Company Increases YTD Total Adjusted EBITDA by
$11 million and Advances Initiatives
to Secure UrtheDaily Financing and Divest of Deimos Subsidiary
VANCOUVER, Aug. 14, 2019 /CNW/ - UrtheCast Corp.
(TSX:UR) ("UrtheCast" or the "Company"), a leading provider of
information-rich products and services in the geospatial and
geo-analytics markets, reported its financial results for the three
and six months ended June 30,
2019.
Highlights
- Adjusted EBITDA from continuing operations improved by
$3.0 million compared to the same
quarter last year and improved by $5.8
million for the year-to-date. Total Adjusted EBITDA for the
Company improved by $7.0 million
compared to the same quarter of 2018 and by $11.0 million for the year-to-date.
- The Company has engaged a leading investment bank as its
financial advisor and is in discussions with institutional
investors to finance the UrtheDaily Constellation and the Company's
growth. The Company has made material progress and is on target to
receive multiple indications of interest by the end of the third
quarter.
- The Company has received a number of non-binding bids to
acquire all or substantially all of the Deimos Imaging business and
continues to negotiate with these parties to complete a transaction
on terms that support UrtheCast's strategic priorities.
Q2 2019 Financial Results
As a result of the planned sale of Deimos Imaging or its assets,
the operations of Deimos Imaging have been classified as
discontinued operations for the three and six months ended
June 30, 2019 and the associated
comparative prior periods. Unless otherwise noted, the financial
information in this press release is based on the Company's
continuing operations and all financial figures are in Canadian
dollars.
(in millions of
Canadian dollars)
|
Q2
2019
|
Q2 2018
|
YTD
2019
|
YTD 2018
|
Revenue
|
$
5.1
|
$
1.5
|
$
9.5
|
$
4.8
|
Operating
costs
|
8.4
|
5.9
|
15.6
|
13.4
|
Adjusted EBITDA from
continuing operations1
|
(0.7)
|
(3.7)
|
(1.5)
|
(7.3)
|
Adjusted EBITDA from
discontinued operation1
|
0.4
|
(3.6)
|
(0.9)
|
(6.2)
|
Net loss from
continuing operations
|
(5.2)
|
(5.2)
|
(6.6)
|
(9.1)
|
Net loss from
discontinued operation
|
-
|
(8.1)
|
(5.1)
|
(15.2)
|
Net loss
|
(5.2)
|
(13.3)
|
(11.7)
|
(24.3)
|
1
Non-IFRS earnings measure. See reconciliation of Adjusted EBITDA
to Net Loss under "Non-IFRS Earnings Measures" in the
Company's Management Discussion & Analysis for the three and
six months ending June 30, 2019.
|
As noted above, adjusted EBITDA from continuing operations of
negative $0.7 million in the second
quarter of 2019 improved by $3.0
million compared to the same quarter last year and improved
by $5.8 million to negative adjusted
EBITDA of $1.5 million for the
year-to-date due to lower corporate overhead, professional fees and
engineering subcontractor costs and a positive EBITDA contribution
from the Company's recently acquired geo-analytics business known
as Geosys.
"Throughout 2019, we have maintained a sharp focus on
streamlining UrtheCast around our core competencies in the
development and provision of value-added geospatial and
geo-analytics services." said Donald
Osborne, CEO of UrtheCast. "We are also making important
progress in our efforts to transform the Company and the industry
with the introduction of the revolutionary UrtheDaily
Constellation. To this end, we have retained a leading investment
bank as our new financial advisor. The Company is targeting
receiving multiple indications of interest by the end of the third
quarter. By realizing significant cost reductions while also
increasing revenue and moving up the value chain with the
integration of Geosys, we have drawn closer to achieving a positive
run-rate EBITDA on a sustainable basis and strengthened our ability
to realize our growth potential. At the same time, our negotiations
to divest of our Deimos subsidiary have now reached advanced stages
with multiple parties, and we hope to announce a binding agreement
to complete the sale and enhance our balance sheet in the coming
months."
Operating Results
UrtheCast recognized revenue of $5.1
million in the second quarter of 2019 and $9.5 million in the year-to-date, which was
comprised entirely of geo-analytics products and services revenue
resulting from the acquisition of Geosys and the commencement of a
13-year services contract with Geosys' former parent company, Land
O'Lakes. The Company did not recognize any engineering and
value-added services revenue in the year-to-date, compared to
$1.5 million and $4.8 million in the three and six months ending
June 30, 2018, due to progress delays
incurred by its key subcontractors in completing milestones under
its engineering and value-added services contract and the
completion certain customer contracts in 2018.
