exactEarth Reports Q2 Fiscal 2017 Financial Results

exactEarth Announces Second Quarter 2017 Financial Results (CNW Group/exactEarth Ltd.)

CAMBRIDGE, ON, June 8, 2017 /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, 2017. All financial figures are in Canadian dollars unless otherwise stated.

Q2 2017 Highlights

• Revenue was $3.7 million
• Revenue in the Commercial market increased 17% from Q2 2016
• Order Bookings were $4.5 million compared to $1.7 million in Q2 2016
• Adjusted EBITDA* was $(1.0) million
• Cash balance was $11.7 million at April 30, 2017

"Our order book was up again in Q2, led by a large renewal agreement with a key commercial customer and more than 30 new orders," said Peter Mabson, CEO of exactEarth. "We continue to build our sales pipeline in both the government and commercial markets while maintaining a close eye on expenses throughout the organization.

"The major milestone on our horizon, which we expect will further boost our pipeline opportunities, is achieving real-time global vessel tracking via our second-generation satellite constellation service, exactView RT. exactView RT is a system of more than 60 maritime satellite payloads, being deployed under our strategic agreement with Harris Corporation, which is hosted onboard the Iridium NEXT satellite constellation.

"Subsequent to quarter-end, we officially launched the exactView RT service with four satellite payloads now providing global real-time Satellite AIS data feeds alongside our first-generation constellation. With additional Iridium NEXT launches scheduled for 2017, the pace with which we are moving towards a continuous real-time vessel tracking capability is expected to accelerate through the remainder of the year."

Financial Review

Total revenue for the three- and six-month periods ended April 30, 2017 ("Q2 2017" and "year-to-date") was $3.7 million and $7.0 million compared to $5.2 million and $11.6 million in the same periods last year. The year-over-year change in revenue was primarily due to lower revenue generated by the Government of Canada ("GoC") contract, which accounted for $2.1 million of the difference in Q2 2017 and $5.3 million in the year-to-date period. Sales for Q2 2017 increased year-over-year with Order Bookings of $4.5 million compared to $1.7 million in Q2 2016. For the year-to-date period, Order Bookings are $13.4 million compared to $5.9 million in the same period last year.

Subscription Services revenue (as defined below) for Q2 2017 and year-to-date was $2.3 million and $5.4 million compared to $4.1 million and $9.4 million in the same periods last year. For the year-to-date period, exactEarth generated $0.62 million in non-cash Subscription Services revenue, from an Asset Transfer Agreement with Communitech related to the EV9 satellite transfer. Excluding the impact of the GoC contract and the non-cash revenue just described, Subscription Services revenue would have increased by $0.38 million (16.5%) in Q2 2017 and $0.59 million (17%) year-to-date.

Subscription Services revenue in Q2 2017 and year-to-date represented 63% and 76% of total revenue compared to 78% and 81% in the same periods last year. Subscription Services revenue from commercial customers rose 9% in Q2 2017 and 10% year-to-date compared to the same periods last year.

Data Products revenue in Q2 2017 and year-to-date was $0.34 million and $0.55 million compared to $0.96 million and $1.3 million in the same periods last year. The comparative periods in 2016 include $0.82 million in non-cash Data Products revenue related to the Asset Transfer Agreement with Communitech. 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 Q2 2017 and year-to-date was $1.0 million and $1.1 million compared to $0.21 million and $0.91 million in the same periods last year. The increase is primarily due to recognition in Q2 2017 of revenue from the Company's small vessel contract with the government of Ghana.

Gross margin in Q2 2017 and year-to-date was 23% and 34% compared to 51% and 55% in the same periods last year. Gross margin decreased year-over-year due primarily to lower revenue and the impact of lower margin hardware revenue generated from the Company's small vessel contract with the government of Ghana. This was offset, in part, by lower operating expenses and the reimbursement of costs related to the Company's Technology Demonstration Program Collaboration Agreement ("TDP Agreement") with MDA. TDP Agreement funding recognized as an offset to cost of revenue in Q2 2017 and YTD was $51,000 and $150,000 compared to $nil and $nil in the same periods last year because the TDP agreement funding only started in the Company's third quarter of fiscal 2016.

Selling, general and administrative ("SG&A") expenses for Q2 2017 and year-to-date were $1.5 million and $3.4 million compared to $2.1 million and $4.1 million in the same periods last year. SG&A decreased in Q2 2017 and year-to-date due primarily to lower headcount, which was offset, in part, by higher sales and marketing expenses related to Order Bookings, which are up significantly from the same periods last year.

Product development and research and development ("R&D") expenses for Q2 2017 and year-to-date were $0.43 million and $0.84 million compared to $0.47 million and $0.93 million in the same periods last year. The decrease primarily reflects the Company's ongoing efforts to closely manage costs. We did not incur any expense for R&D in Q2 2017 and the year-to-date period. R&D is no longer a focus as the technology used to receive and de‑collide S-AIS signals has matured and resources are now being allocated toward customer-facing product development.

