From: exactEarth Ltd
Posted: Friday, January 25, 2019
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, 2018. All financial figures are in Canadian dollars unless otherwise stated.
Q4 and Fiscal 2018 Highlights:
"Driven by the growing adoption of our real-time S-AIS service, exactView RT, our revenue trend was favourable in 2018, which culminated in Q4 results that generated a significant year-over-year increase in subscription revenue and in our order backlog," said Peter Mabson, President & CEO of exactEarth. "In 2018, we also took positive steps to strengthen our balance sheet and reduce our cash burn. The SIF funding announcement in Q4 and private placement financing completed shortly after Q4 provide the Company with significant financial flexibility and approximately $20.0 million in capital to support operational and growth initiatives. Of note, the SIF payment of $1.2 million in Q4 represented a catch-up from Q2 through the end of the fiscal year, so quarterly SIF payments will be more moderate going forward."
Mr. Mabson continued: "Looking out to 2019, our agreement with Harris Corp will come into full-effect and we expect to have all 58 payloads in our second-generation constellation fully-operational. We believe we have a significant growth opportunity in front of us and we will continue to leverage the unique real-time capabilities of exactView RT to develop and launch new analytics products and to maintain sales momentum in our core S-AIS market, while further expanding our footprint in the broader maritime information services market."
Q4 and Fiscal 2018 Financial Review
Total revenue in the three-month period ended October 31, 2018 ("Q4 2018") was $3.8 million compared to $2.9 million in the three-month period ended October 31, 2017 ("Q4 2017"). Total revenue in Fiscal 2018 was $13.0 million compared to $12.8 million in Fiscal 2017.
Order bookings in Q4 and Fiscal 2018 were $5.4 million and $16.9 million compared to $3.0 million and $17.3 million in Q4 and Fiscal 2017, respectively. Order bookings will fluctuate on a quarter-to-quarter basis reflecting the timing to complete new customer agreements. Revenue backlog at October 31, 2018 increased to $31.5 million compared to $29.3 million at the end of Q4 2018 and $26.0 million at the end of Fiscal 2017.
Subscription Services revenue in Q4 2018 was $3.4 million, up 27% compared to $2.7 million in Q4 2017. Subscription Services revenue for Fiscal 2018 was $11.3 million, up 6% compared to $10.6 million in Fiscal 2017. Excluding $0.09 million of non-cash revenue in the Fiscal 2018 period that resulted from the trade of AIS subscription data for data processing services and the $0.62 million in Fiscal 2017 non-cash revenue associated with an Asset Transfer Agreement (whereby we provided in-kind datasets, not licensed for commercial use to Communitech, in exchange for title to the EV-9 satellite), Subscription Services revenue increased by $1.2 million, or 12%, in Fiscal 2018.
Subscription Services revenue in Q4 2018 represented 90% of total revenue (Fiscal 2018: 87%) compared to 94% in Q4 2017 (Fiscal 2017: 83%). Subscription Services revenue from commercial customers rose 35% in Q4 2018 and, excluding non-cash revenue, rose 15% in Fiscal 2018 compared to the same periods last year. Excluding the non-cash Subscription Services revenue generated in Fiscal 2017, Subscription Services revenue from government customers would have risen 19% and 9%, respectively, for the three- and twelve-month periods ended October 31, 2018.
Data Products revenue in Q4 2018 was $0.26 million compared to $0.13 million in Q4 2017. Data Products revenue for Fiscal 2018 was $0.97 million compared to $0.99 million in Fiscal 2017. Data Products revenue is generated from on-demand customer requests, which results in some variability in quarter-to-quarter revenue levels.
Other Products & Services revenue in Q4 2018 was $0.11 million compared to $0.04 million in Q4 2017. Other Products & Services revenue for Fiscal 2018 was $0.69 million compared to $1.2 million in Fiscal 2017. The decrease is primarily due to the timing of delivery of services related to the Company's ongoing small-vessel opportunities.
Gross Margin in Q4 2018 was 60% compared to 30% in Q4 2017. Gross Margin stayed relatively flat for Fiscal 2018 at 33%. Q4 2018 Gross Margin improved year-over-year due to higher revenue and lower cost of revenue. Cost of revenue decreased due to $1.2 million of SIF funding received from the Canadian government to offset costs related to the development and roll-out of exactView RT, the Company's real-time S-AIS service. The SIF funding reflected the period from February 13, 2018 through September 30, 2018. Additional SIF funding payments are expected in the 2019, 2020 and 2021 fiscal years. Detailed information regarding the SIF funding can be found on the Company's website in a press release dated October 19, 2018.
