– Increased Margins for both Services and Products Over Prior Year –
– Year-Over-Year Improvement in Net Loss of 45% and Adjusted EBITDA Growth of 49% –
– Q1 2019 Cash Flow from Operations up $10 Million Versus Prior Year –
- May 1, 2019
The following financial highlights are in thousands of dollars and unaudited.
Three Months Ended | |||||||||
March 31, | |||||||||
2019 | 2018 | ||||||||
Recurring Service Revenues | $ | 37,529 | $ | 36,725 | |||||
Other Service Revenues | 1,478 | 1,267 | |||||||
Total Service Revenues | 39,007 | 37,992 | |||||||
Product Sales | 27,028 | 29,981 | |||||||
Total Revenues | 66,035 | 67,973 | |||||||
Net Loss Attributable to ORBCOMM Inc. Common Stockholders | (5,490 | ) | (10,086 | ) | |||||
Basic EPS | (0.07 | ) | (0.13 | ) | |||||
EBITDA (1,3) | 12,747 | 7,805 | |||||||
Adjusted EBITDA (2,3) | 15,138 | 10,141 |
(1) EBITDA is defined as earnings attributable to
(2) Adjusted EBITDA is defined as EBITDA, adjusted for stock-based compensation expense, noncontrolling interests, impairment loss, non-capitalized satellite launch and in-orbit insurance, and acquisition-related and integration costs.
(3) EBITDA and Adjusted EBITDA are non-GAAP financial measures used by the Company to measure operating performance and the quality of earnings. A table presenting EBITDA and Adjusted EBITDA, reconciled to GAAP Net Income (Loss), is among other financial tables at the end of this release.
“We made major strides this quarter in our plan to improve service margins, hardware margins, working capital and cash generation,” said
Financial Results
Revenues
Total Revenues for the first quarter of 2019 were
Service Revenues were
Product Sales were $27 million in the first quarter of 2019 compared to
Gross Margin (4,5,6)
GAAP Service Gross Margin, inclusive of depreciation and amortization expense, was 55.7% in the first quarter of 2019 compared to 47.8% in the prior year period. Non-GAAP Service Gross Margin, excluding depreciation and amortization expense, was 66.6% in the first quarter of 2019 compared to 59.1% in the prior year period. The year-over-year improvements were due to bringing onboard new subscribers at high margin and limiting product installations at negative margins.
GAAP Product Gross Margin, inclusive of depreciation and amortization expense, was 27.0% in the first quarter of 2019 compared to 18.2% in the prior year period. Non-GAAP Product Gross Margin was 29.6% in the first quarter of 2019 compared to 21.6% in the same period last year. The year-over-year improvements were primarily due to a better mix of higher-margin products shipped in the quarter compared to low-margin deployments with large customers completed last year. Non-GAAP Product Gross Margin improved sequentially for the fifth consecutive quarter, up 210 basis points from the fourth quarter of 2018.
Operating Expenses
Operating Expenses for the first quarter of 2019 were
Net Income (Loss) and Earnings Per Share
Net Loss Attributable to
EBITDA and Adjusted EBITDA (3)
EBITDA for the first quarter of 2019 was
Adjusted EBITDA for the first quarter of 2019 was
Balance Sheet & Cash Flow
As of
2019 Outlook (7)
For the second quarter of 2019, the Company expects Total Revenues to be between
For the full year 2019, the Company maintains its outlook as listed in the table below and continues to expect many of the new sales opportunities to ramp up in the second half of the year.
Projected Outlook | FY 2019 | |
Recurring Service Revenue Growth | 5% - 7.5% | |
Service Gross Margin (4) | 66% - 68% | |
Product Gross Margin (5) | Over 30% | |
Adjusted EBITDA (2) | $70 to $75 million | |
Cash Flow from Operations | Approximately $50 million | |
Capital Expenditures | Approximately $25 million |
(4) Non-GAAP Service Gross Margin is defined as Non-GAAP Service gross profit divided by Service Revenue. Non-GAAP Service gross profit is defined as Service Revenue, minus costs of services (including depreciation and amortization expense) plus depreciation and amortization expense.
