orbc-8k_20200430.htm
false 0001361983 0001361983 2020-04-30 2020-04-30

 

 

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): April 30, 2020

 

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))

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 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 April 30, 2020, ORBCOMM Inc. (“ORBCOMM” or the “Company”) released its earnings for the first quarter 2020 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 Thursday, April 30, 2020 at 8:30 a.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, Adjusted EBITDA Margin, Non-GAAP Service Gross Margin and Non-GAAP Product Gross Margin are not performance measures calculated in accordance with GAAP and are therefore considered non-GAAP measures. Reconciliation tables are presented above.

 

The Company’s outlook includes non-GAAP measures, such as Adjusted EBITDA Margin, which exclude charges or credits not indicative of core operations, which may include but not be limited to stock-based compensation expense, acquisition-related and integration costs, impairment loss, and other significant items that currently cannot be predicted. The exact amount of these charges or credits are not currently determinable, but may be significant. Accordingly, the Company is unable to provide equivalent reconciliations from GAAP to non-GAAP for these financial measures.

 

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 is defined as Adjusted EBITDA divided by Total Revenues.

 

Non-GAAP Service Gross Margin is defined as Non-GAAP Service gross profit divided by Service Revenue. Non-GAAP Service gross profit is defined as Service Revenue, minus costs of services (including depreciation and amortization expense) plus depreciation and amortization expense. Non-GAAP Product Gross Margin is defined as Non-GAAP Product gross profit divided by Product Sales. Non-GAAP Product gross profit is defined as Product Sales, minus cost of product (including depreciation and amortization expense) plus depreciation and amortization expense. The Company believes that Non-GAAP Service Gross Margin and Non-GAAP Product Gross Margin are useful to evaluate and compare the results of the Company’s operations from period to period on a consistent basis by removing the depreciation and amortization impact of capital investments from its operating results.

  

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

 

99

Press Release of the Company dated April 30, 2020.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document).

2


 

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/ Constantine Milcos

Name:

Constantine Milcos

Title:

Executive Vice President and Chief Financial

 

Officer

 

Date: April 30, 2020

 

3

orbc-ex99_6.htm

Exhibit 99

 

 

 

 

ORBCOMM ANNOUNCES FIRST QUARTER 2020 RESULTS

 

Total Revenues of $66.2 Million, In Line with Guidance

Service and Product Gross Margins Increase Over Last Year

Cash Flow from Operations of $8.2 Million

 

Rochelle Park, NJ, April 30, 2020 – ORBCOMM Inc. (NASDAQ: ORBC), a global provider of Machine-to-Machine (M2M) and Internet of Things (IoT) solutions, today announced financial results for the first quarter ended March 31, 2020.

The following financial highlights are in thousands of dollars and unaudited.

 

 

Three Months Ended March 31,

 

 

2020

 

 

2019

 

Recurring Service Revenues

$

39,853

 

 

$

37,529

 

Other Service Revenues

 

671

 

 

 

1,478

 

Total Service Revenues

 

40,524

 

 

 

39,007

 

Product Sales

 

25,655

 

 

 

27,028

 

Total Revenues

 

66,179

 

 

 

66,035

 

Net Loss Attributable to ORBCOMM Inc.

Common Stockholders

 

(6,975

)

 

 

(5,490

)

Basic EPS

 

(0.09

)

 

 

(0.07

)

EBITDA (1)

 

11,772

 

 

 

12,747

 

Adjusted EBITDA (1)

 

13,680

 

 

 

15,138

 

 

(1) Non-GAAP financial measure. See “Non-GAAP Financial Measures” for a reconciliation of GAAP to Non-GAAP financial measures included with the financial tables at the end of this release.

 

“We’re pleased with our results in the first quarter despite facing a difficult environment,” said Marc Eisenberg, ORBCOMM’s Chief Executive Officer. “Service and product margins improved over the prior year, which led to solid Adjusted EBITDA and cash flow generation. The transition for our employees to working remotely has been seamless with minimal disruption to global business operations. As such, we continue to ship products, support customers and execute on our technology roadmap during these unprecedented times. We are disciplined in managing the business, so we can emerge from these challenging times as a more efficient and better-performing company.”

