- UrtheCast secures long-term
UrtheDailyTM revenue commitment from a
leading global aerospace player
- Company signs UrtheDailyTM satellite build
contract with SSTL
- Company progressing towards financing
UrtheDailyTM Constellation by year end with investors'
expressions of interest in excess of amount sought by
Company
VANCOUVER, Nov.14, 2017 /CNW/
- UrtheCast Corp. (TSX:UR) ("UrtheCast" or the "Company")
today announces financial results for the three and nine months
ended September 30, 2017.
(in millions of
Canadian dollars)
|
Q3
2017
|
Q3 2016
|
YTD
2017
|
YTD 2016
|
Revenue excluding
non-cash revenue (1)
|
$
10.2
|
$ 15.5
|
$
31.4
|
$ 38.2
|
Revenue
|
10.2
|
20.7
|
31.4
|
53.8
|
Operating
costs
|
16.0
|
29.6
|
47.9
|
75.9
|
Net loss
|
(6.4)
|
(9.6)
|
(15.4)
|
(21.0)
|
Adjusted
EBITDA(1)
|
(0.4)
|
4.7
|
(0.8)
|
3.8
|
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
$5.1 million recorded in the third
quarter of 2016, revenues decreased by $5.3
million in the third quarter of 2017. Revenues from EO
imagery in the third quarter were $5.3
million lower than the prior year, primarily due to a delay
related to a major contract award, while engineering services
revenues in the third quarter were essentially flat compared to the
prior year.
Operating costs of $16.0 million
in the third quarter were $13.6
million lower than the prior year. When excluding non-cash
costs such as depreciation, amortization, stock-based compensation,
asset impairment charges and other non-cash costs associated with
the ISS cameras in 2016, operating costs were $10.6 million in the quarter compared to
$10.8 million in the prior year. The
decrease in the quarter was mainly due to the consolidation of
certain software development activities and lower cloud storage
costs.
The net loss of $6.4 million in
the third quarter of 2017 decreased by $3.2
million when compared to the prior year, primarily due to
the $7.8 million asset impairment
charge in 2016, which was partially offset by the decrease in
revenues in the current quarter. The lower revenues were the main
reason for the $5.1 decrease in
Adjusted EBITDA compared to the third quarter of 2016.
Business Highlights
"During and subsequent to the third quarter, we have made
significant progress in advancing our strategic growth initiatives
and transitioning UrtheCast to a business model based on
predictable, long-term revenue streams derived from our
revolutionary earth imaging technology," said Wade Larson, UrtheCast's President and CEO. "We
are proud to have secured a multi-year revenue commitment from a
global leader in the aerospace industry, further validating our
belief that UrtheDailyTM represents the state of the art
in the rapidly expanding geoanalytics market. Additionally, we have
received expressions of interest from top-tier institutional
investors meaningfully in excess of our needs for the full build
and launch of the UrtheDailyTM Constellation and have
entered a binding build commitment agreement with leading satellite
manufacturer SSTL ahead of a planned launch in 2020."
Sai Chu, UrtheCast's CFO, stated, "At this time
we have expressions of interest that indicate we can finance
UrtheDaily's capital needs entirely with senior secured debt and
subordinated capital. We expect this to close by the
end of 2017. The entire financing package is expected to be
very attractive for shareholders. Upon closing this
financing, we believe that we will have a clear path to the launch
and commercialization of the UrtheDaily Constellation."
Mr. Larson concluded, "As we take advantage of
the near-term opportunity with UrtheDailyTM while
securing additional contracts from high-quality global customers,
we believe that UrtheCast is well positioned to create long-term
value for our shareholders as a market leader in earth
observation."
Earth Observation ("EO")
- EO revenues of $1.8 million
declined by 74%, compared to $7.1
million in the same period in 2016 (excluding non-cash
revenues).
- EO revenues during the quarter were impacted by a delay in the
award of a major contract, with the expectation of the award taking
place by Q1 2018.
- During the third quarter of 2017, the Company announced a
strategic agreement with e-Geos for the co-marketing of our
complementary SAR/Optical capabilities, and the offering of new
geointelligence products based on our combined optical and SAR
data, targeting in this initial phase maritime surveillance and oil
& gas customers.
- Also during the third quarter of 2017 the Company expanded the
assets available through the PanGeo Alliance, which now includes
the TripleSat Constellation owned and operated by Beijing Space Eye
Innovation Technology Co., Ltd. (which is a wholly owned subsidiary
of Twenty First Century Aerospace Technology Co., Ltd.), a
Beijing-based leading provider of
commercial high-resolution imagery products and services. We are
now able to offer to our customers worldwide an unprecedented fleet
of 7 submetric satellites, including our Deimos-2. This has
significantly expanded our capability to bid for large contracts in
the higher resolution/revisit segment of the EO market.
Update on OptiSARTM Constellation and
UrtheDailyTM Constellation
- Today, the Company announced that it had entered into an
advance data subscription agreement with a major international
aerospace company.
