– Total Revenues of $71.0 Million, Service Revenues Up 10% vs Prior Year –
– Achieved Record Adjusted EBITDA of Over $17 Million –
– Added 85,000 Net Subscribers –
– Delivering Nearly 24,000 Devices with Partner Savi to U.S. Government Customer –
- October 30, 2018
The following financial highlights are in thousands of dollars.
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||||
Recurring Service Revenues | $ | 37,192 | 32,992 | $ | 111,010 | $ | 91,003 | |||||||||||||
Other Service Revenues | 1,281 | 2,048 | 3,930 | 4,626 | ||||||||||||||||
Total Service Revenues | 38,473 | 35,040 | 114,940 | 95,629 | ||||||||||||||||
Product Sales | 32,569 | 34,326 | 94,863 | 82,615 | ||||||||||||||||
Total Revenues | 71,042 | 69,366 | 209,803 | 178,244 | ||||||||||||||||
Net Loss Attributable to ORBCOMM Inc. Common Stockholders |
(3,295 | ) | (39,694 | ) | (20,614 | ) | (53,777 | ) | ||||||||||||
Basic EPS | (0.04 | ) | (0.54 | ) | (0.27 | ) | (0.74 | ) | ||||||||||||
EBITDA (1,3) | 14,612 | (22,231 | ) | 33,110 | (2,298 | ) | ||||||||||||||
Adjusted EBITDA (2,3) | $ | 17,392 | 11,157 | $ | 40,568 | $ | 35,585 |
(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, 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 achieved significant improvements in Adjusted EBITDA in the third quarter with margins successfully progressing on their upward path,” said
Financial Results
Revenues
Total Revenues for the third quarter of 2018 were
Service Revenues were
Product Sales were
Gross Margin
Service Gross Margin was 66.8% in the third quarter of 2018 compared to 61.1% in the prior year period. The year-over-year improvement of 570 basis points was primarily due to the Company’s decision to move away from product installations at negative margins. Third quarter Service Gross Margin was relatively consistent sequentially with the second quarter.
Product Gross Margin was 24.2% in the third quarter of 2018 compared to 13.5% in the same period last year. The large improvement over the prior year period was primarily due to low-margin deployments with large customers completed last year. Sequentially, Product Gross Margin improved 210 basis points from the second quarter, even as the Company moved through a large quantity of inventory at reduced margins in preparation for multiple new higher-margin products to be released in Q4.
Total Gross Margin for the third quarter of 2018 was 47.3% compared to 37.6% in the prior year period.
Operating Expenses
Operating Expenses for the third quarter of 2018 were
Net Income (Loss) and Earnings Per Share
Net Loss Attributable to
EBITDA and Adjusted EBITDA (3)
EBITDA for the third quarter of 2018 was
The Company achieved record Adjusted EBITDA of
Balance Sheet & Cash Flow
As of
2018 Outlook
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 | Michelle Ferris |
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 |
ORBCOMM Inc. Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) |
|||||||||||||||
Quarters Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenues: | |||||||||||||||
Service revenues | $ | 38,473 | $ | 35,040 | $ | 114,940 | $ | 95,629 | |||||||
Product sales | 32,569 | 34,326 | 94,863 | 82,615 | |||||||||||
Total revenues | 71,042 | 69,366 | 209,803 | 178,244 | |||||||||||
Cost of revenues, exclusive of depreciation and amortization shown below: | |||||||||||||||
Cost of services | 12,764 | 13,638 | 40,704 | 33,856 | |||||||||||
Cost of product sales | 24,679 | 29,676 | 73,363 | 67,614 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative | 14,823 | 13,755 | 51,352 | 39,329 | |||||||||||
Product development | 3,816 | 2,453 | 9,671 | 5,964 | |||||||||||
Depreciation and amortization | 12,081 | 12,041 | 36,146 | 34,463 | |||||||||||
Acquisition-related and integration costs | 395 | 800 | 1,495 | 2,290 | |||||||||||
Impairment loss – satellite network | — | 31,224 | — | 31,224 | |||||||||||
