Such statements reflect UrtheCast's current views with respect to future events. Such statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by UrtheCast, are inherently subject to significant uncertainties and contingencies. Many factors could cause UrtheCast's actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements, including, among others: any delays or failures in the design, development, construction, launch and operational commissioning of the proposed OptiSAR™ or UrtheDailyTM constellations; the Company being unable to adequately finance the development, building, launch and commissioning of the UrtheDaily Constellation or to convert the remaining MOUs and other customer discussions in respect of the OptiSAR™ constellation into binding, definitive agreements; the inability of the confidential OptiSAR customer described in this press release to obtain budgetary approval from government or to otherwise comply with its obligations under the binding agreement for the purchase and operation of two satellites; any failure by Geosys, the Government of Canada or one of UrtheCast's third-party lenders to comply with the terms of their respective contracts with UrtheCast, and UrtheCast's ability to comply with any of its covenants thereunder; the decline of key relationships in, or termination of, the PanGeo Alliance of EO satellite operators; failures aboard the ISS or the Deimos-1 or Deimos-2 satellites; failure to obtain, or loss of, regulatory approvals; as well as those factors and assumptions discussed in UrtheCast's annual information form dated March 28, 2017, (the "AIF"), which is available under UrtheCast's SEDAR profile at www.sedar.com. UrtheCast undertakes no obligation to update forward-looking statements except as required by Canadian securities laws. Readers are cautioned against attributing undue certainty to forward-looking statements.

SOURCE UrtheCast Corp.

For further information: Sai Chu, Chief Financial Officer, +1 (604) 669-1788

RELATED LINKS
www.urthecast.com

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