– Increased Margins for both Services and
Products Over Prior Year –– Year-Over-Year
Improvement in Net Loss of 45% and Adjusted EBITDA Growth of 49%
–– Q1 2019 Cash Flow from Operations up $10
Million Versus Prior Year –
ORBCOMM Inc. (NASDAQ: ORBC), a global provider of
Machine-to-Machine (M2M) and Internet of Things (IoT) solutions,
today announced financial results for the first quarter ended March
31, 2019.
The following financial highlights are in
thousands of dollars and unaudited.
|
Three Months Ended |
|
March 31, |
|
2019 |
|
|
2018 |
|
|
|
|
Recurring Service
Revenues |
$ |
37,529 |
|
|
$ |
36,725 |
|
Other Service
Revenues |
|
1,478 |
|
|
|
1,267 |
|
Total
Service Revenues |
|
39,007 |
|
|
|
37,992 |
|
Product Sales |
|
27,028 |
|
|
|
29,981 |
|
Total Revenues |
|
66,035 |
|
|
|
67,973 |
|
Net Loss Attributable to
ORBCOMM Inc. Common Stockholders |
|
(5,490 |
) |
|
|
(10,086 |
) |
Basic EPS |
|
(0.07 |
) |
|
|
(0.13 |
) |
EBITDA (1,3) |
|
12,747 |
|
|
|
7,805 |
|
Adjusted EBITDA
(2,3) |
|
15,138 |
|
|
|
10,141 |
|
(1) EBITDA is defined as earnings
attributable to ORBCOMM Inc. before interest income (expense),
provision for income taxes, depreciation and amortization, and loss
on debt extinguishment.(2) Adjusted EBITDA is defined as EBITDA,
adjusted for stock-based compensation expense, noncontrolling
interests, impairment loss, non-capitalized satellite launch and
in-orbit insurance, and acquisition-related and integration
costs.(3) EBITDA and Adjusted EBITDA are non-GAAP financial
measures used by the Company to measure operating performance and
the quality of earnings. A table presenting EBITDA and Adjusted
EBITDA, reconciled to GAAP Net Income (Loss), is among other
financial tables at the end of this release.
“We made major strides this quarter in our plan
to improve service margins, hardware margins, working capital and
cash generation,” said Marc Eisenberg, ORBCOMM’s Chief Executive
Officer. “Collectively, these improvements led to a $10 million
swing in cash from operations and a 49% increase in Adjusted EBITDA
over the prior year. We continue to see improved customer demand
for our services and products, especially our new feature-rich,
cost-optimized products, which made up about two-thirds of our
shipments in the quarter. Our pipeline remains strong, and we’re
seeing momentum with several large customer opportunities, which we
anticipate will drive incremental revenues over the course of the
year.”
Financial Results
Revenues
Total Revenues for the first quarter of 2019
were $66 million compared to $68 million in the prior year period.
Excluding $5 million of revenue in JB Hunt hardware shipments that
completed in the first quarter of 2018, Total Revenues for the
first quarter 2019 increased $3 million. As of March 31, 2019,
total billable subscriber communicators grew to approximately 2.44
million, an increase of 14.8% compared to the prior year.
Service Revenues were $39 million in the first
quarter of 2019, up $1 million or 2.7% compared to the same period
last year. Recurring Service Revenues increased to $37.5 million in
the first quarter compared to $36.7 million in the prior year
quarter as the Company grew its subscriber base. Other Service
Revenues, which are comprised of installation services,
professional services and software licenses, were $1.5 million in
the quarter, up $0.2 million versus the same period last year with
an increase in high-margin professional service revenue in the
quarter offsetting decreased lower-margin installation
revenues.
Product Sales were $27 million in the
first quarter of 2019 compared to $30 million in the first quarter
of 2018. Excluding revenues from the JB Hunt deployment, Product
Sales improved $2 million over the first quarter of 2018.
Gross Margin
(4,5,6)
GAAP Service Gross Margin, inclusive of
depreciation and amortization expense, was 55.7% in the first
quarter of 2019 compared to 47.8% in the prior year period.
Non-GAAP Service Gross Margin, excluding depreciation and
amortization expense, was 66.6% in the first quarter of 2019
compared to 59.1% in the prior year period. The year-over-year
improvements were due to bringing onboard new subscribers at high
margin and limiting product installations at negative margins.
