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ORBCOMM Announces Second Quarter 2021 Results

– Total Revenues of $65.9 Million, Up 16% from Prior Year Period –
– 90,000 Devices Shipped Drives Product Sales Growth –
– Product Sales of $28.4 Million, Up 55% from Prior Year Period –

Rochelle Park, NJ, August 3, 2021 - ORBCOMM Inc. (NASDAQ: ORBC), a global provider of Internet of Things (IoT) solutions, today announced financial results for the second quarter ended June 30, 2021.

The following financial highlights are in thousands of dollars and unaudited.

Three Months Ended Six Months Ended
June 30, June 30,
2021 2020 2021 2020
Recurring Service Revenues $ 36,355 $ 37,006 $ 72,596 $ 76,859
Other Service Revenues 1,187 1,423 2,696 2,094
Total Service Revenues 37,542 38,429 75,292 78,953
Product Sales 28,386 18,303 54,331 43,958
Total Revenues 65,928 56,732 129,623 122,911
Net Loss Attributable to ORBCOMM Inc.
Common Stockholders
(7,658 ) (6,670 ) (18,232 ) (13,645 )
Basic EPS (0.10 ) (0.09 ) (0.23 ) (0.17 )
EBITDA (1) 6,890 10,330 11,214 22,102
Adjusted EBITDA (1) $ 11,062 $ 11,941 $ 24,562 $ 25,621

(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.

“We’re pleased with our revenues returning to pre-pandemic levels and Product Sales growing significantly compared to the prior year period. We shipped 90 thousand devices in the quarter despite a challenging environment due to the continued global component shortage, which resulted in higher product costs impacting product margins. Demand for our products remains strong, and we enter Q3 with a robust pipeline of orders,” said Marc Eisenberg, ORBCOMM’s Chief Executive Officer. “We are still on track to close the transaction with GI Partners in the second half of 2021, pending receipt of the remaining regulatory approvals, which are proceeding as anticipated.”

Financial Results

Revenues

Total Revenues for the second quarter of 2021 were $65.9 million compared to $56.7 million in the prior year period.

Service Revenues were $37.5 million in the second quarter of 2021 compared to $38.4 million in the same period last year. Recurring Service Revenues were $36.4 million in the second quarter of 2021 compared to $37.0 million in the prior year period. Other Service Revenues, comprised of installation services, professional services, and software licenses, were $1.2 million in the quarter. The Company added over 60,000 net billable subscribers in the second quarter bringing the total billable subscriber communicators to approximately 2.34 million as of June 30, 2021. We expect Service Revenues to recover and trend higher based on the increasing levels of hardware shipments and subsequent subscriber growth.

Product Sales were $28.4 million in the second quarter of 2021, an increase of 55.1% compared to the prior year period and up 9.4% sequentially from the first quarter of 2021 as hardware shipments to customers continued to improve.

Gross Margin ( 1 )

GAAP Service Gross Margin, inclusive of depreciation and amortization expense, was 55.6% in the second quarter of 2021 compared to 56.4% in the prior year period. Non-GAAP Service Gross Margin, excluding depreciation and amortization expense, was 66.0% in the second quarter of 2021 compared to 67.3% in the prior year period. The year-over-year decline was primarily due to $0.9 million of non-recurring low margin installation service revenue recognized in the second quarter of 2021 compared to $0.2 million of installation service revenue in the prior year period.

GAAP Product Gross Margin, inclusive of depreciation and amortization expense, was 19.3% in the second quarter of 2021 compared to 25.0% in the prior year period. Non-GAAP Product Gross Margin, excluding depreciation and amortization expense, was 20.6% in the second quarter of 2021 compared to 27.8% in the same period last year. The year-over-year decline was largely due to higher component costs as a result of the global electronic component supply shortage and higher shipping costs, and to a lesser extent a mix of lower margin Product sales. We expect this component shortage pressure to ease over the upcoming quarters and product margins to return to normalized levels.

Operating Expenses

Operating Expenses for the second quarter of 2021 were $35.3 million compared to $32.8 million for the same period in 2020. The $2.5 million year-over-year increase was primarily due to Acquisition-related costs of $2.7 million in the second quarter of 2021, compared to $0.1 million in the prior year period. Excluding the Acquisition-related costs, operating expenses improved $0.1 million compared to the prior year period.

