– GAAP Product Gross Margin Increases 690 Basis Points Over Prior Year –
– GAAP Service Gross Margin 58.6%, Non-GAAP Service Gross Margin Record 69% –
– Cash Flow from Operations of $10 Million –
- October 30, 2019
The following financial highlights are in thousands of dollars and unaudited.
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||
Recurring Service Revenues | $ | 39,161 | $ | 37,192 | $ | 115,196 | $ | 111,010 | ||||||||||||
Other Service Revenues | 1,389 | 1,281 | 4,099 | 3,930 | ||||||||||||||||
Total Service Revenues | 40,550 | 38,473 | 119,295 | 114,940 | ||||||||||||||||
Product Sales | 28,643 | 32,569 | 83,036 | 94,863 | ||||||||||||||||
Total Revenues | 69,193 | 71,042 | 202,331 | 209,803 | ||||||||||||||||
Net Loss Attributable to ORBCOMM Inc. Common Stockholders | (4,025 | ) | (3,295 | ) | (15,934 | ) | (20,614 | ) | ||||||||||||
Basic EPS | (0.05 | ) | (0.04 | ) | (0.20 | ) | (0.27 | ) | ||||||||||||
EBITDA (1,3) | 15,128 | 14,612 | 39,872 | 33,110 | ||||||||||||||||
Adjusted EBITDA (2,3) | $ | 16,939 | $ | 17,392 | $ | 46,242 | $ | 40,568 |
(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.
“In the third quarter we continued to ship greater quantities of the new cost-reduced, feature-rich products and made great progress in significantly raising Product Margin and Service Margin, increasing cash flow from operations,” said
Financial Results
Revenues
Total Revenues for the third quarter of 2019 were
Service Revenues were
Gross Margin (4,5,6)
GAAP Service Gross Margin, inclusive of depreciation and amortization expense, was 58.6% in the third quarter of 2019 compared to 55.7% in the prior year period. Non-GAAP Service Gross Margin, excluding depreciation and amortization expense, was 69.0% in the third quarter of 2019 compared to 66.8% in the prior year period. The year-over-year increase was predominantly due to recurring service revenue growth and reduced costs, and to a lesser degree the acceleration of deferred revenue associated with the
GAAP Product Gross Margin, inclusive of depreciation and amortization expense, was 28.9% in the third quarter of 2019 compared to 22.0% in the prior year period. Non-GAAP Product Gross Margin was 31.4% in the third quarter of 2019 compared to 24.2% in the same period last year. The year-over-year improvements were primarily due to a better mix of higher-margin products shipped in greater volumes this quarter compared to the same quarter in 2018.
Operating Expenses
Operating Expenses for the third quarter of 2019 were
Net Income (Loss) and Earnings Per Share
Net Loss Attributable to
EBITDA and Adjusted EBITDA (3)
EBITDA for the third quarter of 2019 was
Adjusted EBITDA for the third quarter of 2019 was
Balance Sheet & Cash Flow
As of
Outlook (7)
For the fourth quarter of 2019, the Company expects Total Revenues to be between
For the full year 2020, we are providing preliminary guidance as we finalize our budgeting process. The Company expects 10% to 15% Product Revenue growth over the prior year. This projection is based on significant hardware tailwinds, including as much as a
(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 and 2020 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 (
Contacts | |
Investor Inquiries: | Media Inquiries: |
Aly Bonilla | Michelle Ferris |
Vice President, Investor Relations | Senior Director, Corporate Communications |
ORBCOMM Inc. | ORBCOMM Inc. |
703-433-6360 | 703-433-6516 |
bonilla.aly@orbcomm.com | ferris.michelle@orbcomm.com |
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Service revenues | $ | 40,550 | $ | 38,473 | $ | 119,295 | $ | 114,940 | |||||||
Product sales | 28,643 | 32,569 | 83,036 | 94,863 | |||||||||||
Total revenues | 69,193 | 71,042 | 202,331 | 209,803 | |||||||||||
Cost of revenues, exclusive of depreciation and amortization shown below: | |||||||||||||||
Cost of services | 12,568 | 12,764 | 39,123 | 40,704 | |||||||||||
Cost of product sales | 19,640 | 24,679 | 58,275 | 73,363 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative | 18,211 | 14,823 | 52,842 | 51,352 | |||||||||||
Product development | 3,686 | 3,816 | 11,385 | 9,671 | |||||||||||
Depreciation and amortization | 12,794 | 12,081 | 37,998 | 36,146 | |||||||||||
Acquisition-related and integration costs | 4 | 395 | 693 | 1,495 | |||||||||||
