orbc-8k_20181030.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 30, 2018

 

ORBCOMM Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

001-33118

41-2118289

(State or other jurisdiction

(Commission

(IRS Employer

of incorporation)

File Number)

Identification No.)

395 W. Passaic Street

Rochelle Park, New Jersey 07662

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (703) 433-6300

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

 


 

Item 2.02.

Results of Operations and Financial Condition.

On October 30, 2018, ORBCOMM Inc. (“ORBCOMM” or the “Company”) released its earnings for the third quarter 2018 and is furnishing a copy of the earnings release to the Securities and Exchange Commission under Item 2.02 of this Current Report on Form 8-K. The press release is attached herewith as Exhibit 99 and is incorporated herein by reference. In addition, the Company will discuss its financial results during a webcast and teleconference call Tuesday, October 30, 2018 at 4:30 p.m. (ET). To access the webcast and teleconference call, go to the Company’s website at www.orbcomm.com.

The information contained in Exhibit 99 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

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 and Adjusted EBITDA Margin are not performance measures calculated in accordance with GAAP and are therefore considered non-GAAP measures.

 

EBITDA is defined as earnings attributable to ORBCOMM Inc. before interest income (expense), loss on debt extinguishment, provision for income taxes and depreciation and amortization. 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 equals Adjusted EBITDA divided by Total Revenues.  

Item 9.01.Financial Statements and Exhibits.

(d) Exhibits.

99

Press Release of the Company dated October 30, 2018.

2

 


 

EXHIBIT INDEX

 

Exhibit Number

 

Description of Exhibit

 

 

 

99

 

Press Release of the Company dated October 30, 2018.

 

3

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

ORBCOMM Inc.

 

 

 

 

By

/s/ Michael W. Ford

 

Name:

Michael W. Ford

 

Title:

Executive Vice President, Chief Financial

 

 

Officer

 

 

Date: October 30, 2018

 

4

 

orbc-ex99_7.htm

Exhibit 99

 

 

ORBCOMM ANNOUNCES THIRD QUARTER 2018 RESULTS

 

Total Revenues of $71.0 Million, Service Revenues Up 10% vs Prior Year

Achieved Record Adjusted EBITDA of Over $17 Million

Added 85,000 Net Subscribers

 

Delivering Nearly 24,000 Devices with Partner Savi to U.S. Government Customer

 

Rochelle Park, NJ, October 30, 2018 – ORBCOMM Inc. (NASDAQ: ORBC), a global provider of Machine-to-Machine (M2M) and Internet of Things (IoT) solutions, today announced financial results for the third quarter ended September 30, 2018.

The following financial highlights are in thousands of dollars.

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Recurring Service Revenues

$

37,192

 

 

$

32,992

 

 

$

111,010

 

 

$

91,003

 

Other Service Revenues

 

1,281

 

 

 

2,048

 

 

 

3,930

 

 

 

4,626

 

Total Service Revenues

 

38,473

 

 

 

35,040

 

 

 

114,940

 

 

 

95,629

 

Product Sales

 

32,569

 

 

 

34,326

 

 

 

94,863

 

 

 

82,615

 

Total Revenues

 

71,042

 

 

 

69,366

 

 

 

209,803

 

 

 

178,244

 

Net Loss Attributable to ORBCOMM Inc.

Common Stockholders

 

(3,295

)

 

 

(39,694

)

 

 

(20,614

)

 

 

(53,777

)

Basic EPS

 

(0.04

)

 

 

(0.54

)

 

 

(0.27

)

 

 

(0.74

)

EBITDA (1,3)

 

14,612

 

 

 

(22,231

)

 

 

33,110

 

 

 

(2,298

)

Adjusted EBITDA (2,3)

$

17,392

 

 

$

11,157

 

 

$

40,568

 

 

$

35,585

 

 

(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, 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 achieved significant improvements in Adjusted EBITDA in the third quarter with margins successfully progressing on their upward path,” said Marc Eisenberg, ORBCOMM’s Chief Executive Officer. “Shipments of new cost-reduced products are continuing to ramp up driving product margins higher, and we anticipate deploying a larger percentage of these products in the fourth quarter. With a strong pipeline of opportunities and our business moving in the right direction, we are setting the stage for a great 2019.”


1

 


Financial Results

 

Revenues

 

Total Revenues for the third quarter of 2018 were $71.0 million compared to $69.4 million in the prior year period, an increase of $1.7 million. As of September 30, 2018, total billable subscriber communicators grew to approximately 2.3 million, an increase of 21.4% compared to the third quarter of 2017.