 

Financial Results

 

Revenues

 

Total Revenues for the first quarter of 2020 were $66.2 million compared to $66 million in the prior year period. The Company added about 60,000 net subscriber additions in the first quarter bringing the total billable subscriber communicators to approximately 2.20 million as of March 31, 2020. 

 

1

 


 

Service Revenues were $ 40. 5 million in the first quarter of 20 20 , up $ 1 . 5 million or 3 . 9 % compared to the same period last year . Recurring Service Revenues increased 6 .2 % to $ 3 9. 9 million in the first quarter compared to the prior year quarter . The improvement was driven by a favorable $1.9 million accounting adjustment and from new subscribers added over the last twelve month s . Other Service Revenues, comprised of installation services, professional services and software licenses, were $ 0. 7 million in the quarter .

 

Product Sales were $25.7 million in the first quarter of 2020 compared to $27 million in the first quarter of 2019 as a portion of device shipments were pushed out at the end of March as market conditions changed.

 

Gross Margin ( 1 )

 

GAAP Service Gross Margin, inclusive of depreciation and amortization expense, was 57.2% in the first quarter of 2020 compared to 55.7% in the prior year period. Non-GAAP Service Gross Margin, excluding depreciation and amortization expense, was 67.7% in the first quarter of 2020 compared to 66.6% in the prior year period. The year-over-year improvements were primarily due to adding subscribers at high incremental margins.

 

GAAP Product Gross Margin, inclusive of depreciation and amortization expense, was 30.7% in the first quarter of 2020 compared to 27.0% in the prior year period. Non-GAAP Product Gross Margin, excluding depreciation and amortization expense, was 32.6% in the first quarter of 2020 compared to 29.6% in the same period last year. The year-over-year improvements were primarily due to a better mix of new cost-reduced products, a $0.5 million reduction in estimated warranty expense as new products are performing at a higher reliability rate than accrued, and cost reductions with our manufacturing partner.

 

Operating Expenses

 

Operating Expenses for the first quarter of 2020 were $37 million compared to $34 million for the same period in 2019 . Excluding a $2 million favorable net benefit in 2019 associated with the inthinc acquisition, operating expenses increased $1 million . The increase was largely due to higher selling, general and administrative costs resulting from higher than usual bad debt expense and higher depreciation and amortization expense.

 

Net Income (Loss) and Earnings Per Share

 

Net Loss Attributable to ORBCOMM Inc. Common Stockholders for the first quarter of 2020 was $7 million, or $0.09 per share, compared to a Net Loss of $5.5 million, or $0.07 per share in the first quarter of 2019.

 

EBITDA and Adjusted EBITDA ( 1 )

 

EBITDA for the first quarter of 2020 was $11.8 million compared to $12.7 million in the prior year period.

 

Adjusted EBITDA for the first quarter of 2020 was $13.7 million compared to $15.1 million in the prior year period. Excluding the favorable $2 million net benefit recognized in the first quarter of 2019, Adjusted EBITDA improved $0.5 million, or 4.1% over the prior year period. The Company’s Adjusted EBITDA

 


 

Margin increas ed to 2 0.7 %, an improvement of 8 0 basis points over the prior year . The Adjusted EBITDA performance was primarily driven by higher service and product gross profit s that more than offset incremental operating expenses.

 

Balance Sheet & Cash Flow

 

As of March 31, 2020, Cash and Cash Equivalents totaled $70.1 million, an increase of $15.9 million from the fourth quarter of 2019. This includes the Company drawing $15 million from its revolving credit facility. In the first quarter of 2020, Cash Flow from Operations totaled $8.2 million and Capital Expenditures were $4.8 million.

 

Outlook ( 2 )

 

For the second quarter, the Company anticipates Recurring Service Revenue to be flat to down 3% over the prior year period as a result of the completion of the AT&T contract, as well as anticipating a small impact from fluctuations in foreign exchange rates.  Due to COVID-19, the Company expects a more significant drop in product sales in the second quarter as some OEM’s have temporarily suspended production lines and some fleets have delayed deployments, while the Company is able to provide limited on-site support. The Company believes Total Revenues in the second quarter to be $55 million on the low end and $60 million on the high end depending on how market conditions evolve. The Company anticipates Adjusted EBITDA margin in the second quarter to be approximately 19%.