GAAP Product Gross Margin, inclusive of
depreciation and amortization expense, was 27.0% in the first
quarter of 2019 compared to 18.2% in the prior year period.
Non-GAAP Product Gross Margin was 29.6% in the first quarter of
2019 compared to 21.6% in the same period last year. The
year-over-year improvements were primarily due to a better mix of
higher-margin products shipped in the quarter compared to
low-margin deployments with large customers completed last year.
Non-GAAP Product Gross Margin improved sequentially for the fifth
consecutive quarter, up 210 basis points from the fourth quarter of
2018.
Operating Expenses
Operating Expenses for the first quarter of 2019
were $34 million compared to $33.1 million for the same period in
2018. The increase of $0.9 million in Operating Expenses was
largely due to higher product development costs associated with the
new analytics service offering and the rollouts of the new product
portfolio.
Net Income (Loss) and Earnings Per
Share
Net Loss Attributable to ORBCOMM Inc. Common
Stockholders for the first quarter of 2019 was $5.5 million, or
$0.07 per share, compared to a Net Loss of $10.1 million, or $0.13
per share in the first quarter of 2018.
EBITDA and Adjusted EBITDA
(3)
EBITDA for the first quarter of 2019 was $12.7
million compared to $7.8 million in the prior year period.
Adjusted EBITDA for the first quarter of 2019
was $15.1 million compared to $10.1 million in the prior year
period. A significant one-time accounting entry associated with the
inthinc acquisition resulted in a net benefit of $2 million in the
current quarter, compared to a net benefit of $1.6 million in the
same period last year. Excluding the favorable accounting entries
with the inthinc acquisition from the first quarter in both 2019
and 2018, Adjusted EBITDA increased $4.6 million year-over-year.
The Company’s Adjusted EBITDA Margin increased to 22.9%, an
improvement of 800 basis points over the prior year. The Adjusted
EBITDA performance was primarily driven by higher service and
product gross profits that more than offset incremental operating
expenses.
Balance Sheet & Cash
Flow
As of March 31, 2019, Cash and Cash Equivalents
totaled $58.1 million. Cash Flow from Operations totaled $9 million
for the first quarter of 2019, an increase of $10.2 million over
the prior year period primarily driven by improved operating
results. Capital Expenditures were $4.5 million in the first
quarter of 2019.
2019 Outlook
(7)
For the second quarter of 2019, the Company
expects Total Revenues to be between $66 to $69 million, Adjusted
EBITDA Margin to be approximately 21.5%, and add a similar amount
of net subscribers compared to the first quarter.
For the full year 2019, the Company maintains
its outlook as listed in the table below and continues to expect
many of the new sales opportunities to ramp up in the second half
of the year.
|
Projected
Outlook |
FY
2019 |
|
Recurring
Service Revenue Growth |
5% -
7.5% |
|
Service
Gross Margin (4) |
66% -
68% |
|
Product
Gross Margin (5) |
Over
30% |
|
Adjusted
EBITDA (2) |
$70 to
$75 million |
|
Cash Flow
from Operations |
Approximately $50 million |
|
Capital
Expenditures |
Approximately $25 million |
(4) Non-GAAP Service Gross Margin is defined as
Non-GAAP Service gross profit divided by Service Revenue. Non-GAAP
Service gross profit is defined as Service Revenue, minus costs of
services (including depreciation and amortization expense) plus
depreciation and amortization expense.(5) Non-GAAP Product Gross
Margin is defined as Non-GAAP Product gross profit divided by
Product Sales. Non-GAAP Product gross profit is defined as Product
Sales, minus cost of product (including depreciation and
amortization expense) plus depreciation and amortization
expense.(6) Non-GAAP Service gross margin and Non-GAAP Product
gross margin are non-GAAP financial measures used by the Company to
measure operating performance and the quality of earnings. A table
presenting Non-GAAP Service gross margin and Non-GAAP Product gross
margin, reconciled to GAAP Service gross margin and GAAP Product
gross margin respectively, is among other financial tables at the
end of this release.(7) The Company’s outlook for 2019 includes
non-GAAP measures, such as Adjusted EBITDA and Adjusted EBITDA
Margin, which exclude charges or credits not indicative of core
operations, which may include but not be limited to stock-based
compensation expense, acquisition-related and integration costs,
impairment loss, and other significant items that currently cannot
be predicted. The exact amount of these charges or credits are not
currently determinable, but may be significant. Accordingly, the
Company is unable to provide equivalent reconciliations from GAAP
to non-GAAP for these financial measures.
