orbc-10q_20180930.htm

 

United States

Securities and Exchange Commission

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                      

Commission File Number 001-33118

 

ORBCOMM INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

41-2118289

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

395 W. Passaic Street, Rochelle Park, New Jersey 07662

(Address of principal executive offices)

703-433-6300

(Registrant’s telephone number)

N/A

(Former name, former address and formal fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

 

 

 

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. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

The number of shares outstanding of the registrant’s common stock as of October 26, 2018 is 78,885,953.

 

 

 


TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Condensed Consolidated Balance Sheets as of September 30, 2018 (unaudited) and December 31, 2017

3

Condensed Consolidated Statements of Operations (unaudited) for the quarters and nine months ended September 30, 2018 and September 30, 2017

4

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the quarters and nine months ended September 30, 2018 and September 30, 2017

5

Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2018 and September 30, 2017

6

Condensed Consolidated Statements of Changes in Equity (unaudited) for the nine months ended September 30, 2018 and September 30, 2017

7

Notes to the Condensed Consolidated Financial Statements (unaudited)

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3. Quantitative and Qualitative Disclosures about Market Risks

35

Item 4. Disclosure Controls and Procedures

36

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

36

Item 1A. Risk Factors

36

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3. Defaults Upon Senior Securities

36

Item 4. Mine Safety Disclosures

36

Item 5. Other Information

36

Item 6. Exhibits

37

SIGNATURES

38

 

 

 


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

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

 

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

 

3


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

 

 

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

 

4


ORBCOMM Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(Unaudited)

 

 

 

Quarters Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net loss

 

$

(3,222

)

 

$

(39,663

)

 

$

(20,387

)

 

$

(53,710

)

Other comprehensive (loss) income - foreign currency translation

   adjustments

 

 

(159

)

 

 

154

 

 

 

(561

)

 

 

765

 

Other comprehensive (loss) income

 

 

(159

)

 

 

154

 

 

 

(561

)

 

 

765

 

Comprehensive loss

 

 

(3,381

)

 

 

(39,509

)

 

 

(20,948

)

 

 

(52,945

)

Less: Comprehensive (income) attributable to

   noncontrolling interests

 

 

(71

)

 

 

(19

)

 

 

(209

)

 

 

(50

)

Comprehensive loss attributable to ORBCOMM Inc.

 

$

(3,452

)

 

$

(39,528

)

 

$

(21,157

)

 

$

(52,995

)

 

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

 

5


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

 

Supplemental schedule of noncash investing and financing activities

 

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Capital expenditures incurred not yet paid

 

$

332

 

 

$

725

 

Stock-based compensation related to capital expenditures

 

$

410

 

 

$

357

 

Series A convertible preferred stock dividend paid in-kind

 

$

11

 

 

$

12

 

Common stock issued as form of payment for MPUs

 

$

827

 

 

$

 

Common stock issued in connection with the acquisition of businesses

 

$

 

 

$

764

 

Common stock issued as payment for contingent consideration

 

$

 

 

$

347

 

Acquisition-related contingent consideration

 

$

 

 

$

9,835

 

 

The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.

 

6


ORBCOMM Inc.

Condensed Consolidated Statements of Changes in Equity

Nine Months Ended September 30, 2018 and 2017

(in thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A convertible

 

 

 

 

 

 

 

 

 

 

Additional

 

 

other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

preferred stock

 

 

Common stock

 

 

paid-in

 

 

comprehensive

 

 

Accumulated

 

 

Treasury stock

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

income (loss)

 

 

deficit

 

 

Shares

 

 

Amount

 

 

interests

 

 

equity

 

Balances, January 1, 2018

 

 

37,544

 

 

$

376

 

 

 

74,436,579

 

 

$

74

 

 

$

411,298

 

 

$

256

 

 

$

(166,245

)

 

 

29,990

 

 

$

(96

)

 

$

733

 

 

$

246,396

 

Vesting of restricted

  stock units

 

 

 

 

 

 

 

 

519,362

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,650

 

Proceeds from public offering

   of common stock, net of

   underwriters' discounts and

   commissions and offering

   costs of $1,705

 

 

 

 

 

 

 

 

3,450,000

 

 

 

3

 

 

 

27,964

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,967

 

Common stock issued as

   payment for MPUs

 

 

 

 

 

 

 

 

81,277

 

 

 

 

 

 

827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

827

 

Issuance of common stock

   under employee stock

   purchase plan

 

 

 

 

 

 

 

 

81,525

 

 

 

 

 

 

668

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

668

 

Series A convertible preferred

   stock dividend

 

 

1,128

 

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of SARs

 

 

 

 

 

 

 

 

230,630

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,603

)

 

 

 

 

 

 

 

 

216

 

 

 

(20,387

)

Foreign currency

   translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(554

)

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

(561

)

Balances, September 30, 2018

 

 

38,672

 

 

$

387

 

 

 

78,799,373

 

 

$

79

 

 

$

446,407

 

 

$

(298

)

 

$

(186,859

)

 

 

29,990

 

 

$

(96

)

 

$

942

 

 

$

260,562

 

Balances, January 1, 2017

 

 

36,466

 

 

$

364

 

 

 

71,111,863

 

 

$

71

 

 

$

386,920

 

 

$

(1,089

)

 

$

(104,949

)

 

 

29,990

 

 

$

(96

)

 

$

647

 

 

$

281,868

 

Vesting of restricted

  stock units

 

 

 

 

 

 

 

 

566,156

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,058

 

Proceeds received from

   issuance of common stock

   in connection with a private

   offering

 

 

 

 

 

 

 

 

1,552,795

 

 

 

2

 

 

 

14,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,000

 

Issuance of common stock in

   connection with the

   acquisition of inthinc

 

 

 

 

 

 

 

 

76,796

 

 

 

 

 

 

764

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

764

 

Series A convertible preferred

   stock dividend

 

 

1,078

 

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

   under employee stock

   purchase plan

 

 

 

 

 

 

 

 

75,888

 

 

 

 

 

 

529

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

529

 

Payment of contingent

   consideration

 

 

 

 

 

 

 

 

40,372

 

 

 

 

 

 

347