 

Service Revenues were $38.5 million in the third quarter of 2018, up $3.4 million or 9.8% over the prior year period. The increase was primarily driven by continued growth in the Company’s subscriber base across multiple lines of business and the Blue Tree Systems acquisition in late 2017. Recurring Service Revenues increased to $37.2 million in the third quarter, a 12.7% improvement compared to the priar year. While Recurring Service Revenues were slightly up sequentially, third quarter revenues included a $0.8 million reduction in accounting adjustments related to ORBCOMM’s first year reconciliation with the inthinc business. Other Service Revenues, which are comprised of installation services, professional services and software licenses, were $1.3 million in the quarter, $0.8 million lower versus the same period last year due to less installation service revenue.

 

Product Sales were $32.6 million in the third quarter of 2018, down $1.8 million or 5.1% compared to the third quarter of 2017.  The decrease was primarily attributable to higher product shipments in the prior year in relation to the large inital JB Hunt rollout.

 

Gross Margin

 

Service Gross Margin was 66.8% in the third quarter of 2018 compared to 61.1% in the prior year period. The year-over-year improvement of 570 basis points was primarily due to the Company’s decision to move away from product installations at negative margins. Third quarter Service Gross Margin was relatively consistent sequentially with the second quarter.

 

Product Gross Margin was 24.2% in the third quarter of 2018 compared to 13.5% in the same period last year. The large improvement over the prior year period was primarily due to low-margin deployments with large customers completed last year. Sequentially, Product Gross Margin improved 210 basis points from the second quarter, even as the Company moved through a large quantity of inventory at reduced margins in preparation for multiple new higher-margin products to be released in Q4.

 

Total Gross Margin for the third quarter of 2018 was 47.3% compared to 37.6% in the prior year period.

 

Operating Expenses

 

Operating Expenses for the third quarter of 2018 were $31.1 million compared to $60.3 million for the same period in 2017, which included an impairment loss for satellites of $31 million. Excluding the prior year’s impairment loss, Operating Expenses increased about $2 million, primarily for operating costs at Blue Tree Systems.

 

 


Net Income (Loss) and Earnings Per Share

 

Net Loss Attributable to ORBCOMM Inc. Common Stockholders for the third quarter of 2018 was $3.3 million, or a loss of $0.04 per share, compared to a Net Loss of $39.7 million, or a loss of $0.54 per share in the third quarter of 2017. The year-over-year improvement was primarily driven by the one-time impairment loss in 2017 and increased gross profits, partially offset by higher operating expenses.

 

EBITDA and Adjusted EBITDA (3)

 

EBITDA for the third quarter of 2018 was $14.6 million compared to an EBITDA Loss of $22.2 million in the prior year period, which included a satellite impairment loss.

 

The Company achieved record Adjusted EBITDA of $17.4 million for the third quarter of 2018, an increase of $6 million compared to the prior year. The improvement includes $2 million of one-time net positive items related to the inthinc acquisition, including a reduction in the earnout liability $4 million tied to service revenue growth and an increase in reserves, primarily bad debt, of $2 million. Excluding the adjustments, the normalized Adjusted EBITDA would be approximately $15 million, an improvement of $4 million compared to the prior year and $2 million sequentially. The Company’s Adjusted EBITDA Margin, excluding the inthinc adjustments, increased to approximately 21.1%, an improvement both sequentially and over the prior year. The strong 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 September 30, 2018, Cash and Cash Equivalents totaled $45.9 million. Cash Flow from Operations totaled $11.6 million for the third quarter of 2018, primarily from favorable operating results and working capital improvements driven by a reduction in inventory. Capital Expenditures were $5.4 million in the quarter.

 

2018 Outlook

 

ORBCOMM continues to expect full year Adjusted EBITDA to be between $55 million and $60 million with a continued focus on driving margin expansion, as well as adding between 350,000 to 400,000 net subscribers in 2018. The Company is amending revenue guidance to reflect a $5 million reduction in other service revenue as ORBCOMM minimizes contracting directly with third-party installers, as well as a reduction in hardware revenues that are shifting into 2019 as customers complete their integration of the Company’s new platform of products.  ORBCOMM now expects total revenues for 2018 to be between $280 million and $290 million.

 

 


Investment Community Conference Call

 

ORBCOMM will host a conference call and webcast for the investment community this afternoon at 4:30 PM ET. Senior management will review the results, discuss ORBCOMM’s business, and address questions.  To access the call, US/CAN participants should dial 1-800-949-2175 at least ten minutes prior to the start of the call. International participants should dial 1-323-994-2131. 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 call. To listen to a replay of the conference call, please Click Here. The replay will be available from 9:30 PM ET on October 30, 2018, through 9:30 PM ET on November 13, 2018.