Selling, general and administrative ("SG&A") expense in Q4 2018 was $0.97 million compared to $1.9 million in Q4 2017. SG&A for Fiscal 2018 was $6.3 million, compared to $7.0 million in Fiscal 2017. SG&A expense decreased year-over-year due to reversal of bad debt, reduced Restricted Share Unit, Deferred Share Unit and stock option expense, decreased spending on conference, travel and consulting and moving expenses, partially offset by increased selling expenses and professional fees.
Product development and research and development ("R&D") expense in Q4 2018 was $0.18 million compared to $0.36 million in Q4 2017. Product development and R&D expense for Fiscal 2018 was $1.4 million, compared to $1.7 million in Fiscal 2017. The Company's product development and R&D activities are currently focused primarily on the development of web-based functionality, data processing capabilities and analytics-based product offerings.
Adjusted EBITDA for Q4 2018 was $1.0 million compared to ($1.4) million in Q4 2017. Adjusted EBITDA for Fiscal 2018 was ($3.2) million, compared to ($4.4) million in Fiscal 2017. The year-over-year improvement in Adjusted EBITDA for Q4 2018 and Fiscal 2018 was due to higher revenue, the $1.2 million in SIF funding which offset certain cost of revenue expenses, lower SG&A expense and lower product development and R&D expense. (Adjusted EBITDA is a non-IFRS measure and is defined below)
Net loss for Q4 2018 was ($10.3) million, or ($0.48) per share, compared to ($29.0) million, or ($1.34) per share, in Q4 2017. Net loss for Fiscal 2018 was ($16.2) million, or ($0.75) per share, compared to ($33.8) million, or ($1.57) per share, in Fiscal 2017. Net loss for Q4 and Fiscal 2018 included a non-cash $10.9 million, or $0.50 per share, impairment charge, while the net loss for Q4 and Fiscal 2017 included a non-cash $26.9 million, or $1.24 per share, impairment charge. More information on the impairment charges can be found in the Company's Management Discussion and Analysis ("MD&A"), which is on the exactEarth website (www.exactearth.com) and the Sedar website (www.sedar.com).
Excluding the impairment charges in 2018 and 2017, the Company would have generated a net loss of ($5.3) million in Fiscal 2018 and a net loss of ($6.9) million in Fiscal 2017. The year-over-year improvement is due primarily to increased revenue, the SIF contribution which offset Cost of Revenue and lower expenses for SG&A, product development and R&D, and depreciation and amortization.
exactEarth generated $0.2 million of cash in operations in Q4 2018 compared with $1.6 million of cash used in operations in Q4 2017. For Fiscal 2018, exactEarth used $3.0 million of cash in operations, compared to $7.7 million of cash used in operations in Fiscal 2017. The Company's cash balance at October 31, 2018 was $4.8 million compared to $3.5 million at the end of Q3 2018 and $8.1 million at October 31, 2017.
As at October 31, 2018, the Company had 21,626,288 shares outstanding on a non-diluted basis.
On December 13, 2018, the Company completed an offering of Convertible Debentures at a price of $1,000 per Convertible Debenture for gross proceeds of $13.0 million. The Convertible Debenture Financing represented the culmination of an extensive review of strategic alternatives by the Special Committee of the Board of Directors, which will provide the Company with a solid financial foundation from which to pursue its growth opportunities. Each Convertible Debenture is convertible into 2,000 Common Shares of the Company, being an effective conversion price of $0.50 per share at the option of the holder (subject to customary adjustments from time to time), at any time prior to the fifth anniversary of the closing date. The proceeds from the Convertible Debenture Financing will be used to fund the Company's ongoing working capital needs in support of business operations and for growing the customer base for exactView RT, which is the only real-time S-AIS service on the market today. For additional information on this financing, see the Company's press releases dated December 4, 2018, and December 13, 2018, and/or refer to note 21 (Subsequent events) in the Notes to the Consolidated Financial Statements, which can be found on the Company's website and the SEDAR website.
We measure Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization ("EBITDA"), plus offering related expenses, unrealized foreign exchange losses, share-based compensation costs, restructuring costs and impairment losses, less unrealized foreign exchange gains and gains from insurance settlements. We believe that Adjusted EBITDA provides useful supplemental information as it provides an indication of the income generated by our main business activities before taking into consideration how they are financed or taxed and exclude the impact of items that are considered by management to be outside of the Company's ongoing operating results. Adjusted EBITDA should not be construed as an alternative to net income (loss) determined in accordance with IFRS as an indicator of our performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows.
We define Subscription Revenue as the dollar sum of fully executed contracts for our products and/or services to our customers that are subscription-based, typically sold with a one-year period of service and recognized in our "Subscription Services" segmented revenue.
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