VANCOUVER, Nov. 14, 2019 /CNW/ - UrtheCast Corp. (TSX:UR)
("UrtheCast" or the "Company"), a leading provider of
information-rich products and services in the rapidly growing and
evolving geospatial and geo-analytics markets, reported its
financial results for the three and nine months ended September 30, 2019.
Highlights
- Adjusted EBITDA1 from continuing operations improved
by $3.0 million compared to the same
quarter last year and improved by $8.8
million for the year-to-date. Total Adjusted
EBITDA1 for the Company improved by $6.0 million compared to the same quarter of 2018
and by $17.0 million for the
year-to-date.
- The Company has received multiple indicative term sheets from
institutional investors to finance the UrtheDaily Constellation
project and the Company's growth. The Company is currently working
with its financial advisors on completing due diligence with
several potential investors and their respective advisors. The
Company and the potential investors are targeting the fourth
quarter of 2019 to secure a binding commitment.
- The Company has also 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 and complete due
diligence activities as it seeks to complete a sale.
Q3 2019 Financial Results
As a result of the planned sale of the Deimos Imaging business
or its assets, the operations of Deimos Imaging have been
classified as a discontinued operation for the three and nine
months ended September 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)
|
Q3
2019
|
Q3 2018
|
YTD
2019
|
YTD 2018
|
Revenue
|
$
|
4.4
|
$
|
1.2
|
$
|
13.9
|
$
|
6.0
|
Operating
costs
|
8.8
|
7.6
|
24.4
|
21.0
|
Adjusted EBITDA from
continuing
operations1
|
(1.2)
|
(4.2)
|
(2.7)
|
(11.5)
|
Adjusted EBITDA from
discontinued
operation1
|
0.4
|
(2.6)
|
(0.5)
|
(8.8)
|
Net loss from
continuing operations
|
(14.9)
|
(9.6)
|
(21.5)
|
(18.7)
|
Net loss from
discontinued operation
|
-
|
(6.9)
|
(5.1)
|
(22.1)
|
Net loss
|
(14.9)
|
(16.5)
|
(26.6)
|
(40.8)
|
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 nine months ending September
30, 2019.
|
As noted above, adjusted EBITDA from continuing operations of
negative $1.2 million in the third
quarter of 2019 improved by $3.0
million compared to the same quarter last year and improved
by $8.8 million to negative adjusted
EBITDA of $2.7 million for the
year-to-date due to lower headcount, corporate overhead,
professional fees and engineering subcontractor costs and a
positive EBITDA contribution from Geosys, the Company's
geo-analytics business which was acquired in January 2019.
Donald Osborne, CEO of UrtheCast,
commented: "The continuing improvement in our quarterly and
year-to-date results demonstrates the value of the restructuring
and cost-reduction efforts that we have undertaken since Q4 2018,
as well as our integration and expanded utilization of the powerful
Geosys geo-analytics platform. We are simultaneously making
important strides in advancing our initiatives to finance the
UrtheDaily Constellation and we and our potential investors are
targeting having a binding commitment in place by the end of the
year."
Operating Results
UrtheCast recognized revenue of $4.4
million in the third quarter of 2019 and $13.9 million in the year-to-date, which was
comprised entirely of geo-analytics products and services revenue
resulting from the acquisition of Geosys, including revenue from
the 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
$1.2 million and $6.0 million in the three and nine months ending
September 30, 2018, due to program
delays incurred by its key subcontractors in completing milestones
under its engineering and value-added services contract in 2019,
compared to revenue recognized in the prior year under this
contract and from certain other engineering customer contracts
completed in 2018.
Operating costs of $8.8 million in
the third quarter of 2019 and $24.4
million year-to-date increased by $1.2 million and $3.4
million compared to comparative prior year periods,
respectively, primarily as a result of including Geosys' operating
costs from the January 2019
acquisition date. The increase in operating costs attributable to
the consolidation of Geosys was 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
50% in the third quarter and by 54% in the year-to-date compared to
the prior year period and SG&A costs have decreased by
approximately 55% in the third quarter and 62% in the year-to-date
period from the prior year.