 

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.

 

ORBCOMM Inc. routinely posts important information about the Company to its website at www.orbcomm.com. Effective November 1, 2018, the Company may use its website as a channel for distribution of material non-public information about the Company and for complying with its disclosure obligations under Regulation FD promulgated by the U.S. Securities and Exchange Commission. These disclosures will be included in the “Investors” section of the Company’s website at http://investors.orbcomm.com. Accordingly, investors should monitor this portion of the Company’s website, in conjunction with the Company’s press releases, SEC filings and public conference calls and webcasts. In addition, investors may automatically receive email alerts and other information about the Company by enrolling their email addresses using the “E-mail Alerts” link within the “Investors” section of the website.

 

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; the inability to effect suitable investments, alliances and acquisitions, and even if we are able to make acquisitions, the failure to integrate and effectively operate the acquired businesses and the exposure to additional risks, such as unexpected costs, contingent or other liabilities, or weaknesses in internal controls, and issues related to non-compliance with domestic and foreign laws, particularly in acquisitions of foreign businesses; our dependence on significant customers for a substantial portion of our revenues, including key customers such as JB Hunt Transport Services, Inc., Walmart, Caterpillar Inc., Komatsu Ltd., Hub Group, Onixsat and Satlink S.L.; our ability to expand our business outside the United States, including risks related to the economic, political and other conditions in foreign countries in which we do business, including fluctuations in foreign currency exchange rates; our dependence on a few significant vendors, service providers or suppliers, as well as the loss or disruption or slowdown in the supply of products and services these key vendors, service providers or suppliers, such as our SkyWave business’s dependence on its commercial relationship with Inmarsat plc and the services provided by Inmarsat plc, including the continued availability of Inmarsat plc’s satellites, the supply of our products produced by Sanmina Corporation, or the supply of application specific integrated circuits (ASICs) from S3 Group; competition from existing and potential telecommunications competitors, including terrestrial and satellite-based network providers, some of whom provide wireless network services to our customers in connection with our products and services; our reliance on intellectual property rights and the risk that we, our MCAs, our MCPs and our customers may infringe on the intellectual property rights of others; our inability to operate due to changes or restrictions in the political, legal, regulatory, government, administrative and economic conditions and developments in the United States and other countries and territories in which we provide our services; legal proceedings; the failure of our system or reductions in levels of service due to technological malfunctions or deficiencies or other events, such as in-orbit satellite failures, reduced performance of our existing satellites, or man-made or natural disasters and other extreme events; rapid and significant technological changes, pricing pressures and other competitive factors; 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 U.S. 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, 2017 (“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.

 

Contacts

Investor Inquiries:

Media Inquiries:

Aly Bonilla

Michelle Ferris

Vice President, Investor Relations

Director, Corporate Communications

ORBCOMM Inc.

ORBCOMM Inc.

703-433-6360

703-433-6516

bonilla.aly@orbcomm.com

ferris.michelle@orbcomm.com

 

 


 


 

ORBCOMM Inc.

 

Condensed Consolidated Statements of Operations

 

(In thousands, except per share data)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarters Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

 

$

38,473

 

 

$

35,040

 

 

$

114,940

 

 

$

95,629

 

Product sales

 

 

32,569

 

 

 

34,326

 

 

 

94,863

 

 

 

82,615

 

Total revenues

 

 

71,042

 

 

 

69,366

 

 

 

209,803

 

 

 

178,244

 

Cost of revenues, exclusive of depreciation and amortization

   shown below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

 

12,764

 

 

 

13,638

 

 

 

40,704

 

 

 

33,856

 

Cost of product sales

 

 

24,679

 

 

 

29,676

 

 

 

73,363

 

 

 

67,614

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

14,823

 

 

 

13,755

 

 

 

51,352

 

 

 

39,329

 

Product development

 

 

3,816

 

 

 

2,453

 

 

 

9,671

 

 

 

5,964

 

Depreciation and amortization

 

 

12,081

 

 

 

12,041

 

 

 

36,146

 

 

 

34,463

 

Impairment loss - satellite network

 

 

 

 

 

31,224

 

 

 

 

 

 

31,224

 

Acquisition-related and integration costs

 

 

395

 

 

 

800

 

 

 

1,495

 

 

 

2,290

 

Income (loss) from operations

 

 

2,484

 

 

 

(34,221

)

 

 

(2,928

)

 

 

(36,496

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

648

 

 

 

266

 

 

 

1,576

 

 

 

522

 

Other income (expense)

 

 

120

 