- The Company also announced today that it had entered into a
build contract with UK-based Surrey Satellite Technology Ltd. to
build the UrtheDailyTM Constellation, subject to the
closing and funding of the UrtheDailyTM financing
described below.
- Additionally, the Company announced today that it has received
expressions of interest regarding secured financing from a
syndicate of top tier institutional lenders that significantly
exceedes the US$175 million needed to
be raised for the funding of the development of the
UrtheDailyTM Constellation. Subject to finalizing terms,
definitive documentation and confirmatory business and legal due
diligence, this financing is expected to close prior to the end of
2017, with funding beginning in early 2018.
- The development of the UrtheDailyTM Constellation
continues to progress and, subject to the closing and funding of
the financing described below, management believes that the
UrtheDailyTM Constellation will commence operations in
2020. The Company continues to see robust market interest in the
best-in-class daily multispectral imaging data and unmatched change
detection capability derived from the UrtheDailyTM
Constellation. Our announcement today of an advance data
subscription, the previously announced strategic partnerships with
OmniEarth, Inc. in July 2016, and the
advance data subscription agreement with GEOSYS, a subsidiary of
Land O'Lakes, Inc., announced in February
2017 are strong indications of market interest. The Company
continues to engage in negotiations with additional prospective
UrtheDailyTM data purchasers.
- In October 2017, the
Company formed a Special Committee comprised of independent
directors to review and respond to expressions of interest from
leading industry players interested in exploring potential
partnerships and transaction structures to exploit our leading
SAR-IP and engineering talent to capitalize on the growing interest
by the US and Canadian governments in SAR technology, and to
explore other strategic alternatives potentially available to the
Company. There can be no assurance that this process will result in
any transaction.
- During the third quarter of 2017, the Company announced that it
had entered into a contract with a value in excess of C$100 million dollars with a confidential
customer for the development and delivery of a dual frequency
stand-alone SAR operational class satellite as an accelerator
mission for the OptiSARTM Constellation. The contract
remains subject to the customer obtaining final government
appropriation approval, and to UrtheCast and its suppliers
obtaining technology transfer export permits on terms agreeable to
the customer. Subject to satisfaction of these conditions, we
expect work on the program to begin in early 2018, for launch in
late 2020. As is customary, payments by the customer to UrtheCast
under the contract are conditional on us successfully reaching
various program delivery milestones.
- The Company believes that the sale of one or more accelerator
SAR satellites mitigates some of the technical risks associated
with the OptiSARTM Constellation and assists in
demonstrating the advantages of our unique SAR technology to the
market. The accelerator program also allows the Company to continue
to work closely with its current and prospective
OptiSARTM customers to refine the technical
specifications. Selling one or more stand-alone SAR satellites
provides a means to finance a significant portion of the ongoing
development costs of the OptiSARTM Constellation.
- Although the above statements reflect the Company's current
views on the OptiSARTM Constellation and the
UrtheDailyTM Constellation, the completion of the
Constellations are inherently subject to significant business,
economic, competitive, political, timing and social uncertainties
and contingencies and there can be no guarantee that either
Constellation will be completed in the expected time frame or at
all.
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 OptiSARTM 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. The Company has
filed claims totaling $6.0 million
for the reimbursement of eligible costs incurred for the period
from April 2016 to September 2017.
- During the first quarter of 2017, the Company was also awarded
three non-repayable grants from the Government of Canada's Defence Innovation Research Program
("DIRP") to reimburse up to approximately $2.2 million of eligible OptiSARTM
development costs. The Company has submitted claims of $0.5 million with respect to eligible costs
incurred in the third quarter ($1.5
million for the nine months ending September 30, 2017).
- During the second quarter of 2016, the Company was awarded
$5.0 million from the Government of
Canada's Technology Development
Program ("TDP") to support the development of the
OptiSARTM Constellation. The Company has submitted
claims of $0.3 million with respect
to eligible costs incurred in the third quarter ($1.2 million for the nine months ending
September 30, 2017).
Financing and Liquidity
- As previously announced, the Company obtained a new
$10 million revolving demand credit
facility from the Royal Bank of Canada (RBC) in the first quarter of 2017,
which was originally intended to be used to finance up to 90% of
bank-approved accounts receivable. The agreement was amended during
the second quarter to enable the Company to have unrestricted
access to the facility by providing security in the amount of
$10 million through a combination of
bank-approved accounts receivable and cash. The interest rate on
this facility is RBC's prime rate plus 2% and borrowings are
repayable on demand. At September 30,
2017, $10 million had been
drawn under this facility.
- In April 2017, the Company
obtained an additional credit facility to finance up to
1 million Euros of trade accounts
receivables. At June 30, 2017,
$0.4 million (or 0.3 million Euros) had been drawn under this
facility.
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 and nine months ended
September 30, 2017.
