exactEarth Reports Q3 2016 Financial Results
exactEarth Ltd. (“the Company”), the leading provider of Satellite AIS (“S-AIS”) data services, announces its financial results for the three- and nine-month periods ended July 31, 2016. All financial figures are in Canadian dollars unless otherwise stated.
Q3 Financial Highlights
- Revenue of $4.0 million
- Order Bookings of $16.0 million
- Adjusted EBITDA* of ($0.3) million
- Net loss of ($1.3) million, or ($0.06) per share
- Cash balance was $15.1 million at July 31, 2016
Q3 Operational Highlights
- Partnership with EV Image Inc. for distribution of exactEarth’s S-AIS solutions in China with a minimum financial commitment of USD $8.5 million over six years
- Renewal of a contract to be the sole provider of S-AIS services to the Government of Canada
- Contract with the French Navy for S-AIS services
- Partnership with DigitalGlobe to combat illegal and unreported fishing
- Expanded collaboration with Genscape for S-AIS and Maritime Data services
- Increased satellite constellation to nine with the launch of M3MSat (Maritime Monitoring and Messaging Microsatellite)
- Subsequent to quarter-end, signed a small-vessel tracking contract with Government of Ghana
“Q3 was a strong quarter for new bookings, which more than tripled from a year ago,” said Peter Mabson, CEO of exactEarth. “This activity was driven primarily by our new distribution agreement for China and by sales activity with the French Navy and Government of Canada. Our momentum continued into Q4, where we recently announced a contract to provide small-vessel tracking services to the Government of Ghana. We also broadened our partner network by signing an agreement with DigitalGlobe that targets illegal and unreported fishing and by announcing deeper ties with our existing partner, Genscape. The successful June 20th launch of the M3M satellite brings the total number of satellites in our first generation constellation to nine, and the satellite will enhance the capabilities of this constellation when it comes on line in the fall.
Looking out through Q4 and into fiscal 2017, we have a number of exciting growth catalysts that we are working on. We expect to gain visibility into the potential for further opportunities with the Government of Canada. We look to enter the larger maritime information services market by launching analytics-based applications developed with our partner, Larus. We are leveraging our relationship with the government of Ghana and with DigitalGlobe to build a pipeline of small-vessel tracking opportunities. Longer term, our participation on the IridiumNEXT constellation is expected to increase our addressable market by providing real-time service capability for our AIS and analytics products.”
Financial Review
Total revenue for the three and nine months ended July 31, 2016 was $4.0 million and $15.6 million compared to $7.8 million and $19.1 million in the respective periods of 2015. On May 5, 2016, exactEarth announced that it had won the contract to be the exclusive provider of S-AIS services to the Government of Canada (“GoC”); however, the service levels subscribed for, and the revenue generated by the contract renewal, are well below the previous levels that the Company had with the GoC. The difference between the renewal contract and the original contract accounted for $3.1 million of the revenue change in Q3 and $4.2 million for the YTD period.
Subscription Services, our primary growth and focus area, revenue for the three and nine months ended July 31, 2016 was $2.8 million and $12.3 million compared to $5.1 million and $15.3 million in the respective periods of 2015. Subscription Services revenue in each of the three- and nine-month periods ended July 31, 2016 was also negatively impacted by the lower service and revenue level of the GoC contract renewal in the amount of $3.1 million and $4.2 million, respectively. Excluding the impact of the GoC contract, subscription revenue grew by $0.8 million and $1.2 million in the three and nine-month periods ended July 31, 2016.
Subscription Services revenue for the three and nine months ended July 31, 2016 represented 70% and 79% of total revenue compared to 66% and 80% in the respective periods of 2015. Subscription Services revenue from commercial customers for the three and nine months ended July 31, 2016 rose 29% and 33% compared to the respective periods of 2015.