Net Income (Loss) and Earnings Per Share ( 1 )

Net Loss Attributable to ORBCOMM Inc. Common Stockholders for the second quarter of 2021 was $7.7 million, or $0.10 per share, compared to a Net Loss Attributable to ORBCOMM Inc. Common Stockholders of $6.7 million, or $0.09 per share in the second quarter of 2020. Excluding the Acquisition-related costs, Adjusted Net Loss Attributable to ORBCOMM Inc. Common Stockholders for the second quarter of 2021 was $5.0 million, or $0.06 per share.

EBITDA and Adjusted EBITDA ( 1 )

EBITDA for the second quarter of 2021 was $6.9 million compared to $10.3 million in the prior year period. This was predominantly driven by Acquisition-related costs relating to the merger with GI Partners that were recorded in this year’s quarter.

Adjusted EBITDA for the second quarter of 2021 was $11.1 million compared to $11.9 million in the prior year period. The Company’s Adjusted EBITDA Margin decreased to 16.8% in the second quarter of 2021, a decrease of 420 basis points over the prior year on a comparable basis driven largely by lower Product margins and a higher mix of Product revenues compared to Service revenues.

Balance Sheet & Cash Flow

As of June 30, 2021, Cash and Cash Equivalents totaled $29.6 million and Debt outstanding totaled $205.0 million, a $45.0 million decrease from June 30, 2020. Cash Flow from Operations for the first six months of 2021 totaled $16.6 million and Capital Expenditures were $12.6 million in the quarter, inclusive of $2.4 million associated with subscription model investments.

Proposed Merger Agreement

The transaction is expected to close in the second half of 2021 following the satisfaction of customary closing conditions, including the receipt of required regulatory approvals. The waiting period under the Hart-Scott-Rodino Act expired at 11:59 p.m. EST on June 14, 2021. Various other regulatory approvals – including CFIUS approval, approval by the FCC and certain applicable foreign telecommunications regulatory entities, and approvals from applicable investment and national security regulatory entities in foreign jurisdictions – remain in process. These are proceeding as anticipated, and we continue to expect the remaining approvals to be granted sometime in the second half of 2021. ORBCOMM’s shareholders approved the merger on July 8, 2021. Additional information, including the definitive merger agreement filed and the proxy statement filed with the Securities and Exchange Commission in connection with the vote of ORBCOMM’s shareholders, are available in the Investors section of the Company’s website at http://investors.orbcomm.com.

ORBCOMM WILL NOT HOST A SECOND QUARTER 2021 EARNINGS CONFERENCE CALL OR PROVIDE A FINANCIAL OUTLOOK.

About ORBCOMM Inc.

ORBCOMM (Nasdaq: ORBC) is a global leader and innovator in the industrial Internet of Things industry, providing solutions that connect businesses to their assets to deliver increased visibility and operational efficiency. The Company offers a broad set of asset monitoring and control solutions, including seamless satellite and cellular connectivity, unique hardware, and powerful applications, all backed by end-to-end customer support, from installation to deployment to customer care. ORBCOMM has a diverse customer base including premier OEMs, solutions customers and channel partners spanning transportation, supply chain, warehousing and inventory, heavy equipment, maritime, natural resources, and government. For more information, visit www.orbcomm.com.

