– Q4 2018 Total Revenues of $66.3 Million; $276 Million Full Year, Up 8.6% –
– Q4 2018 Recurring Service Revenues of $37.4 Million; $148 Million Full Year, Up 17.2% –
– 2018 Year-Over-Year Improvement in Net Loss of 57% and Adjusted EBITDA Growth of 27% –
– Added 348,000 Net Subscribers in 2018, Up 17.2% Over 2017 –
– Company Provides 2019 Outlook –
- February 27, 2019
The following financial highlights are in thousands of dollars.
Three Months Ended | Twelve Months Ended | ||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||||||
Recurring Service Revenues | $ | 37,357 | $ | 35,537 | $ | 148,367 | $ | 126,540 | |||||||||||
Other Service Revenues | 1,292 | 3,772 | 5,222 | 8,398 | |||||||||||||||
Total Service Revenues | 38,649 | 39,309 | 153,589 | 134,938 | |||||||||||||||
Product Sales | 27,688 | 36,667 | 122,551 | 119,282 | |||||||||||||||
Total Revenues | 66,337 | 75,976 | 276,140 | 254,220 | |||||||||||||||
Net Loss Attributable to ORBCOMM Inc. Common Stockholders | (5,649 | ) | (7,519 | ) | (26,262 | ) | (61,296 | ) | |||||||||||
Basic EPS | (0.07 | ) | (0.10 | ) | (0.34 | ) | (0.84 | ) | |||||||||||
EBITDA (1,3) | 14,125 | 6,848 | 47,235 | 4,550 | |||||||||||||||
Adjusted EBITDA (2,3) | $ | 16,506 | $ | 9,266 | $ | 57,074 | $ | 44,851 |
(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.
“2018 full year results were highlighted by our double-digit growth in Adjusted EBITDA driven by significant progress in growing our product and service margins, leading to a large positive swing in cash flow,” said
Financial Results
Revenues
Total Revenues for the fourth quarter of 2018 were
Service Revenues were
Product Sales were
Gross Margin
Service Gross Margin was 67.7% in the fourth quarter of 2018 compared to 57.5% in the prior year period. The 10 percentage point year-over-year improvement was primarily due to the Company’s decision to move away from negative margins realized from managing third-party installation services. For 2018, Service Gross Margin was 65.4%, a 290 basis point improvement over 2017.
Product Gross Margin was 27.5% in the fourth quarter of 2018 compared to 12.7% in the same period last year. The large year-over-year improvement was 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. Product Gross Margin improved sequentially for the fourth consecutive quarter, up 330 basis points from the third quarter of 2018. For the full year 2018, Product Gross Margin was 23.8%, a 730 basis point improvement over 2017.
Total Gross Margin for the fourth quarter of 2018 was 50.9% compared to 35.9% in the prior year period. For 2018, Total Gross Margin was 46.9%, up 600 basis points compared to 2017.
Operating Expenses
Operating Expenses for the fourth quarter of 2018 were
Net Income (Loss) and Earnings Per Share
Net Loss Attributable to
EBITDA and Adjusted EBITDA (3)
EBITDA for the fourth quarter of 2018 was
Adjusted EBITDA for the fourth quarter of 2018 was
For 2018, the Company achieved record Adjusted EBITDA of
Balance Sheet & Cash Flow
As of
For 2018, Cash Flow from Operations was
2019 Outlook
Projected Outlook | FY 2019 | ||
Recurring Service Revenue Growth | 5% - 7.5% | ||
Service Gross Margin | 66% - 68% | ||
Product Gross Margin | Over 30% | ||
Adjusted EBITDA (2,4) | $70 to $75 million | ||
Cash Flow from Operations | Approximately $50 million | ||
Capital Expenditures | Approximately $25 million |
On the conference call, the Company will discuss a significant number of sizable opportunities in the sales pipeline. The revenues from many of these new opportunities are anticipated to ramp up in the back half of 2019. Due to the uncertain timing, the Company will provide quarterly guidance for Product Sales and Net Subscriber Counts. Accordingly, for the first quarter of 2019, the Company expects Product Sales to be similar to the fourth quarter of 2018 and add approximately 70,000 new subscribers.
(4) The Company’s outlook for 2019 includes non-GAAP measures, such as Adjusted EBITDA, which excludes 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 (
Contacts
Investor Inquiries: Media Inquiries:
Aly Bonilla
Vice President, Investor Relations Director, Corporate Communications
ORBCOMM Inc. ORBCOMM Inc.
