ORBCOMM Inc. (NASDAQ: ORBC), a global provider of Internet of
Things (IoT) solutions, today announced financial results for the
second quarter ended June 30, 2020.
The following financial highlights are in
thousands of dollars and unaudited.
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Recurring Service Revenues |
$ |
37,006 |
|
|
$ |
38,506 |
|
|
$ |
76,859 |
|
|
$ |
76,035 |
|
Other Service Revenues |
|
1,423 |
|
|
|
1,232 |
|
|
|
2,094 |
|
|
|
2,710 |
|
Total Service Revenues |
|
38,429 |
|
|
|
39,738 |
|
|
|
78,953 |
|
|
|
78,745 |
|
Product Sales |
|
18,303 |
|
|
|
27,365 |
|
|
|
43,958 |
|
|
|
54,393 |
|
Total Revenues |
|
56,732 |
|
|
|
67,103 |
|
|
|
122,911 |
|
|
|
133,138 |
|
Net Loss Attributable to
ORBCOMM Inc. Common Stockholders |
|
(6,670 |
) |
|
|
(6,419 |
) |
|
|
(13,645 |
) |
|
|
(11,909 |
) |
Basic EPS |
|
(0.09 |
) |
|
|
(0.08 |
) |
|
|
(0.17 |
) |
|
|
(0.15 |
) |
EBITDA (1) |
|
10,330 |
|
|
|
11,997 |
|
|
|
22,102 |
|
|
|
24,744 |
|
Adjusted EBITDA (1) |
$ |
11,941 |
|
|
$ |
14,165 |
|
|
$ |
25,621 |
|
|
$ |
29,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Non-GAAP
financial measure. See “Non-GAAP Financial Measures” for a
reconciliation of GAAP to Non-GAAP financial measures included with
the financial tables at the end of this release.
“We’re pleased with our second quarter results
as revenues came in as anticipated, while Adjusted EBITDA margin
exceeded expectations in a challenging macro environment,” said
Marc Eisenberg, ORBCOMM’s Chief Executive Officer. “Our integration
plan and disciplined focus on cash management led to an improved
Adjusted EBITDA margin of 21% and an $11 million increase in cash
flow from operations over the prior year. We’ve added several new
customers and expanded long-standing relationships, while building
a pipeline of opportunities. Our integration plan is nearing
completion, and we’re pivoting our innovation to focus on long-term
growth. With stable recurring service revenues, a solid liquidity
position and a diverse base of customers, we’re confident we will
come out stronger as markets begin to stabilize and momentum grows
in the back half of the year.”
Financial Results
Revenues
Total Revenues for the second quarter of 2020
were $56.7 million compared to $67.1 million in the prior year
period.
Service Revenues were $38.4 million in the
second quarter of 2020 compared to $39.7 million in the same period
last year. Recurring Service Revenues decreased $1.5 million to $37
million in the second quarter compared to $38.5 million in the
prior year quarter primarily due to the AT&T/Maersk revenues
from 2019 that did not recur this year. Excluding revenues from
AT&T/Maersk, Recurring Service Revenues were 99% of prior year
despite headwinds from foreign exchange, dormant assets and a weak
oil and gas environment. The Company added nearly 18,000 net
subscriber additions in the second quarter bringing the total
billable subscriber communicators to approximately 2.22 million as
of June 30, 2020.
Product Sales were $18.3 million in
the second quarter of 2020 compared to $27.4 million in the prior
year, as impacts from COVID-19 affected customer deployment
schedules and resulted in many temporary customer facility
closures.
Gross Margin
(1)
GAAP Service Gross Margin, inclusive of
depreciation and amortization expense, was 56.4% in the second
quarter of 2020 compared to 55.3% in the prior year period.
Non-GAAP Service Gross Margin, excluding depreciation and
amortization expense, was 67.3% in the second quarter of 2020
compared to 66% in the prior year period. The year-over-year
improvement was primarily driven by lower direct service costs
achieved through the Company’s cost reduction plan.
GAAP Product Gross Margin, inclusive of
depreciation and amortization expense, was 25% in the second
quarter of 2020 compared to 25.8% in the prior year period.
Non-GAAP Product Gross Margin, excluding depreciation and
amortization expense, was 27.8% in the second quarter of 2020
compared to 28.4% in the same period last year. The year-over-year
decline was primarily due to lower product revenue on approximately
$2 million of fixed costs.
