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UrtheCast Reports Second Quarter 2018 Financial Results

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UrtheCast Reports Second Quarter 2018 Financial Results

Canada NewsWire

  • UrtheCast entered into a binding agreement to purchase leading geoanalytics firm Geosys, including a 13-year service level agreement with a total contract value in excess of US$100 million

  • Total UrtheCast revenue backlog now in excess of C$275 million

VANCOUVER, Aug. 14, 2018 /CNW/ - UrtheCast Corp. (TSX:UR) ("UrtheCast" or the "Company") today announces financial results for the three and six months ended on June 30, 2018 and provides an update on its financial condition.

UrtheCast Corp. (CNW Group/UrtheCast Corp.)

Q2 2018 Financial Results

(in millions of Canadian dollars)

Q2 2018

Q2 2017

YTD 2018

YTD 2017

Revenue

$

3.4

$

11.9

$

7.6

$

21.2

Operating costs

15.6

16.4

31.0

32.0

Net loss

(13.3)

(3.9)

(24.3)

(9.0)

Adjusted EBITDA (1)

(7.4)

0.9

(13.4)

(0.4)


1 Non-IFRS earnings measure. See reconciliation to Net Loss later in this press release.

 

Revenue decreased by $8.5 million in the second quarter of 2018 compared to the same quarter last year. Revenue from engineering services decreased by $7.0 million in the second 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, which resulted in the remaining revenue being recognized over a longer period. Earth Observation ("EO") imagery sales decreased by $1.5 million in the second quarter of 2018 compared to the same quarter last year, due to lower contract volume in the current year and a delay in securing a major contract award, which was announced subsequent to June 30, 2018 as described below in "Business Highlights".

The net loss of $13.3 million and negative adjusted EBITDA of $7.4 million in the second quarter of 2018 were lower compared to the net loss of $3.9 million and adjusted EBITDA of $0.9 million in the same quarter last year, primarily due to the decrease in revenue.

Donald Osborne, CEO of UrtheCast, commented, "UrtheCast is at a major inflection point in the Company's history, having recently achieved a significant milestone by securing financing for the groundbreaking UrtheDaily Constellation and undergoing a leadership transition. While our financial results for the second quarter reflect the extent of the changes that are currently underway, we are taking decisive action to strengthen the Company in a number of ways, including through the acquisition of Geosys, which expands our customer footprint and moves up the geoanalytics value chain. In this way, we believe that we can unlock the vast potential of UrtheCast's deep industry experience and best-in-class technology portfolio to establish clear market leadership and create lasting value for our shareholders."

Business Highlights

Geosys Acquisition

  • UrtheCast and Land O'Lakes, Inc. today announced that they have entered a binding term sheet for the purchase of Geosys Technology Holding LLC ("Geosys"), a wholly owned subsidiary of Land O'Lakes for an aggregate purchase price of US$20 million. This landmark deal brings unprecedented value to UrtheCast, ultimately enabling the Company to offer to its agribusiness customers a full solution of imagery data and geoanalytical solutions.

  • Upon the first closing, UrtheCast will continue to provide Land O'Lakes with all the 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 with total potential fees payable over the term of the agreement in excess of US$100 million.

  • The Geosys acquisition would bring UrtheCast's total contracted revenue backlog to in excess of $275 million.

Unsecured Revolving Credit Facility

  • The Company has 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 an unsecured revolving credit facility of up to US$20 million. 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 Award

  • On July 12, 2018 UrtheCast and its subsidiary, Deimos Imaging, announced that they have been awarded a multi-million Euro contract through a consortium led by Airbus Defence and Space to provide a very large set of EO products and services to the European Commission and the European Space Agency (the "ESA").

UrtheDaily Financing

  • On May 18, 2018 the Company entered into a US$142 million senior secured credit facility (the "Credit Agreement") to finance the construction, launch, and deployment of the six-satellite UrtheDaily Constellation, as well as related working capital and general corporate purposes. The loan will be available in two equal drawdown amounts, subject to the Company meeting certain conditions precedent.
  • In May and June 2018, gross proceeds of approximately $21.7 million were released from escrow to the Company from the private placement that closed on May 3, 2018.

  • On July 10, 2018 the Company entered into an Escrow Release and Amending Agreement to release the remaining $5 million principal amount of brokered private placement debentures held in escrow, as further detailed in the Management Discussion and Analysis for the three and six months ended June 30, 2018

Changes to the Board of Directors and Management

  • On June 19, 2018 Don Osborne was appointed as Chief Executive Officer of UrtheCast and assumed his role on July 5, 2018. Mr. Osborne is a seasoned technology executive, having spent more than 30 years in the satellite, space and defence industries. Most recently, from 2009 to 2017 he was a senior executive at MDA, a Maxar Company, including as President of the MDA Information Systems Group where he was responsible for MDA's Canadian businesses.

