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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 June 30, 2019

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 former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.001 per share

ORBC

The Nasdaq Stock Market, LLC

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 July 29, 2019 is 79,754,005.

 

 


TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Condensed Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018

3

Condensed Consolidated Statements of Operations (unaudited) for the quarters and six months ended June 30, 2019 and June 30, 2018

4

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the quarters and six months ended June 30, 2019 and June 30, 2018

5

Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2019 and June 30, 2018

6

Condensed Consolidated Statements of Changes in Equity (unaudited) for the quarters and six months ended June 30, 2019 and June 30, 2018

7

Notes to the Condensed Consolidated Financial Statements (unaudited)

9

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

25

Item 3. Quantitative and Qualitative Disclosures about Market Risks

34

Item 4. Disclosure Controls and Procedures

34

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

35

Item 1A. Risk Factors

35

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

35

Item 3. Defaults Upon Senior Securities

35

Item 4. Mine Safety Disclosures

35

Item 5. Other Information

35

Item 6. Exhibits

36

SIGNATURES

37

 

 

 


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ORBCOMM Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share data)

 

 

June 30,

 

 

 

 

 

 

2019

 

 

December 31,

 

 

(Unaudited)

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

54,795

 

 

$

53,766

 

Accounts receivable, net of allowance for doubtful accounts of $4,055

   and $4,072, respectively

 

59,732

 

 

 

57,665

 

Inventories

 

33,621

 

 

 

34,300

 

Prepaid expenses and other current assets

 

16,308

 

 

 

15,553

 

Total current assets

 

164,456

 

 

 

161,284

 

Satellite network and other equipment, net

 

153,076

 

 

 

160,070

 

Goodwill

 

166,129

 

 

 

166,129

 

Intangible assets, net

 

79,779

 

 

 

86,264

 

Other assets

 

24,656

 

 

 

12,603

 

Deferred income taxes

 

127

 

 

 

109

 

Total assets

$

588,223

 

 

$

586,459

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

16,276

 

 

$

15,527

 

Accrued liabilities

 

34,074

 

 

 

35,735

 

Current portion of deferred revenue

 

3,708

 

 

 

5,954

 

Total current liabilities

 

54,058

 

 

 

57,216

 

Note payable - related party

 

1,298

 

 

 

1,298

 

Notes payable, net of unamortized deferred issuance costs

 

246,295

 

 

 

245,907

 

Deferred revenue, net of current portion

 

7,432

 

 

 

5,471

 

Deferred tax liabilities

 

15,663

 

 

 

16,109

 

Other liabilities

 

12,374

 

 

 

2,600

 

Total liabilities

 

337,120

 

 

 

328,601

 

Commitments and contingencies

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

ORBCOMM Inc. stockholders' equity

 

 

 

 

 

 

 

Series A Convertible Preferred Stock, par value $0.001; 1,000,000 shares

   authorized; 39,442 shares issued and outstanding at June 30, 2019 and

   December 31, 2018

 

394

 

 

 

394

 

Common stock, par value $0.001; 250,000,000 shares authorized; 79,753,545 and

   79,008,243 shares issued at June 30, 2019 and December 31, 2018, respectively

 

80

 

 

 

79

 

Additional paid-in capital

 

454,587

 

 

 

449,343

 

Accumulated other comprehensive loss

 

(582

)

 

 

(381

)

Accumulated deficit

 

(204,416

)

 

 

(192,507

)

Less treasury stock, at cost; 29,990 shares at June 30, 2019 and

   December 31, 2018

 

(96

)

 

 

(96

)

Total ORBCOMM Inc. stockholders' equity

 

249,967

 

 

 

256,832

 

Noncontrolling interests

 

1,136

 

 

 

1,026

 

Total equity

 

251,103

 

 

 

257,858

 

Total liabilities and equity

$

588,223

 

 

$

586,459

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

 

$

39,738

 

 

$

38,475

 

 

$

78,745

 

 

$

76,467

 

Product sales

 

 

27,365

 

 

 

32,313

 

 

 

54,393

 

 

 

62,294

 

Total revenues

 

 

67,103

 

 

 

70,788

 

 

 

133,138

 

 

 

138,761

 

Cost of revenues, exclusive of depreciation and amortization

   shown below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

 

13,508

 

 

 

12,392

 

 

 

26,555

 

 

 

27,940

 

Cost of product sales

 

 

19,607

 

 

 

25,173

 

 

 

38,635

 

 

 

48,684

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

17,452

 

 

 

19,029

 

 

 

34,631

 

 

 

36,529

 

Product development

 

 

3,732

 

 

 

3,042

 

 

 

7,699

 

 

 

5,855

 

Depreciation and amortization

 

 

12,526

 

 

 

11,842

 

 

 

25,204

 

 

 

24,065

 

Acquisition-related and integration costs

 

 

474

 

 

 

494

 

 

 

689

 

 

 

1,100

 

Loss from operations

 

 

(196

)

 

 

(1,184

)

 

 

(275

)

 

 

(5,412

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

572

 

 

 

453

 

 

 

964

 

 

 

928

 

Other income (expense)

 

 

(300

)

 

 

155

 

 

 

(58

)

 

 

(12

)

Interest expense

 

 

(5,322

)

 

 

(5,301

)

 

 

(10,563

)

 

 

(10,501

)

Total other expense

 

 

(5,050

)

 

 

(4,693

)

 

 

(9,657

)

 

 

(9,585

)

Loss before income taxes

 

 

(5,246

)

 

 

(5,877

)

 

 

(9,932

)

 

 

(14,997

)

Income taxes

 

 

1,140

 

 

 

1,225

 

 

 

1,850

 

 

 

2,168

 

Net loss

 

 

(6,386

)

 

 

(7,102

)

 

 

(11,782

)

 

 

(17,165

)

Less: Net income attributable to noncontrolling

   interests

 

 

33

 

 

 

120

 

 

 

127

 

 

 

143

 

Net loss attributable to ORBCOMM Inc.