Income (loss) from operations | 2,484 | (34,221 | ) | (2,928 | ) | (36,496 | ) | ||||||||
Other income (expense): | |||||||||||||||
Interest income | 648 | 266 | 1,576 | 522 | |||||||||||
Other income (expense) | 120 | (32 | ) | 108 | (210 | ) | |||||||||
Interest expense | (5,232 | ) | (5,197 | ) | (15,733 | ) | (12,466 | ) | |||||||
Loss on debt extinguishment | — | — | — | (3,868 | ) | ||||||||||
Total other expense | (4,464 | ) | (4,963 | ) | (14,049 | ) | (16,022 | ) | |||||||
Loss before income taxes | (1,980 | ) | (39,184 | ) | (16,977 | ) | (52,518 | ) | |||||||
Income taxes | 1,242 | 479 | 3,410 | 1,192 | |||||||||||
Net loss | (3,222 | ) | (39,663 | ) | (20,387 | ) | (53,710 | ) | |||||||
Less: Net income attributable to the noncontrolling interests | 73 | 19 | 216 | 55 | |||||||||||
Net loss attributable to ORBCOMM Inc. | $ | (3,295 | ) | $ | (39,682 | ) | $ | (20,603 | ) | $ | (53,765 | ) | |||
Net loss attributable to ORBCOMM Inc. common stockholders |
$ | (3,295 | ) | $ | (39,694 | ) | $ | (20,614 | ) | $ | (53,777 | ) | |||
Per share information-basic: | |||||||||||||||
Net loss attributable to ORBCOMM Inc. common stockholders |
$ | (0.04 | ) | $ | (0.54 | ) | $ | (0.27 | ) | $ | (0.74 | ) | |||
Per share information-diluted: | |||||||||||||||
Net loss attributable to ORBCOMM Inc. common stockholders |
$ | (0.04 | ) | $ | (0.54 | ) | $ | (0.27 | ) | $ | (0.74 | ) | |||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 78,649 | 73,762 | 77,158 | 72,396 | |||||||||||
Diluted | 78,649 | 73,762 | 77,158 | 72,396 | |||||||||||
ORBCOMM Inc. Condensed Consolidated Balance Sheets (In thousands, except par value and share data) (Unaudited) |
||||||||
September 30, 2018 |
December 31, 2017 |
|||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 45,894 | $ | 34,830 | ||||
Accounts receivable, net of allowance for doubtful accounts of $3,619 and $400, respectively | 58,615 | 46,900 | ||||||
Inventories | 37,042 | 42,437 | ||||||
Prepaid expenses and other current assets | 18,996 | 18,692 | ||||||
Total current assets | 160,547 | 142,859 | ||||||
Satellite network and other equipment, net | 165,176 | 174,178 | ||||||
Goodwill | 166,129 | 166,678 | ||||||
Intangible assets, net | 89,514 | 99,339 | ||||||
Other assets | 12,676 | 12,036 | ||||||
Deferred income taxes | 181 | 104 | ||||||
Total assets | $ | 594,223 | $ | 595,194 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 11,680 | $ | 29,298 | ||||
Accrued liabilities | 41,972 | 33,016 | ||||||
Current portion of deferred revenue | 3,622 | 6,263 | ||||||
Total current liabilities | 57,274 | 68,577 | ||||||
Note payable – related party | 1,321 | 1,366 | ||||||
Note payable, net of unamortized deferred issuance costs | 245,713 | 245,131 | ||||||
Deferred revenue, net of current portion | 6,779 | 2,459 | ||||||
Deferred tax liabilities | 15,912 | 17,646 | ||||||
Other liabilities | 6,662 | 13,619 | ||||||
Total liabilities | 333,661 | 348,798 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
ORBCOMM Inc. stockholders’ equity | ||||||||
Series A Convertible Preferred Stock, par value $0.001; 1,000,000 shares authorized; 38,672 and 37,544 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively | 387 | 376 | ||||||
Common stock, par value $0.001; 250,000,000 shares authorized; 78,799,373 and 74,436,579 shares issued at September 30, 2018 and December 31, 2017, respectively | 79 | 74 | ||||||
Additional paid-in capital | 446,407 | 411,298 | ||||||
Accumulated other comprehensive (loss) income | (298 | ) | 256 | |||||
Accumulated deficit | (186,859 | ) | (166,245 | ) | ||||
Less treasury stock, at cost; 29,990 shares at September 30, 2018 and December 31, 2017 | (96 | ) | (96 | ) | ||||
Total ORBCOMM Inc. stockholders’ equity | 259,620 | 245,663 | ||||||
Noncontrolling interest | 942 | 733 | ||||||
Total equity | 260,562 | 246,396 | ||||||
Total liabilities and equity | $ | 594,223 | $ | 595,194 | ||||