 

 

(32

)

 

 

108

 

 

 

(210

)

Interest expense

 

 

(5,232

)

 

 

(5,197

)

 

 

(15,733

)

 

 

(12,466

)

Loss on debt extinguishment

 

 

 

 

 

 

 

 

 

 

 

(3,868

)

Total other expense

 

 

(4,464

)

 

 

(4,963

)

 

 

(14,049

)

 

 

(16,022

)

Loss before income taxes

 

 

(1,980

)

 

 

(39,184

)

 

 

(16,977

)

 

 

(52,518

)

Income taxes

 

 

1,242

 

 

 

479

 

 

 

3,410

 

 

 

1,192

 

Net loss

 

 

(3,222

)

 

 

(39,663

)

 

 

(20,387

)

 

 

(53,710

)

Less: Net income attributable to noncontrolling

   interests

 

 

73

 

 

 

19

 

 

 

216

 

 

 

55

 

Net loss attributable to ORBCOMM Inc.

 

$

(3,295

)

 

$

(39,682

)

 

$

(20,603

)

 

$

(53,765

)

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(3,295

)

 

$

(39,694

)

 

$

(20,614

)

 

$

(53,777

)

Per share information-basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(0.04

)

 

$

(0.54

)

 

$

(0.27

)

 

$

(0.74

)

Per share information-diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(0.04

)

 

$

(0.54

)

 

$

(0.27

)

 

$

(0.74

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

78,649

 

 

 

73,762

 

 

 

77,158

 

 

 

72,396

 

Diluted

 

 

78,649

 

 

 

73,762

 

 

 

77,158

 

 

 

72,396

 


 


ORBCOMM Inc.

 

Condensed Consolidated Balance Sheets

 

(In thousands, except par value and share data)

 

(Unaudited)

 

 

September 30,

 

 

December 31,

 

 

2018

 

 

2017

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

45,894

 

 

$

34,830

 

Accounts receivable, net of allowance for doubtful accounts of $3,619

   and $400, respectively

 

58,615

 

 

 

46,900

 

Inventories

 

37,042

 

 

 

42,437

 

Prepaid expenses and other current assets

 

18,996

 

 

 

18,692

 

Total current assets

 

160,547

 

 

 

142,859

 

Satellite network and other equipment, net

 

165,176

 

 

 

174,178

 

Goodwill

 

166,129

 

 

 

166,678

 

Intangible assets, net

 

89,514

 

 

 

99,339

 

Other assets

 

12,676

 

 

 

12,036

 

Deferred income taxes

 

181

 

 

 

104

 

Total assets

$

594,223

 

 

$

595,194

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

11,680

 

 

$

29,298

 

Accrued liabilities

 

41,972

 

 

 

33,016

 

Current portion of deferred revenue

 

3,622

 

 

 

6,263

 

Total current liabilities

 

57,274

 

 

 

68,577

 

Note payable-related party

 

1,321

 

 

 

1,366

 

Notes payable, net of unamortized deferred issuance costs

 

245,713

 

 

 

245,131

 

Deferred revenue, net of current portion

 

6,779

 

 

 

2,459

 

Deferred tax liabilities

 

15,912

 

 

 

17,646

 

Other liabilities

 

6,662

 

 

 

13,619

 

Total liabilities

 

333,661

 

 

 

348,798

 

Commitments and contingencies

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

ORBCOMM Inc. stockholders' equity

 

 

 

 

 

 

 

Series A convertible preferred stock, par value $0.001; 1,000,000 shares

   authorized; 38,672 and 37,544 shares issued and outstanding at September 30, 2018

   and December 31, 2017, respectively

 

387

 

 

 

376

 

Common stock, par value $0.001; 250,000,000 shares authorized; 78,799,373 and

   74,436,579 shares issued at September 30, 2018 and December 31, 2017, respectively

 

79

 

 

 

74

 

Additional paid-in capital

 

446,407

 

 

 

411,298

 

Accumulated other comprehensive (loss) income

 

(298

)

 

 

256

 

Accumulated deficit

 

(186,859

)

 

 

(166,245

)

Less treasury stock, at cost; 29,990 shares at September 30, 2018 and

   December 31, 2017

 

(96

)

 

 

(96

)

Total ORBCOMM Inc. stockholders' equity

 

259,620

 

 

 

245,663

 

Noncontrolling interests

 

942

 

 

 

733

 

Total equity

 

260,562

 

 

 

246,396

 

Total liabilities and equity

$

594,223

 

 

$

595,194

 


 



ORBCOMM Inc.