Loss from operations | 2,290 | 2,484 | 2,015 | (2,928 | ) | ||||||||||
Other income (expense): | |||||||||||||||
Interest income | 444 | 648 | 1,408 | 1,576 | |||||||||||
Other income (expense) | 188 | 120 | 130 | 108 | |||||||||||
Interest expense | (5,287 | ) | (5,232 | ) | (15,850 | ) | (15,733 | ) | |||||||
Total other expense | (4,655 | ) | (3,464 | ) | (14,312 | ) | (14,049 | ) | |||||||
Loss before income taxes | (2,365 | ) | (1,980 | ) | (12,297 | ) | (16,977 | ) | |||||||
Income taxes | 1,504 | 1,242 | 3,354 | 3,410 | |||||||||||
Net loss | (3,869 | ) | (3,222 | ) | (15,651 | ) | (20,387 | ) | |||||||
Less: Net income attributable to noncontrolling interests | 144 | 73 | 271 | 216 | |||||||||||
Net loss attributable to ORBCOMM Inc. | $ | (4,013 | ) | $ | (3,295 | ) | $ | (15,922 | ) | $ | (20,603 | ) | |||
Net loss attributable to ORBCOMM Inc. common stockholders |
$ | (4,025 | ) | $ | (3,295 | ) | $ | (15,934 | ) | $ | (20,614 | ) | |||
Per share information-basic: | |||||||||||||||
Net loss attributable to ORBCOMM Inc. common stockholders |
$ | (0.05 | ) | $ | (0.04 | ) | $ | (0.20 | ) | $ | (0.27 | ) | |||
Per share information-diluted: | |||||||||||||||
Net loss attributable to ORBCOMM Inc. common stockholders |
$ | (0.05 | ) | $ | (0.04 | ) | $ | (0.20 | ) | $ | (0.27 | ) | |||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 79,695 | 78,649 | 79,591 | 77,158 | |||||||||||
Diluted | 79,695 | 78,649 | 79,591 | 77,158 | |||||||||||
Condensed Consolidated Balance Sheets
(In thousands, except par value and share data)
September 30, 2019 |
December 31, 2018 |
|||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 50,904 | $ | 53,766 | ||||
Accounts receivable, net of allowances for doubtful accounts of $4,334 and $4,072, respectively | 61,563 | 57,665 | ||||||
Inventories | 38,224 | 34,300 | ||||||
Prepaid expenses and other current assets | 19,314 | 15,553 | ||||||
Total current assets | 170,005 | 161,284 | ||||||
Satellite network and other equipment, net | 149,769 | 160,070 | ||||||
Goodwill | 166,129 | 166,129 | ||||||
Intangible assets, net | 76,529 | 86,264 | ||||||
Other assets | 25,153 | 12,603 | ||||||
Deferred income taxes | 127 | 109 | ||||||
Total assets | $ | 587,712 | $ | 586,459 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 17,395 | $ | 15,527 | ||||
Accrued liabilities | 41,754 | 35,735 | ||||||
Current portion of deferred revenue | 2,308 | 5,954 | ||||||
Total current liabilities | 61,457 | 57,216 | ||||||
Note payable – related party | 1,241 | 1,298 | ||||||
Notes payable, net of unamortized deferred issuance costs | 246,489 | 245,907 | ||||||
Deferred revenue, net of current portion | 8,771 | 5,471 | ||||||
Deferred tax liabilities | 15,012 | 16,109 | ||||||
Other liabilities | 14,162 | 2,600 | ||||||
Total liabilities | 347,132 | 328,601 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
ORBCOMM Inc. stockholders’ equity | ||||||||
Series A Convertible Preferred Stock, par value $0.001; 1,000,000 shares authorized; 40,624 and 39,442 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively | 406 | 394 | ||||||
Common stock, par value $0.001; 250,000,000 shares authorized; 78,286,252 and 79,008,243 shares issued at September 30, 2019 and December 31, 2018, respectively | 78 | 79 | ||||||
Additional paid-in capital | 448,833 | 449,343 | ||||||
Accumulated other comprehensive loss | (1,132 | ) | (381 | ) | ||||
Accumulated deficit | (208,441 | ) | (192,507 | ) | ||||
Less treasury stock, at cost; 98,276 and 29,990 shares at September 30, 2019 and December 31, 2018, respectively | (433 | ) | (96 | ) | ||||
Total ORBCOMM Inc. stockholders’ equity | 239,311 | 256,832 | ||||||
Noncontrolling interests | 1,269 | 1,026 | ||||||
Total equity | 240,580 | 257,858 | ||||||
Total liabilities and equity | $ | 587,712 | $ | 586,459 | ||||
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (15,651 | ) | $ | (20,387 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Change in allowance for doubtful accounts | 1,766 | 2,995 | ||||||
Change in the fair value of acquisition-related contingent consideration | (2,063 | ) | (5,494 | ) | ||||
Amortization and write-off of deferred financing fees | 582 | 582 | ||||||
Depreciation and amortization | 37,998 | 36,146 | ||||||
Stock-based compensation | 5,406 | 5,747 | ||||||
Foreign exchange (gain) loss | (194 | ) | 64 | |||||
