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.
Guidance
For fiscal 2017, the Company expects to achieve revenue of between $52 and $60 million and adjusted EBITDA of between $7 and $12 million.
"The Company is continuing to execute on our current business, which is growing and from which we've removed a lot of operating costs," said Wade Larson, UrtheCast's President and CEO. "At the same time, we're very pleased with the momentum on our big initiatives of UrtheDaily and OptiSAR. We expect to make announcements on both fronts soon."
SELECTED FINANCIAL INFORMATION
The following table provides selected financial information of the Company, which was derived from, and should be read in conjunction with, the unaudited condensed interim consolidated financial statements for the three months ended March 31, 2017.
|
(in thousands of Canadian dollars) |
Three Months Ended March 31, | |||
|
|
|
2017 |
|
2016 |
|
Revenue |
$ |
9,396 |
|
12,152 |
|
Other operating income |
|
50 |
|
- |
|
|
|
9,446 |
|
12,152 |
|
Operating costs |
|
|
|
|
|
Direct costs, selling, general and administrative expenses |
|
10,509 |
|
15,127 |
|
Research expenditures |
|
276 |
|
1,736 |
|
Depreciation and amortization |
|
4,474 |
|
6,564 |
|
Share-based payments |
|
333 |
|
558 |
|
|
|
15,592 |
|
23,985 |
|
Operating loss |
|
(6,146) |
|
(11,833) |
|
Net finance costs |
|
(442) |
|
(521) |
|
Loss on derivative financial instruments |
|
242 |
|
- |
|
Foreign exchange (loss) gain |
|
(219) |
|
(192) |
|
Loss before income taxes |
|
(6,565) |
|
(12,546) |
|
Income tax recovery (expense) |
|
1,486 |
|
1,446 |
|
Net loss |
|
(5,079) |
|
(11,100) |
|
Other comprehensive income (loss) |
|
542 |
|
(1,959) |
|
Comprehensive loss |
$ |
(4,537) |
|
(13,059) |
|
Net loss per share – basic and diluted |
$ |
(0.05) |
|
(0.11) |
NON-IFRS EARNINGS MEASURES
|
(in thousands of Canadian dollars) |
Three Months Ended March 31, | |||
|
|
|
2017 |
|
2016 |
|
NON-IFRS REVENUE: |
|
|
|
|
|
Revenue per income statement |
$ |
9,396 |
$ |
12,152 |
|
Non-cash revenue |
|
- |
|
(5,334) |
|
NON-IFRS REVENUE |
$ |
9,396 |
$ |
6,818 |
|
|
|
|
|
|
|
ADJUSTED EBITDA: |
|
|
|
|
|
Net loss |
$ |
(5,079) |
$ |
(11,100) |
|
Add back (subtract): |
|
|
|
|
|
Depreciation and amortization |
|
4,474 |
|
6,564 |
|
Net finance costs |
|
442 |
|
521 |
|
Income tax recovery |
|
(1,486) |
|
(1,446) |
|
EBITDA |
|
(1,649) |
|
(5,461) |
|
Non-cash revenue |
|
- |
|
(5,334) |
|
Non-cash operating costs |
|
- |
|
4,066 |
|
Share-based payments expense |
|
333 |
|
558 |
|
Loss on derivative financial instruments |
|
(242) |
|
- |
|
Foreign exchange losses (gains) |
|
219 |
|
192 |
|
ADJUSTED EBITDA |
$ |
(1,339) |
$ |
(5,979) |
As previously announced, UrtheCast will host a conference call regarding its first quarter 2017 financial results at 5:00 p.m. ET (2:00 p.m. PT) on May 4, 2017. The live conference call will be available by calling toll-free at 1-800-806-5484, or by toll call at +1-416-340-2217. The participant pass code is 1998003#.
An archived version of the conference call will be made available on the Company's investor website ( investors.urthecast.com) following the live conference call.
ABOUT URTHECAST CORP.