 

$

(6,419

)

 

$

(7,222

)

 

$

(11,909

)

 

$

(17,308

)

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(6,419

)

 

$

(7,233

)

 

$

(11,909

)

 

$

(17,319

)

Per share information-basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(0.08

)

 

$

(0.09

)

 

$

(0.15

)

 

$

(0.23

)

Per share information-diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(0.08

)

 

$

(0.09

)

 

$

(0.15

)

 

$

(0.23

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

79,688

 

 

 

78,079

 

 

 

79,538

 

 

 

76,404

 

Diluted

 

 

79,688

 

 

 

78,079

 

 

 

79,538

 

 

 

76,404

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

 

$

(6,386

)

 

$

(7,102

)

 

$

(11,782

)

 

$

(17,165

)

Other comprehensive income (loss) - foreign currency translation

   adjustments

 

 

297

 

 

 

(822

)

 

 

(218

)

 

 

(402

)

Other comprehensive income (loss)

 

 

297

 

 

 

(822

)

 

 

(218

)

 

 

(402

)

Comprehensive loss

 

 

(6,089

)

 

 

(7,924

)

 

 

(12,000

)

 

 

(17,567

)

Less: Comprehensive income attributable to

   noncontrolling interests

 

 

(25

)

 

 

(113

)

 

 

(110

)

 

 

(138

)

Comprehensive loss attributable to ORBCOMM Inc.

 

$

(6,114

)

 

$

(8,037

)

 

$

(12,110

)

 

$

(17,705

)

 

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) 

 

 

 

Six Months Ended June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(11,782

)

 

$

(17,165

)

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

 

 

 

 

 

 

 

 

Change in allowance for doubtful accounts

 

 

477

 

 

 

1,823

 

Change in the fair value of acquisition-related contingent consideration

 

 

(2,063

)

 

 

(1,322

)

Amortization and write-off of deferred financing fees

 

 

388

 

 

 

388

 

Depreciation and amortization

 

 

25,204

 

 

 

24,065

 

Stock-based compensation

 

 

3,743

 

 

 

3,435

 

Foreign exchange loss (gain)

 

 

21

 

 

 

(116

)

Deferred income taxes

 

 

(446

)

 

 

(1,056

)

Other

 

 

968

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(2,592

)

 

 

(8,377

)

Inventories

 

 

672

 

 

 

(2,255

)

Prepaid expenses and other assets

 

 

(2,587

)

 

 

1,861

 

Accounts payable and accrued liabilities

 

 

(2,418

)

 

 

(13,382

)

Deferred revenue

 

 

(287

)

 

 

128

 

Other liabilities

 

 

1,637

 

 

 

(541

)

Net cash provided by (used in) operating activities

 

 

10,935

 

 

 

(12,514

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(10,550

)

 

 

(11,773

)

Net cash used in investing activities

 

 

(10,550

)

 

 

(11,773

)

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

 

Payments under revolving credit facility

 

 

 

 

 

(14,000

)

Proceeds under revolving credit facility

 

 

 

 

 

14,000

 

Proceeds from issuance of common stock under employee stock purchase plan

 

 

604

 

 

 

668

 

Net cash provided by financing activities

 

 

604

 

 

 

28,635

 

Effect of exchange rate changes on cash and cash equivalents

 

 

40

 

 

 

(151

)

Net increase in cash and cash equivalents

 

 

1,029

 

 

 

4,197

 

Beginning of period

 

 

53,766

 

 

 

34,830

 

End of period

 

$

54,795

 

 

$

39,027

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Interest

 

$

10,000

 

 

$

10,036

 

Income taxes

 

$

1,763

 

 

$

 

Supplemental schedule of noncash investing and financing activities

 

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Capital expenditures incurred not yet paid

 

$

854

 

 

$

689

 

Stock-based compensation related to capital expenditures

 

$

458

 

 

$

244

 

Series A convertible preferred stock dividend paid in kind

 

$

 

 

$

11

 

 

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

Quarters Ended June 30, 2019 and 2018

(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, April 1, 2019

 

 

39,442

 

 

$

394

 

 

 

79,568,496

 

 

$

80

 

 

$

452,240

 

 

$

(887

)

 

$

(197,997

)

 

 

29,990

 

 

$

(96

)

 

$

1,111

 

 

$

254,845

 

Vesting of restricted

  stock units

 

 

 

 

 

 

 

 

71,346

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,743

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,743

 

Issuance of common stock

   under employee stock

   purchase plan

 

 

 

 

 

 

 

 

113,703

 

 

 

 

 

 

604

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

604

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,419

)

 

 

 

 

 

 

 

 

33

 

 

 

(6,386

)

Foreign currency

   translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

305

 

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

297

 

Balances, June 30, 2019

 

 

39,442

 

 

$

394

 

 

 

79,753,545

 

 

$

80

 

 

$

454,587

 

 

$

(582

)

 

$

(204,416

)

 

 

29,990

 

 

$