exactEarth Announces Q2 Fiscal 2018 Financial Results

CAMBRIDGE, ON, June 14, 2018 /CNW/ - 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, 2018. All financial figures are in Canadian dollars unless otherwise stated.

Q2 2018 Financial Highlights

• Revenue was $3.2 million
• Subscription-based revenue was 77% of total revenue
• Subscription-based revenue in the Commercial market increased 7% from Q2 2017
• Revenue backlog was $25.9 million at quarter-end
• Order Bookings were $2.6 million
• Adjusted EBITDA* was $(1.6) million
• Net loss was $(2.0) million, or $(0.09) per share  
• Cash balance was $5.8 million at quarter-end

"We made great progress in Q2 with the ongoing roll-out of our second-generation real-time satellite AIS system, exactView RT, adding eleven more payloads to the system," said Peter Mabson, CEO of exactEarth. "Just last week another ten payloads went live, so we now have 39 exactView RT payloads in operation, which means we are now capable of providing the positional data for more than 250,000 vessels in real-time."

"In Q2 we also launched our EV-8 AIS payload onboard the Spanish radar satellite, Paz, operated by Hisdesat. This payload provides an opportunity to develop new applications in the maritime surveillance industry by uniquely combining a high-performance satellite AIS payload with radar satellite images. Finally, in Q2, our investee company, Myriota Pty Ltd, closed an AUD $20.0 million 'up-round' of financing to advance the development of their exciting satellite Internet-of-Things business. exactEarth made an AUD $2.0 million investment in Myriota in November 2015, and following completion of this recent financing, we have retained an 18% ownership in this promising company."

Financial Review

Total revenue in the three-month period ended April 30, 2018 ("Q2 2018") was $3.2 million compared to $3.7 million in the three-month period ended April 30, 2017 ("Q2 2017"). Total revenue in the six-month period ended April 30, 2018 ("YTD 2018") was $6.0 million compared to $7.0 million in the six-month period ended April 30, 2017 ("YTD 2017").

Order bookings in Q2 and YTD 2018 were $2.6 million and $4.9 million compared to $3.5 million and $12.6 million in Q2 and YTD 2017. Order bookings will fluctuate on a quarter-to-quarter basis reflecting the timing to complete new customer agreements. Revenue backlog at April 30, 2018 was $25.9 million compared to $25.5 million at the end of Q1 2018.

Subscription Services revenue in Q2 2018 was $2.5 million compared to $2.3 million in the same period last year. Subscription Services revenue in Q2 2018 included $0.05 million of non-cash revenue resulting from the trade of AIS subscription data, which is not licensed for commercial use, for data processing services. Excluding that non-cash revenue, Subscription Services revenue increased 4% year-over-year in Q2 2018. Subscription Services revenue for the YTD 2018 period was $5.0 million compared to $5.4 million in the same period last year. Excluding the Q2 2018 non-cash revenue described above and the Q1 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 3.5% for the YTD 2018 period.

Subscription Services revenue in Q1 2018 represented 77% of total revenue (YTD 2018: 83%) compared to 63% in the same period last year (YTD 2017: 76%). Excluding the $0.05 million of non-cash revenue in Q1 2018, Subscription Services revenue from commercial customers rose 7% in Q2 2018 and 6.5% YTD 2018 compared to the same periods last year. Excluding the non-cash revenue generated in Q1 2017 associated with the Asset Transfer Agreement, Subscription Services revenue from government customers would have risen slightly for both the three- and six-month periods ended April 30, 2018.

Data Products revenue in Q2 2018 was $0.59 million compared to $0.34 million in the same period last year. Data Products revenue for the YTD 2018 period was $0.68 million compared to $0.55 million in the same period last year. The quarterly and year-to-date increases are primarily due to $0.16 million of non-cash revenue resulting from the exchange of AIS subscription data, which is not licensed for commercial use, for data processing services.

Other Products & Services revenue in Q2 2018 was $0.12 million compared to $1.0 million in the same period last year. Other Products & Services revenue for the YTD 2018 period was $0.37 million compared to $1.1 million in the same period last year. The decrease is primarily due to the timing of delivery of services related to the Company's ongoing small-vessel opportunities.

Gross margin in Q2 2018 was 30% compared to 21% in the same period last year. Gross margin for the YTD 2018 period was 28% compared to 31% in the same period last year. Gross margin increased in Q2 2018 compared to Q2 2017 due primarily to lower margin revenue generated in Q2 2017 from one of the Company's small vessel deployments. For the YTD 2018 period, gross margin decreased due to lower revenue, partially offset by decreased cost of revenue. Cost of revenue decreased due to lower satellite lease, data processing and project related costs and the reimbursement of costs related to the TDP Agreement, partially offset by costs related to the Harris Agreement and increased terrestrial data costs.

