– Q4 2019 Total Revenues of $69.7 Million, Up 5% Over Prior Year –
– Q4 2019 Recurring Service Revenues of $40.1 Million, Up 7.3% Versus Last Year –
– 2019 Cash Flow from Operations Increases $18.6 Million Over Prior Year –
- February 26, 2020
The following financial highlights are in thousands of dollars and unaudited.
Three Months Ended | Twelve Months Ended | ||||||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||||||
Recurring Service Revenues | $ | 40,087 | $ | 37,357 | $ | 155,284 | $ | 148,367 | |||||||||||
Other Service Revenues | 1,211 | 1,292 | 5,310 | 5,222 | |||||||||||||||
Total Service Revenues | 41,299 | 38,649 | 160,594 | 153,589 | |||||||||||||||
Product Sales | 28,383 | 27,688 | 111,419 | 122,551 | |||||||||||||||
Total Revenues | 69,682 | 66,337 | 272,013 | 276,140 | |||||||||||||||
Net Loss Attributable to |
(26,262 | ) | |||||||||||||||||
Common Stockholders | (2,501 | ) | (5,649 | ) | (18,435 | ) | |||||||||||||
Basic EPS | (0.03 | ) | (0.07 | ) | (0.23 | ) | (0.34 | ) | |||||||||||
EBITDA (1) | 15,982 | 14,125 | 55,854 | 47,235 | |||||||||||||||
Adjusted EBITDA (1) | $ | 16,871 | $ | 16,506 | $ | 63,113 | $ | 57,074 |
(1) Non-GAAP financial measure. See “Non-GAAP Financial Measures” for a reconciliation of GAAP to Non-GAAP financial measures included with the financial tables at the end of this release.
“In the fourth quarter, we’re pleased with our progress in growing revenues and gross margins in both service and product, leading to strong Adjusted EBITDA and significant cash flow generation,” said
Financial Results
Revenues
Total Revenues for the fourth quarter of 2019 were
Service Revenues were
Product Sales were
Gross Margin (1)
GAAP Service Gross Margin, inclusive of depreciation and amortization expense, was 57.9% in the fourth quarter of 2019 compared to 56.7% in the prior year period. Non-GAAP Service Gross Margin, excluding depreciation and amortization expense, was 68.2% in the fourth quarter of 2019 compared to 67.7% 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 expired AT&T contract. For the full-year 2019, Non-GAAP Service Gross Margin was 67.5%, a 210 basis point improvement over 2018.
GAAP Product Gross Margin, inclusive of depreciation and amortization expense, was 27.3% in the fourth quarter of 2019 compared to 24.9% in the prior year period. Non-GAAP Product Gross Margin, excluding depreciation and amortization expense, was 29.2% in the fourth quarter of 2019 compared to 27.5% in the same period last year. The year-over-year improvement was primarily due to a higher mix of new cost-reduced products shipped in greater volumes this quarter compared to the same quarter in 2018. For the full-year 2019, Non-GAAP Product Gross Margin was 29.7%, a 590 basis point improvement over 2018.
Operating Expenses
Operating Expenses for the fourth quarter of 2019 were
Net Income (Loss) and Earnings Per Share
Net Loss Attributable to
EBITDA and Adjusted EBITDA (1)
EBITDA for the fourth quarter of 2019 was
Adjusted EBITDA for the fourth quarter of 2019 was
For the full-year 2019, the Company achieved record Adjusted EBITDA of
Balance Sheet & Cash Flow
As of
For the full-year 2019, Cash Flow from Operations was
2020 Outlook (2)
For the first quarter of 2020, the Company expects Total Revenues to be similar to the prior year, which was
The Company provides the following outlook for the full year listed in the table below.