The net loss of $14.9 million in
the third quarter of 2019 improved by $1.6
million compared to the net loss from the third quarter of
2018, and net loss of $26.6 million
in the year-to-date improved by $14.3
million from the prior year, primarily due to higher
revenue, lower non-Geosys operating costs and a reduction in net
loss from our discontinued operation. The net loss includes a loss
of $7.7 million for the quarter (2018
– loss of $1.8 million) and
$4.6 million for the year-to-date
(2018 – gain of $2.6 million) as a
result of fair value adjustments on derivative financial
instruments.
Business Developments
Deferral of Second Instalment Payable to Land O'Lakes
UrtheCast agreed with Land O'Lakes to defer US$4.25 million of the second instalment of the
purchase price for the acquisition of Geosys to February 14, 2020, with the balance of US
$0.75 million to be paid on
January 1, 2020 through a setoff of
amounts owed by Land O' Lakes under the above mentioned 13-year
services agreement.
US$1.5 Million Term Loan
Financing
As announced on July 26, 2019, the
Company entered into a US$1.5 million
secured term loan with Lunar Ventures Inc. which accrues interest
at 17% per annum and has a maturity date of January 15, 2020.
$6.6 Million Financing
On September 11, 2019, the Company
announced the closing of a $6.6
million financing with Vine Rose Limited consisting of a
$3.0 million senior unsecured
convertible debenture of the Company and a $3.6 million senior unsecured non-convertible
debenture of the Company. The debentures, which accrue interest at
a rate of 17% per annum, had a maturity date of October 31, 2019. The debentures were
subsequently amended with an extended maturity date of December 31, 2019 whereby the non-convertible
debenture became convertible into Common Shares of the Company on
the same terms as the convertible debenture. In addition, the
Company agreed to issue 6,034,745 common share purchase warrants to
Vine Rose Limited, which have a five-year term to maturity and an
exercise price of $0.48 per common
share, subject to adjustment in certain circumstances.
Payment Deferral under €25 Million Secured Term Loan
In October 2019, Banco de
Sabadell, S.A. ("Sabadell"), a lender to UrtheCast in connection
with a secured term loan which is secured against the assets of the
Deimos Imaging business, agreed to defer €1.35 million of the
previously deferred €1.5 million principal payment to January 31, 2020 in exchange for a partial
principal repayment of €0.15 million plus accrued interest.
Furthermore, Sabadell agreed to defer the €4.0 million principal
repayment that will be due in December
2019 to January 31, 2020 in
order to provide the Company with additional time to complete the
proposed sale of the Deimos Imaging business.
Technology Development Funding
In July 2019, the Company signed a
project funding agreement with Canada's Digital Technology Supercluster to
receive up to approximately $1.4
million in non-repayable funding to reimburse costs incurred
to advance development of its UrthePipeline ground segment systems.
The Company filed its first claim during the three months ended
September 30, 2019.
Outlook & Going Concern
We refer you to the Company's interim condensed consolidated
financial statements for the three and nine months ended
September 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 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 nine months ended September 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 September
30,
|
Nine Months
Ended
September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Revenue
|
$
|
4,429
|
$
|
1,225
|
$
|
13,912
|
$
|
6,019
|
Other operating
income
|
|
377
|
|
172
|
|
927
|
|
404
|
|
|
4,806
|
|
1,397
|
|
14,839
|
|
6,423
|
Operating
costs
|
|
|
|
|
|
|
|
|
Direct costs,
selling, general and administrative
|
|
|
|
|
|
|
|
|
expenses
|
|
5,650
|
|
4,764
|
|
16,632
|
|
16,438
|
Impairment of
assets
|
|
-
|
|
744
|
|
-
|
|
744
|
Research
expenditures
|
|
392
|
|
842
|
|
920
|
|
1,454
|
Depreciation and
amortization
|
|
1,641
|
|
96
|
|
4,789
|
|
378
|
Share-based
payments
|
|
1,082
|
|
1,108
|
|
2,046
|
|
1,985
|
|
|
8,765
|
|
7,554
|
|
24,387
|
|
20,999
|
Operating
loss
|
|
(3,959)
|
|
(6,157)
|
|
(9,548)
|
|