  • On June 25, 2018 the Company announced the results of its Annual General and Special Meeting of Shareholders, including the election of all management nominees to the board of directors. The nominees included two long-serving directors, William M. Evans (director since June, 2013) and James Topham (director since May, 2015) along with two directors appointed on May 25, 2018, namely Mark J. Piegza and Adam M. Vore, and two other highly-qualified candidates, Andreas M. Georghiou and John (Jack) Shannon.

  • On August 13, 2018, Don Osborne was appointed to UrtheCast's board of directors.

Outlook

We refer you to the Company's condensed interim consolidated financial statements for the three and six months ended June 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 June 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 June 30,

Six Months Ended June 30,



2018


2017


2018


2017

Revenue    

$

3,377

$

11,854

$

7,644

$

21,250

Other operating income


37


61


232


111



3,414


11,915


7,876


21,361

Operating costs









Direct costs, selling, general and administrative expenses


10,476


10,894


20,696


21,403

Research expenditures


306


112


612


388

Depreciation and amortization


4,291


4,188


8,659


8,662

Asset impairment


-


309


-


309

Share-based payments


520


878


1,049


1,211



15,593


16,381


31,016


31,973

Operating loss


(12,179)


(4,466)


(23,140)


(10,612)

Net finance costs


(5,904)


(436)


(6,448)


(878)

Gain on derivative financial instruments


4,169


681


4,371


923

Foreign exchange gain (loss)


534


(986)


696


(1,205)

Loss before income taxes


(13,380)


(5,207)


(24,521)


(11,772)

Income tax recovery


127


1,302


210


2,788

Net loss


(13,253)


(3,905)


(24,311)


(8,984)

Other comprehensive income (loss)


(1,355)


2,463


901


3,004

Comprehensive loss

$

(14,608)

$

(1,442)

$

(23,410)

$

(5,980)

Net loss per share – basic and diluted

$

(0.11)

$

(0.03)

$

(0.20)

$

(0.08)

 

NON-IFRS EARNINGS MEASURES

The following table reconciles our Non-IFRS earnings measures to Net Loss prepared in accordance with IFRS.


Three Months Ended June 30,

Six Months Ended June 30,



2018


2017


2018


2017

ADJUSTED EBITDA:









Net loss

$

(13,253)


(3,905)

$

(24,311)

$

(8,984)

Add back (subtract):









Depreciation and amortization


4,291


4,188


8,659


8,662

Net finance costs


5,904


436


6,448


878

Income tax recovery


(127)


(1,302)


(210)


(2,788)

EBITDA


(3,185)


(583)


(9,414)


(2,232)

Impairment of assets


-


309


-


309

Share-based payments expense


520


878


1,049


1,211

Gain on derivative financial instruments


(4,169)


(681)


(4,371)


(923)

Foreign exchange (gain) loss


(534)


986


(696)


1,205

ADJUSTED EBITDA

$

(7,368)

$

909

$

(13,432)

$

(430)

 

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 launching 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). UrtheCast is also developing OptiSAR™, a constellation of SAR satellites which, together with UrtheDaily™, will form the world's first fully-integrated optical and SAR constellation. 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 MD&A.

Forward Looking Information

This release contains certain information which, as presented, constitutes "forward-looking information" or "forward-oriented financial information" within the meaning of applicable Canadian securities laws. Forward-looking information involves statements that relate to future events and often addresses expected future business and financial performance, containing words such as "anticipate", "believe", "plan", "estimate", "expect" and "guidance", statements that an action or event "may", "might", "could" or "will" be taken or occur, or other similar expressions and includes, but is not limited to, statements relating to:

UrtheCast's expectations with respect to: UrtheCast's expected completion of the Geosys acquisition on terms set out in this press release, the definitive documentation related thereto, or at all; UrtheCast's expectations with respect to its ability to pay all installments making up the aggregate purchase price; UrtheCast's expectations with respect to the revenue to be generated by the service level agreement; Deimos Imaging's expected ability to deliver data produced by Deimos-2 to the consortium and fulfil its other obligations under the consortium agreement with Airbus Defence and Space; UrtheCast's expected completion of the UrtheDaily Financing and beginning of the UrtheDaily Constellation build phase; UrtheCast's expectations with respect to its ability to raise proceeds from a subordinated debt or equity offering, achieve the required leverage and contracted revenue ratios and otherwise satisfy the first drawdown conditions and the final drawdown conditions under the Credit Agreement in a timely manner; opportunities to renegotiate current and future customer contracts; and the Company's ability to continue as a going concern. Such statements reflect UrtheCast's current views with respect to future events. Such statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by UrtheCast, are inherently subject to significant uncertainties and contingencies.

Many factors could cause UrtheCast's actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements, including, among others: UrtheCast's 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 (the "AIF"), which is available under UrtheCast's SEDAR profile at www.sedar.com. UrtheCast undertakes no obligation to update forward-looking statements except as required by Canadian securities laws. Readers are cautioned against attributing undue certainty to forward-looking statements.

SOURCE UrtheCast Corp.

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