Projected Outlook | FY 2020 |
Total Revenue Growth | 5% - 8% |
Recurring Service Revenue Growth | 2% - 4% |
Product Sales Growth | 7% - 15% |
Service Gross Margin | 67% - 68% |
Product Gross Margin | 29% - 31% |
Adjusted EBITDA Margin | 23.5% - 24% |
Cash Flow from Operations | Approximately |
On the conference call, the Company will discuss the 2020 outlook in greater detail.
(2) The Company’s outlook for 2020 includes non-GAAP measures, such as Adjusted EBITDA and Adjusted EBITDA Margin, 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: |
Vice President, Investor Relations | Senior Director, Corporate Communications |
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, |
||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Service revenues | $ | 41,299 | $ | 38,649 | $ | 160,594 | $ | 153,589 | |||||||
Product sales | 28,383 | 27,688 | 111,419 | 122,551 | |||||||||||
Total revenues | 69,682 | 66,337 | 272,013 | 276,140 | |||||||||||
Cost of revenues, exclusive of depreciation and amortization | |||||||||||||||
shown below: | |||||||||||||||
Cost of services | 13,141 | 12,480 | 52,264 | 53,184 | |||||||||||
Cost of product sales | 20,102 | 20,081 | 78,377 | 93,444 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative | 16,748 | 15,636 | 69,590 | 66,988 | |||||||||||
Product development | 3,335 | 3,734 | 14,720 | 13,405 | |||||||||||
Depreciation and amortization | 12,704 | 13,538 | 50,702 | 49,684 | |||||||||||
Acquisition-related and integration costs | 95 | 129 | 788 | 1,624 | |||||||||||
Income (loss) from operations | 3,557 | 739 | 5,572 | (2,189 | ) | ||||||||||
Other (expense) income: | |||||||||||||||
Interest income | 549 | 342 | 1,957 | 1,918 | |||||||||||
Other income (expense) | (259 | ) | (63 | ) | (129 | ) | 45 | ||||||||
Interest expense | (5,299 | ) | (5,322 | ) | (21,149 | ) | (21,055 | ) | |||||||
Total other expense | (5,009 | ) | (5,043 | ) | (19,321 | ) | (19,092 | ) | |||||||
Loss before income taxes | (1,452 | ) | (4,304 | ) | (13,749 | ) | (21,281 | ) | |||||||
Income taxes | 1,029 | 1,248 | 4,383 | 4,658 | |||||||||||
Net loss | (2,481 | ) | (5,552 | ) | (18,132 | ) | (25,939 | ) | |||||||
Less: Net income attributable to the noncontrolling interests | 20 | 89 | 291 | 305 | |||||||||||
Net loss attributable to |
$ | (2,501 | ) | $ | (5,641 | ) | $ | (18,423 | ) | $ | (26,244 | ) | |||
Net loss attributable to common stockholders |
$ | (2,501 | ) | $ | (5,649 | ) | $ | (18,435 | ) | $ | (26,262 | ) | |||
Per share information-basic: | |||||||||||||||
Net loss attributable to common stockholders |
$ | (0.03 | ) | $ | (0.07 | ) | $ | (0.23 | ) | $ | (0.34 | ) | |||
Per share information-diluted: | |||||||||||||||
Net loss attributable to common stockholders |
$ | (0.03 | ) | $ | (0.07 | ) | $ | (0.23 | ) | $ | (0.34 | ) | |||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 78,275 | 78,895 | 79,259 | 77,603 | |||||||||||
Diluted | 78,275 | 78,895 | 79,259 | 77,603 |
Consolidated Balance Sheets
(In thousands, except par value and share data)
(Unaudited)
2019 | 2018 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 54,258 | $ | 53,766 | ||||
Accounts receivable, net of allowances for doubtful accounts of |
||||||||
60,595 | 57,665 | |||||||
Inventories | 39,881 | 34,300 | ||||||
Prepaid expenses and other current assets | 18,003 | 15,553 | ||||||