Investment Community Conference
Call
ORBCOMM will host a conference call and webcast
for the investment community this morning at 8:30 AM ET. Senior
management will review the results, discuss ORBCOMM’s business, and
address questions. To access the call, U.S. participants should
dial 1-877-270-2148 at least ten minutes prior to the start of the
call. International participants should dial 1-412-902-6510. To
hear a live web simulcast or to listen to the archived webcast
following completion of the call, please Click Here or visit the
Company’s investor relations website at
http://investors.orbcomm.com and then select “News & Events” to
access the link to the webcast. To listen to a replay of the
conference call, please dial 1-877-344-7529 or 412-317-0088 for
International callers using access code 10130643. The audio replay
will be available from approximately 11:30 AM ET on May 1, 2019
through May 15, 2019.
About ORBCOMM Inc.
ORBCOMM (Nasdaq: ORBC) is a global leader and
innovator in the industrial Internet of Things, providing solutions
that connect businesses to their assets to deliver increased
visibility and operational efficiency. The company offers a broad
set of asset monitoring and control solutions, including seamless
satellite and cellular connectivity, unique hardware and powerful
applications, all backed by end-to-end customer support, from
installation to deployment to customer care. ORBCOMM has a
diverse customer base including premier OEMs, solutions customers
and channel partners spanning transportation, supply chain,
warehousing and inventory, heavy equipment, maritime, natural
resources, and government. For more information,
visit www.orbcomm.com.
Forward-Looking Statements
Certain statements discussed in this press
release constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These
forward-looking statements generally relate to our plans,
estimates, objectives and expectations for future events, as well
as projections, business trends and other statements that are not
historical facts. Such forward-looking statements are subject to
known and unknown risks and uncertainties, some of which are beyond
our control, which may cause our actual results, performance or
achievements, or industry results, to be materially different from
any future results, performance or achievements expressed or
implied by such forward-looking statements. These risks and
uncertainties include but are not limited to: demand for and market
acceptance of our products and services and our ability to
successfully implement our business plan; our dependence on our
subsidiary companies (Market Channel Affiliates (“MCAs”)) and
third-party product and service developers and providers,
distributors and resellers (Market Channel Partners (“MCPs”)) to
develop, market and sell our products and services, especially in
markets outside the United States; substantial losses we have
incurred and may continue to incur; substantial competition in the
telecommunications, Automatic Identification Service (“AIS”) data
and industrial Internet of Things (“IoT”) industries; the inability
to effect suitable investments, alliances and acquisitions or the
inability to successfully integrate acquired businesses; defects,
errors or other insufficiencies in our products or services;
failure to meet minimum service level commitments to certain of our
customers; our dependence on significant customers for a
substantial portion of our revenues, including key customers such
as JB Hunt Transport Services, Inc. (“JB Hunt”), Caterpillar Inc.,
Komatsu Ltd., Carrier Transicold and Satlink S.L.; our ability to
expand our business outside the United States and risks related to
the economic, political and other conditions in foreign countries
where we do business; fluctuations in foreign currency exchange
rates; unanticipated domestic or foreign tax or fee liabilities;
