From: exactEarth Ltd
Posted: Thursday, June 11, 2020
exactEarth Ltd. ("the Company"), a leading provider of Satellite-AIS data services, announces its financial results for the three- and six-month periods ended April 30, 2020. All financial figures are in Canadian dollars unless otherwise stated.
Q2 Fiscal 2020 Highlights:
"Q2 saw continued progress on our objectives to drive subscription revenue growth and margin expansion," said Peter Mabson, President and CEO of exactEarth. "The broader onset of the COVID-19 pandemic took place during the quarter and in response, we implemented measures to protect our employees, customers and others from the spread of the virus. Working remotely, we continue to execute on existing customer mandates, while also working to identify and complete new sales and partner opportunities. So far we have had just one customer delay payment citing issues related to COVID-19, but beyond that, the fundamental operating prospects for exactEarth remain sound and importantly, with the recent measures we have undertaken to reduce our expense base, we believe that our outlook for the business is now stronger than it has been at any time in the past few years."
"Looking forward, in the second half of this year, we expect a significant reduction in our quarterly cash burn and to trend closer to becoming cash flow and Adjusted EBITDA positive. In Q2 we announced the sale of select satellites and assets to Myriota Pty Ltd that, upon closing, would generate annual cash savings of approximately $1.0 million and help push us even closer to our objectives. We expect that transaction to close by the end of our fiscal year."
"In addition to our Q2 transaction with Myriota, we are also an investor in that company, having made our initial investment in November 2015. In Q2, Myriota completed a Series B funding round, raising US$19.3 million. exactEarth did not participate in this funding round and while our ownership stake is lower now on a percentage basis, the value of our holding has increased in each of their successive financings, and we also continue to have a seat on the Board. This is an exciting company to watch and their latest financing gives them further opportunity to scale globally and execute on their growth plan."
Q2 Fiscal 2020 Financial Review
Total revenue in the three-month period ended April 30, 2020 ("Q2 2020") was $4.4 million, up 13% compared to $3.9 million in the three-month period ended April 30, 2019 ("Q2 2019"). Total revenue in the six-month period ended April 30, 2020 ("YTD 2020") was $8.5 million, up 15% compared to $7.4 million in the six-month period ended April 30, 2019 ("YTD 2019").
Revenue rose primarily due to the increase in Subscription Services revenue, which was $3.9 million (88% of total revenue) in Q2 2020, up 22% from $3.2 million (81% of total revenue) in Q2 2019. Subscription Services revenue in the YTD 2020 period was $7.7 million, up 23% compared to $6.3 million in the YTD 2019 period.
Total revenue and Subscription Services revenue growth for Q2 2020 and YTD 2020 was driven primarily by customer growth in the commercial market segment. Revenue from commercial customers for Q2 2020 and YTD 2020 was $3.3 million and $6.6 million, respectively, which was up 16% and 25% from the respective comparison periods in 2019. The increases reflect growing market interest in the Company's real-time Satellite-AIS service, exactView RT, and expansion of the Company's channel partner strategy. Revenue from government customers for Q2 2020 and YTD 2020 was $1.1 million and $1.9 million, respectively, which was up 4% and down 11% from the respective comparison periods in 2019. As shown in Q2, the Company expects performance in the government vertical to continue to trend favourably in Fiscal 2020, due in part to new customer contracts signed so far this year, such as that with EMSA.
Data Products revenue and Other Products & Services revenue combined in Q2 2020 was $0.5 million compared to $0.7 million in Q2 2019. For the YTD 2020 period, Data Products revenue and Other Products & Services revenue combined was $0.8 million compared to $1.1 million in the same period last year. Data Products revenue and Other Products & Services revenue is typically generated from on-demand customer requests and/or projects, which results in some variability in quarter-to-quarter revenue levels from these segments.
Order Bookings for Q2 2020 were $3.5 million, compared to $6.0 million in Q2 2019. Order bookings for the YTD 2020 period were $10.6 million, compared to $9.0 million in the same period last year. Order Bookings will fluctuate on a quarter-to-quarter basis reflecting the timing to complete new customer agreements. The increase year-to-date reflects strong new and renewal order activity with customers in both the commercial and government markets. Order Bookings backlog at April 30, 2020 was $24.9 million compared to $22.4 million at the end of Fiscal 2019 and $24.6 million at the end of Q2 2019. Revenue of $7.7 million from the current revenue backlog is forecasted to be earned over the remainder of 2020.