Deferred income taxes | (1,097 | ) | (1,847 | ) | ||||
Other | 1,971 | — | ||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||
Accounts receivable | (5,972 | ) | (14,490 | ) | ||||
Inventories | (3,973 | ) | 5,554 | |||||
Prepaid expenses and other assets | (3,338 | ) | 601 | |||||
Accounts payable and accrued liabilities | 6,960 | (11,493 | ) | |||||
Deferred revenue | (348 | ) | 1,687 | |||||
Other liabilities | (1,246 | ) | (595 | ) | ||||
Net cash provided by (used in) operating activities | 20,801 | (930 | ) | |||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (16,234 | ) | (17,163 | ) | ||||
Other | — | 650 | ||||||
Net cash used in investing activities | (16,234 | ) | (16,513 | ) | ||||
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 | ||||||
Payments under revolving credit facility | — | (14,000 | ) | |||||
Proceeds under revolving credit facility | — | 14,000 | ||||||
Proceeds from issuance of common stock under employee stock purchase plan | 604 | 668 | ||||||
Purchases of common stock under share repurchase program | (7,875 | ) | — | |||||
Net cash (used in) provided by financing activities | (7,271 | ) | 28,635 | |||||
Effect of exchange rate changes on cash and cash equivalents | (158 | ) | (128 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (2,862 | ) | 11,064 | |||||
Beginning of period | 53,766 | 34,830 | ||||||
End of period | $ | 50,904 | $ | 45,894 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for: | ||||||||
Interest | $ | 10,000 | $ | 10,036 | ||||
Income taxes | $ | 2,439 | $ | 3,221 | ||||
The following table reconciles Net Loss Attributable to
Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
(In thousands) | 2019 | 2018 | 2019 | 2018 | ||||||||||||||
Adjustments to EBITDA | ||||||||||||||||||
Net loss attributable to ORBCOMM Inc. | $ | (4,013 | ) | $ | (3,295 | ) | $ | (15,922 | ) | $ | (20,603 | ) | ||||||
Income tax expense | 1,504 | 1,242 | 3,354 | 3,410 | ||||||||||||||
Interest income | (444 | ) | (648 | ) | (1,408 | ) | (1,576 | ) | ||||||||||
Interest expense | 5,287 | 5,232 | 15,850 | 15,733 | ||||||||||||||
Depreciation and amortization | 12,794 | 12,081 | 37,998 | 36,146 | ||||||||||||||
EBITDA | $ | 15,128 | $ | 14,612 | $ | 39,872 | $ | 33,110 | ||||||||||
Adjustments to Adjusted EBITDA | ||||||||||||||||||
Stock-based compensation | 1,663 | 2,312 | 5,406 | 5,747 | ||||||||||||||
Noncontrolling interests | 144 | 73 | 271 | 216 | ||||||||||||||
Acquisition-related and integration costs | 4 | 395 | 693 | 1,495 | ||||||||||||||
Adjusted EBITDA | $ | 16,939 | $ | 17,392 | $ | 46,242 | $ | 40,568 |
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 | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
(In thousands, except margin data and unaudited) | 2019 | 2018 | 2019 | 2018 | ||||||||||||||
Service revenue | $ | 40,550 | $ | 38,473 | $ | 119,295 | $ | 114,940 | ||||||||||
Minus – Cost of services, including depreciation and amortization expense | 16,804 | 17,059 | 51,858 | 53,576 | ||||||||||||||
GAAP Service gross profit | $ | 23,746 | $ | 21,414 | $ | 67,437 | $ | 61,364 | ||||||||||
Plus – Depreciation and amortization expense | 4,236 | 4,295 | 12,735 | 12,872 | ||||||||||||||
Non-GAAP Service gross profit | $ | 27,982 | $ | 25,706 | $ | 80,172 | $ | 74,236 | ||||||||||
GAAP Service gross margin | 58.6% | 55.7% | 56.5% | 53.4% | ||||||||||||||
Non-GAAP Service gross margin | 69.0% | 66.8% | 67.2% | 64.6% |
Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
(In thousands, except margin data and unaudited) | 2019 | 2018 | 2019 | 2018 | ||||||||||||||
Product sales | $ | 28,643 | $ | 32,569 | $ | 83,036 | $ | 94,863 | ||||||||||
Minus – Cost of product, including depreciation and amortization expense | 20,352 | 25,414 | 60,385 | 75,887 | ||||||||||||||
GAAP Product gross profit | $ | 8,291 | $ | 7,155 | $ | 22,651 | $ | 18,976 | ||||||||||
Plus – Depreciation and amortization expense | 712 | 735 | 2,110 | 2,524 | ||||||||||||||
Non-GAAP Product gross profit | $ | 9,003 | $ | 7,890 | $ | 24,761 | $ | 21,500 | ||||||||||
GAAP Product gross margin | 28.9% | 22.0% | 27.3% | 20.0% | ||||||||||||||
Non-GAAP Product gross margin | 31.4% | 24.2% | 29.8% | 22.7% |
The Company’s outlook for 2019 and 2020 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.
Source: ORBCOMM Inc.