the possibility we will be required to collect certain taxes in
jurisdictions where we have not historically done so; economic,
political and other conditions; extreme events such as a man-made
or natural disaster, earthquakes, severe weather or other climate
change-related events; our dependence on a limited number of
manufacturers for many of our products and services; interruptions,
discontinuations, slowdown or loss of the supply of subscriber
communicators from our vendor Sanmina Corporation; legal
proceedings; our reliance on intellectual property; increased
regulatory restrictions; lack of in-orbit or other insurance for
our ORBCOMM Generation 1 or ORBCOMM Generation 2 satellites; our
reliance on third-party wireless network service providers to
deliver existing and developing services in certain areas of our
business; significant interruptions, discontinuation or loss of
services provided by Inmarsat plc; failure to maintain proper and
effective internal controls; inaccurate estimates in accounting or
incorrect financial assumptions; significant operating risks
related to our satellites due to various types of potential
anomalies and potential impacts of space debris or other
spacecrafts; the failure of our systems or reductions in levels of
service due to technological malfunctions or deficiencies or other
events outside of our control; difficulty upgrading or replacing
aging hardware and software we use in operating our gateway earth
stations and our customers’ subscriber communicators; technical or
other difficulties with our gateway earth stations; security risks
related to our networks and data processing systems and those of
our third-party service providers; liabilities or additional costs
as a result of laws, governmental regulations and evolving views of
personal privacy rights; failure of our information technology
systems; cybersecurity risks; the level of our indebtedness and the
terms of our $250 million 8.0% senior secured note indenture and
our revolving credit agreement, under which we may borrow up to $25
million, that could restrict our business activities or our ability
to execute our strategic objectives or adversely affect our
financial performance; and the other risks described in our filings
with the Securities and Exchange Commission (“SEC”). For more
detail on these and other risks, please see our Annual Report on
Form 10-K for the year ended December 31, 2018 (“Annual
Report”), and other documents we file with the SEC. We undertake no
obligation to publicly revise any forward-looking statements or
cautionary factors, except as required by law.
ContactsInvestor
Inquiries:
Media Inquiries:Aly
Bonilla
Michelle FerrisVice President, Investor
Relations
Director, Corporate CommunicationsORBCOMM Inc.
ORBCOMM
Inc.703-433-6360
703-433-6516bonilla.aly@orbcomm.com
ferris.michelle@orbcomm.com
ORBCOMM Inc.Condensed
Consolidated Statements of Operations(In
thousands, except per share
data)(Unaudited)
|
Three Months Ended March
31, |
|
2019 |
|
2018 |
Revenues: |
|
|
|
Service revenues |
$ |
39,007 |
|
|
$ |
37,992 |
|
Product
sales |
|
27,028 |
|
|
|
29,981 |
|
Total
revenues |
|
66,035 |
|
|
|
67,973 |
|
Cost of revenues,
exclusive of depreciation and amortization shown
below: |
|
|
|
|
|
|
|
Cost of
services |
|
13,047 |
|
|
|
15,548 |
|
Cost of
product sales |
|
19,028 |
|
|
|
23,511 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Selling,
general and administrative |
|
17,179 |
|
|
|
17,500 |
|
Product
development |
|
3,967 |
|
|
|
2,813 |
|
Depreciation
and amortization |
|
12,678 |
|
|
|
12,223 |
|
Acquisition-related and integration costs |
|
215 |
|
|
|
606 |
|
Loss from
operations |
|
(79 |
) |
|
|
(4,228 |
) |
Other income
(expense): |
|
|
|
|
|
|
|
Interest
income |
|
392 |
|
|
|
475 |
|
Other income
(expense) |
|
242 |
|
|
|
(167 |
) |
Interest
expense |
|
(5,241 |
) |
|
|
(5,200 |
) |
Total other
expense |
|
(4,607 |