Operating costs of $8.4 million in
the second quarter of 2019 and $15.6
million year-to-date increased by $2.5 million and $2.2
million compared to comparative prior year periods,
respectively, due to an increase in depreciation and amortization
costs and direct, selling, general and administration costs
("SG&A") as a result of including Geosys' operating costs from
the acquisition date. The additional costs of Geosys were partially
offset by the positive impact of our cost reduction initiatives and
a decrease in engineering subcontractor costs related to the
decrease in engineering services activities. Operating costs from
continuing operations, exclusive of Geosys, have been reduced by
approximately 55% in the year-to-date compared to the prior year
period and SG&A costs have decreased by approximately 65% in
the year-to-date period from the prior year.
The net loss of $5.2 million in
the second quarter of 2019 improved by $8.1
million compared to the net loss from the second quarter of
2018, primarily due to higher revenue, lower non-Geosys operating
costs and a reduction in net loss from our discontinued
operation.
Business Developments
Term Loan Financings
As announced on June 27, 2019, the
Company entered into a US$1.5 million
secured term loan with Bolzano Investments Limited which accrues
interest at 17% per annum and has a maturity date of January 15, 2020.
On July 26, 2019, the Company
announced that it entered into a US$1.5
million secured term loan with Lunar Ventures Inc. on
similar terms as described above.
UrtheDaily Financing
The Company has engaged a leading investment bank as its
financial advisor and is in discussions with institutional
investors to finance the UrtheDaily Constellation and the Company's
growth. The Company has made material progress and is on target to
receive multiple indications of interest by the end of the third
quarter. However, there can be no assurance that an agreement will
be entered into or will be secured on commercially reasonable
terms, in a timely matter, or at all.
Deimos Imaging Sale
The Company has received a number of non-binding bids to acquire
all or substantially all of Deimos Imaging's assets, including the
Deimos-1 and Deimos-2 satellites, operations and ground station
assets, and is in the process of evaluating the bids. There can be
no assurance that a transaction will be entered into on
commercially reasonable terms, in a timely manner, or at all.
Technology Development Funding
On May 28, 2019, the Company
announced that it was awarded $2.0
million from the Canadian Space Agency's Space Technology
Development Program, in two separate agreements of $1.0 million each, for the development of new
satellite technologies including the Company's planned UrtheDaily
Constellation and the development of the next generation UrtheCast
SAR-XL Synthetic Aperture Radar.
Changes to the Board of Directors
On June 26, 2019, the Company
announced the results of its Annual General and Special Meeting of
Shareholders, including the election of all five management
nominees to the board of directors. The nominees included
William M. Evans (as Chairman),
Pirmin Lüönd, Mark J. Piegza, James
Topham and Don Osborne.
Outlook & Going Concern
We refer you to the Company's interim condensed consolidated
financial statements for the three and six months ended
June 30, 2019 and the related
Management's Discussion & Analysis for further details relating
to the Company's liquidity position. The Company has continued to
take steps subsequent to June 30,
2019 to ensure that it is able to continue as a going
concern and that it has adequate liquidity in the near term.