(5) Non-GAAP Product Gross Margin is defined as Non-GAAP Product gross profit divided by Product Sales. Non-GAAP Product gross profit is defined as Product Sales, minus cost of product (including depreciation and amortization expense) plus depreciation and amortization expense.
(6) Non-GAAP Service gross margin and Non-GAAP Product gross margin are non-GAAP financial measures used by the Company to measure operating performance and the quality of earnings. A table presenting Non-GAAP Service gross margin and Non-GAAP Product gross margin, reconciled to GAAP Service gross margin and GAAP Product gross margin respectively, is among other financial tables at the end of this release.
(7) The Company’s outlook for 2019 includes non-GAAP measures, such as Adjusted EBITDA and Adjusted EBITDA Margin, which exclude charges or credits not indicative of core operations, which may include but not be limited to stock-based compensation expense, acquisition-related and integration costs, impairment loss, and other significant items that currently cannot be predicted. The exact amount of these charges or credits are not currently determinable, but may be significant. Accordingly, the Company is unable to provide equivalent reconciliations from GAAP to non-GAAP for these financial measures.
Investment Community Conference Call
About
Forward-Looking Statements
Certain statements discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally relate to our plans, estimates, objectives and expectations for future events, as well as projections, business trends and other statements that are not historical facts. Such forward-looking statements are subject to known and unknown risks and uncertainties, some of which are beyond our control, which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include but are not limited to: demand for and market acceptance of our products and services and our ability to successfully implement our business plan; our dependence on our subsidiary companies (Market Channel Affiliates (“MCAs”)) and third-party product and service developers and providers, distributors and resellers (
ORBCOMM Contacts
Investor Inquiries:
Aly Bonilla
VP of Investor Relations
ORBCOMM Inc.
+1 703.433.6360
bonilla.aly@orbcomm.com
Media Inquiries:
Michelle Ferris
Director, Corporate Communications
ORBCOMM Inc.
+1 703.433.6516
ferris.michelle@orbcomm.com
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended March 31, |
|||||||
2019 | 2018 | ||||||
Revenues: | |||||||
Service revenues | $ | 39,007 | $ | 37,992 | |||
Product sales | 27,028 | 29,981 | |||||
Total revenues | 66,035 | 67,973 | |||||
Cost of revenues, exclusive of depreciation and amortization shown below: | |||||||
Cost of services | 13,047 | 15,548 | |||||
Cost of product sales | 19,028 | 23,511 | |||||
Operating expenses: | |||||||
Selling, general and administrative | 17,179 | 17,500 | |||||
Product development | 3,967 | 2,813 | |||||
Depreciation and amortization | 12,678 | 12,223 | |||||
Acquisition-related and integration costs | 215 | 606 | |||||
Loss from operations | (79 | ) | (4,228 | ) | |||
Other income (expense): | |||||||
Interest income | 392 | 475 | |||||
Other income (expense) | 242 | (167 | ) | ||||
Interest expense | (5,241 | ) | (5,200 | ) | |||
Total other expense | (4,607 | ) | (4,892 | ) | |||
Loss before income taxes | (4,686 | ) | (9,120 | ) | |||
Income taxes | 710 | 943 | |||||
Net loss | (5,396 | ) | (10,063 | ) | |||
Less: Net income attributable to noncontrolling interests | 94 | 23 | |||||
Net loss attributable to ORBCOMM Inc. | $ | (5,490 | ) | $ | (10,086 | ) | |
Net loss attributable to ORBCOMM Inc. common stockholders |
$ | (5,490 | ) | $ | (10,086 | ) | |
Per share information-basic: | |||||||
Net loss attributable to ORBCOMM Inc. common stockholders |
$ | (0.07 | ) | $ | (0.13 | ) | |
Per share information-diluted: | |||||||
Net loss attributable to ORBCOMM Inc. common stockholders |
$ | (0.07 | ) | $ | (0.13 | ) | |
Weighted average common shares outstanding: | |||||||
Basic | 79,387 | 74,729 | |||||
Diluted | 79,387 | 74,729 |