(14,576)
|
Net finance
costs
|
|
(2,895)
|
|
(1,358)
|
|
(6,863)
|
|
(7,053)
|
(Loss) gain on
derivative financial instruments
|
|
(7,733)
|
|
(1,802)
|
|
(4,627)
|
|
2,576
|
Foreign exchange
(loss) gain
|
|
(691)
|
|
(298)
|
|
(1,420)
|
|
407
|
Loss before income
taxes
|
|
(15,278)
|
|
(9,615)
|
|
(22,458)
|
|
(18,646)
|
Income tax recovery
(expense)
|
|
398
|
|
(24)
|
|
982
|
|
(75)
|
Net loss from
continuing operations
|
|
(14,880)
|
|
(9,639)
|
|
(21,476)
|
|
(18,721)
|
Net loss from
discontinued operation
|
|
(18)
|
|
(6,890)
|
|
(5,097)
|
|
(22,119)
|
Net
loss
|
|
(14,898)
|
|
(16,529)
|
|
(26,573)
|
|
(40,840)
|
Other comprehensive
income (loss)
|
|
365
|
|
(650)
|
|
78
|
|
251
|
Comprehensive
loss
|
$
|
(14,533)
|
$
|
(17,179)
|
$
|
(26,495)
|
$
|
(40,859)
|
Loss per share –
basic and diluted
|
$
|
(0.11)
|
$
|
(0.13)
|
$
|
(0.20)
|
$
|
(0.33)
|
Loss per share
from continuing operations
– basic and diluted
|
$
|
(0.11)
|
$
|
(0.08)
|
$
|
(0.16)
|
$
|
(0.15)
|
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,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
ADJUSTED
EBITDA:
|
|
|
|
|
|
|
|
|
Net loss from
continuing operations
|
$
|
(14,880)
|
$
|
(9,639)
|
$
|
(21,476)
|
$
|
(18,721)
|
Add back
(subtract):
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
1,641
|
|
96
|
|
4,789
|
|
378
|
Net finance
costs
|
|
2,895
|
|
1,358
|
|
6,863
|
|
7,053
|
Income tax (recovery)
expense
|
|
(398)
|
|
24
|
|
(982)
|
|
75
|
EBITDA from
continuing operations
|
|
(10,742)
|
|
(8,161)
|
|
(10,806)
|
|
(11,215)
|
Impairment of
assets
|
|
-
|
|
744
|
|
-
|
|
744
|
Share-based
payments
|
|
1,082
|
|
1,108
|
|
2,046
|
|
1,985
|
Loss (gain) on
derivative financial instruments
|
|
7,733
|
|
1,802
|
|
4,627
|
|
(2,576)
|
Foreign exchange loss
(gain)
|
|
691
|
|
298
|
|
1,420
|
|
(407)
|
ADJUSTED EBITDA
FROM CONTINUING
|
|
|
|
|
|
|
|
|
OPERATIONS
|
$
|
(1,236)
|
$
|
(4,209)
|
$
|
(2,713)
|
$
|
(11,469)
|
ADJUSTED EBITDA
FROM DISCONTINUED
|
|
|
|
|
|
|
|
|
OPERATION
|
|
387
|
|
(2,612)
|
|
(541)
|
|
(8,784)
|
ADJUSTED
EBITDA
|
$
|
(849)
|
$
|
(6,821)
|
$
|
(3,254)
|
$
|
(20,253)
|
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 nine months
ending September 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", "target",
"is seeking" 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 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 and the negotiations with interested parties in
respect thereof; UrtheCast's expectations with respect to its
ability to enter into a financing arrangement to advance the build,
launch and commissioning 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, and the status and timing of any discussions in respect
thereof; 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, Lunar Ventures Inc. and Vine Rose Limited;
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 the
performance of key subcontractors and the completion of certain
customer contracts or achievement of payment milestones under the
Company's engineering services contract which depends on its key
subcontractors meeting certain delivery obligations; 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 the expectations
regarding its build, launch and operations and the timing of the
UrtheDaily Constellation.
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, or inability, to rectify its
current cash constraints and to continue as a going concern; the
Company's ability to enter into a financing arrangement for the
UrtheDaily 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;
substantial dilution of the Company's Common Shares as a result of
conversion of outstanding debentures or the exercise of outstanding
warrants; 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;
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 of, or other transaction that would
monetize, Deimos Imaging on commercially reasonable terms, or at
all, or a significant further 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, engineering services or value-added services contracts,
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 and Management's
Discussion & Analysis for the three and nine months ended
September 30, 2019, both of which are
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.