Adjusted EBITDA for Q2 2017 and year-to-date was $(1.0) million and $(1.5) million compared to $(0.2) million and $1.2 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 Q2 2017 and year-to-date was $0.2 million, or $0.02 diluted per share, and $2.2 million, or $0.10 diluted per share, compared to $29.5 million, or $1.39 per share, and $30.5 million, or $1.89 per share, in the same periods last year. Results for the Q2 2017 and year-to-date periods include $1.5 million in Other Income related to the net proceeds from the EV5 insurance claim, which was announced on April 5, 2017. The $1.5 million in Other Income is a result of the difference between the $3.5 million settlement amount and the carrying value of the EV5 asset, which was $2.0 million. Results for the Q2 2016 and year-to-date periods include a $28.0 million non-cash impairment charge related to the write-down of certain assets on the balance sheet. Excluding those items, net loss was greater in Q2 2017 and year-to-date, primarily due to lower revenue from the GoC, offset in part by lower operating expenses.

exactEarth used $2.7 million of cash from operating activities in Q2 2017 compared with cash generated from operations of $1.6 million in Q2 2016. For the year-to-date period, exactEarth used $4.8 million of cash from operating activities compared with cash generated from operations of $1.2 million in the same period last year. The Company received $3.5 million in cash from investing activities in Q2 2017 resulting from the insurance claim related to its EV5 satellite. The Company's cash balance at April 30, 2017 was $11.7 million compared to $13.7 million at October 31, 2016.

As at April 30, 2017, the Company had 21,611,572 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, June 8, 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, please go to http://bit.ly/2rRIv8f or visit the exactEarth website for more details. The webcast will be archived for 30 days.
Replay:	Encore Toll Free Dial-In Number: [phone] Encore Password: 30486546 Dial-In Replay Availability: 08/06/2017 11:30 ET - 22/06/2017 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.

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, timing of the achievement of real-time global vessel tracking via our second-generation constellation, timing expectations with respect to launch of satellites and growth opportunities for the Company in the maritime information services market. 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

	Three months ended				Six months ended
(in thousands of dollars)	April 30, 2017		April 30, 2016		April 30, 2017		April 30, 2016
Net loss	$	(176)	$	(29,512)	$	(2,170)	$	(30,513)
Interest expense		17		21		32		315
Income tax expense		8		-		13		-
Depreciation and amortization		961		1,435		1,906		2,812
EBITDA	$	810	$	(28,056)	$	(219)	$	(27,386)
Unrealized foreign exchange loss (gain)		(333)		(401)		(347)		288
Share-based compensation		2		266		569		266
Restructuring Costs		(40)		-		(8)		-
Other income		(1,455)		-		(1,455)		-
Impairment losses		-		27,987		-		27,987
Adjusted EBITDA	$	(1,016)	$	(204)	$	(1,460)	$	1,155

exactEarth^TMLtd.
Interim  Condensed Consolidated Statements of Financial Position
(in thousands of Canadian Dollars)
Unaudited
		As at April 30,		As at October 31,
		2017		2016
		$		$
	ASSETS
Current assets
	Cash	11,706		13,680
	Trade accounts receivable	2,604		1,778
	Inventory	-		425
	Unbilled revenue	245		794
	Prepaid expenses and other assets	1,629		867
Total current assets		16,184		17,544
Property, plant and equipment		32,665		31,423
Intangible assets		13,970		18,855
Total assets		62,819		67,822
	LIABILITIES & EQUITY
Current liabilities
	Accounts payable and accrued liabilities	3,428		5,409
	Deferred revenue	2,169		1,968
	Restructuring provision - current	670		1,154
	Loans Payable - current	716		716
	Incentive plan liability - current	179		86
Total current liabilities		7,162		9,333
Government loan payable		836		1,045
Loans payable		-		143
Long-term incentive plan liability		285		316
Restructuring provision		106		442
Total liabilities		8,389		11,279
Shareholders' equity
	Share capital	123,769		123,769
	Contributed surplus	889		699
	Accumulated other comprehensive loss	(88)		45
	Deficit	(70,140)		(67,970)
Total shareholders' equity		54,430		56,543
Total liabilities and equity		62,819		67,822