Operating Expenses
Operating Expenses for the second quarter of
2020 were $32.8 million compared to $34.2 million for the same
period in 2019. The $1.4 million decrease was primarily driven by
reductions in professional services, labor, travel and
entertainment expenses, as well as lower product development
costs.
Net Income (Loss) and Earnings Per
Share
Net Loss Attributable to ORBCOMM Inc. Common
Stockholders for the second quarter of 2020 was $6.7 million, or
$0.09 per share, compared to a Net Loss of $6.4 million, or $0.08
per share in the second quarter of 2019.
EBITDA and Adjusted EBITDA
(1)
EBITDA for the second quarter of 2020 was $10.3
million compared to $12.0 million in the prior year period.
Adjusted EBITDA for the second quarter of 2020
was $11.9 million compared to $14.2 million in the prior year
period. The year-over-year decline was primarily due to the
flow-through impact from lower revenue, mainly product sales,
partially offset by a greater mix of high-margin service revenues
and reduced operating expenses. The Company’s Adjusted EBITDA
Margin in the second quarter of 2020 was 21%, relatively flat to
the prior year period.
Balance Sheet and Cash Flow
As of June 30, 2020, Cash and Cash Equivalents
totaled $62.4 million, a decrease of $7.8 million in the quarter,
which included a repayment of $15 million on the Company’s
revolving credit facility, and a $10 million-dollar interest
payment on the Company’s debt. Cash Flow from Operations totaled
$12.6 million for the second quarter of 2020, an increase of $10.7
million over the prior year period primarily driven by improvements
in working capital and margins. Capital Expenditures were $5.7
million in the second quarter of 2020.
Outlook
(2)
As the spread of the COVID-19 pandemic continues
to be unpredictable, a high degree of uncertainty remains as to the
level of business disruption across the multiple markets ORBCOMM
serves. That being said, ORBCOMM believes the largest impact of the
pandemic to financial results will most likely have occurred in the
second quarter of 2020, and anticipates improvement in the third
quarter. The Company expects Total Revenues in the third quarter
will be between $59 million and $62 million and anticipates
Adjusted EBITDA margin in the third quarter to be approximately
21.5%. The Company intends to provide fourth quarter guidance
during the earnings conference call in late October.
(2) The Company’s
outlook 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 1-844-735-3762 at least ten minutes prior to the start
of the call. International participants should dial 1-412-317-5710.
To hear a live web simulcast or to listen to the archived webcast
following completion of the call, please 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 1-412-317-0088 for International callers using
access code 10146215. The audio replay will be available from
approximately 11:00 AM ET on July 30, 2020 through August 13,
2020.
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: the impact of the
novel coronavirus (COVID-19) pandemic; 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 and
systems; 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., Caterpillar Inc., Komatsu
Ltd., Carrier Global Corporation 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
in which 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 man-made or
natural disasters, 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 and oversight; 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, data processing systems and
software 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 $250.0 million 8.0%
senior secured note indenture and our revolving credit agreement,