 

Due to the uncertainty surrounding the level of business disruption across the multiple markets ORBCOMM serves as a result of the spread of COVID-19, the Company is withdrawing its previously announced full-year 2020 outlook.  The Company expects to provide better visibility on its Q2 earnings call.

 

( 2 ) The Company’s outlook includes non-GAAP measures, such as Adjusted EBITDA and Adjusted EBITDA Margin, which exclude charges or credits not indicative of core operations, which may include but not be limited to stock-based compensation expense, acquisition-related and integration costs, impairment loss, and other significant items that currently cannot be predicted. The exact amount of these charges or credits are not currently determinable, but may be significant. Accordingly, the Company is unable to provide equivalent reconciliations from GAAP to non-GAAP for these financial measures.

 

Investment Community Conference Call

 

ORBCOMM will host a conference call and webcast for the investment community this morning at 8:30 AM ET. Senior management will review the results, discuss ORBCOMM’s business, and address questions.  To access the call, participants in the U.S. should dial 1-844-735-3762 at least ten minutes prior to the start of the call. International participants should dial 1-412-317-5710. 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 webcast. To listen to a replay of the conference call, please dial 1-877-344-7529 or 412-317-0088 for International callers using access code 10143043. The audio replay will be available from approximately 11:30 AM ET on April 30, 2020 through May 14, 2020.

About ORBCOMM Inc.

 

ORBCOMM (Nasdaq: ORBC) is a global leader and innovator in the industrial Internet of Things industry, 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 .

 

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: the impact of the novel coronavirus (COVID-19) pandemic; 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; substantial competition in the telecommunications, AIS data and industrial IoT industries; the inability to effect suitable investments, alliances and acquisitions or the inability to successfully integrate acquired businesses and systems; defects, errors or other insufficiencies in our products or services; failure to meet minimum service level commitments to certain of our customers; our dependence on significant customers for a substantial portion of our revenues, including key customers such as JB Hunt Transport Services, Inc., Caterpillar Inc., Komatsu Ltd., Carrier Transicold and Satlink S.L.; our ability to expand our business outside the United States and risks related to the economic, political and other conditions in foreign countries in which we do business; fluctuations in foreign currency exchange rates; unanticipated domestic or foreign tax or fee liabilities; the possibility we will be required to collect certain taxes in jurisdictions where we have not historically done so; economic, political and other conditions; extreme events such as a man-made or natural disasters, earthquakes, severe weather or other climate change-related events; our dependence on a limited number of manufacturers for many of our products and services; interruptions, discontinuations, slowdown or loss of the supply of subscriber communicators from our vendor Sanmina Corporation; legal proceedings; our reliance on intellectual property; increased regulatory restrictions and oversight; lack of in-orbit or other insurance for our ORBCOMM Generation 1 or ORBCOMM Generation 2 satellites; our reliance on third-party wireless network service providers to deliver existing and developing services in certain areas of our business; significant interruptions, discontinuation or loss of services provided by Inmarsat plc; failure to maintain proper and effective internal controls; inaccurate estimates in accounting or incorrect financial assumptions; significant operating risks related to our satellites due to various types of potential anomalies and potential impacts of space debris or other spacecrafts; the failure of our systems or reductions in levels of service due to technological malfunctions or deficiencies or other events outside of our control; difficulty upgrading or replacing aging hardware and software we use in operating our gateway earth stations and our customers’ subscriber communicators; technical or other difficulties with our gateway earth stations; security risks related to our networks and datanetworks, data processing systems and software systems and those of our third-party service providers; liabilities or additional costs as a result of laws, governmental

 