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. With respect to the business and operations of ORBCOMM, 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 (Market Channel Partners (“MCPs”)) to develop, market and sell our products and services, especially in markets outside the United States; substantial losses we have incurred and may continue to incur; substantial competition in the telecommunications, Automatic Identification Service (“AIS”) data and industrial Internet of Things (“IoT”) industries; the inability to effect suitable investments, alliances and acquisitions or the inability to successfully integrate acquired businesses and systems; defects, errors or other insufficiencies in our products or services; failure to meet minimum service level commitments to certain of our customers; our dependence on significant customers for a substantial portion of our revenues, including key customers such as JB Hunt Transport Services, Inc., Caterpillar Inc., Komatsu Ltd., Carrier Corporation and Satlink S.L.; our ability to expand our business outside the United States and risks related to the economic, political and other conditions in foreign countries in which we do business; unanticipated domestic or foreign tax or fee liabilities; the possibility we will be required to collect certain taxes in jurisdictions where we have not historically done so; economic, political and other conditions; extreme events such as man-made or natural disasters, earthquakes, severe weather or other climate change-related events; our dependence on a limited number of manufacturers for many of our products and services; interruptions, discontinuations, slowdown or loss of the supply of subscriber communicators from our vendor Sanmina Corporation; legal proceedings; our reliance on intellectual property; increased regulatory restrictions and oversight; lack of in-orbit or other insurance for our ORBCOMM Generation 1 or ORBCOMM Generation 2 satellites; our reliance on third-party wireless network service providers to deliver existing and developing services in certain areas of our business; significant interruptions, discontinuation or loss of services provided by Inmarsat plc; risks related to the novel coronavirus (“COVID-19”) pandemic; inaccurate estimates in accounting or incorrect financial assumptions; significant operating risks related to our satellites due to various types of potential anomalies and potential impacts of space debris or other spacecrafts; the failure of our systems or reductions in levels of service due to technological malfunctions or deficiencies or other events outside of our control; difficulty upgrading or replacing aging hardware and software we use in operating our gateway earth stations and our customers’ subscriber communicators; technical or other difficulties with our gateway earth stations; security risks related to our networks, data processing systems and software systems and those of our third-party service providers; liabilities or additional costs as a result of laws, governmental regulations and evolving views of personal privacy rights; failure of our information technology systems; cybersecurity risks; the level of our indebtedness and the terms of the credit agreement for our $200.0 million term loan facility and our $50.0 million revolving credit facility, that could restrict our business activities or our ability to execute our strategic objectives or adversely affect our financial performance; risks related to an investment in our common stock, including volatility due to our quarterly performance; and the other risks described in our filings with the Securities and Exchange Commission (“SEC”). With respect to our pending merger transaction with GI Partners, these risks and uncertainties include but are not limited to: the risk that the merger transaction may not be consummated in a timely manner, if at all; the risk that the merger transaction may not be consummated as a result of buyer’s failure to comply with its covenants and that, in certain circumstances, we may not be entitled to a termination fee; the risk that the definitive merger agreement may be terminated in circumstances that require us to pay the buyer a termination fee; risks related to the diversion of management’s attention from our ongoing business operations; risks regarding the failure of the buyer to obtain the necessary financing to complete the merger transaction; the effect of the announcement of the merger transaction on our business relationships (including, without limitation, customers), operating results and business generally; risks related to obtaining the requisite consents to the merger transaction, including, without limitation, the timing (including possible delays) and receipt of regulatory approvals from governmental entities (including any conditions, limitations or restrictions placed on these approvals); and the risk that one or more governmental entities may deny approval. For more detail on these and other risks, please see our Annual Report on Form 10-K for the year ended December 31, 2020, and other documents we file with the SEC. We undertake no obligation to publicly revise any forward-looking statements or cautionary factors, except as required by law.

Contact

Media Inquiries:
Michelle Ferris
Senior Director, Corporate Communications
ORBCOMM Inc.
703-462-3894
ferris.michelle@orbcomm.com


ORBCOMM Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Revenues:
Service revenues $ 37,542 $ 38,429 $ 75,292 $ 78,953
Product sales 28,386 18,303 54,331 43,958
Total revenues 65,928 56,732 129,623 122,911
Cost of revenues, exclusive of depreciation and amortization
shown below:
Cost of services 12,783 12,559 25,469 25,640
Cost of product sales 22,525 13,211 42,135 30,492
Operating expenses:
Selling, general and administrative 17,706 17,474 34,971 37,204
Product development 3,218 2,784 6,609 6,604
Depreciation and amortization 11,728 12,409 23,960 25,773
Impairment loss - satellite network 6,656
Acquisition-related and integration costs 2,653 111 3,241 202
Loss from operations (4,685 ) (1,816 ) (13,418 ) (3,004 )
Other income (expense):
Interest income 167 265 404 681
Other (expense) income (121 ) (234 ) 875 (500 )
Interest expense (2,192 ) (5,410 ) (4,420 ) (10,656 )
Total other expense (2,146 ) (5,379 ) (3,141 ) (10,475 )
Loss before income taxes (6,831 ) (7,195 ) (16,559 ) (13,479 )
Income tax expense (benefit) 778 (554 ) 1,441 (1 )
Net loss (7,609 ) (6,641 ) (18,000 ) (13,478 )
Less: Net income attributable to noncontrolling
interests
32 29 203 167
Net loss attributable to ORBCOMM Inc. $ (7,641 ) $ (6,670 ) $ (18,203 ) $ (13,645 )
Net loss attributable to ORBCOMM Inc.
common stockholders
$ (7,658 ) $ (6,670 ) $ (18,232 ) $ (13,645 )
Per share information-basic:
Net loss attributable to ORBCOMM Inc.
common stockholders
$ (0.10 ) $ (0.09 ) $ (0.23 ) $ (0.17 )
Per share information-diluted:
Net loss attributable to ORBCOMM Inc.
common stockholders
$ (0.10 ) $ (0.09 ) $ (0.23 ) $ (0.17 )
Weighted average common shares outstanding:
Basic 79,547 78,071 79,311 78,192
Diluted 79,547 78,071 79,311 78,192


