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VANCOUVER, Nov. 14, 2018 /CNW/ - UrtheCast Corp. (TSX:UR) ("UrtheCast" or the "Company") today announces financial results for the three and nine months ended on September 30, 2018 and provides an update on its financial condition.
Q3 2018 Financial Results
(in millions of Canadian dollars)
Adjusted EBITDA (1)
1 Non-IFRS earnings measure. See reconciliation to Net Loss later in this press release.
Revenue decreased by $8.0 million in the third quarter of 2018 compared to the same quarter last year and by $21.6 million for the year-to-date compared to the same period last year. Revenue from engineering services decreased by $7.1 million in the third quarter of 2018 compared to the same quarter last year, primarily due to a change in the expected completion date of one of our engineering services contracts during the current year, which resulted in the remaining revenue being recognized over a longer period, and due to a reduction in engineering revenue on our contracts for the provision of space hardware compared to the prior year. Earth Observation ("EO") imagery sales decreased by $0.9 million in the third quarter of 2018 compared to the same quarter last year, due to lower contract volume in the current year and a delay in securing and meeting the revenue recognition criteria for the major contract with the ESA as discussed further below in "Business Highlights - Major EO Contract Awards".
The net loss of $16.5 million and negative adjusted EBITDA of $6.8 million in the third quarter of 2018 were higher compared to the net loss of $6.4 million and negative adjusted EBITDA of $0.4 million in the same quarter last year, primarily due to the decrease in revenue.
Donald Osborne, CEO of UrtheCast, commented, "We have made important progress in the implementation of our strategic initiatives to restructure, streamline, and strengthen UrtheCast in order to achieve long-term sustainability and profitability. By simultaneously reducing our run-rate fixed costs and dramatically expanding our contracted revenue backlog to more than $350 million, we have refocused the Company on fully realizing the value of our unique service offering and the deep UrtheCast team. Building on this improved foundation, our upcoming acquisition of Geosys will enable us to move further up the geoanalytics value chain and deliver increasingly high-margin services to both existing and new customers. As we continue to conduct negotiations with our lenders, we believe that we have materially strengthened the Company and demonstrated a significant level of demand for UrtheDaily, and as such we remain confident that we will bring the groundbreaking UrtheDaily Constellation to the market for the benefit of our shareholders."
- On November 7, 2018, UrtheCast announced that it entered into a definitive purchase agreement with Land O'Lakes, Inc. ("Land O'Lakes") for the acquisition of Geosys Technology Holding LLC ("Geosys"), a wholly owned subsidiary of Land O'Lakes, for an aggregate cash purchase price of US$20 million, subject to customary working capital adjustments. The Company expects to complete the first closing before the end of 2018.
- UrtheCast will continue to provide Land O'Lakes with certain services currently provided by Geosys but with an expanded utilization of data once the UrtheDaily constellation is fully operational. Services would be provided by UrtheCast pursuant to a 13-year agreement, to be entered into on first closing, with total annual fees payable to UrtheCast in excess of US$10 million per year, and an increased rate at such time as the UrtheDaily Constellation is operational.
- The Geosys acquisition would bring UrtheCast's total contracted revenue backlog to in excess of $350 million.
Secured Revolving Credit Facility
- The Company reached an agreement in principle with 1112099 B.C. Ltd., the backstop party which entered into the conditional backstop agreement with the Company in connection with the private placement that closed on May 3, 2018, to extend to the Company a secured revolving credit facility of up to US$20 million, of which US$5 million was advanced as a non-convertible unsecured interest-bearing demand promissory note in September 2018. The revolving credit facility and the terms and conditions thereof remain subject to, among other things, the entering into of definitive documentation and the receipt of all necessary consents and approvals.
Major EO Contract Awards
- On July 12, 2018 UrtheCast and its subsidiary, Deimos Imaging, S.L.U. ("Deimos"), announced that they have been awarded a multi-million Euro contract through a consortium led by Airbus Defence and Space to provide a large set of EO products and services to the European Commission and the European Space Agency (the "ESA"). As at September 30, 2018, Deimos had delivered over 90% of the contracted EO products to Airbus and approximately 50% of this data was accepted by Airbus. However, Deimos did not meet the revenue recognition criteria in the third quarter since the revenue recognition is tied to ESA's acceptance of complete data sets to be delivered by Airbus, on behalf of the consortium, which has not yet been achieved.
- On September 20, 2018, UrtheCast announced that it signed a binding contract for US$25 million to provide data from its planned UrtheDaily Constellation to a long-established commercial Earth Observation operator and value-added services provider, which will provide UrtheCast US$5 million annually over the first five years of UrtheDaily operations.
- On October 18, 2018, UrtheCast announced that it signed a binding contract for US$30 million to provide data from its planned UrtheDaily Constellation to TerraTech JSC, a commercial provider of Earth observation and geoinformation services and a subsidiary of the Russian Space Agency, Roscosmos. The contract would provide US$10 million annually over the first three years of UrtheDaily operations, with an option for an additional two years at the same annual rate.
- As previously announced, the Company entered into a US$142 million senior secured credit facility (the "Credit Agreement") on May 18, 2018 with the senior lenders thereunder (the "Senior Lenders") to finance the construction, launch, and deployment of the six-satellite UrtheDaily Constellation as well as related working capital and general corporate purposes.