) |
|
|
(4,892 |
) |
Loss before income
taxes |
|
(4,686 |
) |
|
|
(9,120 |
) |
Income
taxes |
|
710 |
|
|
|
943 |
|
Net
loss |
|
(5,396 |
) |
|
|
(10,063 |
) |
Less: Net
income attributable to noncontrolling interests |
|
94 |
|
|
|
23 |
|
Net loss
attributable to ORBCOMM Inc. |
$ |
(5,490 |
) |
|
$ |
(10,086 |
) |
Net loss
attributable to ORBCOMM Inc. common
stockholders |
$ |
(5,490 |
) |
|
$ |
(10,086 |
) |
Per share
information-basic: |
|
|
|
|
|
|
|
Net loss
attributable to ORBCOMM Inc. common stockholders |
$ |
(0.07 |
) |
|
$ |
(0.13 |
) |
Per share
information-diluted: |
|
|
|
|
|
|
|
Net loss
attributable to ORBCOMM Inc. common stockholders |
$ |
(0.07 |
) |
|
$ |
(0.13 |
) |
Weighted average
common shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
79,387 |
|
|
|
74,729 |
|
Diluted |
|
79,387 |
|
|
|
74,729 |
|
ORBCOMM Inc.Condensed
Consolidated Balance Sheets(In thousands, except
par value and share data)
|
|
March 31,2019 |
|
|
December 31,2018 |
|
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
58,078 |
|
|
$ |
53,766 |
|
Accounts
receivable, net of allowances for doubtful accounts of $4,084 and
$4,072 respectively |
|
|
60,233 |
|
|
|
57,665 |
|
Inventories |
|
|
35,059 |
|
|
|
34,300 |
|
Prepaid
expenses and other current assets |
|
|
17,848 |
|
|
|
15,553 |
|
Total
current assets |
|
|
171,218 |
|
|
|
161,284 |
|
Satellite network and
other equipment, net |
|
|
155,649 |
|
|
|
160,070 |
|
Goodwill |
|
|
166,129 |
|
|
|
166,129 |
|
Intangible assets,
net |
|
|
83,029 |
|
|
|
86,264 |
|
Other assets |
|
|
22,547 |
|
|
|
12,603 |
|
Deferred income taxes |
|
|
495 |
|
|
|
109 |
|
Total assets |
|
$ |
599,067 |
|
|
$ |
586,459 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
19,000 |
|
|
$ |
15,527 |
|
Accrued
liabilities |
|
|
40,570 |
|
|
|
35,735 |
|
Current
portion of deferred revenue |
|
|
5,312 |
|
|
|
5,954 |
|
Total
current liabilities |
|
|
64,882 |
|
|
|
57,216 |
|
Note payable – related
party |
|
|
1,275 |
|
|
|
1,298 |
|
Notes payable, net of
unamortized deferred issuance costs |
|
|
246,101 |
|
|
|
245,907 |
|
Deferred revenue, net of
current portion |
|
|
6,463 |
|
|
|
5,471 |
|
Deferred tax
liabilities |
|
|
15,436 |
|
|
|
16,109 |
|
Other liabilities |
|
|
10,065 |
|
|
|
2,600 |
|
Total
liabilities |
|
|
344,222 |
|
|
|
328,601 |
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
ORBCOMM Inc.
stockholders’ equity |
|
|
|
|
|
|
|
|
Series A
Convertible Preferred Stock, par value $0.001; 1,000,000
shares authorized; 39,442 shares issued and outstanding
at March 31, 2019 and December 31, 2018 |
|
|
394 |
|
|
|
394 |
|
Common
stock, par value $0.001; 250,000,000 shares authorized; 79,568,496
and 79,008,243 shares issued at March 31, 2019 and
December 31, 2018, respectively |
|
|
80 |
|
|
|
79 |
|
Additional
paid-in capital |
|
|
452,240 |
|
|
|
449,343 |
|
Accumulated
other comprehensive income |
|
|
(887 |
) |
|
|
(381 |
) |
Accumulated
deficit |
|
|
(197,997 |
) |
|
|
(192,507 |
) |
Less
treasury stock, at cost; 29,990 shares at March 31, 2019 and
December 31, 2018 |
|
|
(96 |
) |
|
|
(96 |
) |
Total
ORBCOMM Inc. stockholders’ equity |
|
|
253,734 |
|
|
|
256,832 |
|
Noncontrolling interests |
|
|
1,111 |
|
|
|
1,026 |
|
Total
equity |
|
|
254,845 |
|
|
|
257,858 |
|
Total liabilities and equity |
|
$ |
599,067 |
|
|
$ |
586,459 |
|
ORBCOMM Inc.Condensed
Consolidated Statements of Cash Flows(In
thousands)(Unaudited)
|
|
Three Months Ended March 31, |
|
|
2019 |
|
2018 |
Cash flows from
operating activities: |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(5,396 |
) |
|
$ |
(10,063 |
) |
Adjustments
to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
Change in
allowance for doubtful accounts |
|
|
144 |
|
|
|
881 |
|
Change in
the fair value of acquisition-related contingent consideration |
|
|
(2,063 |
) |
|
|
(1,508 |
) |
Amortization
and write-off of deferred financing fees |
|
|