Data Products revenue for the three and nine months ended July 31, 2016 was $1.0 million and $2.3 million compared to $1.9 million and $2.2 million in the respective periods of 2015. In Q3 2015, exactEarth generated $1.6 million in Data Products revenue from the sale of its historical S-AIS data to Harris Corporation (“Harris”).
For the three and nine months ended July 31, 2016, exactEarth generated $0.81 million and $1.6 million, respectively, in non-cash Data Products revenue, and $0.68 million and $0.75 million, respectively, in non-cash Subscription Services revenue, from an Asset Transfer Agreement with Communitech related to the EV9 satellite. Under the agreement, the Company will provide in‑kind datasets at a value of $3.7 million, not licensed for commercial use, in exchange for title to the EV9 satellite, subject to certain restrictions. The Company expects to recognize revenue from the remaining $1.3 million of in-kind data sets over the next six months.
Other Products & Services revenue for the three and nine months ended July 31, 2016 was $0.17 million and $1.1 million compared to $0.75 million and $1.6 million in the respective periods of 2015. This revenue tends to fluctuate from quarter to quarter as it is generated from on-demand customer requests and long-term percentage-of-completion contracts.
Gross margin for the three and nine months ended July 31, 2016 was 50.5% and 54.1% compared to 64.4% and 58.7% in the respective periods of 2015. Gross margin decreased quarter over quarter due to lower Subscription Services and Data Products revenue, offset in part by a decrease in operational costs for the Company’s satellite constellation.
Selling, general and administrative expenses for the three and nine months ended July 31, 2016 were $1.7 million and $5.7 million compared to $2.6 million and $6.2 million in the respective periods of 2015. The decrease in SG&A expense reflects the Company’s focus on cost control, and costs related to investments in growth-oriented initiatives that were made in 2015. Lower expenses in fiscal 2016 were offset, in part, due to collection issues related to one customer and higher administrative costs related to the Company’s public listing.
Product development expense for the three and nine months ended July 31, 2016 was $0.51 million and $1.4 million compared to $0.35 million and $1.0 million in the respective periods of 2015. The increase primarily reflects investment in the Company’s next generation of analytics-based product offerings.
Adjusted EBITDA for the three and nine months ended July 31, 2016 was ($0.29) million and $0.86 million compared to $3.6 million and $5.7 million in the respective periods of 2015. The year-over-year decrease in Adjusted EBITDA was primarily due to lower revenue from the GoC, the one-time Data Product sale of historical S-AIS data to Harris, collection issues related to one customer and the introduction of costs related to being a public company. (Adjusted EBITDA is a non-IFRS measure and is defined below.)
Net loss for the three and nine months ended July 31, 2016 was ($1.3) million, or ($0.06) per share, and ($31.8) million, or ($1.77) per share, compared to net income of $0.31 million, or $0.03 per share, and a net loss of ($1.5) million, or ($0.13) per share, in the respective periods of 2015. For the nine month period ended July 31, 2016, the year-over-year increase in net loss is primarily due to a $28.0 million non-cash charge taken in Q2 2016, related to the impairment and write-down of certain assets. Excluding the non-cash write-down, net loss for the nine months ended July 31, 2016 was ($3.8) million, or ($0.21) per share. Additional information related to the Q2 2016 non-cash asset impairment and write-down can be found below in this press release.
exactEarth used $1.8 million of cash from operating activities in the three months ended July 31, 2016 compared with cash generated from operations of $2.6 million in the same period of 2015. Approximately $3.7 million of cash used in operations was paid to Harris as part of the agreement signed between exactEarth and Harris. This represented the final up-front payment obligation to Harris from exactEarth. The Company’s cash balance at July 31, 2016 was $15.1 million, up from $2.4 million at October 31, 2015.
As at July 31, 2016, the Company had 21,605,506 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: Wednesday, September 14, 2016 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/2bJ5MWI or visit the exactEarth website for more details.
The web cast will be archived for 30 days.
Replay:
Replay Toll Free Dial-In Number: 1-855-859-2056
Replay Password: 74764236
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.