ORBCOMM Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) |
||||||||
Nine Months Ended September 30, | ||||||||
2018 | 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (20,387 | ) | $ | (53,710 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Change in allowance for doubtful accounts | 2,995 | 241 | ||||||
Change in the fair value of acquisition-related contingent consideration | (5,494 | ) | (1,276 | ) | ||||
Amortization and write-off of deferred financing fees | 582 | 2,912 | ||||||
Depreciation and amortization | 36,146 | 34,463 | ||||||
Impairment loss – satellite network | — | 31,224 | ||||||
Stock-based compensation | 5,747 | 4,314 | ||||||
Foreign exchange loss | 64 | 366 | ||||||
Deferred income taxes | (1,847 | ) | 758 | |||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||
Accounts receivable | (14,490 | ) | (18,010 | ) | ||||
Inventories | 5,554 | (11,893 | ) | |||||
Prepaid expenses and other assets | 601 | (4,156 | ) | |||||
Accounts payable and accrued liabilities | (11,493 | ) | 8,929 | |||||
Deferred revenue | 1,687 | (1,106 | ) | |||||
Other liabilities | (595 | ) | (262 | ) | ||||
Net cash used in operating activities | (930 | ) | (7,206 | ) | ||||
Cash flows from investing activities: | ||||||||
Acquisition of business, net of cash acquired | — | (34,236 | ) | |||||
Capital expenditures | (17,163 | ) | (21,410 | ) | ||||
Other | 650 | (650 | ) | |||||
Net cash used in investing activities | (16,513 | ) | (56,296 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from public offering of common stock, net of underwriters’ discounts and commissions and offering costs of $1,705 | 27,967 | — | ||||||
Proceeds from private offering of common stock | — | 15,000 | ||||||
Payment of long-term debt | — | (150,000 | ) | |||||
Proceeds from issuance of long-term debt | — | 250,000 | ||||||
Payments under revolving credit facility | (14,000 | ) | — | |||||
Proceeds under revolving credit facility | 14,000 | ) | — | |||||
Cash paid for debt issuance costs | — | (5,359 | ) | |||||
Proceeds from issuance of common stock under employee stock purchase plan | 668 | 529 | ||||||
Payment of deferred purchase consideration | — | (347 | ) | |||||
Net cash provided by financing activities | 28,635 | 109,823 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (128 | ) | 568 | |||||
Net increase in cash and cash equivalents, including restricted cash of $34,500 at September 30, 2017 | 11,064 | 46,889 | ||||||
Beginning of period | 34,830 | 25,023 | ||||||
End of period | $ | 45,894 | $ | 71,912 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for | ||||||||
Interest | $ | 10,036 | $ | 3,411 | ||||
Income taxes | $ | 3,221 | $ | 508 | ||||
The following table reconciles Net Loss Attributable to
Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||||
Adjustments to EBITDA | ||||||||||||||||||
Net loss attributable to ORBCOMM Inc. | $ | (3,295 | ) | $ | (39,682 | ) | $ | (20,603 | ) | $ | (53,765 | ) | ||||||
Income tax expense | 1,242 | 479 | 3,410 | 1,192 | ||||||||||||||
Interest income | (648 | ) | (266 | ) | (1,576 | ) | (522 | ) | ||||||||||
Interest expense | 5,232 | 5,197 | 15,733 | 12,466 | ||||||||||||||
Depreciation and amortization | 12,081 | 12,041 | 36,146 | 34,463 | ||||||||||||||
Loss on debt extinguishment | — | — | — | 3,868 | ||||||||||||||
EBITDA | $ | 14,612 | $ | (22,231 | ) | $ | 33,110 | $ | (2,298 | ) | ||||||||
Adjustments to Adjusted EBITDA | ||||||||||||||||||
Stock-based compensation | 2,312 | 1,345 | 5,747 | 4,314 | ||||||||||||||
Noncontrolling interests | 73 | 19 | 216 | 55 | ||||||||||||||
Acquisition-related and integration costs | 395 | 800 | 1,495 | 2,290 | ||||||||||||||
Impairment loss – satellite network | — | 31,224 | — | 31,224 | ||||||||||||||
Adjusted EBITDA | $ | 17,392 | $ | 11,157 | $ | 40,568 | $ | 35,585 |
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 equals Adjusted EBITDA divided by Total Revenues.