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 interim condensed consolidated financial
statements for the three and six months ended June 30, 2019. All financial information is in
thousands of Canadian dollars, unless otherwise noted, and except
for number of shares and per share amounts.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenue
|
$
|
5,058
|
$
|
1,543
|
$
|
9,483
|
$
|
4,794
|
Other operating
income
|
|
219
|
|
37
|
|
550
|
|
232
|
|
|
5,277
|
|
1,580
|
|
10,033
|
|
5,026
|
Operating
costs
|
|
|
|
|
|
|
|
|
Direct costs,
selling, general and administrative
|
|
|
|
|
|
|
|
|
expenses
|
|
5,745
|
|
5,004
|
|
10,982
|
|
11,674
|
Research
expenditures
|
|
234
|
|
306
|
|
528
|
|
612
|
Depreciation and
amortization
|
|
1,731
|
|
122
|
|
3,148
|
|
282
|
Share-based
payments
|
|
735
|
|
436
|
|
964
|
|
877
|
|
|
8,445
|
|
5,868
|
|
15,622
|
|
13,445
|
Operating
loss
|
|
(3,168)
|
|
(4,288)
|
|
(5,589)
|
|
(8,419)
|
Net finance
costs
|
|
(2,332)
|
|
(5,537)
|
|
(3,968)
|
|
(5,695)
|
Gain on derivative
financial instruments
|
|
(369)
|
|
4,151
|
|
3,106
|
|
4,378
|
Foreign exchange gain
(loss)
|
|
364
|
|
493
|
|
(729)
|
|
705
|
Loss before income
taxes
|
|
(5,505)
|
|
(5,181)
|
|
(7,180)
|
|
(9,031)
|
Income tax recovery
(expense)
|
|
331
|
|
(25)
|
|
584
|
|
(51)
|
Net loss from
continuing operations
|
|
(5,174)
|
|
(5,206)
|
|
(6,596)
|
|
(9,082)
|
Net loss from
discontinued operation
|
|
(26)
|
|
(8,047)
|
|
(5,079)
|
|
(15,229)
|
Net
loss
|
|
(5,200)
|
|
(13,253)
|
|
(11,675)
|
|
(24,311)
|
Other comprehensive
income
|
|
(450)
|
|
(1,355)
|
|
(287)
|
|
901
|
Comprehensive
loss
|
$
|
(5,650)
|
$
|
(14,608)
|
$
|
(11,962)
|
$
|
(23,410)
|
Loss per share –
basic and diluted
|
$
|
(0.04)
|
$
|
(0.11)
|
$
|
(0.09)
|
$
|
(0.20)
|
Loss per share
from continuing operations
– basic and diluted
|
$
|
(0.04)
|
$
|
(0.04)
|
$
|
(0.05)
|
$
|
(0.07)
|
NON-IFRS EARNINGS MEASURES
The following table reconciles our Non-IFRS earnings measures to
Net Loss prepared in accordance with IFRS.
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
ADJUSTED
EBITDA:
|
|
|
|
|
|
|
|
|
Net loss from
continuing operations
|
$
|
(5,174)
|
$
|
(5,206)
|
$
|
(6,596)
|
$
|
(9,082)
|
Add back
(subtract):
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
1,731
|
|
122
|
|
3,148
|
|
282
|
Net finance
costs
|
|
2,332
|
|
5,537
|
|
3,968
|
|
5,695
|
Income tax (recovery)
expense
|
|
(331)
|
|
25
|
|
(584)
|
|
51
|
EBITDA from
continuing operations
|
|
(1,442)
|
|
478
|
|
(64)
|
|
(3,054)
|
Share-based
payments
|
|
735
|
|
436
|
|
964
|
|
877
|
Loss (gain) on
derivative financial instruments
|
|
369
|
|
(4,151)
|
|
(3,106)
|
|
(4,378)
|
Foreign exchange
(gain) loss
|
|
(364)
|
|
(493)
|
|
729
|
|
(705)
|
ADJUSTED EBITDA
FROM CONTINUING
|
|
|
|
|
|
|
|
|
OPERATIONS
|
$
|
(702)
|
$
|
(3,730)
|
$
|
(1,477)
|
$
|
(7,260)
|
ADJUSTED EBITDA
FROM DISCONTINUED
|
|
|
|
|
|
|
|
|
OPERATION
|
|
365
|
|
(3,638)
|
|
(928)
|
|
(6,172)
|
ADJUSTED
EBITDA
|
$
|
(337)
|
$
|
(7,368)
|
$
|
(2,405)
|
$
|
(13,432)
|
About UrtheCast
UrtheCast Corp. is a Vancouver-based company that serves the
rapidly growing and evolving geospatial and geo-analytics markets
with a wide range of information-rich products and services.
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
EBITDA, adjusted EBITDA, and adjusted EBITDA from continuing
operations. 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. An explanation of how the Company calculates
these measures is set out in the Company's MD&A under the
heading "Non-IFRS Earnings Measures" for the three and six months
ending June 30, 2019, a copy of which
is available on the Company's SEDAR profile and website.
