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exactEarth Reports Q2 Fiscal 2017 Financial Results

Press Release From: exactEarth Ltd
Posted: Thursday, June 8, 2017

exactEarth Ltd. ("the Company"), a leading provider of Satellite AIS ("S-AIS") data services, announces its financial results for the three- and six-month periods ended April 30, 2017. All financial figures are in Canadian dollars unless otherwise stated.

Q2 2017 Highlights

  • Revenue was $3.7 million
  • Revenue in the Commercial market increased 17% from Q2 2016
  • Order Bookings were $4.5 million compared to $1.7 million in Q2 2016
  • Adjusted EBITDA* was $(1.0) million
  • Cash balance was $11.7 million at April 30, 2017

"Our order book was up again in Q2, led by a large renewal agreement with a key commercial customer and more than 30 new orders," said Peter Mabson, CEO of exactEarth. "We continue to build our sales pipeline in both the government and commercial markets while maintaining a close eye on expenses throughout the organization.

"The major milestone on our horizon, which we expect will further boost our pipeline opportunities, is achieving real-time global vessel tracking via our second-generation satellite constellation service, exactView RT. exactView RT is a system of more than 60 maritime satellite payloads, being deployed under our strategic agreement with Harris Corporation, which is hosted onboard the Iridium NEXT satellite constellation.

"Subsequent to quarter-end, we officially launched the exactView RT service with four satellite payloads now providing global real-time Satellite AIS data feeds alongside our first-generation constellation. With additional Iridium NEXT launches scheduled for 2017, the pace with which we are moving towards a continuous real-time vessel tracking capability is expected to accelerate through the remainder of the year."

Financial Review

Total revenue for the three- and six-month periods ended April 30, 2017 ("Q2 2017" and "year-to-date") was $3.7 million and $7.0 million compared to $5.2 million and $11.6 million in the same periods last year. The year-over-year change in revenue was primarily due to lower revenue generated by the Government of Canada ("GoC") contract, which accounted for $2.1 million of the difference in Q2 2017 and $5.3 million in the year-to-date period. Sales for Q2 2017 increased year-over-year with Order Bookings of $4.5 million compared to $1.7 million in Q2 2016. For the year-to-date period, Order Bookings are $13.4 million compared to $5.9 million in the same period last year.

Subscription Services revenue (as defined below) for Q2 2017 and year-to-date was $2.3 million and $5.4 million compared to $4.1 million and $9.4 million in the same periods last year. For the year-to-date period, exactEarth generated $0.62 million in non-cash Subscription Services revenue, from an Asset Transfer Agreement with Communitech related to the EV9 satellite transfer. Excluding the impact of the GoC contract and the non-cash revenue just described, Subscription Services revenue would have increased by $0.38 million (16.5%) in Q2 2017 and $0.59 million (17%) year-to-date.

Subscription Services revenue in Q2 2017 and year-to-date represented 63% and 76% of total revenue compared to 78% and 81% in the same periods last year. Subscription Services revenue from commercial customers rose 9% in Q2 2017 and 10% year-to-date compared to the same periods last year.

Data Products revenue in Q2 2017 and year-to-date was $0.34 million and $0.55 million compared to $0.96 million and $1.3 million in the same periods last year. The comparative periods in 2016 include $0.82 million in non-cash Data Products revenue related to the Asset Transfer Agreement with Communitech. As of January 31, 2017, the Company has recognized, in full, all of the non-cash revenue from the in-kind sale of these datasets. The complete datasets have been delivered to Communitech and title to the EV9 satellite has transferred to exactEarth.

Other Products & Services revenue in Q2 2017 and year-to-date was $1.0 million and $1.1 million compared to $0.21 million and $0.91 million in the same periods last year. The increase is primarily due to recognition in Q2 2017 of revenue from the Company's small vessel contract with the government of Ghana.

Gross margin in Q2 2017 and year-to-date was 23% and 34% compared to 51% and 55% in the same periods last year. Gross margin decreased year-over-year due primarily to lower revenue and the impact of lower margin hardware revenue generated from the Company's small vessel contract with the government of Ghana. This was offset, in part, by lower operating expenses and the reimbursement of costs related to the Company's Technology Demonstration Program Collaboration Agreement ("TDP Agreement") with MDA. TDP Agreement funding recognized as an offset to cost of revenue in Q2 2017 and YTD was $51,000 and $150,000 compared to $nil and $nil in the same periods last year because the TDP agreement funding only started in the Company's third quarter of fiscal 2016.

Selling, general and administrative ("SG&A") expenses for Q2 2017 and year-to-date were $1.5 million and $3.4 million compared to $2.1 million and $4.1 million in the same periods last year. SG&A decreased in Q2 2017 and year-to-date due primarily to lower headcount, which was offset, in part, by higher sales and marketing expenses related to Order Bookings, which are up significantly from the same periods last year.

Product development and research and development ("R&D") expenses for Q2 2017 and year-to-date were $0.43 million and $0.84 million compared to $0.47 million and $0.93 million in the same periods last year. The decrease primarily reflects the Company's ongoing efforts to closely manage costs. We did not incur any expense for R&D in Q2 2017 and the year-to-date period. R&D is no longer a focus as the technology used to receive and de‑collide S-AIS signals has matured and resources are now being allocated toward customer-facing product development.

Adjusted EBITDA for Q2 2017 and year-to-date was $(1.0) million and $(1.5) million compared to $(0.2) million and $1.2 million in the same periods last year. The year-over-year decrease in Adjusted EBITDA was primarily due to lower revenue from the GoC contract, offset in part by lower operating expenses. (Adjusted EBITDA is a non-IFRS measure and is defined below.)

Net loss for Q2 2017 and year-to-date was $0.2 million, or $0.02 diluted per share, and $2.2 million, or $0.10 diluted per share, compared to $29.5 million, or $1.39 per share, and $30.5 million, or $1.89 per share, in the same periods last year. Results for the Q2 2017 and year-to-date periods include $1.5 million in Other Income related to the net proceeds from the EV5 insurance claim, which was announced on April 5, 2017. The $1.5 million in Other Income is a result of the difference between the $3.5 million settlement amount and the carrying value of the EV5 asset, which was $2.0 million. Results for the Q2 2016 and year-to-date periods include a $28.0 million non-cash impairment charge related to the write-down of certain assets on the balance sheet. Excluding those items, net loss was greater in Q2 2017 and year-to-date, primarily due to lower revenue from the GoC, offset in part by lower operating expenses.

exactEarth used $2.7 million of cash from operating activities in Q2 2017 compared with cash generated from operations of $1.6 million in Q2 2016. For the year-to-date period, exactEarth used $4.8 million of cash from operating activities compared with cash generated from operations of $1.2 million in the same period last year. The Company received $3.5 million in cash from investing activities in Q2 2017 resulting from the insurance claim related to its EV5 satellite. The Company's cash balance at April 30, 2017 was $11.7 million compared to $13.7 million at October 31, 2016.

As at April 30, 2017, the Company had 21,611,572 shares outstanding. 

Read the full financial highlights.

Conference Call

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, June 8, 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/2rRIv8f or visit the exactEarth website for more details. The webcast will be archived for 30 days.

Replay: Encore Toll Free Dial-In Number: (855) 859-2056
Encore Password: 30486546
Dial-In Replay Availability: 08/06/2017 11:30 ET - 22/06/2017 23:59 ET

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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