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)
|
Q3
2018
|
Q3 2017
|
YTD
2018
|
YTD 2017
|
Revenue
|
$
|
2.2
|
$
|
10.2
|
$
|
9.8
|
$
|
31.4
|
Operating
costs
|
15.2
|
16.0
|
46.2
|
47.9
|
Net loss
|
(16.5)
|
(6.4)
|
(40.8)
|
(15.4)
|
Adjusted EBITDA
(1)
|
(6.8)
|
(0.4)
|
(20.3)
|
(0.8)
|
|
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."
Business Highlights
Geosys Acquisition
- 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.
UrtheDaily Financing
- 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.
Outlook
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,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenue
|
$
|
2,151
|
$
|
10,165
|
$
|
9,795
|
$
|
31,415
|
Other operating
income
|
|
172
|
|
90
|
|
404
|
|
201
|
|
|
2,323
|
|
10,255
|
|
10,199
|
|
31,616
|
Operating
costs
|
|
|
|
|
|
|
|
|
Direct costs,
selling, general and administrative expenses
|
|
8,302
|
|
10,418
|
|
28,998
|
|
31,821
|
Research
expenditures
|
|
842
|
|
211
|
|
1,454
|
|
599
|
Depreciation and
amortization
|
|
4,210
|
|
4,156
|
|
12,869
|
|
12,818
|
Asset
impairment
|
|
744
|
|
355
|
|
744
|
|
664
|
Share-based
payments
|
|
1,063
|
|
822
|
|
2,112
|
|
2,033
|
|
|
15,161
|
|
15,962
|
|
46,177
|
|
47,935
|
Operating
loss
|
|
(12,838)
|
|
(5,707)
|
|
(35,978)
|
|
(16,319)
|
Net finance
costs
|
|
(1,703)
|
|
(528)
|
|
(8,151)
|
|
(1,406)
|
(Loss) gain on
derivative financial instruments
|
|
(1,796)
|
|
422
|
|
2,575
|
|
1,345
|
Foreign exchange
(loss) gain
|
|
(295)
|
|
(760)
|
|
401
|
|
(1,965)
|
Loss before income
taxes
|
|
(16,632)
|
|
(6,573)
|
|
(41,153)
|
|
(18,345)
|
Income tax
recovery
|
|
103
|
|
173
|
|
313
|
|
2,961
|
Net
loss
|
|
(16,529)
|
|
(6,400)
|
|
(40,840)
|
|
(15,384)
|
Other comprehensive
(loss) income
|
|
(650)
|
|
(340)
|
|
251
|
|
2,664
|
Comprehensive
loss
|
$
|
(17,179)
|
$
|
(6,740)
|
$
|
(40,589)
|
$
|
(12,720)
|
Net loss per share
– basic and diluted
|
$
|
(0.13)
|
$
|
(0.05)
|
$
|
(0.33)
|
$
|
(0.13)
|
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,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
ADJUSTED
EBITDA:
|
|
|
|
|
|
|
|
|
Net
loss
|
$
|
(16,529)
|
$
|
(6,400)
|
$
|
(40,840)
|
$
|
(15,384)
|
Add back
(subtract):
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
4,210
|
|
4,156
|
|
12,869
|
|
12,818
|
Net finance
costs
|
|
1,703
|
|
528
|
|
8,151
|
|
1,406
|
Income tax
recovery
|
|
(103)
|
|
(173)
|
|
(313)
|
|
(2,961)
|
EBITDA
|
|
(10,719)
|
|
(1,889)
|
|
(20,133)
|
|
(4,121)
|
Asset
impairment
|
|
744
|
|
355
|
|
744
|
|
664
|
Share-based payments
expense
|
|
1,063
|
|
822
|
|
2,112
|
|
2,033
|
Loss (gain) on
derivative financial instruments
|
|
1,796
|
|
(422)
|
|
(2,575)
|
|
(1,345)
|
Foreign exchange loss
(gain)
|
|
295
|
|
760
|
|
(401)
|
|
1,965
|
ADJUSTED
EBITDA
|
$
|
(6,821)
|
$
|
(374)
|
$
|
(20,253)
|
$
|
(804)
|
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. 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.