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", "plan", "explore" and
"expect", statements that an action or event "may", "should" are
"going" to occur 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 to its
ability to raise capital and to continue as a going concern and
management's plans to improve the Company's financial position;
expectations regarding achieving a positive run-rate EBITDA by the
end of 2019 expectations regarding UrtheCast's ability to meet its
obligations and satisfy its liabilities under its existing
indebtedness; expectations underlying the Company's financial
statements, including that they have been prepared on a
going concern basis, meaning that the Company will be able to
realize its assets and discharge its liabilities in the normal
course of operations; expectations regarding
discussions of, and the proposed and/or planned sale or other
monetization of all or substantially all of Deimos Imaging and its
related business; UrtheCast's expectations pertaining to the
non-binding bids in respect of the Deimos Imagining assets;
UrtheCast's expectations with respect to its ability to enter into
a binding agreement with a senior lender in respect of the proposed
UrtheDaily financing, and to otherwise raise proceeds from a
debt or equity offering, achieve the required leverage and
contracted value ratios and satisfy the conditions of its
indebtedness and business needs generally; UrtheCast's ability to
fully integrate Geosys into the Company's other operations and
achieve the expected synergies and other benefits therefrom on an
ongoing basis and to complete the second closing of the acquisition
of Geosys on the terms set forth in the definitive purchase
agreement or at all, as well as the Company's ability to service
and obtain additional revenues from the Service Level Agreement
with Winfield, a subsidiary of
Land O' Lakes; UrtheCast's ability to meet its obligations and
satisfy its liabilities under its existing indebtedness including
but not limited to the previously announced financings with Bolzano
Investments Limited and Lunar Ventures Inc.; UrtheCast's ability to
satisfy the conditions precedent to certain contracts related to
the purchase of imagery data from the UrtheDaily satellite
constellation; expectations regarding monetization of the OptiSAR
technology and related intellectual property developed by the
Company; expectations regarding the performance of key
subcontractors and the completion of certain customer contracts;
new product functionality and suitability; projected operating
expenses and ongoing efforts to reduce capital expenditures and
fixed costs including engineering subcontractor costs and other
professional costs; UrtheCast's ability to secure additional
customer contracts for the planned UrtheDaily™ Constellation
project in a commercially reasonable and timely manner or at all;
and UrtheCast's ability to secure financing for the planned
UrtheDaily™ Constellation project on acceptable terms, in a
commercially reasonable and timely manner, or at all, and the
related expectations regarding its build, launch and operations and
the timing thereof;. Such statements reflect UrtheCast's
current views with respect to future events, and are necessarily
based upon a number of estimates and assumptions that, while
considered reasonable by UrtheCast as at the date of this press
release, are inherently subject to significant uncertainties and
contingencies.
Many factors could cause UrtheCast's actual results or
performance to be materially different from expectations that may
be expressed or implied by such forward-looking statements,
including, among others: the Company's ability to rectify
its current cash constraints and to continue as a going concern;
the Company's ability to enter into alternative financing for the
UrtheDaily satellite constellation, and any delays or failures in
the design, development, construction, launch and operational
commissioning of the such constellation; the Company's ability to
comply with debt and repayment obligations and avoid the exercise
of lenders' rights, including with respect to seizing secured
assets; unexpected increases in fixed or variable costs; lower than
expected revenues from Geosys or the Company's other products and
services in the remainder of 2019; the loss of key personnel due to
the Company's financial position and/or market factors; unexpected
delays in operations caused by key subcontractors; the Company's
ability to fund its future operations, which is contingent on its
efforts to raise additional financing and/or sell certain assets of
the Company; an adverse outcome in the Company's litigation with
Eastwood Capital Corp and William
Holland, or additional claims made by lenders, shareholders
or suppliers of the Company in connection with its operations
and/or performance; the Company's ability to successfully complete
a sale or other transaction involving Deimos Imaging on
commercially reasonable terms, or at all, or a significant delay in
the sale process; UrtheCast's ability to fund the remaining
two installments for the purchase price of the Geosys transaction
or otherwise successfully complete the second closing of the Geosys
acquisition; loss, reduction in scope, termination, failure
to satisfy conditions precedent or decline in general of the
Company's agreements or relationships with its key partners,
including Land O' Lakes, Inc. and purchasers of advance data
purchase subscription agreements for the data expected to be
provided by the UrtheDaily constellation; risks related to the
government funding received by UrtheCast and risks arising from
breach or default of obligations under the related agreements with
certain government agencies; delays or disputes with
customers regarding the payment milestones under the Company's data
imagery or value-added services, which often include complex
criteria and/or performance by third parties to successfully
complete the contract and obtain payment; legal and regulatory
changes, or the Company's failure to comply with listing
requirements and other rules of the TSX and/or regulations of
applicable securities authorities in Canada; and; as well as those factors and
assumptions discussed in UrtheCast's Annual Information Form dated
March 29, 2019, which is available
under UrtheCast's SEDAR profile
at www.sedar.com. UrtheCast cautions readers
that such factors and uncertainties are not exhaustive and that
should certain risks or uncertainties materialize, or should
underlying estimates or assumptions prove incorrect, actual
results, performance or achievements may vary significantly from
those expected. There can be no assurance that the actual
strategies, results, performance, events or activities anticipated
by the Company will be realized or, even if substantially realized,
that they will have the expected consequences to, or effects on,
the Company.
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.