 

Condensed Consolidated Statements of Cash Flows

 

(In thousands)

 

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(20,387

)

 

$

(53,710

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Change in allowance for doubtful accounts

 

 

2,995

 

 

 

241

 

Change in the fair value of acquisition-related contingent consideration

 

 

(5,494

)

 

 

(1,276

)

Amortization and write-off of deferred financing fees

 

 

582

 

 

 

2,912

 

Depreciation and amortization

 

 

36,146

 

 

 

34,463

 

Impairment loss - satellite network

 

 

 

 

 

31,224

 

Stock-based compensation

 

 

5,747

 

 

 

4,314

 

Foreign exchange loss

 

 

64

 

 

 

366

 

Deferred income taxes

 

 

(1,847

)

 

 

758

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(14,490

)

 

 

(18,010

)

Inventories

 

 

5,554

 

 

 

(11,893

)

Prepaid expenses and other assets

 

 

601

 

 

 

(4,156

)

Accounts payable and accrued liabilities

 

 

(11,493

)

 

 

8,929

 

Deferred revenue

 

 

1,687

 

 

 

(1,106

)

Other liabilities

 

 

(595

)

 

 

(262

)

Net cash used in operating activities

 

 

(930

)

 

 

(7,206

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of business, net of cash acquired

 

 

 

 

 

(34,236

)

Capital expenditures

 

 

(17,163

)

 

 

(21,410

)

Other

 

 

650

 

 

 

(650

)

Net cash used in investing activities

 

 

(16,513

)

 

 

(56,296

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from public offering of common stock, net of underwriters’ discounts and

   commissions and offering costs of $1,705

 

 

27,967

 

 

 

 

Proceeds from private offering of common stock

 

 

 

 

 

15,000

 

Payment of long-term debt

 

 

 

 

 

(150,000

)

Proceeds from issuance of long-term debt

 

 

 

 

 

250,000

 

Payments under revolving credit facility

 

 

(14,000

)

 

 

 

Proceeds under revolving credit facility

 

 

14,000

 

 

 

 

Cash paid for debt issuance costs

 

 

 

 

 

(5,359

)

Proceeds from issuance of common stock under employee stock purchase plan

 

 

668

 

 

 

529

 

Payment of deferred purchase consideration

 

 

 

 

 

(347

)

Net cash provided by financing activities

 

 

28,635

 

 

 

109,823

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(128

)

 

 

568

 

Net increase in cash and cash equivalents, including restricted cash held for acquisition

    of $34,500 at September 30, 2017

 

 

11,064

 

 

 

46,889

 

Beginning of period

 

 

34,830

 

 

 

25,023

 

End of period

 

$

45,894

 

 

$

71,912

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Interest

 

$

10,036

 

 

$

3,411

 

Income taxes

 

$

3,221

 

 

$

508

 

 


 


 

The following table reconciles Net Loss Attributable to ORBCOMM Inc. to EBITDA and Adjusted EBITDA for the periods shown:

 

 

Quarters Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

(In thousands)

2018

 

 

2017

 

 

2018

 

 

2017

 

Adjustments to EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to ORBCOMM Inc.

$

(3,295

)

 

$

(39,682

)

 

$

(20,603

)

 

$

(53,765

)

Income tax expense

 

1,242

 

 

 

479

 

 

 

3,410

 

 

 

1,192

 

Interest income

 

(648

)

 

 

(266

)

 

 

(1,576

)

 

 

(522

)

Interest expense

 

5,232

 

 

 

5,197

 

 

 

15,733

 

 

 

12,466

 

Loss on debt extinguishment

 

-

 

 

 

-

 

 

 

-

 

 

 

3,868

 

Depreciation and amortization

 

12,081

 

 

 

12,041

 

 

 

36,146

 

 

 

34,463

 

EBITDA

$

14,612

 

 

$

(22,231

)

 

$

33,110

 

 

$

(2,298

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

2,312

 

 

 

1,345

 

 

 

5,747

 

 

 

4,314

 

Noncontrolling interests

 

73

 

 

 

19

 

 

 

216

 

 

 

55

 

Impairment loss

 

-

 

 

 

31,224

 

 

 

-

 

 

 

31,224

 

Acquisition-related and integration costs

 

395

 

 

 

800

 

 

 

1,495

 

 

 

2,290

 

Adjusted EBITDA

$

17,392

 

 

$

11,157

 

 

$

40,568

 

 

$

35,585

 

 

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 and Adjusted EBITDA Margin are not performance measures calculated in accordance with GAAP and are therefore considered non-GAAP measures. A reconciliation table is presented above.

 

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 equals Adjusted EBITDA divided by Total Revenues.