UrtheCast Reports Fourth Quarter and Fiscal 2016 Financial Results
Posted: Tuesday, March 28, 2017
UrtheCast Corp. (TSX:UR) ("UrtheCast" or the "Company") today announces financial results for the three and twelve months ended on December 31, 2016.
Non-IFRS revenue of $49.9 million in fiscal 2016 increased by 95% over the prior year (IFRS revenue of $111.3 million in 2016 increased by 205%)
Non-IFRS adjusted EBITDA of $5.6 million in fiscal 2016 was an improvement of $18.6M over the prior year
Non-IFRS revenue of $11.7 million in the fourth quarter increased by 45% over the prior year (IFRS revenue of $57.5 million in Q4 increased by 333%)
Non-IFRS adjusted EBITDA of $1.9 million in the fourth quarter was an improvement of $9.6 million over the prior year
Strong Growth in Revenue and Adjusted EBITDA Year-Over-Year
The Company is pleased to report fiscal 2016 non-IFRS revenues of $49.9 million, a 95% increase over fiscal 2015 non-IFRS revenue of $25.5 million. IFRS revenue for the year was $112.3 million as compared to $36.5 million reported in the prior year. Similarly, the Company's non-IFRS adjusted EBITDA was positive $5.6 million in the year compared to a loss of $12.9 million in the same period in 2015, amounting to an $18.6 million dollar improvement year-over-year to adjusted EBITDA. At December 31, 2016, the Company had total cash balances of $15.6 million and working capital of $18.9 million.
CFO Transition and Guidance
As announced on February 21, 2017, Mr. Sai Chu will be appointed Chief Financial Officer effective March 29, 2017. At this time, UrtheCast re-affirms its preliminary view for 2017 of growing non-IFRS revenues and expanding adjusted EBITDA margins over 2016 with similar seasonality to that of 2016.
Revenues in Earth Observation Growing by 115% Year-Over-Year
Revenues in the Company's Earth observation (EO) business in the 2016 fiscal year grew by 115% compared with fiscal 2015, growing from $7.1 million to $15.2 million (non-IFRS reporting). This triple-digit growth in the EO business is primarily due to the continued acceptance of the high-resolution imagery offering from the Deimos-2 satellite.
Impairment Charge for ISS Cameras
During the quarter, the Company recorded an additional non-cash asset impairment charge of $3.1 million for the Company's two EO cameras aboard the International Space Station (ISS). This resulted in a total non-cash impairment charge in fiscal 2016 of $10.9 million.
As the Company was unsuccessful in negotiating a new agreement with its ISS partner following the termination of the original agreement effective December 31, 2016, the deferred revenue liability associated with the ISS cameras was written off at December 31, 2016. This non-cash write-off was recognized as revenue of $40.6 million in the fourth quarter of 2016. This was offset by an acceleration of depreciation on the barter assets to reflect the reduced useful life. Following the termination of the agreement with the Company's ISS partner on December 31, 2016, the Company's financial statements will no longer require barter accounting for this partnership.
The Company continues to seek to monetize the ISS cameras through alternative means, including licensing arrangements or an asset sale.
Earth Observation Update
For the 2016 fiscal year, EO revenues grew by 115% compared with fiscal 2015, growing from $7.1 million to $15.2 million.
The Company hired Jamie Ritchie to lead the Company's EO sales and business development team under Fabrizio Pirondini, CEO of Deimos Imaging. Mr. Ritchie has been working in the EO field for over 15 years, with experience in business development, marketing and product management, including leading imagery at Esri Inc. and acting as Head of Product Portfolio and Marketing at Airbus Defence & Space, Geo-Intelligence.
Elecnor Deimos Space, a subsidiary of Elecnor, S.A., signed a multi-year agreement with the Ukrainian Space Agency to provide a Direct Receiving Station (DRS) for Deimos-2 data. Once the DRS is completed, Elecnor Deimos Space is expected to award a contract to Deimos Imaging to supply Deimos-2 imagery.
The Company entered into a long-term agreement with GEOSYS, a subsidiary of Land O' Lakes, Inc., to deliver geospatial data from the planned UrtheDaily Constellation. Pursuant to the terms of the agreement, GEOSYS will become an anchor customer for the UrtheDaily Constellation. The agreement, for an undisclosed purchase price and term, represents the Company's largest data-buy contract to date. This agreement will provide GEOSYS with sufficient capacity to receive imagery of the Earth's entire landmass (excluding Antarctica) throughout the contract term and payments will begin when UrtheCast begins delivering UrtheDaily Constellation data to GEOSYS. The agreement is subject to the Company arranging for the financing for the build and launch of the first portion of the satellites in the UrtheDaily Constellation and other customary covenants for agreements of this nature.
The Company announced that it had entered into a binding agreement with a confidential government customer for the sale and shared operation of the first two satellites in the Company's planned OptiSAR Constellation for a purchase price of approximately US$180 million. This agreement represents the first successful conversion of the three previously announced Memoranda of Understanding (MOUs) for the purchase of the OptiSAR Constellation satellites into binding contracts. The agreement is subject to a number of closing conditions, including UrtheCast obtaining the necessary customer commitments to allow for the build, launch and financing of the first eight satellites in the OptiSAR Constellation, the customer obtaining funding on or before December 31, 2017, the parties reaching mutual agreement on the detailed procedures for the shared operation and tasking of the two satellites, and other customary covenants and regulatory approvals for agreements of this nature. Provided these closing conditions are satisfied or waived, the purchase price is expected to be paid upon achievement of certain build-phase milestones, concurrent with the start of the build-phase for the first eight satellites.
The Company is also continuing its negotiations to convert other MOUs and customer discussions into binding, definitive agreements. The Company expects that each agreement will have unique pricing depending on the imaging and commercial rights, ground segment features, and the operating, maintenance and training services to be provided to each customer.
The Company entered into a contribution agreement whereby the Company will receive approximately $17.6 million in funding, on an expense reimbursement basis, 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 over the next four years and repaid by the Company in annual installments over 15 years, beginning in 2023.
Financing and Liquidity
The Company closed a public offering of 13,033,341 common shares at a price of $1.50 per Common Share, for aggregate gross proceeds of $19,550,012.
The Company obtained a new $10,000,000 revolving demand credit facility from the Royal Bank of Canada (RBC). Borrowings under this facility will primarily be used to finance up to 90% of the accounts receivable under the Company's US$65,000,000 engineering services contract and may also be used to finance other contracts. The interest rate on this facility is RBC's prime rate plus 2% and borrowings are repayable when the related accounts receivable are collected from the customer, or on demand.
"We're really pleased with the progress the Company is making across the board", said Wade Larson, UrtheCast's President and CEO. "Growing EO revenue, a strengthened balance sheet, programmatic and technological progress on our development programs, significant customer signings on both OptiSAR and UrtheDaily, and an improved outlook going forward on both top-line revenue and adjusted EBITDA."
As previously announced, UrtheCast will host a conference call regarding its 2016 fourth quarter and fiscal year financial results at 4:30 p.m. ET (1:30 p.m. PT) on March 28, 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 1329750.
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'.