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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 September 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 October 28, 2019 is 78,286,252.

 

 


TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

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

3

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

4

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

5

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

6

Condensed Consolidated Statements of Changes in Equity (unaudited) for the quarters and nine months ended September 30, 2019 and September 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

35

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

37

Item 6. Exhibits

38

SIGNATURES

39

 

 

 


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ORBCOMM Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share data)

 

 

September 30,

 

 

 

 

 

 

2019

 

 

December 31,

 

 

(Unaudited)

 

 

2018

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

50,904

 

 

$

53,766

 

Accounts receivable, net of allowance for doubtful accounts of $4,334

   and $4,072, respectively

 

61,563

 

 

 

57,665

 

Inventories

 

38,224

 

 

 

34,300

 

Prepaid expenses and other current assets

 

19,314

 

 

 

15,553

 

Total current assets

 

170,005

 

 

 

161,284

 

Satellite network and other equipment, net

 

149,769

 

 

 

160,070

 

Goodwill

 

166,129

 

 

 

166,129

 

Intangible assets, net

 

76,529

 

 

 

86,264

 

Other assets

 

25,153

 

 

 

12,603

 

Deferred income taxes

 

127

 

 

 

109

 

Total assets

$

587,712

 

 

$

586,459

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

17,395

 

 

$

15,527

 

Accrued liabilities

 

41,754

 

 

 

35,735

 

Current portion of deferred revenue

 

2,308

 

 

 

5,954

 

Total current liabilities

 

61,457

 

 

 

57,216

 

Note payable - related party

 

1,241

 

 

 

1,298

 

Notes payable, net of unamortized deferred issuance costs

 

246,489

 

 

 

245,907

 

Deferred revenue, net of current portion

 

8,771

 

 

 

5,471

 

Deferred tax liabilities

 

15,012

 

 

 

16,109

 

Other liabilities

 

14,162

 

 

 

2,600

 

Total liabilities

 

347,132

 

 

 

328,601

 

Commitments and contingencies

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

ORBCOMM Inc. stockholders' equity

 

 

 

 

 

 

 

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

   40,624 and 39,442 shares issued and outstanding at September 30, 2019 and

   December 31, 2018, respectively

 

406

 

 

 

394

 

Common stock, par value $0.001; 250,000,000 shares authorized; 78,286,252 and

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

 

78

 

 

 

79

 

Additional paid-in capital

 

448,833

 

 

 

449,343

 

Accumulated other comprehensive loss

 

(1,132

)

 

 

(381

)

Accumulated deficit

 

(208,441

)

 

 

(192,507

)

Less treasury stock, at cost; 98,276 and 29,990 shares at September 30, 2019 and

   December 31, 2018, respectively

 

(433

)

 

 

(96

)

Total ORBCOMM Inc. stockholders' equity

 

239,311

 

 

 

256,832

 

Noncontrolling interests

 

1,269

 

 

 

1,026

 

Total equity

 

240,580

 

 

 

257,858

 

Total liabilities and equity

$

587,712

 

 

$

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

 

$

40,550

 

 

$

38,473

 

 

$

119,295

 

 

$

114,940

 

Product sales

 

 

28,643

 

 

 

32,569

 

 

 

83,036

 

 

 

94,863

 

Total revenues

 

 

69,193

 

 

 

71,042

 

 

 

202,331

 

 

 

209,803

 

Cost of revenues, exclusive of depreciation and amortization

   shown below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

 

12,568

 

 

 

12,764

 

 

 

39,123

 

 

 

40,704

 

Cost of product sales

 

 

19,640

 

 

 

24,679

 

 

 

58,275

 

 

 

73,363

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

18,211

 

 

 

14,823

 

 

 

52,842

 

 

 

51,352

 

Product development

 

 

3,686

 

 

 

3,816

 

 

 

11,385

 

 

 

9,671

 

Depreciation and amortization

 

 

12,794

 

 

 

12,081

 

 

 

37,998

 

 

 

36,146

 

Acquisition-related and integration costs

 

 

4

 

 

 

395

 

 

 

693

 

 

 

1,495

 

Income (loss) from operations

 

 

2,290

 

 

 

2,484

 

 

 

2,015

 

 

 

(2,928

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

444

 

 

 

648

 

 

 

1,408

 

 

 

1,576

 

Other income (expense)

 

 

188

 

 

 

120

 

 

 

130

 

 

 

108

 

Interest expense

 

 

(5,287

)

 

 

(5,232

)

 

 

(15,850

)

 

 

(15,733

)

Total other expense

 

 

(4,655

)

 

 

(4,464

)

 

 

(14,312

)

 

 

(14,049

)

Loss before income taxes

 

 

(2,365

)

 

 

(1,980

)

 

 

(12,297

)

 

 

(16,977

)

Income taxes

 

 

1,504

 

 

 

1,242

 

 

 

3,354

 

 

 

3,410

 

Net loss

 

 

(3,869

)

 

 

(3,222

)

 

 

(15,651

)

 

 

(20,387

)

Less: Net income attributable to noncontrolling

   interests

 

 

144

 

 

 

73

 

 

 

271

 

 

 

216

 

Net loss attributable to ORBCOMM Inc.