Total current assets | 172,737 | 161,284 | ||||||
Satellite network and other equipment, net | 145,553 | 160,070 | ||||||
166,129 | 166,129 | |||||||
Intangible assets, net | 73,280 | 86,264 | ||||||
Other assets | 23,149 | 12,603 | ||||||
Deferred income taxes | 132 | 109 | ||||||
Total assets | $ | 580,980 | $ | 586,459 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 16,722 | $ | 15,527 | ||||
Accrued liabilities | 36,951 | 35,735 | ||||||
Current portion of deferred revenue | 3,865 | 5,954 | ||||||
Total current liabilities | 57,538 | 57,216 | ||||||
Note payable – related party | 1,275 | 1,298 | ||||||
Notes payable, net of unamortized deferred issuance costs | 246,683 | 245,907 | ||||||
Deferred revenue, net of current portion | 6,771 | 5,471 | ||||||
Deferred tax liabilities | 14,894 | 16,109 | ||||||
Other liabilities | 16,303 | 2,600 | ||||||
Total liabilities | 343,464 | 328,601 | ||||||
Commitments and contingencies | ||||||||
Equity: | ||||||||
Series A Convertible Preferred Stock, par value |
||||||||
authorized; 40,624 and 39,442 shares issued and outstanding at |
||||||||
2019 and |
406 | 394 | ||||||
Common stock, par value |
||||||||
79,008,243 shares issued at |
||||||||
respectively | 78 | 79 | ||||||
Additional paid-in capital | 447,681 | 449,343 | ||||||
Accumulated other comprehensive loss | (1,013 | ) | (381 | ) | ||||
Accumulated deficit | (210,942 | ) | (192,507 | ) | ||||
Less treasury stock, at cost; 29,990 shares at |
— | (96 | ) | |||||
236,210 | 256,832 | |||||||
Noncontrolling interests | 1,306 | 1,026 | ||||||
Total equity | 237,516 | 257,858 | ||||||
Total liabilities and equity | $ | 580,980 | $ | 586,459 |
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Twelve Months Ended |
||||||||
2019 | 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (18,132 | ) | $ | (25,939 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Change in allowance for doubtful accounts | 2,008 | 3,426 | ||||||
Depreciation and amortization | 50,702 | 49,684 | ||||||
Change in the fair values of acquisition-related contingent consideration | (2,063 | ) | (8,035 | ) | ||||
Amortization and write-off of deferred debt fees | 776 | 776 | ||||||
Stock-based compensation | 6,180 | 7,910 | ||||||
Foreign exchange (gain) loss | (143 | ) | 59 | |||||
Deferred income taxes | (1,213 | ) | (1,491 | ) | ||||
Other | 2,240 | — | ||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||
Accounts receivable | (5,156 | ) | (14,040 | ) | ||||
Inventories | (5,607 | ) | 8,277 | |||||
Prepaid expenses and other assets | 2,432 | 3,994 | ||||||
Accounts payable and accrued liabilities | 1,093 | (14,876 | ) | |||||
Deferred revenue | (783 | ) | 2,708 | |||||
Other liabilities | (2,250 | ) | (999 | ) | ||||
Net cash provided by operating activities | 30,084 | 11,454 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (21,067 | ) | (22,198 | ) | ||||
Other | — | 650 | ||||||
Net cash used in investing activities | (21,067 | ) | (21,548 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of common stock | — | 27,967 | ||||||
Payments under revolving credit facility | — | (14,000 | ) | |||||
Proceeds from revolving credit facility | — | 14,000 | ||||||
Proceeds received from employee stock purchase plan | 1,076 | 1,194 | ||||||
Purchases of common stock under share repurchase program | (9,444 | ) | — | |||||