Selling, general and administrative ("SG&A") expense in Q2 2018 was $2.3 million compared to $1.4 million in the same period last year. SG&A for the YTD 2018 period was $3.6 million, compared to $3.3 million in the same period last year. SG&A increased year-over-year due primarily to a bad debt provision taken in Q2 2018, the recovery of a bad debt provision in Q2 2017, an increase in professional fees, partially offset by lower stock-based compensation. For the remainder of 2018, the Company expects SG&A to normalize to more traditional historic levels.

Product development and research and development ("R&D") expense in Q2 2018 was $0.49 million compared to $0.43 million in the same period last year. Product development and R&D expense for the YTD 2018 period was $1.0 million, compared to $0.84 million in the same period last year. The Company's product development and R&D activities are currently focused primarily on the development of web-based functionality, new analytics-based product offerings, new data processing capabilities and Project VESTA.

Adjusted EBITDA for Q2 2018 was $(1.6) million compared to $(1.0) million in the same period last year. Adjusted EBITDA for the YTD 2018 period was $(2.7) million, compared to $(1.5) million in the same period last year. The decrease in Adjusted EBITDA was primarily due to lower revenue and higher SG&A, offset in part by lower cost of revenue. (Adjusted EBITDA is a non-IFRS measure and is defined below)

Net loss for Q2 2018 was $(2.0) million, or $(0.09) per share, compared to $(0.18) million, or $(0.01) per share, in the same period last year. Net loss for the YTD 2018 period was $(3.6) million, or $(0.17) per share, compared to $(2.2) million, or $(0.10) per share, in the same period last year. Net loss increased year-over-year due primarily to lower revenue and higher operating expenses, which was partially offset by lower cost of revenue.

exactEarth used $0.71 million of cash in operations in Q2 2018 compared with $2.7 million of cash used in operations in Q2 2017. For the YTD 2018 period, exactEarth used $1.6 million of cash in operations, compared to $4.8 million of cash used in operations in the same period last year. The Company's cash balance at April 30, 2018 was $5.8 million compared to $8.1 million at October 31, 2017.

As at April 30, 2018, the Company had 21,626,288 shares outstanding on a non-diluted basis. 

Update on Review of Strategic Alternatives

As previously announced, exactEarth's Board is undertaking a process to explore and evaluate potential strategic alternatives focused on maximizing shareholder value and has formed a Special Committee of the Board to explore these alternatives.

The Company's Board is committed to fully evaluating appropriate strategic alternatives while concurrently supporting management and employees in their delivery of services and products to customers. The Board believes that this course of action is in the best interests of the Company and its stakeholders. The Board has not set a timetable for this process nor has it made any decisions related to any strategic alternatives at this time. There can be no assurance that the exploration and review of strategic alternatives will result in a transaction. The Company does not intend to provide announcements or updates unless or until it determines that further disclosure is required by law.

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.

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.

Forward-Looking Statements

This news release contains statements that, to the extent they are not recitations of historical fact, may constitute "forward-looking statements" within the meaning of applicable Canadian securities laws. Forward-looking statements may include financial and other projections, as well as statements regarding exactEarth's future plans, objectives or economic performance, or the assumptions underlying any of the foregoing, including statements regarding, among other things, expectations of our exactView RT offering relative to competitors, timing of the achievement of real-time global vessel tracking via our second-generation constellation, timing expectations with respect to launch of satellites, expectations of the exactView RT capabilities driving growth, growth opportunities for the Company in the maritime information services market, the outcome of the election of directors and the outcome of a strategic review process. exactEarth uses words such as "may", "would", "could", "will", "likely", "expect", "anticipate", "believe", "intend", "plan", "forecast", "project", "estimate" and similar expressions to identify forward-looking statements. Any such forward-looking statements are based on assumptions and analyses made by exactEarth in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors exactEarth believes are appropriate under the relevant circumstances. However, whether actual results and developments will conform to exactEarth's expectations and predictions is subject to any number of risks, assumptions and uncertainties. Many factors could cause exactEarth's actual results, historical financial statements, or future events to differ materially from those expressed or implied by the forward-looking statements contained in this news release. These factors include, without limitation: uncertainty in the global economic environment; fluctuations in currency exchange rates; delays in the purchasing decisions of exactEarth's customers; the competition exactEarth faces in its industry and/or marketplace; the further delayed launch of satellites; the reduced scope of significant existing contracts; and the possibility of technical, logistical or planning issues in connection with the deployment of exactEarth's products or services.

*Non-IFRS Measures

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.

Adjusted EBITDA (000's)

SOURCE exactEarth Ltd.

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