Thursday, January 25, 2018

exactEarth Announces $33.8Mln Loss in 2017: Board Evaluating "Potential Strategic Alternatives"

         By Chuck Black

Back in the fall of 2015, Cambridge, ON based COM DEV International was being bought out by Phoenix, AZ based Honeywell International and spewing out Cambridge, ON based subsidiary exactEarth LLP as a standalone publicly traded Canadian company.

There was at least some hope that the newly elected Federal government's benign neglect towards the deal would provide exactEarth with enough"wiggle room" to maintain old COM DEV era Federal government contracts as it developed new customers for its automatic identification system (AIS).

After all, as outlined in the November 7th, 2015 post, "Should the proposed COM DEV sale to US based Honeywell trigger the Investment Canada Act?," the COM DEV sale didn't even trigger a Trudeau government review under the Investment Canada Act, although it most certainly could have.

Since then however, everything seems to have gone to "hell in a hand basket." As outlined in the May 6th, 2016 post, "Orbcomm, Skywave, exactEarth, CSA Rovers, High School Robotics, MDA, Emerson, Magellan, Honeywell & UrtheCast," the Federal government under Prime Minister Justin Trudeau subsequently slashed exactEarth revenues by rewriting the terms of a Federal contract for exactEarth down to a small $116,000 CDN sliver of what should have been an easily renewed, eighteen month contract worth $19Mln CDN.

The only thing that could be said for certain was that the company was struggling. The January 25th, 2018 exactEarth press release, "exactEarth Announces Fiscal 2017 Financial Results," contained more bad news. According to the press release, 2017 financial highlights included:
  • $12.8Mln CDN in revenue generated but a net loss of $33.8Mln CDN, which included a $26.9Mln non-cash charge related to the impairment and write-down of certain assets.
  • An adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of -$4.5Mln CDN.
  • A 14% increase in revenue in the commercial market over 2016.
  • A revenue backlog of $26.0Mln CDN at year-end.
  • 2017 order bookings of $17.3Mln CDN.
Cash balance was $8.1Mln CDN on October 31th, 2017.

As outlined in the press release:
Total revenue for the three- and twelve-month periods ended October 31, 2017 ("Q4 2017" and "full-year") was $2.9Mln and $12.8Mln compared to $3.3Mln and $18.9Mln in the same periods last year.  
The change in revenue for Q4 2017 was primarily due to $0.68Mln of non-cash revenue generated in Q4 2016 from an Asset Transfer Agreement with Communitech ("Asset Transfer Agreement") related to the EV9 satellite transfer. There was no revenue related to the Asset Transfer Agreement recognized in Q4 2017.
The change in revenue for the full-year period was primarily due to lower revenue generated by the Government of Canada ("GoC") contract in 2017, which accounted for $5.3Mln of the difference year-over-year, and lower non-cash revenue related to the Asset Transfer Agreement in 2017, which accounted for $2.4Mln of the difference year-over-year.  
Excluding the loss of revenue associated with the GoC contract and the Asset Transfer Agreement, total revenue would have increased 8% in Q4 2017 and would have increased 14% year-over-year.
The company also announced that former Canadian Space Agency (CSA) president William MacDonald ("Mac") Evans was joining the exactEarth board of directors. Evans (who is currently on the board of Vancouver, BC based Urthecast and a member of the Federal Space Advisory Board) and the rest of the exactEarth board will commence:
...a process to explore and evaluate potential strategic alternatives focused on maximizing shareholder value. These alternatives could include, among other things, a financing, a sale of assets, a sale of the Company or a merger or other business combination or other strategic transactions that may be available to the Company.
Overview of one month exactEarth (XCT) trading volume and price on the TSX. Will the stock drop on Tuesday? Stay tuned. Graphic c/o Globe & Mail

Whatever that might finally mean to exactEarth, the scrappy (but mostly unloved) child of Honeywell's 2015 COM DEV purchase, any final solution is likely to only become clear over the next several months.

exactEarth is currently in partnership with Melbourne, FL based Harris Corporation to build and launch 58 AIS detecting payloads to cover the worlds oceans with a low latency satellite tracking system. The company trades on the Toronto Stock Exchange (TSE) under the ticker symbol XCT.
Chuck Black.

Chuck Black is the editor of the Commercial Space blog.

No comments:

Post a Comment

Support our Patreon Page