UrtheCast Reports Second Quarter 2019 Financial Results

Company Increases YTD Total Adjusted EBITDA by $11 million and Advances Initiatives to Secure UrtheDaily Financing and Divest of Deimos Subsidiary

VANCOUVER, Aug. 14, 2019 /CNW/ - UrtheCast Corp. (TSX:UR) ("UrtheCast" or the "Company"), a leading provider of information-rich products and services in the geospatial and geo-analytics markets, reported its financial results for the three and six months ended June 30, 2019.

Highlights

• Adjusted EBITDA from continuing operations improved by $3.0 million compared to the same quarter last year and improved by $5.8 million for the year-to-date. Total Adjusted EBITDA for the Company improved by $7.0 million compared to the same quarter of 2018 and by $11.0 million for the year-to-date.
• The Company has engaged a leading investment bank as its financial advisor and is in discussions with institutional investors to finance the UrtheDaily Constellation and the Company's growth. The Company has made material progress and is on target to receive multiple indications of interest by the end of the third quarter.
• The Company has received a number of non-binding bids to acquire all or substantially all of the Deimos Imaging business and continues to negotiate with these parties to complete a transaction on terms that support UrtheCast's strategic priorities.

Q2 2019 Financial Results 

As a result of the planned sale of Deimos Imaging or its assets, the operations of Deimos Imaging have been classified as discontinued operations for the three and six months ended June 30, 2019 and the associated comparative prior periods. Unless otherwise noted, the financial information in this press release is based on the Company's continuing operations and all financial figures are in Canadian dollars.

(in millions of Canadian dollars)	Q2 2019	Q2 2018	YTD 2019	YTD 2018
Revenue	$       5.1	$      1.5	$         9.5	$      4.8
Operating costs	8.4	5.9	15.6	13.4
Adjusted EBITDA from continuing operations^1	(0.7)	(3.7)	(1.5)	(7.3)
Adjusted EBITDA from discontinued operation^1	0.4	(3.6)	(0.9)	(6.2)
Net loss from continuing operations	(5.2)	(5.2)	(6.6)	(9.1)
Net loss from discontinued operation	-	(8.1)	(5.1)	(15.2)
Net loss	(5.2)	(13.3)	(11.7)	(24.3)

¹ Non-IFRS earnings measure. See reconciliation of Adjusted EBITDA to Net Loss under "Non-IFRS Earnings Measures" in the Company's Management Discussion & Analysis for the three and six months ending June 30, 2019.

As noted above, adjusted EBITDA from continuing operations of negative $0.7 million in the second quarter of 2019 improved by $3.0 million compared to the same quarter last year and improved by $5.8 million to negative adjusted EBITDA of $1.5 million for the year-to-date due to lower corporate overhead, professional fees and engineering subcontractor costs and a positive EBITDA contribution from the Company's recently acquired geo-analytics business known as Geosys.

"Throughout 2019, we have maintained a sharp focus on streamlining UrtheCast around our core competencies in the development and provision of value-added geospatial and geo-analytics services." said Donald Osborne, CEO of UrtheCast. "We are also making important progress in our efforts to transform the Company and the industry with the introduction of the revolutionary UrtheDaily Constellation. To this end, we have retained a leading investment bank as our new financial advisor. The Company is targeting receiving multiple indications of interest by the end of the third quarter. By realizing significant cost reductions while also increasing revenue and moving up the value chain with the integration of Geosys, we have drawn closer to achieving a positive run-rate EBITDA on a sustainable basis and strengthened our ability to realize our growth potential. At the same time, our negotiations to divest of our Deimos subsidiary have now reached advanced stages with multiple parties, and we hope to announce a binding agreement to complete the sale and enhance our balance sheet in the coming months."

Operating Results

UrtheCast recognized revenue of $5.1 million in the second quarter of 2019 and $9.5 million in the year-to-date, which was comprised entirely of geo-analytics products and services revenue resulting from the acquisition of Geosys and the commencement of a 13-year services contract with Geosys' former parent company, Land O'Lakes. The Company did not recognize any engineering and value-added services revenue in the year-to-date, compared to $1.5 million and $4.8 million in the three and six months ending June 30, 2018, due to progress delays incurred by its key subcontractors in completing milestones under its engineering and value-added services contract and the completion certain customer contracts in 2018.

