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exactEarth Reports Q3 Fiscal 2017 Financial Results

Press Release From: exactEarth Ltd
Posted: Thursday, September 14, 2017

exactEarth Ltd. ("the Company"), a leading provider of Satellite AIS ("S-AIS") data services, announces its financial results for the three- and nine-month periods ended July 31, 2017. All financial figures are in Canadian dollars unless otherwise stated.

Q3 2017 Highlights

  • Revenue was $2.9 million
  • Revenue in the Commercial market increased 26% from Q3 2016
  • Revenue backlog was $25.8 million at quarter-end
  • Order Bookings were $1.7 million in Q3 2016
  • Adjusted EBITDA* was $(1.2) million
  • Cash balance was $10.1 million at July 31, 2017

"The key event of the quarter was the official service launch of exactView RT, our second-generation satellite constellation service," said Peter Mabson, CEO of exactEarth. "Hosted onboard the Iridium NEXT satellite constellation, exactView RT is a system of more than 60 maritime satellite payloads that we believe will be the only offering on the market capable of delivering high performance high reliability real-time global vessel tracking for a population of more than 250,000 vessels."

Mr. Mabson added, "As of today, our 16-satellite constellation includes nine exactView RT payloads in service, with additional launches expected through the end of this year and into 2018. Already we are receiving positive feedback from the market on the utility of this new capability in core application markets such as surveillance, vessel tracking and commodity flows. We believe that the real time exactViewRT capability will be a significant driver for the business going forward." 

Financial Review

Total revenue for the three- and nine-month periods ended July 31, 2017 ("Q3 2017" and "year-to-date") was $2.9 million and $10.0 million compared to $4.0 million and $15.6 million in the same periods last year. The change in revenue for Q3 2017 was primarily due to $1.5 million of non-cash revenue generated in Q3 2016 from an Asset Transfer Agreement with Communitech related to the EV9 satellite transfer. There was no revenue related to the Asset Transfer Agreement recognized in Q3 2017. The change in revenue for the year-to-date period was primarily due to lower revenue generated by the Government of Canada ("GoC") contract in 2017, which accounted for $5.3 million of the difference year-over-year, and lower non-cash revenue related to the Asset Transfer Agreement in 2017, which accounted for $1.7 million of the difference year-over-year. Excluding the impact of the GoC contract and the Asset Transfer Agreement, revenue would have increased by $0.4 million (18%) in Q3 2017 and $1.4 million (18%) year-to-date.

Order bookings for Q3 2017 were $1.7 million compared to $16.0 million in Q3 2016. For the year-to-date period, Order Bookings are $14.3 million compared to $21.1 million in the same period last year. Revenue backlog at July 31, 2017 was $25.8 million compared to $20.6 million at July 31, 2016.

Subscription Services revenue for Q3 2017 and year-to-date was $2.6 million and $8.0 million compared to $2.8 million and $12.3 million in the same periods last year. For Q3 2017 and the year-to-date period, exactEarth generated nil and $0.62 million in non-cash Subscription Services revenue, from the Asset Transfer Agreement with Communitech, compared to $0.68 million and $0.75 million in the same periods last year. Excluding the impact of the GoC contract and the Asset Transfer Agreement, Subscription Services revenue would have increased by $0.46 million (22%) in Q3 2017 and $1.0 million (17%) year-to-date.

Subscription Services revenue in Q3 2017 and year-to-date represented 88% and 80% of total revenue compared to 70% and 78% in the same periods last year. Subscription Services revenue from commercial customers rose 21% in Q3 2017 and 16% year-to-date compared to the same periods last year.

Data Products revenue in Q3 2017 and year-to-date was $0.31 million and $0.86 million compared to $1.0 million and $2.3 million in the same periods last year. The comparative periods in 2016 include $0.81 million and $1.6 million, respectively, in non-cash Data Products revenue related to the Asset Transfer Agreement with Communitech. Excluding non-cash revenue from the Asset Transfer Agreement, Data Products revenue would have increased year-over-year. 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 Q3 2017 and year-to-date was $0.05 million and $1.2 million compared to $0.17 million and $1.1 million in the same periods last year. The increase for the year-to-date period, is primarily due to recognition in Q2 2017 of revenue from the Company's small vessel contract with the government of Ghana, which has now been completed.

Gross margin in Q3 2017 and year-to-date was 44.5% and 37% compared to 51% and 54% in the same periods last year. Gross margin decreased year-over-year due primarily to lower Subscription Services and Data Products revenue. This was offset, in part, by lower operating expenses for the year-to-date period and the reimbursement of costs related to the Company's Technology Demonstration Program Collaboration Agreement ("TDP Agreement") with MacDonald Dettwiler and Associates Ltd. TDP Agreement funding recognized as an offset to cost of revenue in Q3 2017 and year-to-date was $0.13 million and $0.28 million compared to $0.55 million in the same periods last year (TDP agreement funding only started in the Company's Q3 2016).

Selling, general and administrative ("SG&A") expenses for Q3 2017 and year-to-date were $2.1 million and $5.5 million compared to $1.7 million and $5.7 million in the same periods last year. SG&A increased year-over-year and in the third quarter due primarily to activity related to the launch of exactView RT, the Company's second-generation satellite constellation with real-time S-AIS feeds, and the implementation of a sales and financial software system.

Product development and research and development ("R&D") expenses for Q3 2017 and year-to-date were $0.5 million and $1.3 million compared to $0.51 million and $1.4 million in the same periods last year. exactEarth generated $93 thousand in R&D expense in both Q3 2017 and the year-to-date period. The R&D expense was incurred on Project VESTA, which has an objective to demonstrate a satellite-based, two-way maritime communications system representing initial implementation of VHF Data Exchange System (VDES) technology.

Adjusted EBITDA for Q3 2017 and year-to-date was $(1.2) million and $(2.9) million compared to $(0.29) million and $0.86 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 Q3 2017 and year-to-date was $2.6 million, or $0.12 per share, and $4.9 million, or $0.23 per share, compared to $1.2 million, or $0.06 per share, and $31.6 million, or $1.77 per share, in the same periods last year. Net loss for the 2016 year-to-date period includes a $28.0 million non-cash impairment charge related to the write-down of certain assets on the balance sheet. Excluding that item, net loss was greater in the 2017 year-to-date period, primarily due to lower revenue from the GoC contract, offset in part by lower operating expenses.

exactEarth used $1.2 million of cash in operations in Q3 2017 compared with $1.8 million of cash used in operations in Q3 2016. The lower amount of cash used in operations in Q3 2017 reflects the ongoing efforts the Company is taking to closely manage – and reduce where possible – its cost base. For the year-to-date period, exactEarth used $6.0 million of cash in operations compared with $1.4 million of cash used in operations in the same period last year. The Company's cash balance at July 31, 2017 was $10.1 million compared to $13.7 million at October 31, 2016.

As at July 31, 2017, the Company had 21,614,120 shares outstanding. 

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, September 14, 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: http://event.on24.com/r.htm?e=1499597&s=1&k=39CB4AC857B60ECE63932FA62585A905 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: 79474187

Dial-In Replay Availability: 14/09/2017 11:30 ET - 29/09/2017 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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