Condensed Consolidated Balance Sheets
(In thousands, except par value and share data)
March 31, 2019 |
December 31, 2018 |
|||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 58,078 | $ | 53,766 | ||||
Accounts receivable, net of allowances for doubtful accounts of $4,084 and $4,072 respectively |
60,233 | 57,665 | ||||||
Inventories | 35,059 | 34,300 | ||||||
Prepaid expenses and other current assets | 17,848 | 15,553 | ||||||
Total current assets | 171,218 | 161,284 | ||||||
Satellite network and other equipment, net | 155,649 | 160,070 | ||||||
Goodwill | 166,129 | 166,129 | ||||||
Intangible assets, net | 83,029 | 86,264 | ||||||
Other assets | 22,547 | 12,603 | ||||||
Deferred income taxes | 495 | 109 | ||||||
Total assets | $ | 599,067 | $ | 586,459 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 19,000 | $ | 15,527 | ||||
Accrued liabilities | 40,570 | 35,735 | ||||||
Current portion of deferred revenue | 5,312 | 5,954 | ||||||
Total current liabilities | 64,882 | 57,216 | ||||||
Note payable – related party | 1,275 | 1,298 | ||||||
Notes payable, net of unamortized deferred issuance costs | 246,101 | 245,907 | ||||||
Deferred revenue, net of current portion | 6,463 | 5,471 | ||||||
Deferred tax liabilities | 15,436 | 16,109 | ||||||
Other liabilities | 10,065 | 2,600 | ||||||
Total liabilities | 344,222 | 328,601 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
ORBCOMM Inc. stockholders’ equity | ||||||||
Series A Convertible Preferred Stock, par value $0.001; 1,000,000 shares authorized; 39,442 shares issued and outstanding at March 31, 2019 and December 31, 2018 |
394 | 394 | ||||||
Common stock, par value $0.001; 250,000,000 shares authorized; 79,568,496 and 79,008,243 shares issued at March 31, 2019 and December 31, 2018, respectively |
80 | 79 | ||||||
Additional paid-in capital | 452,240 | 449,343 | ||||||
Accumulated other comprehensive income | (887 | ) | (381 | ) | ||||
Accumulated deficit | (197,997 | ) | (192,507 | ) | ||||
Less treasury stock, at cost; 29,990 shares at March 31, 2019 and December 31, 2018 |
(96 | ) | (96 | ) | ||||
Total ORBCOMM Inc. stockholders’ equity | 253,734 | 256,832 | ||||||
Noncontrolling interests | 1,111 | 1,026 | ||||||
Total equity | 254,845 | 257,858 | ||||||
Total liabilities and equity | $ | 599,067 | $ | 586,459 |
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (5,396 | ) | $ | (10,063 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Change in allowance for doubtful accounts | 144 | 881 | ||||||
Change in the fair value of acquisition-related contingent consideration | (2,063 | ) | (1,508 | ) | ||||
Amortization and write-off of deferred financing fees | 194 | 194 | ||||||
Depreciation and amortization | 12,678 | 12,223 | ||||||
Stock-based compensation | 2,082 | 1,707 | ||||||
Foreign exchange (gain) loss | (256 | ) | 176 | |||||
Deferred income taxes | (1,042 | ) | 779 | |||||
Other | 752 | — | ||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||
Accounts receivable | (2,852 | ) | (2,155 | ) | ||||
Inventories | (785 | ) | (5,549 | ) | ||||
Prepaid expenses and other assets | (1,549 | ) | 1,070 | |||||
Accounts payable and accrued liabilities | 7,439 | 2,076 | ||||||
Deferred revenue | 351 | (578 | ) | |||||
Other liabilities | (679 | ) | (435 | ) | ||||
Net cash provided by (used in) operating activities | 9,018 | (1,182 | ) | |||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (4,515 | ) | (5,623 | ) | ||||
Net cash (used in) investing activities | (4,515 | ) | (5,623 | ) | ||||
Cash flows from financing activities: | ||||||||
Net cash provided by (used in) financing activities | — | — | ||||||
Effect of exchange rate changes on cash and cash equivalents | (191 | ) | 200 | |||||
Net increase (decrease) in cash and cash equivalents | 4,312 | (6,605 | ) | |||||
Beginning of period | 53,766 | 34,830 | ||||||
End of period | $ | 58,078 | $ | 28,225 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for: | ||||||||
Interest | $ | — | $ | — | ||||
Income taxes | $ | — | $ | — |
The following table reconciles Net Loss Attributable to
Three Months Ended | |||||||||