Operating costs of $8.4 million in the second quarter of 2019 and $15.6 million year-to-date increased by $2.5 million and $2.2 million compared to comparative prior year periods, respectively, due to an increase in depreciation and amortization costs and direct, selling, general and administration costs ("SG&A") as a result of including Geosys' operating costs from the acquisition date. The additional costs of Geosys were partially offset by the positive impact of our cost reduction initiatives and a decrease in engineering subcontractor costs related to the decrease in engineering services activities. Operating costs from continuing operations, exclusive of Geosys, have been reduced by approximately 55% in the year-to-date compared to the prior year period and SG&A costs have decreased by approximately 65% in the year-to-date period from the prior year.

The net loss of $5.2 million in the second quarter of 2019 improved by $8.1 million compared to the net loss from the second quarter of 2018, primarily due to higher revenue, lower non-Geosys operating costs and a reduction in net loss from our discontinued operation.

Business Developments

Term Loan Financings

As announced on June 27, 2019, the Company entered into a US$1.5 million secured term loan with Bolzano Investments Limited which accrues interest at 17% per annum and has a maturity date of January 15, 2020.

On July 26, 2019, the Company announced that it entered into a US$1.5 million secured term loan with Lunar Ventures Inc. on similar terms as described above.

UrtheDaily Financing

The Company has engaged a leading investment bank as its financial advisor and is in discussions with institutional investors to finance the UrtheDaily Constellation and the Company's growth. The Company has made material progress and is on target to receive multiple indications of interest by the end of the third quarter. However, there can be no assurance that an agreement will be entered into or will be secured on commercially reasonable terms, in a timely matter, or at all.

Deimos Imaging Sale

The Company has received a number of non-binding bids to acquire all or substantially all of Deimos Imaging's assets, including the Deimos-1 and Deimos-2 satellites, operations and ground station assets, and is in the process of evaluating the bids. There can be no assurance that a transaction will be entered into on commercially reasonable terms, in a timely manner, or at all.

Technology Development Funding

On May 28, 2019, the Company announced that it was awarded $2.0 million from the Canadian Space Agency's Space Technology Development Program, in two separate agreements of $1.0 million each, for the development of new satellite technologies including the Company's planned UrtheDaily Constellation and the development of the next generation UrtheCast SAR-XL Synthetic Aperture Radar.

Changes to the Board of Directors

On June 26, 2019, the Company announced the results of its Annual General and Special Meeting of Shareholders, including the election of all five management nominees to the board of directors. The nominees included William M. Evans (as Chairman), Pirmin Lüönd, Mark J. Piegza, James Topham and Don Osborne.

Outlook & Going Concern

We refer you to the Company's interim condensed consolidated financial statements for the three and six months ended June 30, 2019 and the related Management's Discussion & Analysis for further details relating to the Company's liquidity position. The Company has continued to take steps subsequent to June 30, 2019 to ensure that it is able to continue as a going concern and that it has adequate liquidity in the near term.

SELECTED FINANCIAL INFORMATION

The following table provides selected financial information of the Company, which was derived from, and should be read in conjunction with, the interim condensed consolidated financial statements for the three and six months ended June 30, 2019. All financial information is in thousands of Canadian dollars, unless otherwise noted, and except for number of shares and per share amounts.

	Three Months Ended June 30,				Six Months Ended June 30,
		2019		2018		2019		2018
Revenue	$	5,058	$	1,543	$	9,483	$	4,794
Other operating income		219		37		550		232
		5,277		1,580		10,033		5,026
Operating costs
Direct costs, selling, general and administrative
expenses		5,745		5,004		10,982		11,674
Research expenditures		234		306		528		612
Depreciation and amortization		1,731		122		3,148		282
Share-based payments		735		436		964		877
		8,445		5,868		15,622		13,445
Operating loss		(3,168)		(4,288)		(5,589)		(8,419)
Net finance costs		(2,332)		(5,537)		(3,968)		(5,695)
Gain on derivative financial instruments		(369)		4,151		3,106		4,378
Foreign exchange gain (loss)		364		493		(729)		705
Loss before income taxes		(5,505)		(5,181)		(7,180)		(9,031)
Income tax recovery (expense)		331		(25)		584		(51)
Net loss from continuing operations		(5,174)		(5,206)		(6,596)		(9,082)
Net loss from discontinued operation		(26)		(8,047)		(5,079)		(15,229)
Net loss		(5,200)		(13,253)		(11,675)		(24,311)
Other comprehensive income		(450)		(1,355)		(287)		901
Comprehensive loss	$	(5,650)	$	(14,608)	$	(11,962)	$	(23,410)
Loss per share – basic and diluted	$	(0.04)	$	(0.11)	$	(0.09)	$	(0.20)
Loss per share from continuing operations – basic and diluted	$	(0.04)	$	(0.04)	$	(0.05)	$	(0.07)