703-433-6360 703-433-6516
bonilla.aly@orbcomm.com ferris.michelle@orbcomm.com
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended December 31, |
Twelve Months Ended December 31, |
||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Service revenues | $ | 38,649 | $ | 39,309 | $ | 153,589 | $ | 134,938 | |||||||
Product sales | 27,688 | 36,667 | 122,551 | 119,282 | |||||||||||
Total revenues | 66,337 | 75,976 | 276,140 | 254,220 | |||||||||||
Cost of revenues, exclusive of depreciation and amortization shown below: |
|||||||||||||||
Cost of services | 12,480 | 16,692 | 53,184 | 50,548 | |||||||||||
Cost of product sales | 20,081 | 32,026 | 93,444 | 99,640 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative | 15,636 | 16,424 | 66,988 | 55,753 | |||||||||||
Product development | 3,734 | 2,977 | 13,405 | 8,941 | |||||||||||
Depreciation and amortization | 13,538 | 11,218 | 49,684 | 45,681 | |||||||||||
Acquisition-related and integration costs | 129 | 1,025 | 1,624 | 3,315 | |||||||||||
Impairment charges – satellite network | — | — | — | 31,224 | |||||||||||
Income (loss) from operations | 739 | (4,386 | ) | (2,189 | ) | (40,882 | ) | ||||||||
Other (expense) income: | |||||||||||||||
Interest income | 342 | 437 | 1,918 | 959 | |||||||||||
Other income (expense) | (63 | ) | 50 | 45 | (160 | ) | |||||||||
Interest expense | (5,322 | ) | (5,187 | ) | (21,055 | ) | (17,653 | ) | |||||||
Loss on debt extinguishment | — | — | — | (3,868 | ) | ||||||||||
Total other expense | (5,043 | ) | (4,700 | ) | (19,092 | ) | (20,722 | ) | |||||||
Loss before income taxes | (4,304 | ) | (9,086 | ) | (21,281 | ) | (61,604 | ) | |||||||
Income taxes | 1,248 | (1,601 | ) | 4,658 | (409 | ) | |||||||||
Net loss | (5,552 | ) | (7,485 | ) | (25,939 | ) | (61,195 | ) | |||||||
Less: Net income attributable to the noncontrolling interests | 89 | 34 | 305 | 89 | |||||||||||
Net loss attributable to ORBCOMM Inc. | $ | (5,641 | ) | $ | (7,519 | ) | $ | (26,244 | ) | $ | (61,284 | ) | |||
Net loss attributable to ORBCOMM Inc. common stockholders |
$ | (5,649 | ) | $ | (7,519 | ) | $ | (26,262 | ) | $ | (61,296 | ) | |||
Per share information-basic: | |||||||||||||||
Net loss attributable to ORBCOMM Inc. common stockholders |
$ | (0.07 | ) | $ | (0.10 | ) | $ | (0.34 | ) | $ | (0.84 | ) | |||
Per share information-diluted: | |||||||||||||||
Net loss attributable to ORBCOMM Inc. common stockholders |
$ | (0.07 | ) | $ | (0.10 | ) | $ | (0.34 | ) | $ | (0.84 | ) | |||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 78,895 | 74,325 | 77,603 | 72,882 | |||||||||||
Diluted | 78,895 | 74,325 | 77,603 | 72,882 |
Consolidated Balance Sheets
(In thousands, except par value and share data)
(Unaudited)
December 31, 2018 |
December 31, 2017 |
|||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 53,766 | $ | 34,830 | ||||
Accounts receivable, net of allowances for doubtful accounts of $4,072 and $400, respectively |
57,665 | 46,900 | ||||||
Inventories | 34,300 | 42,437 | ||||||
Prepaid expenses and other current assets | 15,553 | 18,692 | ||||||
Total current assets | 161,284 | 142,859 | ||||||
Satellite network and other equipment, net | 160,070 | 174,178 | ||||||
Goodwill | 166,129 | 166,678 | ||||||
Intangible assets, net | 86,264 | 99,339 | ||||||
Other assets | 12,603 | 12,036 | ||||||
Deferred income taxes | 109 | 104 | ||||||
Total assets | $ | 586,459 | $ | 595,194 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 15,527 | $ | 29,298 | ||||
Accrued liabilities | 35,735 | 33,016 | ||||||
Current portion of deferred revenue | 5,954 | 6,263 | ||||||
Total current liabilities | 57,216 | 68,577 | ||||||
Note payable – related party | 1,298 | 1,366 | ||||||
Notes payable, net of unamortized deferred issuance costs | 245,907 | 245,131 | ||||||
Deferred revenue, net of current portion | 5,471 | 2,459 | ||||||
Deferred tax liabilities | 16,109 | 17,646 | ||||||
Other liabilities | 2,600 | 13,619 | ||||||
Total liabilities | 328,601 | 348,798 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
ORBCOMM Inc. stockholders’ equity | ||||||||
Series A Convertible Preferred Stock, par value $0.001; 1,000,000 shares authorized; 39,442 and 37,544 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively |
394 | 376 | ||||||
Common stock, par value $0.001; 250,000,000 shares authorized; 79,008,243 and 74,436,579 shares issued at December 31, 2018 and December 31, 2017, respectively |
79 | 74 | ||||||
Additional paid-in capital | 449,343 | 411,298 | ||||||
