Higher Revenues and Lower Operating Costs in the First Quarter of 2017
|
(in millions of Canadian dollars) |
Q1 2017 |
Q1 2016 | ||
|
Revenue excluding non-cash revenue (1) |
9.4 |
6.8 | ||
|
Revenue |
$ |
9.4 |
$ |
12.2 |
|
Operating costs |
15.6 |
24.0 | ||
|
Net loss |
(5.1) |
(11.1) | ||
|
Adjusted EBITDA(1) |
(1.3) |
(6.0) | ||
|
1 |
Non-IFRS earnings measure. See reconciliation to Revenue and Net Loss later in this press release |
Excluding the non-cash revenue related to the ISS cameras of $5.3 million recorded in the first quarter of 2016, revenues increased by $2.6 million, or 38%, from higher Earth Observation (EO) imagery sales and higher engineering services revenues.
The net loss of $5.1 million in the first quarter of 2017 (2016 - $11.1 million) improved by $6.0 million, or 54%, over the prior year. Adjusted EBITDA of $(1.3) million also improved by $4.7 million, or 78%, over the prior year, primarily due to an overall decrease in UrtheCast's operating costs resulting from its continued focus on cost-savings initiatives, including consolidating certain software development and operations activities and reducing cloud storage costs.
Business Highlights
EO Update
- During UrtheCast's seasonally slowest quarter, EO revenues grew by 20% to $1.6 million, compared to $1.3 million in the same period in 2016.
UrtheDaily Update
- As previously announced, in the first quarter of 2017 the Company entered into a long-term agreement with GEOSYS, a subsidiary of Land O' Lakes, Inc., to deliver geospatial data from the planned UrtheDaily Constellation. Pursuant to the terms of the agreement, GEOSYS will become an anchor customer for the UrtheDaily Constellation. The agreement, for an undisclosed purchase price and term, represents the Company's largest data-buy contract to date. This agreement will provide Geosys with sufficient capacity to receive imagery of the Earth's entire landmass (excluding Antarctica) throughout the contract term and payments will begin when UrtheCast begins delivering UrtheDaily Constellation data to GEOSYS. The agreement is subject to the Company arranging for the financing for the build and launch of the first portion of the satellites in the UrtheDaily Constellation and other customary covenants for agreements of this nature.
OptiSAR Progress
- As previously announced, the Company entered into a binding agreement in the first quarter of 2017 with a confidential government customer for the sale and shared operation of the first two satellites in the Company's planned OptiSAR Constellation for a purchase price of approximately US$180 million. This agreement represents the first successful conversion of the three previously announced Memoranda of Understanding (MOUs) for the purchase of the OptiSAR Constellation satellites into binding contracts. The agreement is subject to a number of closing conditions, including UrtheCast obtaining the necessary customer commitments to allow for the build, launch and financing of the first eight satellites in the OptiSAR Constellation, the customer obtaining funding on or before December 31, 2017, the parties reaching mutual agreement on the detailed procedures for the shared operation and tasking of the two satellites, and other customary covenants and regulatory approvals for agreements of this nature. Provided these closing conditions are satisfied or waived, the purchase price is expected to be paid upon achievement of certain build-phase milestones, concurrent with the start of the build-phase for the first eight satellites.
Government Funding
- As previously announced, during the first quarter of 2017 the Company was awarded approximately $17.6 million in funding from Innovation, Science and Economic Development Canada's Industrial Technologies Office as part of its Strategic Aerospace & Defense Initiative program to support the development of the OptiSAR Constellation. The agreement is structured as a repayable contribution that management anticipates will be disbursed in quarterly installments, on a cost-reimbursement basis, over the next four years and repaid by the Company in annual installments over 15 years, beginning in 2023.
- During the first quarter of 2017, the Company was also awarded three non-repayable grants from the Government of Canada's Defense Innovation Research Program to reimburse up to approximately $2.2 million of eligible OptiSAR development costs.
Financing and Liquidity
- As previously announced, the Company completed a public offering of 13,033,341 common shares on March 6, 2017 at a price of C$1.50 per common share, for aggregate net proceeds of approximately C$18.2 million.
- During the first quarter of 2017, the Company obtained a new $10 million revolving demand credit facility from the Royal Bank of Canada (RBC). Borrowings under this facility will primarily be used to finance up to 90% of the accounts receivable under the Company's US $65 million engineering services contract and may also be used to finance other contracts. The interest rate on this facility, if drawn upon, is RBC's prime rate plus 2% and borrowings are repayable when the related accounts receivable are collected from the customer, or on demand.
- In April 2017 , the Company obtained an additional credit facility to finance up to 1 million Euros of trade receivables.