exactEarth^TMLtd.
Interim  Condensed Consolidated Statements of Loss and  Comprehensive Loss
(in thousands of Canadian Dollars)
Unaudited
		Three months ended				Six months ended
		April 30,		April 30,		April 30,		April 30,
		2017		2016		2017		2016
		$		$		$		$
	Revenue	3,711		5,222		7,047		11,602
	Cost of revenue	2,830		2,554		4,669		5,182
	Gross margin	881		2,668		2,378		6,420
Operating expenses
	Selling, general and administrative	1,472		2,133		3,435		4,074
	Product development & R&D	426		467		836		930
	Depreciation and amortization	961		1,435		1,906		2,812
	Impairment losses	-		27,987		-		27,987
Loss from operations		(1,978)		(29,354)		(3,799)		(29,383)
Other income and expense
	Other income	(1,455)		-		(1,455)		-
	Other expense	45		80		48		80
	Restructuring gain	(40)		-		(8)		-
	Foreign exchange loss	(377)		57		(259)		735
	Interest expense	17		21		32		315
Total other expense		(1,810)		158		(1,642)		1,130
	Income tax expense	8		-		13		-
Net loss		(176)		(29,512)		(2,170)		(30,513)
Other comprehensive loss
	Items that may be subsequently reclassified to net income:
	Foreign currency translation, net of income tax expense of nil	(138)		154		(133)		166
Total other comprehensive (loss)/income		(138)		154		(133)		166
Comprehensive loss		(314)		(29,358)		(2,303)		(30,347)
Loss per share
Basic loss per share		(0.01)		(1.39)		(0.10)		(1.89)
Diluted loss per share		(0.02)		(1.39)		(0.10)		(1.89)

exactEarth^TMLtd.
Interim Condensed Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
Unaudited
		Three months ended				Six months ended
		April 30,		April 30,		April 30,		April 30,
		2017		2016		2017		2016
		$		$		$		$
Net loss		(176)		(29,512)		(2,170)		(30,513)
Add (deduct) items not involving cash
	Non-monetary transaction	-		(882)		(618)		(882)
	Non-cash interest	34		33		71		69
	Impairment losses	-		27,987		-		27,987
	Depreciation and amortization	961		1,435		1,906		2,812
	Loss on disposal of assets	-		-		3		-
	Long-term incentive plan expense	(91)		45		174		65
	Gain on insurance settlement	(1,455)		-		(1,455)		-
	Stock-based compensation	87		119		190		119
	Technology demonstration program recovery	(51)		-		(150)		-
Net change in non-cash working capital balances		(1,488)		2,385		(2,335)		1,573
Other operating cash flows
	Restructuring provision - payment of salary continuance	(418)		-		(820)		-
	Settlement of RSU units	(112)		-		(112)		-
	Technology demonstration program funding	-		-		552		-
Cash flows from (used in) operations		(2,709)		1,610		(4,764)		1,230
Investing activities
	Acquisition of property, plant and equipment	(100)		(301)		(423)		(1,288)
	Reimbursement of acquisition costs of property, plant and equipment	-		120		224		120
	Insurance recovery	3,500		-		3,500		-
	Acquisition of intangible assets	(137)		(1,620)		(192)		(3,940)
Cash flows from (used in) investing activities		3,263		(1,801)		3,109		(5,108)
Financing activities
	Government loan repayment	(123)		(123)		(246)		(246)
	Long-term debt repayment	(88)		(29)		(176)		(29)
	Shares issued	-		20,440		-		20,440
	Shareholder loan advances	-		-		-		3,000
Cash flows from (used in) financing activities		(211)		20,288		(422)		23,165
Effect of exchange rate changes on cash		209		(192)		103		(71)
Net increase (decrease) in cash		552		19,905		(1,974)		19,216
Cash, beginning of the period		11,154		1,676		13,680		2,365
Cash, end of the period		11,706		21,581		11,706		21,581
Supplemental cash flow information
	Interest paid	-		-		-		334
	Interest received	-		30		-		34
	Taxes paid	8		-		13		-

exactEarth^TMLtd.
Interim Condensed Consolidated Statements of Changes in Equity
(in thousands of Canadian Dollars)
Unaudited
For the Six Months Ended April 30, 2017		Total	Deficit	Accumulated Other Comprehensive Loss	Share Capital	Contributed Surplus
		$	$	$	$	$
Balance October 31, 2016		56,543	(67,970)	45	123,769	699
	Stock option expense	190	-	-	-	190
	Comprehensive loss	(2,303)	(2,170)	(133)	-	-
Balance April 30, 2017		54,430	(70,140)	(88)	123,769	889
For the Six Months Ended April 30, 2016
Balance October 31, 2015		23,066	(32,007)	(296)	55,120	249
	Stock Option expense	119	-	-	-	119
	Comprehensive loss	(30,347)	(30,513)	166	-	-
	7,349,780 common shares issued on conversion of debt	48,209	-	-	48,209	-
	3,144,615 common shares issued for cash	20,440	-	-	20,440	-
Balance April 30, 2016		61,487	(62,520)	(130)	123,769	368

SOURCE exactEarth Ltd.

Contact information: INVESTORS: Dave Mason, Investor Relations, Tel: [phone], [email protected]; MEDIA: Nicole Schill, Marketing Communications Manager, Tel: [phone], [email protected]

Related Links

http://www.exactearth.com/