Accumulated other comprehensive (loss) income | (381 | ) | 256 | |||||
Accumulated deficit | (192,507 | ) | (166,245 | ) | ||||
Less treasury stock, at cost; 29,990 shares at December 31, 2018 and December 31, 2017 |
(96 | ) | (96 | ) | ||||
Total ORBCOMM Inc. stockholders’ equity | 256,832 | 245,663 | ||||||
Noncontrolling interest | 1,026 | 733 | ||||||
Total equity | 257,858 | 246,396 | ||||||
Total liabilities and equity | $ | 586,459 | $ | 595,194 |
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Twelve Months Ended December 31, | ||||||||
2018 |
2017 |
|||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (25,939 | ) | $ | (61,195 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Change in allowance for doubtful accounts | 3,426 | 85 | ||||||
Depreciation and amortization | 49,684 | 45,681 | ||||||
Impairment loss – satellite network | — | 31,224 | ||||||
Change in the fair values of acquisition-related contingent consideration | (8,035 | ) | (1,002 | ) | ||||
Amortization and write-off of deferred debt fees | 776 | 3,106 | ||||||
Stock-based compensation | 7,910 | 5,673 | ||||||
Foreign exchange loss | 59 | 299 | ||||||
Deferred income taxes | (1,491 | ) | (2,047 | ) | ||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||
Accounts receivable | (14,040 | ) | (10,025 | ) | ||||
Inventories | 8,277 | (16,922 | ) | |||||
Prepaid expenses and other assets | 3,994 | (10,474 | ) | |||||
Accounts payable and accrued liabilities | (14,876 | ) | 12,168 | |||||
Deferred revenue | 2,708 | (1,653 | ) | |||||
Other liabilities | (999 | ) | 41 | |||||
Net cash provided by (used in) operating activities | 11,454 | (5,041 | ) | |||||
Cash flows from investing activities: | ||||||||
Acquisition of businesses, net of cash acquired | — | (67,911 | ) | |||||
Capital expenditures | (22,198 | ) | (27,360 | ) | ||||
Other | 650 | (650 | ) | |||||
Net cash used in investing activities | (21,548 | ) | (95,921 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common stock | 27,967 | 15,000 | ||||||
Proceeds received from issuance of long-term debt | — | 250,000 | ||||||
Payments under revolving credit facility | (14,000 | ) | — | |||||
Proceeds from revolving credit facility | (14,000 | ) | — | |||||
Cash paid for debt issuance costs | — | (5,359 | ) | |||||
Proceeds received from employee stock purchase plan | 1,194 | 1,001 | ||||||
Principal payment of long-term debt | — | (150,000 | ) | |||||
Payment of deferred purchase consideration | — | (347 | ) | |||||
Net cash provided by financing activities | 29,161 | 110,295 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (131 | ) | 474 | |||||
Net increase in cash and cash equivalents | 18,936 | 9,807 | ||||||
Beginning of year | 34,830 | 25,023 | ||||||
End of year | $ | 53,766 | $ | 34,830 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for: | ||||||||
Interest | $ | 20,036 | $ | 12,911 | ||||
Income taxes | $ | 5,532 | $ | 805 |
The following table reconciles Net Loss Attributable to
Three Months Ended | Twelve Months Ended | |||||||||||||||||
December 31, | December 31, | |||||||||||||||||
(In thousands and unaudited) | 2018 | 2017 | 2018 | 2017 |
||||||||||||||
Adjustments for EBITDA | ||||||||||||||||||
Net loss attributable to ORBCOMM Inc. | $ | (5,641 | ) | $ | (7,519 | ) | $ | (26,244 | ) | $ | (61,284 | ) | ||||||
Income tax expense | 1,248 | (1,601 | ) | 4,658 | (409 | ) | ||||||||||||
Interest income | (342 | ) | (437 | ) | (1,918 | ) | (959 | ) | ||||||||||
Interest expense | 5,322 | 5,187 | 21,055 | 17,653 | ||||||||||||||
Depreciation and amortization | 13,538 | 11,218 | 49,684 | 45,681 | ||||||||||||||
Loss on debt extinguishment | — | — | — | 3,868 | ||||||||||||||
EBITDA | $ | 14,125 | $ | 6,848 | $ | 47,235 | $ | 4,550 | ||||||||||
Adjustments for Adjusted EBITDA | ||||||||||||||||||
Stock-based compensation | 2,163 | 1,359 | 7,910 | 5,673 | ||||||||||||||
Net income attributable to the noncontrolling interests | 89 | 34 | 305 | 89 | ||||||||||||||
Acquisition-related and integration costs | 129 | 1,025 | 1,624 | 3,315 | ||||||||||||||
Impairment loss – satellite network | — | — | — | 31,224 | ||||||||||||||
Adjusted EBITDA | $ | 16,506 | $ | 9,266 | $ | 57,074 | $ | 44,851 |
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, non-capitalized satellite launch and in-orbit insurance, 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 equals Adjusted EBITDA divided by Total Revenues.
Source: ORBCOMM Inc.