UrtheCast Corp. is a Vancouver-based technology company that serves the rapidly evolving geospatial and geoanalytics markets with a wide range of information-rich products and services. The Company operates Earth Observation (EO) sensors in space, including two satellites, Deimos-1 and Deimos-2, to produce imagery data that is displayed on UrtheCast's cloud-based web platform and sold to partners and customers. Through its subsidiary Deimos Imaging, UrtheCast processes and distributes imagery data and value-added products on behalf of the PanGeo Alliance, a network of eight satellite operators with a combined 15 medium- and high-resolution EO sensors. UrtheCast is also developing and expects to launch two EO satellite constellations: the world's first fully-integrated constellation of sixteen multispectral optical and SAR satellites, called OptiSAR™, and an eight-satellite constellation designed to capture high-quality, medium-resolution optical imagery of the Earth's entire landmass (excluding Antarctica) every day, called UrtheDaily™. Together, the Company believes these constellations will revolutionize monitoring of our planet with medium- and high-resolution, high-coverage and high-revisit imagery in all weather conditions. Common shares of UrtheCast trade on the Toronto Stock Exchange as ticker 'UR'.
For more information, visit UrtheCast's website at www.urthecast.com.
Non-IFRS Financial Measures
The Company prepares its financial statements in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board. This release includes certain non-IFRS financial measures, such as non-IFRS revenues, EBITDA and adjusted EBITDA. The Company uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies, and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS or considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-IFRS financial measures should be read in conjunction with the Company's financial statements and accompanying MD&A.
Forward Looking Information
This release contains certain information which, as presented, constitutes "forward-looking information" or "forward-oriented financial information" within the meaning of applicable Canadian securities laws. Forward-looking information involves statements that relate to future events and often addresses expected future business and financial performance, containing words such as "anticipate", "believe", "plan", "estimate", "expect" and "guidance", statements that an action or event "may", "might", "could" or "will" be taken or occur, or other similar expressions and includes, but is not limited to, statements relating to: UrtheCast's expectations with respect its current sensors and proposed OptiSAR™ and UrtheDailyTM constellations; the satisfaction of the financing and other conditions set out in the binding agreement for the purchase of two OptiSAR satellites in order to trigger payment obligations thereunder; its plans for and timing of expansion of its product offering and value-added services; its future growth and operations plans; expectations regarding government contributions and reimbursement grants; expectations regarding revenue and EBITDA in fiscal 2017; and anticipated trends and challenges in its business and the markets in which the Company operates. Such statements reflect UrtheCast's current views with respect to future events. Such statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by UrtheCast, are inherently subject to significant uncertainties and contingencies. Many factors could cause UrtheCast's actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements, including, among others: any delays or failures in the design, development, construction, launch and operational commissioning of the proposed OptiSAR™ or UrtheDailyTM constellations; the Company being unable to adequately finance the development, building, launch and commissioning of the UrtheDaily Constellation or to convert the remaining MOUs and other customer discussions in respect of the OptiSAR™ constellation into binding, definitive agreements; the inability of the confidential OptiSAR customer described in this press release to obtain budgetary approval from government or to otherwise comply with its obligations under the binding agreement for the purchase and operation of two satellites; any failure by Geosys, the Government of Canada or one of UrtheCast's third-party lenders to comply with the terms of their respective contracts with UrtheCast, and UrtheCast's ability to comply with any of its covenants thereunder; the decline of key relationships in, or termination of, the PanGeo Alliance of EO satellite operators; loss of key EO imagery sales contracts or customers; failures aboard the ISS or the Deimos-1 or Deimos-2 satellites; failure to obtain, or loss of, regulatory approvals; as well as those factors and assumptions discussed in UrtheCast's annual information form dated March 28, 2017, (the "AIF"), which is available under UrtheCast's SEDAR profile at www.sedar.com. UrtheCast undertakes no obligation to update forward-looking statements except as required by Canadian securities laws. Readers are cautioned against attributing undue certainty to forward-looking statements.
SOURCE UrtheCast Corp.
| Contact: |
| UrtheCast Corp.
Sai Chu, Chief Financial Officer Phone: +1 (604) 669-1788 Web: www.urthecast.com |