- As announced on October 26, 2018, the Company received a letter dated October 24, 2018 from the Senior Lenders advising that an event of default (the "Event of Default") had occurred under the Credit Agreement as a result of the recent resignation of an executive of Deimos, who was identified as a key man in the Credit Agreement. UrtheCast also announced that it had entered into a forbearance agreement (the "Forbearance Agreement") dated October 25, 2018 with the Senior Lenders pursuant to which the Senior Lenders agreed to refrain from taking any actions or seeking any remedies available to them under the terms of the Credit Agreement until November 23, 2018. The Company is in discussions with the Senior Lenders regarding ways to remedy the Event of Default. At the same time, the Company is exploring an alternate transaction with other lenders.
- UrtheCast is continuing to work to meet all previously announced first drawdown conditions under the Credit Agreement, including but not limited to, the refinancing of the Sabadell loan and the receipt of confirmation from the Senior Lenders that the minimum annual binding contractual commitments for UrtheDaily have been met. With more than $350 million in binding contractual commitments, management believes that UrtheCast's business case, including for the UrtheDaily Constellation, has been validated, and intends to seek out alternative funding sources if the Senior Lenders choose not to fund under the Credit Agreement.
We refer you to the Company's condensed interim consolidated financial statements for the three and nine months ended September 30, 2018 and the related Management's Discussion & Analysis for further details relating to the Company's liquidity position. The Company has taken steps subsequent to the quarter ended September 30, 2018 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 unaudited condensed interim consolidated financial statements for the respective periods. All financial information is in thousands of Canadian dollars, unless otherwise noted, and except for per share amounts.
Three Months Ended September 30,
Nine Months Ended September 30,
Other operating income
Direct costs, selling, general and administrative expenses
Depreciation and amortization
Net finance costs
(Loss) gain on derivative financial instruments
Foreign exchange (loss) gain
Loss before income taxes
Income tax recovery
Other comprehensive (loss) income
Net loss per share – basic and diluted
NON-IFRS EARNINGS MEASURES
The following table reconciles our Non-IFRS earnings measures to Net Loss prepared in accordance with IFRS.
Three Months Ended September 30,
Nine Months Ended September 30,
Add back (subtract):
Depreciation and amortization
Net finance costs
Income tax recovery
Share-based payments expense
Loss (gain) on derivative financial instruments
Foreign exchange loss (gain)
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. The Company currently owns and operates two Earth Observation (EO) satellites, Deimos-1 and Deimos-2. Together with its exclusive partnerships, spanning an additional 20 satellites, UrtheCast processes and distributes imagery data and value-added products on a global scale to partners and customers in multiple markets. UrtheCast is also planning to launch UrtheDaily™, a satellite constellation that will be the most advanced change detection system in the world, designed to capture daily, scientific grade, high-quality, medium resolution optical imagery of the Earth's entire landmass (excluding Antarctica). Additionally, UrtheCast continues to seek options to exploit its unique SAR technology. 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 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 Management's Discussion & Analysis.
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" 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; UrtheCast's expectations with respect to the Senior Lenders continuing to forbear on, and UrtheCast's ability to cure, the Event of Default under the Credit Agreement prior to the expiry of the Forbearance Agreement or at all; UrtheCast's ability to complete each of the first and second closings of the acquisition of Geosys on the terms set forth in the definitive purchase agreement or at all; UrtheCast's ability to meet its obligations and satisfy its liabilities under its existing indebtedness; UrtheCast's ability to enter into the definitive documentation relating to the revolving credit facility on terms acceptable to the Company or at all; UrtheCast's ability to enter into the planned UrtheDaily™ satellite constellation; UrtheCast's expectations with respect to its ability to raise proceeds from a subordinated debt or equity offering, achieve the required leverage and contracted value ratios and otherwise satisfy the first drawdown conditions under the Credit Agreement; UrtheCast's ability to satisfy the conditions precedent to certain contracts signed and announced; new product functionality and suitability; projected operating expenses and capital expenditures; UrtheCast's ability to secure additional customer contracts for the planned UrtheDaily™ constellation in a timely manner or at all; UrtheCast's ability to secure financing for the planned UrtheDaily™ constellation on acceptable terms, in a timely manner, or at all. 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 as at the date of this press release, 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: UrtheCast's inability to enter into definitive documentation or satisfy any of the other conditions to the completion of the Geosys transaction; UrtheCast's inability to fund the installments for the purchase price of the Geosys transaction; Deimos Imaging or any other imaging provider supplying data to the consortium being unable to deliver imagery products meeting the minimum specifications required by the consortium agreement; interruptions to or failures of Deimos' infrastructure or the infrastructure of any other imaging provider supplying data to the consortium; Airbus Defence and Space's inability to satisfy its payment obligations under the consortium agreement; ESA's inability to satisfy its payments obligations under the head contract with Airbus Defence and Space; legal and regulatory changes; UrtheCast's inability to raise proceeds from a subordinated debt or equity offering, achieve the required leverage and contracted revenue ratios or otherwise satisfy the first drawdown conditions or the final drawdown conditions under the Credit Agreement in a timely manner or at all; and uncertainty about UrtheCast's ability to continue as a going concern; as well as those factors and assumptions discussed in UrtheCast's annual information form dated April 2, 2018, 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.
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