under which we may borrow up to $25.0 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, 2019 (“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:
Aly Bonilla Vice President, Investor RelationsORBCOMM
Inc. 703-433-6360 bonilla.aly@orbcomm.com
|
Media Inquiries:Michelle FerrisSenior Director,
Corporate CommunicationsORBCOMM
Inc.703-433-6516 ferris.michelle@orbcomm.com |
|
|
|
|
ORBCOMM Inc.Condensed
Consolidated Statements of Operations(In
thousands, except per share
data)(Unaudited)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues |
$ |
38,429 |
|
|
$ |
39,738 |
|
|
$ |
78,953 |
|
|
$ |
78,745 |
|
Product sales |
|
18,303 |
|
|
|
27,365 |
|
|
|
43,958 |
|
|
|
54,393 |
|
Total revenues |
|
56,732 |
|
|
|
67,103 |
|
|
|
122,911 |
|
|
|
133,138 |
|
Cost of revenues,
exclusive of depreciation and amortization shown
below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
12,559 |
|
|
|
13,508 |
|
|
|
25,640 |
|
|
|
26,555 |
|
Cost of product sales |
|
13,211 |
|
|
|
19,607 |
|
|
|
30,492 |
|
|
|
38,635 |
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
17,474 |
|
|
|
17,452 |
|
|
|
37,204 |
|
|
|
34,631 |
|
Product development |
|
2,784 |
|
|
|
3,732 |
|
|
|
6,604 |
|
|
|
7,699 |
|
Depreciation and amortization |
|
12,409 |
|
|
|
12,526 |
|
|
|
25,773 |
|
|
|
25,204 |
|
Acquisition-related and integration costs |
|
111 |
|
|
|
474 |
|
|
|
202 |
|
|
|
689 |
|
Loss from
operations |
|
(1,816 |
) |
|
|
(196 |
) |
|
|
(3,004 |
) |
|
|
(275 |
) |
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
265 |
|
|
|
572 |
|
|
|
681 |
|
|
|
964 |
|
Other income (expense) |
|
(234 |
) |
|
|
(300 |
) |
|
|
(500 |
) |
|
|
(58 |
) |
Interest expense |
|
(5,410 |
) |
|
|
(5,322 |
) |
|
|
(10,656 |
) |
|
|
(10,563 |
) |
Total other expense |
|
(5,379 |
) |
|
|
(5,050 |
) |
|
|
(10,475 |
) |
|
|
(9,657 |
) |
Loss before income
taxes |
|
(7,195 |
) |
|
|
(5,246 |
) |
|
|
(13,479 |
) |
|
|
(9,932 |
) |
Income tax (benefit)
expense |
|
(554 |
) |
|
|
1,140 |
|
|
|
(1 |
) |
|
|
1,850 |
|
Net loss |
|
(6,641 |
) |
|
|
(6,386 |
) |
|
|
(13,478 |
) |
|
|
(11,782 |
) |
Less: Net income attributable to noncontrolling interests |
|
29 |
|
|
|
33 |
|
|
|
167 |
|
|
|
127 |
|
Net loss attributable
to ORBCOMM Inc. |
$ |
(6,670 |
) |
|
$ |
(6,419 |
) |
|
$ |
(13,645 |
) |
|
$ |
(11,909 |
) |
Net loss attributable
to ORBCOMM Inc. common
stockholders |
$ |
(6,670 |
) |
|
$ |
(6,419 |
) |
|
$ |
(13,645 |
) |
|
$ |
(11,909 |
) |
Per share
information-basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ORBCOMM Inc. common
stockholders |
$ |
(0.09 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.17 |
) |
|
$ |
(0.15 |
) |
Per share
information-diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to ORBCOMM Inc. common
stockholders |
$ |
(0.09 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.17 |
) |
|
$ |
(0.15 |
) |
Weighted average
common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
78,071 |
|
|
|
79,688 |
|
|
|
78,192 |
|
|
|
79,538 |
|
Diluted |
|
78,071 |
|
|
|
79,688 |
|
|
|
78,192 |
|
|
|
79,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORBCOMM Inc.Condensed
Consolidated Balance Sheets(In thousands, except
par value and share data)
|
|
June 30,2020 |
|
|
December 31, |
|
|
|
(Unaudited) |
|
|
2019 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
62,355 |
|
|
$ |
54,258 |
|
Accounts receivable, net of allowances for doubtful accounts of
$6,666 and $4,480, respectively |
|
|
48,273 |
|
|
|
60,595 |
|
Inventories |
|
|
38,297 |
|
|
|
39,881 |
|
Prepaid expenses and other current assets |
|
|
16,886 |
|
|
|
18,003 |
|
Total current assets |
|
|
165,811 |
|
|
|
172,737 |
|
Satellite network and other equipment, net |
|
|
137,021 |
|
|
|
145,553 |
|
Goodwill |