Gross margin for Q2 2020 was 32.3% compared to 8.4% in Q2 2019. Gross margin for the YTD 2020 period was 40.9% compared to 23% in the same period last year. Gross margin improved in both periods year-over-year due to revenue growth and a lower cost of revenue. Cost of revenue decreased primarily due to lower satellite operating costs related to the Company's Second-Generation Constellation.
Selling, general and administrative ("SG&A") expense for Q2 2020 was $2.6 million compared to $1.8 million in Q2 2019. SG&A for the YTD 2020 period was $4.3 million compared to $3.8 million in the same period last year. The increase in SG&A year-over-year is due primarily to an increase in bad debt expense of $0.9 million related to one customer that has been significantly impacted by COVID-19 developments. While exactEarth and this customer are in discussions to negotiate a revised payment and/or service arrangement, the Company has conservatively taken an allowance on the full amount owing.
Product development and research and development ("R&D") expense for Q2 2020 was $0.21 million compared to $0.24 million in Q2 2019. R&D for the YTD 2020 period was $0.51 million compared to $0.54 million in the same period last year. The Company's product development and R&D activities continue to be focused primarily on the development of web-based functionality and new analytics-based product offerings.
Adjusted EBITDA for Q2 2020 was ($0.55) million compared to ($1.6) million in Q2 2019. Adjusted EBITDA for the YTD 2020 period was ($0.3) million compared to ($2.5) million in the same period last year. Adjusted EBITDA improved year-over-year due primarily to higher revenue and lower cost of revenue. (Adjusted EBITDA is a non-IFRS measure and is defined below.)
Net loss for Q2 2020 was ($2.9) million, or ($0.13) per basic and diluted share, compared to ($2.2) million, or ($0.10) per basic and diluted share, in Q2 2019. Net loss for the YTD 2020 period was ($3.5) million, or ($0.16) per basic and diluted share, compared to ($3.4) million, or ($0.16) per basic and diluted share in the same period last year. Net loss increased year-over-year due to a $0.84 million non-cash impairment charge related to the sale of assets to Myriota and higher SG&A, offset in part by higher revenue and a lower cost of revenue. Upon closing of the Myriota transaction, the Company expects that a non-cash expense of approximately $0.5 million will be recognized related to the transaction.
Cash used in operations for Q2 2020 was ($1.3) million, compared to ($0.8) million in Q2 2019. Cash used in operations for the YTD 2020 period was ($3.2) million, compared to ($3.0) million in the same period last year. The year-over-year increase in cash used from operations in Q2 2020 was primarily due to working capital changes. Q2 2020 cash used in investing activities included $0.9 million paid related to the launch of the EV-10 satellite, which is expected to be launched this month and when in orbit will further enhance the Company's exactView RT service. exactEarth's cash balance at April 30, 2020 was $6.8 million compared to $10.2 million at October 31, 2019.
As at June 11, 2020, the Company had 22,048,640 shares outstanding on a non-diluted basis.
We measure Adjusted EBITDA as earnings before interest expense, taxes, depreciation and amortization ("EBITDA"), plus unrealized foreign exchange losses, share-based compensation costs, impairment losses and COVID-19 related allowances for doubtful accounts, less interest income and unrealized foreign exchange gains. 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.
Adjusted EBITDA (000's)
Full financial results available here.
About exactEarth Ltd.
exactEarth is a leading provider of global maritime vessel data for ship tracking and maritime situational awareness solutions. Since its formation in 2009, exactEarth has pioneered a powerful new method of maritime surveillance called Satellite 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's second-generation constellation, exactView RT, securely relays satellite-detected AIS vessel signals from any location on the earth's surface to the ground in seconds – thus enabling global real-time vessel tracking. This unique capability consists of 58 advanced satellite payloads designed and built by L3Harris Technologies, Inc. under agreement with exactEarth and that are hosted onboard the Iridium NEXT constellation of satellites. www.exactearth.com
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