From: exactEarth Ltd
Posted: Thursday, January 19, 2017
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
2016 Operational Highlights
"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."
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.
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.
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