NON-IFRS EARNINGS MEASURES

The following table reconciles our Non-IFRS earnings measures to Net Loss prepared in accordance with IFRS.

	Three Months Ended June 30,				Six Months Ended June 30,
		2019		2018		2019		2018
ADJUSTED EBITDA:
Net loss from continuing operations	$	(5,174)	$	(5,206)	$	(6,596)	$	(9,082)
Add back (subtract):
Depreciation and amortization		1,731		122		3,148		282
Net finance costs		2,332		5,537		3,968		5,695
Income tax (recovery) expense		(331)		25		(584)		51
EBITDA from continuing operations		(1,442)		478		(64)		(3,054)
Share-based payments		735		436		964		877
Loss (gain) on derivative financial instruments		369		(4,151)		(3,106)		(4,378)
Foreign exchange (gain) loss		(364)		(493)		729		(705)
ADJUSTED EBITDA FROM CONTINUING
OPERATIONS	$	(702)	$	(3,730)	$	(1,477)	$	(7,260)
ADJUSTED EBITDA FROM DISCONTINUED
OPERATION		365		(3,638)		(928)		(6,172)
ADJUSTED EBITDA	$	(337)	$	(7,368)	$	(2,405)	$	(13,432)

About UrtheCast

UrtheCast Corp. is a Vancouver-based company that serves the rapidly growing and evolving geospatial and geo-analytics markets with a wide range of information-rich products and services.

For more information, visit UrtheCast's website at www.urthecast.com.

Non-IFRS Financial Measures

The Company prepares its financial statements in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board. This release includes certain non-IFRS financial measures, such as EBITDA, adjusted EBITDA, and adjusted EBITDA from continuing operations. The Company uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS or considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-IFRS financial measures should be read in conjunction with the Company's financial statements and accompanying MD&A. An explanation of how the Company calculates these measures is set out in the Company's MD&A under the heading "Non-IFRS Earnings Measures" for the three and six months ending June 30, 2019, a copy of which is available on the Company's SEDAR profile and website.