|
|
166,129 |
|
|
|
166,129 |
|
Intangible assets, net |
|
|
66,912 |
|
|
|
73,280 |
|
Other assets |
|
|
20,783 |
|
|
|
23,149 |
|
Deferred
income taxes |
|
|
144 |
|
|
|
132 |
|
Total assets |
|
$ |
556,800 |
|
|
$ |
580,980 |
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
10,654 |
|
|
$ |
16,722 |
|
Accrued liabilities |
|
|
33,360 |
|
|
|
36,951 |
|
Current portion of deferred revenue |
|
|
6,486 |
|
|
|
3,865 |
|
Total current liabilities |
|
|
50,500 |
|
|
|
57,538 |
|
Note
payable – related party |
|
|
1,275 |
|
|
|
1,275 |
|
Notes
payable, net of unamortized deferred issuance costs |
|
|
247,071 |
|
|
|
246,683 |
|
Deferred
revenue, net of current portion |
|
|
2,844 |
|
|
|
6,771 |
|
Deferred
tax liabilities |
|
|
14,482 |
|
|
|
14,894 |
|
Other
liabilities |
|
|
15,055 |
|
|
|
16,303 |
|
Total liabilities |
|
|
331,227 |
|
|
|
343,464 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
ORBCOMM Inc. stockholders’ equity |
|
|
|
|
|
|
|
|
Series A Convertible Preferred Stock, par value $0.001; 1,000,000
shares authorized; 40,624 shares issued and outstanding at June 30,
2020 and December 31, 2019 |
|
|
406 |
|
|
|
406 |
|
Common stock, par value $0.001; 250,000,000 shares authorized;
77,952,878 and 78,062,451 shares issued at June 30, 2020 and
December 31, 2019, respectively |
|
|
78 |
|
|
|
78 |
|
Additional paid-in capital |
|
|
448,908 |
|
|
|
447,681 |
|
Accumulated other comprehensive loss |
|
|
(676 |
) |
|
|
(1,013 |
) |
Accumulated deficit |
|
|
(224,587 |
) |
|
|
(210,942 |
) |
Total ORBCOMM Inc. stockholders’ equity |
|
|
224,129 |
|
|
|
236,210 |
|
Noncontrolling interests |
|
|
1,444 |
|
|
|
1,306 |
|
Total equity |
|
|
225,573 |
|
|
|
237,516 |
|
Total liabilities and equity |
|
$ |
556,800 |
|
|
$ |
580,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ORBCOMM Inc.Condensed
Consolidated Statements of Cash Flows(In
thousands)(Unaudited)
|
|
Six Months Ended June 30, |
|
|
2020 |
|
2019 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(13,478 |
) |
|
$ |
(11,782 |
) |
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
Change in allowance for doubtful accounts |
|
|
3,033 |
|
|
|
477 |
|
Change in the fair value of acquisition-related contingent
consideration |
|
|
— |
|
|
|
(2,063 |
) |
Amortization and write-off of deferred financing fees |
|
|
388 |
|
|
|
388 |
|
Depreciation and amortization |
|
|
25,773 |
|
|
|
25,204 |
|
Stock-based compensation |
|
|
3,150 |
|
|
|
3,743 |
|
Foreign exchange loss |
|
|
338 |
|
|
|
21 |
|
Deferred income taxes |
|
|
(464 |
) |
|
|
(446 |
) |
Other |
|
|
1,109 |
|
|
|
968 |
|
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
9,345 |
|
|
|
(2,592 |
) |
Inventories |
|
|
1,592 |
|
|
|
672 |
|
Prepaid expenses and other assets |
|
|
1,840 |
|
|
|
(2,587 |
) |
Accounts payable and accrued liabilities |
|
|
(9,416 |
) |
|
|
(2,418 |
) |
Deferred revenue |
|
|
(1,313 |
) |
|
|
(287 |
) |
Other liabilities |
|
|
(1,113 |
) |
|
|
1,637 |
|
Net cash provided by operating activities |
|
|
20,784 |
|
|
|
10,935 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(10,517 |
) |
|
|
(10,550 |
) |
Subscription model capital expenditures |
|
|
(217 |
) |
|
|
— |
|
Net cash used in investing activities |
|
|
(10,734 |
) |
|
|
(10,550 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
|
Purchases of commons stock under share repurchase program |
|
|
(2,527 |
) |
|
|
— |
|
Payments under revolving credit facility |
|
|
(15,000 |
) |
|
|
— |
|
Proceeds under revolving credit facility |
|
|
15,000 |
|
|
|
— |
|
Payments under the Paycheck Protection Program |
|
|
(7,588 |
) |
|
|
|
|
Proceeds under the Paycheck Protection Program |
|
|
7,588 |
|
|
|
|
|
Proceeds from issuance of common stock under employee stock