ORBCOMM Inc.
Condensed Consolidated Balance Sheets
(In thousands, except par value and share data)
June 30,
2021 December 31,
(Unaudited) 2020
ASSETS
Current assets:
Cash and cash equivalents $ 29,646 $ 40,384
Accounts receivable, net of allowance for doubtful accounts of $7,041
and $8,209, respectively
48,627 51,199
Inventories 26,283 29,987
Prepaid expenses and other current assets 15,303 14,592
Total current assets 119,859 136,162
Satellite network and other equipment, net 116,254 127,537
Goodwill 166,129 166,129
Intangible assets, net 54,336 60,559
Other assets 21,722 20,200
Deferred income taxes 256 258
Total assets $ 478,556 $ 510,845
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 15,588 $ 14,323
Accrued liabilities 29,012 31,907
Current portion of notes payable 12,500 10,000
Current portion of deferred revenue 5,470 5,238
Total current liabilities 62,570 61,468
Note payable - related party 1,352 1,400
Notes payable, net of unamortized deferred issuance costs 189,713 206,897
Deferred revenue, net of current portion 4,636 4,158
Deferred tax liabilities 12,731 13,413
Other liabilities 13,729 14,094
Total liabilities 284,731 301,430
Commitments and contingencies
Equity:
ORBCOMM Inc. stockholders' equity
Series A Convertible Preferred Stock, par value $0.001; 1,000,000 shares
authorized; 43,530 and 40,624 shares issued and outstanding at
June 30, 2021 and December 31, 2020, respectively
435 406
Common stock, par value $0.001; 250,000,000 shares authorized; 79,650,953
and 78,183,806 shares issued and outstanding at June 30, 2021 and
December 31, 2020, respectively
80 78
Additional paid-in capital 455,325 451,327
Accumulated other comprehensive (loss) income (538 ) 1,021
Accumulated deficit (263,114 ) (244,882 )
Total ORBCOMM Inc. stockholders' equity 192,188 207,950
Noncontrolling interests 1,637 1,465
Total equity 193,825 209,415
Total liabilities and equity $ 478,556 $ 510,845


ORBCOMM Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended June 30,
2021 2020
Cash flows from operating activities:
Net loss $ (18,000 ) $ (13,478 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Change in allowance for doubtful accounts (45 ) 3,033
Amortization and write-off of deferred financing fees 316 388
Depreciation and amortization 23,960 25,773
Impairment loss - satellite network 6,656
Stock-based compensation 3,248 3,150
Foreign exchange (gain) loss (1,017 ) 338
Deferred income taxes (637 ) (464 )
Other 1,266 1,109
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 2,453 9,345
Inventories 3,706 1,592
Prepaid expenses and other assets (2,940 ) 1,840
Accounts payable and accrued liabilities (1,715 ) (9,416 )
Deferred revenue 715 (1,313 )
Other liabilities (1,331 ) (1,113 )
Net cash provided by operating activities 16,635 20,784
Cash flows from investing activities:
Capital expenditures (10,242 ) (10,517 )
Capital expenditures associated with the subscription model (2,376 ) (217 )
Net cash used in investing activities (12,618 ) (10,734 )
Cash flows from financing activities:
Purchases of common stock under share repurchase program (2,527 )
Principal payments of long-term debt (5,000 )
Payments under revolving credit facility (10,000 ) (15,000 )
Proceeds from revolving credit facility 15,000
Payments under the Paycheck Protection Program (7,588 )
Proceeds from the Paycheck Protection Program 7,588
Proceeds from issuance of common stock under employee stock purchase plan 533 430
Net cash used in financing activities (14,467 ) (2,097 )
Effect of exchange rate changes on cash and cash equivalents (288 ) 144
Net (decrease) increase in cash and cash equivalents (10,738 ) 8,097
Beginning of period 40,384 54,258
End of period $ 29,646 $ 62,355
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 4,093 $ 10,000
Income taxes $ 1,728 $ 2,745