 

$

(4,013

)

 

$

(3,295

)

 

$

(15,922

)

 

$

(20,603

)

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(4,025

)

 

$

(3,295

)

 

$

(15,934

)

 

$

(20,614

)

Per share information-basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(0.05

)

 

$

(0.04

)

 

$

(0.20

)

 

$

(0.27

)

Per share information-diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(0.05

)

 

$

(0.04

)

 

$

(0.20

)

 

$

(0.27

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

79,695

 

 

 

78,649

 

 

 

79,591

 

 

 

77,158

 

Diluted

 

 

79,695

 

 

 

78,649

 

 

 

79,591

 

 

 

77,158

 

 

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,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net loss

 

$

(3,869

)

 

$

(3,222

)

 

$

(15,651

)

 

$

(20,387

)

Other comprehensive loss - foreign currency translation

   adjustments

 

 

(561

)

 

 

(159

)

 

 

(779

)

 

 

(561

)

Other comprehensive loss

 

 

(561

)

 

 

(159

)

 

 

(779

)

 

 

(561

)

Comprehensive loss

 

 

(4,430

)

 

 

(3,381

)

 

 

(16,430

)

 

 

(20,948

)

Less: Comprehensive income attributable to

   noncontrolling interests

 

 

(133

)

 

 

(71

)

 

 

(243

)

 

 

(209

)

Comprehensive loss attributable to ORBCOMM Inc.

 

$

(4,563

)

 

$

(3,452

)

 

$

(16,673

)

 

$

(21,157

)

 

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,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(15,651

)

 

$

(20,387

)

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

 

 

 

 

 

 

 

 

Change in allowance for doubtful accounts

 

 

1,766

 

 

 

2,995

 

Change in the fair value of acquisition-related contingent consideration

 

 

(2,063

)

 

 

(5,494

)

Amortization and write-off of deferred financing fees

 

 

582

 

 

 

582

 

Depreciation and amortization

 

 

37,998

 

 

 

36,146

 

Stock-based compensation

 

 

5,406

 

 

 

5,747

 

Foreign exchange (gain) loss

 

 

(194

)

 

 

64

 

Deferred income taxes

 

 

(1,097

)

 

 

(1,847

)

Other

 

 

1,971

 

 

 

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(5,972

)

 

 

(14,490

)

Inventories

 

 

(3,973

)

 

 

5,554

 

Prepaid expenses and other assets

 

 

(3,338

)

 

 

601

 

Accounts payable and accrued liabilities

 

 

6,960

 

 

 

(11,493

)

Deferred revenue

 

 

(348

)

 

 

1,687

 

Other liabilities

 

 

(1,246

)

 

 

(595

)

Net cash provided by (used in) operating activities

 

 

20,801

 

 

 

(930

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(16,234

)

 

 

(17,163

)

Other

 

 

 

 

 

650

 

Net cash used in investing activities

 

 

(16,234

)

 

 

(16,513

)

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

 

Purchases of common stock under share repurchase program

 

 

(7,875

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(7,271

)

 

 

28,635

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(158

)

 

 

(128

)

Net (decrease) increase in cash and cash equivalents

 

 

(2,862

)

 

 

11,064

 

Beginning of period

 

 

53,766

 

 

 

34,830

 

End of period

 

$

50,904

 

 

$

45,894

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Interest

 

$

10,000

 

 

$

10,036

 

Income taxes

 

$

2,439

 

 

$

3,221

 

Supplemental schedule of noncash investing and financing activities

 

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Capital expenditures incurred not yet paid

 

$

785

 

 

$

332

 

Stock-based compensation related to capital expenditures

 

$

539

 

 

$

410

 

Series A convertible preferred stock dividend paid-in-kind

 

$

12

 

 

$

11

 

Common stock issued as payment for MPUs

 

$

502

 

 

$

827

 

 

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 September 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, July 1, 2019

 

 

39,442

 

 

$

394

 

 

 

79,753,545

 

 

$

80

 

 

$

454,587

 

 

$

(582

)

 

$

(204,416

)

 

 

29,990

 

 

$

(96

)

 

$

1,136

 

 

$

251,103

 

Vesting of restricted

   stock units

 

 

 

 

 

 

 

 

46,450

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,782

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,782

 

Common stock repurchased

   under share repurchase

   program

 

 

 

 

 

 

 

 

(1,513,743

)

 

 

(2

)

 

 

(7,536

)

 

 

 

 

 

 

 

 

68,286

 

 

 

(337

)

 

 

 

 

 

(7,875

)

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,013

)

 

 

 

 

 

 

 

 

144

 

 

 

(3,869

)

Series A convertible preferred

   stock dividend

 

 

1,182

 

 

 

12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency

   translation adjustments