Forward Looking Information

This release contains certain information which, as presented, constitutes "forward-looking information" or "forward-oriented financial information" within the meaning of applicable Canadian securities laws. Forward-looking information involves statements that relate to future events and often addresses expected future business and financial performance, containing words such as "anticipate", "plan", "explore" and "expect", statements that an action or event "may", "should" are "going" to occur or "will" be taken or occur, or other similar expressions and includes, but is not limited to, statements relating to:  UrtheCast's expectations with respect to its ability to raise capital and to continue as a going concern and management's plans to improve the Company's financial position; expectations regarding achieving a positive run-rate EBITDA by the end of 2019 expectations regarding UrtheCast's ability to meet its obligations and satisfy its liabilities under its existing indebtedness; expectations underlying the Company's financial statements, including that they have been prepared on a going concern basis, meaning that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations; expectations regarding discussions of, and the  proposed and/or planned sale or other monetization of all or substantially all of Deimos Imaging and its related business; UrtheCast's expectations pertaining to the non-binding bids in respect of the Deimos Imagining assets; UrtheCast's expectations with respect to its ability to enter into a binding agreement with a senior lender in respect of the proposed UrtheDaily financing, and to otherwise raise proceeds from a  debt or equity offering, achieve the required leverage and contracted value ratios and satisfy the conditions of its indebtedness and business needs generally; UrtheCast's ability to fully integrate Geosys into the Company's other operations and achieve the expected synergies and other benefits therefrom on an ongoing basis and to complete the second closing of the acquisition of Geosys on the terms set forth in the definitive purchase agreement or at all, as well as the Company's ability to service and obtain additional revenues from the Service Level Agreement with Winfield, a subsidiary of Land O' Lakes; UrtheCast's ability to meet its obligations and satisfy its liabilities under its existing indebtedness including but not limited to the previously announced financings with Bolzano Investments Limited and Lunar Ventures Inc.; UrtheCast's ability to satisfy the conditions precedent to certain contracts related to the purchase of imagery data from the UrtheDaily satellite constellation; expectations regarding monetization of the OptiSAR technology and related intellectual property developed by the Company; expectations regarding the performance of key subcontractors and the completion of certain customer contracts; new product functionality and suitability; projected operating expenses and ongoing efforts to reduce capital expenditures and fixed costs including engineering subcontractor costs and other professional costs; UrtheCast's ability to secure additional customer contracts for the planned UrtheDaily™ Constellation project in a commercially reasonable and timely manner or at all; and UrtheCast's ability to secure financing for the planned UrtheDaily™ Constellation project on acceptable terms, in a commercially reasonable and timely manner, or at all, and the related expectations regarding its build, launch and operations and the timing thereof;. Such statements reflect UrtheCast's current views with respect to future events, and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by UrtheCast as at the date of this press release, are inherently subject to significant uncertainties and contingencies.

Many factors could cause UrtheCast's actual results or performance to be materially different from expectations that may be expressed or implied by such forward-looking statements, including, among others: the Company's ability to rectify its current cash constraints and to continue as a going concern; the Company's ability to enter into alternative financing for the UrtheDaily satellite constellation, and any delays or failures in the design, development, construction, launch and operational commissioning of the such constellation; the Company's ability to comply with debt and repayment obligations and avoid the exercise of lenders' rights, including with respect to seizing secured assets; unexpected increases in fixed or variable costs; lower than expected revenues from Geosys or the Company's other products and services in the remainder of 2019; the loss of key personnel due to the Company's financial position and/or market factors; unexpected delays in operations caused by key subcontractors; the Company's ability to fund its future operations, which is contingent on its efforts to raise additional financing and/or sell certain assets of the Company; an adverse outcome in the Company's litigation with Eastwood Capital Corp and William Holland, or additional claims made by lenders, shareholders or suppliers of the Company in connection with its operations and/or performance; the Company's ability to successfully complete a sale or other transaction involving Deimos Imaging on commercially reasonable terms, or at all, or a significant delay in the sale process; UrtheCast's ability to fund the remaining two installments for the purchase price of the Geosys transaction or otherwise successfully complete the second closing of the Geosys acquisition; loss, reduction in scope, termination, failure to satisfy conditions precedent or decline in general of the Company's agreements or relationships with its key partners, including Land O' Lakes, Inc. and purchasers of advance data purchase subscription agreements for the data expected to be provided by the UrtheDaily constellation; risks related to the government funding received by UrtheCast and risks arising from breach or default of obligations under the related agreements with certain government agencies; delays or disputes with customers regarding the payment milestones under the Company's data imagery or value-added services, which often include complex criteria and/or performance by third parties to successfully complete the contract and obtain payment; legal and regulatory changes, or the Company's failure to comply with listing requirements and other rules of the TSX and/or regulations of applicable securities authorities in Canada; and; as well as those factors and assumptions discussed in UrtheCast's Annual Information Form dated March 29, 2019, which is available under UrtheCast's SEDAR profile at www.sedar.com. UrtheCast cautions readers that such factors and uncertainties are not exhaustive and that should certain risks or uncertainties materialize, or should underlying estimates or assumptions prove incorrect, actual results, performance or achievements may vary significantly from those expected. There can be no assurance that the actual strategies, results, performance, events or activities anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.

UrtheCast undertakes no obligation to update forward-looking statements except as required by Canadian securities laws. Readers are cautioned against attributing undue certainty to forward-looking statements.

SOURCE UrtheCast Corp.

Sai Chu, Chief Financial Officer, [phone]

Related Links

www.urthecast.com