March 31, | |||||||||
(In thousands and unaudited) | 2019 | 2018 | |||||||
Adjustments for EBITDA | |||||||||
Net loss attributable to ORBCOMM Inc. | $ | (5,490 | ) | $ | (10,086 | ) | |||
Income tax expense | 710 | 943 | |||||||
Interest income | (392 | ) | (475 | ) | |||||
Interest expense | 5,241 | 5,200 | |||||||
Depreciation and amortization | 12,678 | 12,223 | |||||||
EBITDA | $ | 12,747 | $ | 7,805 | |||||
Adjustments for Adjusted EBITDA | |||||||||
Stock-based compensation | 2,082 | 1,707 | |||||||
Net income attributable to the noncontrolling interests | 94 | 23 | |||||||
Acquisition-related and integration costs | 215 | 606 | |||||||
Adjusted EBITDA | $ | 15,138 | $ | 10,141 |
The following tables reconcile GAAP Service Gross Margin to Non-GAAP Service Gross Margin and GAAP Product Gross Margin to Non-GAAP Product Gross Margin for the periods shown:
Three Months Ended | |||||||||||
March 31, | |||||||||||
(In thousands except margin data and unaudited) | 2019 | 2018 | |||||||||
Service revenue | $ | 39,007 | $ | 37,992 | |||||||
Minus – Cost of services, including depreciation and amortization expense | 17,297 | 19,835 | |||||||||
GAAP Service gross profit | $ | 21,710 | $ | 18,157 | |||||||
Plus – Depreciation and amortization expense | 4,250 | 4,287 | |||||||||
Non-GAAP Service gross profit | $ | 25,960 | $ | 22,444 | |||||||
GAAP Service gross margin | 55.7 | % | 47.8 | % | |||||||
Non-GAAP Service gross margin | 66.6 | % | 59.1 | % |
Three Months Ended | |||||||||||
March 31, | |||||||||||
(In thousands except margin data and unaudited) | 2019 | 2018 | |||||||||
Product sales | $ | 27,028 | $ | 29,981 | |||||||
Minus – Cost of product, including depreciation and amortization expense | 19,721 | 24,539 | |||||||||
GAAP Product gross profit | $ | 7,307 | $ | 5,442 | |||||||
Plus – Depreciation and amortization expense | 693 | 1,028 | |||||||||
Non-GAAP Product gross profit | $ | 8,000 | $ | 6,470 | |||||||
GAAP Product gross margin | 27.0 | % | 18.2 | % | |||||||
Non-GAAP Product gross margin | 29.6 | % | 21.6 | % |
The Company’s outlook for 2019 includes non-GAAP measures, such as Adjusted EBITDA and Adjusted EBITDA Margin, which exclude charges or credits not indicative of core operations, which may include but not be limited to stock-based compensation expense, acquisition-related and integration costs, impairment loss, and other significant items that currently cannot be predicted. The exact amount of these charges or credits are not currently determinable, but may be significant. Accordingly, the Company is unable to provide equivalent reconciliations from GAAP to non-GAAP for these financial measures.
EBITDA is defined as earnings attributable to
The Company also believes that Adjusted EBITDA, defined as EBITDA adjusted for stock-based compensation expense, noncontrolling interests, impairment loss, and acquisition-related and integration costs, is useful to investors to evaluate the Company’s core operating results and financial performance because it excludes items that are significant non-cash or non-recurring expenses reflected in the Condensed Consolidated Statements of Operations. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Total Revenues.
Non-GAAP Service Gross Margin is defined as Non-GAAP Service gross profit divided by Service Revenue. Non-GAAP Service gross profit is defined as Service Revenue, minus costs of services (including depreciation and amortization expense) plus depreciation and amortization expense. Non-GAAP Product Gross Margin is defined as Non-GAAP Product gross profit divided by Product Sales. Non-GAAP Product gross profit is defined as Product Sales, minus cost of product (including depreciation and amortization expense) plus depreciation and amortization expense. The Company believes that Non-GAAP Service Gross Margin and Non-GAAP Product Gross Margin are useful to evaluate and compare the results of the Company’s operations from period to period on a consistent basis by removing the depreciation and amortization impact of capital investments from its operating results.