194 |
|
|
|
194 |
|
Depreciation
and amortization |
|
|
12,678 |
|
|
|
12,223 |
|
Stock-based
compensation |
|
|
2,082 |
|
|
|
1,707 |
|
Foreign
exchange (gain) loss |
|
|
(256 |
) |
|
|
176 |
|
Deferred
income taxes |
|
|
(1,042 |
) |
|
|
779 |
|
Other |
|
|
752 |
|
|
|
— |
|
Changes in
operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
(2,852 |
) |
|
|
(2,155 |
) |
Inventories |
|
|
(785 |
) |
|
|
(5,549 |
) |
Prepaid
expenses and other assets |
|
|
(1,549 |
) |
|
|
1,070 |
|
Accounts
payable and accrued liabilities |
|
|
7,439 |
|
|
|
2,076 |
|
Deferred
revenue |
|
|
351 |
|
|
|
(578 |
) |
Other
liabilities |
|
|
(679 |
) |
|
|
(435 |
) |
Net cash provided by (used in) operating activities |
|
|
9,018 |
|
|
|
(1,182 |
) |
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
(4,515 |
) |
|
|
(5,623 |
) |
Net cash (used in) investing activities |
|
|
(4,515 |
) |
|
|
(5,623 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
— |
|
|
|
— |
|
Effect of exchange
rate changes on cash and cash equivalents |
|
|
(191 |
) |
|
|
200 |
|
Net increase
(decrease) in cash and cash equivalents |
|
|
4,312 |
|
|
|
(6,605 |
) |
Beginning of
period |
|
|
53,766 |
|
|
|
34,830 |
|
End of
period |
|
$ |
58,078 |
|
|
$ |
28,225 |
|
Supplemental
disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid
for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
— |
|
|
$ |
— |
|
Income
taxes |
|
$ |
— |
|
|
$ |
— |
|
The following table reconciles Net Loss
Attributable to ORBCOMM Inc. to EBITDA and Adjusted EBITDA for the
periods shown:
|
Three Months Ended |
|
March 31, |
(In thousands and
unaudited) |
2019 |
|
2018 |
Adjustments for
EBITDA |
|
|
|
Net loss
attributable to ORBCOMM Inc. |
$ |
(5,490 |
) |
|
$ |
(10,086 |
) |
Income tax expense |
|
710 |
|
|
|
943 |
|
Interest income |
|
(392 |
) |
|
|
(475 |
) |
Interest expense |
|
5,241 |
|
|
|
5,200 |
|
Depreciation and
amortization |
|
12,678 |
|
|
|
12,223 |
|
EBITDA |
$ |
12,747 |
|
|
$ |
7,805 |
|
Adjustments for
Adjusted EBITDA |
|
|
|
|
|
|
|
Stock-based
compensation |
|
2,082 |
|
|
|
1,707 |
|
Net income attributable to
the noncontrolling interests |
|
94 |
|
|
|
23 |
|
Acquisition-related and
integration costs |
|
215 |
|
|
|
606 |
|
Adjusted
EBITDA |
$ |
15,138 |
|
|
$ |
10,141 |
|
The following tables reconcile GAAP Service
Gross Margin to Non-GAAP Service Gross Margin and GAAP Product
Gross Margin to Non-GAAP Product Gross Margin for the periods
shown:
|
Three Months Ended |
|
March 31, |
(In thousands except
margin data and unaudited) |
2019 |
|
2018 |
Service revenue |
$ |
39,007 |
|
|
|
$ |
37,992 |
|
|
Minus – Cost of services,
including depreciation and amortization expense |
|
17,297 |
|
|
|
|
19,835 |
|
|
GAAP Service gross
profit |
$ |
21,710 |
|
|
|
$ |
18,157 |
|
|
Plus – Depreciation and
amortization expense |
|
4,250 |
|
|
|
|
4,287 |
|
|
Non-GAAP Service gross
profit |
$ |
25,960 |
|
|
|
$ |
22,444 |
|
|
GAAP Service
gross margin |
|
55.7 |
% |
|
|
|
47.8 |
% |
|
Non-GAAP
Service gross margin |
|
66.6 |
% |
|
|
|
59.1 |
% |
|
|
Three Months Ended |
|
March 31, |
(In thousands except
margin data and unaudited) |
2019 |
|
2018 |
Product sales |
$ |
27,028 |
|
|
|
$ |
29,981 |
|
|
Minus – Cost of product,
including depreciation and amortization expense |
|
19,721 |
|
|
|
|
24,539 |
|
|
GAAP Product gross
profit |
$ |
7,307 |
|
|
|
$ |
5,442 |
|
|
Plus – Depreciation and
amortization expense |
|
693 |
|
|
|
|
1,028 |
|
|
Non-GAAP Product gross
profit |
$ |
8,000 |
|
|
|
$ |
6,470 |
|
|
GAAP Product
gross margin |
|
27.0 |
% |
|
|
|
18.2 |
% |
|
Non-GAAP
Product gross margin |
|
29.6 |
% |
|
|
|
21.6 |
% |
|
ORBCOMM publicly reports its financial
information in accordance with accounting principles generally
accepted in the United States of America (“US GAAP”). To facilitate
external analysis of the Company’s operating performance, ORBCOMM
also presents financial information that are considered “non-GAAP