The following table reconciles Net Loss Attributable to ORBCOMM Inc. to EBITDA and Adjusted EBITDA for the periods shown:

Three Months Ended Six Months Ended
June 30, June 30,
(In thousands) 2021 2020 2021 2020
Adjustments to EBITDA
Net loss attributable to ORBCOMM Inc. $ (7,641 ) $ (6,670 ) $ (18,203 ) $ (13,645 )
Income tax expense 778 (554 ) 1,441 (1 )
Interest income (167 ) (265 ) (404 ) (681 )
Interest expense 2,192 5,410 4,420 10,656
Depreciation and amortization 11,728 12,409 23,960 25,773
EBITDA $ 6,890 $ 10,330 $ 11,214 $ 22,102
Adjustments to Adjusted EBITDA
Stock-based compensation 1,487 1,471 3,248 3,150
Noncontrolling interests 32 29 203 167
Impairment loss - satellite network - - 6,656 -
Acquisition-related and integration costs 2,653 111 3,241 202
Adjusted EBITDA $ 11,062 $ 11,941 $ 24,562 $ 25,621

The following table reconciles Net Loss Attributable to ORBCOMM Inc. Common Stockholders to Adjusted Net Loss Attributable to ORBCOMM Inc. Common Stockholders for the periods shown:

Three Months
Ended June 30,
Six Months Ended
June 30,
2021 2020 2021 2020
(in thousands except per share data)
Net Loss Attributable to ORBCOMM Inc. Common Stockholders $ (7,658 ) $ (6,670 ) $ (18,232 ) $ (13,645 )
Impairment loss - satellite network 6,656
Acquisition-related and integration costs 2,653 111 3,241 202
Net Loss – Ex-Items Attributable to ORBCOMM Inc. Common Stockholders $ (5,005 ) $ (6,559 ) $ (8,335 ) $ (13,443 )
Basic EPS $ (0.10 ) $ (0.09 ) $ (0.23 ) $ (0.17 )
Impact of Adjustments listed above on Basic EPS $ 0.04 $ $ 0.12 $
Basic EPS – Ex-Items $ (0.06 ) $ (0.09 ) $ (0.11 ) $ (0.17 )

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 June 30, Six Months Ended June 30,
2021 2020 2021 2020
(In thousands, except margin data and unaudited)
Service revenues $ 37,542 $ 38,429 $ 75,292 $ 78,953
Minus - Cost of services, including depreciation
and amortization expense
16,678 16,747 33,751 34,107
GAAP Service gross profit $ 20,864 $ 21,682 $ 41,541 $ 44,846
Plus - Depreciation and amortization expense 3,895 4,188 8,282 8,467
Non-GAAP Service gross profit $ 24,759 $ 25,870 $ 49,823 $ 53,313
GAAP Service gross margin 55.6 % 56.4 % 55.2 % 56.8 %
Non-GAAP Service gross margin 66.0 % 67.3 % 66.2 % 67.5 %


Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
(In thousands, except margin data and unaudited)
Product sales $ 28,386 $ 18,303 $ 54,331 $ 43,958
Minus - Cost of product sales, including depreciation
and amortization expense
22,898 13,732 42,859 31,522
GAAP Product gross profit $ 5,488 $ 4,571 $ 11,472 $ 12,436
Plus - Depreciation and amortization expense 373 521 724 1,030
Non-GAAP Product gross profit $ 5,861 $ 5,092 $ 12,196 $ 13,466
GAAP Product gross margin 19.3 % 25.0 % 21.1 % 28.3 %
Non-GAAP Product gross margin 20.6 % 27.8 % 22.4 % 30.6 %