Net cash (used in) provided by financing activities | (8,368 | ) | 29,161 | |||||
Effect of exchange rate changes on cash and cash equivalents | (157 | ) | (131 | ) | ||||
Net increase in cash and cash equivalents | 492 | 18,936 | ||||||
Beginning of year | 53,766 | 34,830 | ||||||
End of year | $ | 54,258 | $ | 53,766 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for: | ||||||||
Interest | $ | 20,000 | $ | 20,036 | ||||
Income taxes | $ | 4,810 | $ | 5,532 |
Non-GAAP Financial Measures
The following table reconciles Net Loss Attributable to
Three Months Ended | Twelve Months Ended | ||||||||||||||||||
(In thousands and unaudited) | 2019 | 2018 | 2019 | 2018 | |||||||||||||||
Adjustments for EBITDA | |||||||||||||||||||
Net loss attributable to |
$ | (2,501 | ) | $ | (5,641 | ) | $ | (18,423 | ) | $ | (26,244 | ) | |||||||
Income tax expense | 1,029 | 1,248 | 4,383 | 4,658 | |||||||||||||||
Interest income | (549 | ) | (342 | ) | (1,957 | ) | (1,918 | ) | |||||||||||
Interest expense | 5,299 | 5,322 | 21,149 | 21,055 | |||||||||||||||
Depreciation and amortization | 12,704 | 13,538 | 50,702 | 49,684 | |||||||||||||||
EBITDA | $ | 15,982 | $ | 14,125 | $ | 55,854 | $ | 47,235 | |||||||||||
Adjustments for Adjusted EBITDA | |||||||||||||||||||
Stock-based compensation | 774 | 2,163 | 6,180 | 7,910 | |||||||||||||||
Net income attributable to the noncontrolling interests | 20 | 89 | 291 | 305 | |||||||||||||||
Acquisition-related and integration costs | 95 | 129 | 788 | 1,624 | |||||||||||||||
Adjusted EBITDA | $ | 16,871 | $ | 16,506 | $ | 63,113 | $ | 57,074 |
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 |
Twelve Months Ended | ||||||||||||||||
(In thousands, except margin data) | 2019 | 2018 | 2019 | 2018 | |||||||||||||
Service revenue | $ | 41,299 | $ | 38,649 | $ | 160,594 | $ | 153,589 | |||||||||
Minus – Cost of services, including depreciation and | |||||||||||||||||
amortization expense | 17,392 | 16,736 | 69,250 | 70,312 | |||||||||||||
GAAP Service gross profit | $ | 23,907 | $ | 21,913 | $ | 91,344 | $ | 83,277 | |||||||||
Plus – Depreciation and amortization expense | 4,251 | 4,256 | 16,986 | 17,128 | |||||||||||||
Non-GAAP Service gross profit | $ | 28,158 | $ | 26,169 | $ | 108,330 | $ | 100,405 | |||||||||
GAAP Service gross margin | 57.9% | 56.7% | 56.9% | 54.2% | |||||||||||||
Non-GAAP Service gross margin | 68.2% | 67.7% | 67.5% | 65.4% |
Three Months Ended | Twelve Months Ended | ||||||||||||||||
(In thousands, except margin data) | 2019 | 2018 | 2019 | 2018 | |||||||||||||
Product sales | $ | 28,383 | $ | 27,688 | $ | 111,419 | $ | 122,551 | |||||||||
Minus – Cost of product, including depreciation and | | ||||||||||||||||
amortization expense | 20,621 | 20,799 | 81,006 | 96,686 | |||||||||||||
GAAP Product gross profit | $ | 7,762 | $ | 6,889 | $ | 30,413 | $ | 25,865 | |||||||||
Plus – Depreciation and amortization expense | 519 | 718 | 2,629 | 3,242 | |||||||||||||
Non-GAAP Product gross profit | $ | 8,281 | $ | 7,607 | $ | 33,042 | $ | 29,107 | |||||||||
GAAP Product gross margin | 27.3% | 24.9% | 27.3% | 21.1% | |||||||||||||
Non-GAAP Product gross margin | 29.2% | 27.5% | 29.7% | 23.8% |
The Company’s outlook for 2020 includes non-GAAP measures, such as 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 forward-looking non-GAAP 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.