financial measures” under Regulation G and related reporting
requirements promulgated by the U.S. Securities and Exchange
Commission. Non-GAAP measures should be considered in addition to,
and not as a substitute for, or superior to, Net Income or other
measures of financial performance prepared in accordance with GAAP
and may be different than those presented by other companies.
EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Non-GAAP Service
Gross Margin and Non-GAAP Product Gross Margin are not performance
measures calculated in accordance with GAAP and are therefore
considered non-GAAP measures. Reconciliation tables are presented
above.
The Company’s outlook for 2019 includes non-GAAP
measures, such as Adjusted EBITDA and Adjusted EBITDA Margin, which
exclude charges or credits not indicative of core operations, which
may include but not be limited to stock-based compensation expense,
acquisition-related and integration costs, impairment loss, and
other significant items that currently cannot be predicted. The
exact amount of these charges or credits are not currently
determinable, but may be significant. Accordingly, the Company is
unable to provide equivalent reconciliations from GAAP to non-GAAP
for these financial measures.
EBITDA is defined as earnings attributable to
ORBCOMM Inc. before interest income (expense), provision for income
taxes, depreciation and amortization, and loss on debt
extinguishment. ORBCOMM believes EBITDA is useful to its management
and investors in evaluating operating performance because it is one
of the primary measures used to evaluate the economic productivity
of the Company’s operations, including its ability to obtain and
maintain its customers, its ability to operate its business
effectively, the efficiency of its employees and the profitability
associated with their performance. It also helps ORBCOMM’s
management and investors to meaningfully evaluate and compare the
results of the Company’s operations from period to period on a
consistent basis by removing the impact of its financing
transactions and the depreciation and amortization impact of
capital investments from its operating results. In addition,
ORBCOMM management uses EBITDA in presentations to its board of
directors to enable it to have the same measurement of operating
performance used by management and for planning purposes, including
the preparation of the annual operating budget.
The Company also believes that Adjusted EBITDA,
defined as EBITDA adjusted for stock-based compensation expense,
noncontrolling interests, impairment loss, and acquisition-related
and integration costs, is useful to investors to evaluate the
Company’s core operating results and financial performance because
it excludes items that are significant non-cash or non-recurring
expenses reflected in the Condensed Consolidated Statements of
Operations. Adjusted EBITDA Margin is defined as Adjusted EBITDA
divided by Total Revenues.
Non-GAAP Service Gross Margin is defined as
Non-GAAP Service gross profit divided by Service Revenue. Non-GAAP
Service gross profit is defined as Service Revenue, minus costs of
services (including depreciation and amortization expense) plus
depreciation and amortization expense. Non-GAAP Product Gross
Margin is defined as Non-GAAP Product gross profit divided by
Product Sales. Non-GAAP Product gross profit is defined as Product
Sales, minus cost of product (including depreciation and
amortization expense) plus depreciation and amortization expense.
The Company believes that Non-GAAP Service Gross Margin and
Non-GAAP Product Gross Margin are useful to evaluate and compare
the results of the Company’s operations from period to period on a
consistent basis by removing the depreciation and amortization
impact of capital investments from its operating results.
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