(in thousands of
Canadian dollars)
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenue
|
$
|
10,165
|
$
|
20,651
|
$
|
31,415
|
$
|
53,776
|
Other operating
income
|
|
90
|
|
61
|
|
201
|
|
756
|
|
|
10,255
|
|
20,712
|
|
31,616
|
|
54,532
|
Operating
costs
|
|
|
|
|
|
|
|
|
Direct costs,
selling, general and
|
|
|
|
|
|
|
|
|
|
administrative
expenses
|
|
10,418
|
|
13,853
|
|
31,821
|
|
42,895
|
Research
expenditures
|
|
211
|
|
844
|
|
599
|
|
4,073
|
Depreciation and
amortization
|
|
4,156
|
|
6,321
|
|
12,818
|
|
19,277
|
Asset
impairment
|
|
355
|
|
7,780
|
|
664
|
|
7,780
|
Share-based
payments
|
|
822
|
|
769
|
|
2,033
|
|
1,892
|
|
|
15,962
|
|
29,567
|
|
47,935
|
|
75,917
|
Operating
loss
|
|
(5,707)
|
|
(8,855)
|
|
(16,319)
|
|
(21,385)
|
Net finance
costs
|
|
(528)
|
|
(535)
|
|
(1,406)
|
|
(1,636)
|
Gain (loss) on
derivative financial
|
|
|
|
|
|
|
|
|
|
instruments
|
|
422
|
|
(775)
|
|
1,345
|
|
(775)
|
Foreign exchange
(loss) gain
|
|
(760)
|
|
296
|
|
(1,965)
|
|
(106)
|
Loss before income
taxes
|
|
(6,573)
|
|
(9,869)
|
|
(18,345)
|
|
(23,902)
|
Income tax
recovery
|
|
173
|
|
251
|
|
2,961
|
|
2,907
|
Net
loss
|
|
(6,400)
|
|
(9,618)
|
|
(15,384)
|
|
(20,995)
|
Other comprehensive
(loss) income
|
|
(340)
|
|
1,425
|
|
2,664
|
|
(2,031)
|
Comprehensive
loss
|
$
|
(6,740)
|
$
|
(8,193)
|
$
|
(12,720)
|
$
|
(23,026)
|
Net loss per share
– basic and diluted
|
$
|
(0.05)
|
$
|
(0.09)
|
$
|
(0.13)
|
$
|
(0.20)
|
NON-IFRS EARNINGS MEASURES
(in thousands of
Canadian dollars)
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
REVENUE EXCLUDING
NON-CASH REVENUE:
|
|
|
|
|
|
|
|
|
Revenue per income
statement
|
$
|
10,165
|
$
|
20,651
|
$
|
31,415
|
$
|
53,776
|
Non-cash
revenue
|
|
-
|
|
(5,128)
|
|
-
|
|
(15,541)
|
REVENUE EXCLUDING
NON-CASH REVENUE
|
$
|
10,165
|
$
|
15,523
|
$
|
31,415
|
$
|
38,235
|
ADJUSTED
EBITDA:
|
|
|
|
|
|
|
|
|
Net
loss
|
$
|
(6,400)
|
$
|
(9,618)
|
$
|
(15,384)
|
$
|
(20,995)
|
Add back
(subtract):
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
4,156
|
|
6,321
|
|
12,818
|
|
19,277
|
Net finance
costs
|
|
528
|
|
535
|
|
1,406
|
|
1,636
|
Income tax
recovery
|
|
(173)
|
|
(251)
|
|
(2,961)
|
|
(2,907)
|
EBITDA
|
|
(1,889)
|
|
(3,013)
|
|
(4,121)
|
|
(2,989)
|
Non-cash
revenue
|
|
-
|
|
(5,128)
|
|
-
|
|
(15,541)
|
Non-cash operating
costs
|
|
-
|
|
3,859
|
|
-
|
|
11,736
|
Impairment of
assets
|
|
355
|
|
7,780
|
|
664
|
|
7,780
|
Share-based payments
expense
|
|
822
|
|
769
|
|
2,033
|
|
1,892
|
(Gain) loss on
derivative financial instruments
|
|
(422)
|
|
775
|
|
(1,345)
|
|
775
|
Foreign exchange loss
(gain)
|
|
760
|
|
(296)
|
|
1,965
|
|
106
|
ADJUSTED
EBITDA
|
$
|
(374)
|
$
|
4,746
|
$
|
(804)
|
$
|
3,759
|
As previously announced, UrtheCast will host a conference call
regarding its third quarter 2017 financial results at 5:00 p.m. ET (2:00 p.m.
PT) on November 14,
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 3363233#.
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 for
partners and customers in multiple markets. Through its subsidiary
Deimos Imaging, UrtheCast processes and distributes imagery data
and value-added products on behalf of the PanGeo Alliance, a
network of seven satellite operators with a combined 13 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 synthetic aperture radar ("SAR") satellites, called
OptiSAR™, and a six-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 revenue or revenue excluding non-cash revenue, 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", "target",
"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; 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:
UrtheCast's ability to satisfy the conditions precedent to certain
contracts signed and announced; 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 and on acceptable terms,
finance the development, building, launch and commissioning of the
UrtheDailyTM Constellation or to convert the remaining
MOUs and other customer discussions in respect of the
OptiSAR™ constellation into binding, definitive agreements in
a timely manner or at all; 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; 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.