purchase plan |
|
|
430 |
|
|
|
604 |
|
Net cash (used in) provided by financing activities |
|
|
(2,097 |
) |
|
|
604 |
|
Effect of exchange
rate changes on cash and cash equivalents |
|
|
144 |
|
|
|
40 |
|
Net increase in cash
and cash equivalents |
|
|
8,097 |
|
|
|
1,029 |
|
Beginning of period |
|
|
54,258 |
|
|
|
53,766 |
|
End of period |
|
$ |
62,355 |
|
|
$ |
54,795 |
|
Supplemental
disclosures of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid
for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
10,000 |
|
|
$ |
10,000 |
|
Income taxes |
|
$ |
2,745 |
|
|
$ |
1,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
The following table reconciles Net Loss
Attributable to ORBCOMM Inc. to EBITDA and Adjusted EBITDA for the
periods shown:
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
(In thousands and
unaudited) |
2020 |
|
2019 |
|
2020 |
|
2019 |
Adjustments to EBITDA |
|
|
|
|
|
|
|
Net loss attributable to ORBCOMM Inc. |
$ |
(6,670 |
) |
|
$ |
(6,419 |
) |
|
$ |
(13,645 |
) |
|
$ |
(11,909 |
) |
Income tax expense |
|
(554 |
) |
|
|
1,140 |
|
|
|
(1 |
) |
|
|
1,850 |
|
Interest income |
|
(265 |
) |
|
|
(572 |
) |
|
|
(681 |
) |
|
|
(964 |
) |
Interest expense |
|
5,410 |
|
|
|
5,322 |
|
|
|
10,656 |
|
|
|
10,563 |
|
Depreciation and
amortization |
|
12,409 |
|
|
|
12,526 |
|
|
|
25,773 |
|
|
|
25,204 |
|
EBITDA |
$ |
10,330 |
|
|
$ |
11,997 |
|
|
$ |
22,102 |
|
|
$ |
24,744 |
|
Adjustments to Adjusted
EBITDA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
1,471 |
|
|
|
1,661 |
|
|
|
3,150 |
|
|
|
3,743 |
|
Noncontrolling interests |
|
29 |
|
|
|
33 |
|
|
|
167 |
|
|
|
127 |
|
Acquisition-related and
integration costs |
|
111 |
|
|
|
474 |
|
|
|
202 |
|
|
|
689 |
|
Adjusted
EBITDA |
$ |
11,941 |
|
|
$ |
14,165 |
|
|
$ |
25,621 |
|
|
$ |
29,303 |
|
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 |
|
Six Months Ended |
|
June 30, |
|
June 30, |
(In thousands, except margin
data and unaudited) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenue |
$ |
38,429 |
|
|
$ |
39,738 |
|
|
$ |
78,953 |
|
|
$ |
78,745 |
|
Minus – Cost of services,
including depreciation and amortization expense |
|
16,747 |
|
|
|
17,758 |
|
|
|
34,107 |
|
|
|
35,054 |
|
GAAP Service gross profit |
$ |
21,682 |
|
|
$ |
21,980 |
|
|
$ |
44,846 |
|
|
$ |
43,691 |
|
Plus – Depreciation and
amortization expense |
|
4,188 |
|
|
|
4,250 |
|
|
|
8,467 |
|
|
|
8,499 |
|
Non-GAAP Service gross
profit |
$ |
25,870 |
|
|
$ |
26,230 |
|
|
$ |
53,313 |
|
|
$ |
52,190 |
|
GAAP Service gross
margin |
|
56.4 |
% |
|
|
55.3 |
% |
|
|
56.8 |
% |
|
|
55.5 |
% |
Non-GAAP Service gross
margin |
|
67.3 |
% |
|
|
66.0 |
% |
|
|
67.5 |
% |
|
|
66.3 |
% |
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
(In thousands, except margin
data and unaudited) |
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
$ |
18,303 |
|
|
$ |
27,365 |
|
|
$ |
43,958 |
|
|
$ |
54,393 |
|
Minus – Cost of product,
including depreciation and amortization expense |
|
13,732 |
|
|
|
20,312 |
|
|
|
31,522 |
|
|
|
40,033 |
|
GAAP Product gross profit |
$ |
4,571 |
|
|
$ |
7,053 |
|
|
$ |
12,436 |
|
|
$ |
14,360 |
|
Plus – Depreciation and
amortization expense |
|
521 |
|
|
|
705 |
|
|
|
1,030 |
|
|
|
1,398 |
|
Non-GAAP Product gross
profit |
$ |
5,092 |
|
|
$ |
7,758 |
|
|
$ |
13,466 |
|
|
$ |
15,758 |
|
GAAP Product gross
margin |
|
25.0 |
% |
|
|
25.8 |
% |
|
|
28.3 |
% |
|
|
26.4 |
% |
Non-GAAP Product gross
margin |
|
27.8 |
% |
|
|
28.4 |
% |
|
|
30.6 |
% |
|
|
29.0 |
% |
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 includes non-GAAP
measures, such as 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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