 

regulations and evolving views of personal privacy rights; failure of our information technology systems; cybersecurity risks; the level of our indebtedness and the terms of our $250.0 million 8.0% senior secured note indenture and our revolving credit agreement, under which we may borrow up to $25.0 million, that could restrict our business activities or our ability to execute our strategic objectives or adversely affect our financial performance; and risks related to an investment in our common stock, including volatility due to our quarterly performance or our recently announced stock repurchase program. For more detail on these and other risks, please see our Annual Report on Form 10-K for the year ended December 31, 2019 (“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

Senior 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)

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

Service revenues

 

$

40,524

 

 

$

39,007

 

Product sales

 

 

25,655

 

 

 

27,028

 

Total revenues

 

 

66,179

 

 

 

66,035

 

Cost of revenues, exclusive of depreciation and amortization

   shown below:

 

 

 

 

 

 

 

 

Cost of services

 

 

13,081

 

 

 

13,047

 

Cost of product sales

 

 

17,281

 

 

 

19,028

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

19,730

 

 

 

17,179

 

Product development

 

 

3,820

 

 

 

3,967

 

Depreciation and amortization

 

 

13,364

 

 

 

12,678

 

Acquisition-related and integration costs

 

 

91

 

 

 

215

 

Loss from operations

 

 

(1,188

)

 

 

(79

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

416

 

 

 

392

 

Other income (expense)

 

 

(266

)

 

 

242

 

Interest expense

 

 

(5,246

)

 

 

(5,241

)

Total other expense

 

 

(5,096

)

 

 

(4,607

)

Loss before income taxes

 

 

(6,284

)

 

 

(4,686

)

Income taxes

 

 

553

 

 

 

710

 

Net loss

 

 

(6,837

)

 

 

(5,396

)

Less: Net income attributable to noncontrolling

   interests

 

 

138

 

 

 

94

 

Net loss attributable to ORBCOMM Inc.

 

$

(6,975

)

 

$

(5,490

)

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(6,975

)

 

$

(5,490

)

Per share information-basic:

 

 

 

 

 

 

 

 

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(0.09

)

 

$

(0.07

)

Per share information-diluted:

 

 

 

 

 

 

 

 

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(0.09

)

 

$

(0.07

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

78,313

 

 

 

79,387

 

Diluted

 

 

78,313

 

 

 

79,387

 


 


 

ORBCOMM Inc.

Condensed Consolidated Balance Sheets

(In thousands, except par value and share data)

 


 

March 31,

 

 

December 31,

 

 

2020

 

 

2019

 

 

(Unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

70,112

 

 

$

54,258

 

Accounts receivable, net of allowance for doubtful accounts of $5,305

   and $4,480, respectively

 

58,460

 

 

 

60,595

 

Inventories

 

40,473

 

 

 

39,881

 

Prepaid expenses and other current assets

 

16,200

 

 

 

18,003

 

Total current assets

 

185,245

 

 

 

172,737

 

Satellite network and other equipment, net

 

140,291

 

 

 

145,553

 

Goodwill

 

166,129

 

 

 

166,129

 

Intangible assets, net

 

70,096

 

 

 

73,280

 

Other assets

 

21,735

 

 

 

23,149

 

Deferred income taxes

 

207

 

 

 

132

 

Total assets

$

583,703

 

 

$

580,980

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

14,796

 

 

$

16,722

 

Accrued liabilities

 

35,625

 

 

 

36,951

 

Current portion of deferred revenue

 

6,932

 

 

 

3,865

 

Total current liabilities

 

57,353

 

 

 

57,538

 

Note payable - related party

 

1,252

 

 

 

1,275

 

Notes payable, net of unamortized deferred issuance costs

 

261,877

 

 

 

246,683

 

Deferred revenue, net of current portion

 

2,708

 

 

 

6,771

 

Deferred tax liabilities

 

14,900

 

 

 

14,894

 

Other liabilities

 

15,623

 

 

 

16,303

 

Total liabilities

 

353,713

 

 

 

343,464

 

Commitments and contingencies

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

ORBCOMM Inc. stockholders' equity

 

 

 

 

 

 

 

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

   authorized; 40,624 shares issued and outstanding at March 31, 2020 and

   December 31, 2019

 

406

 

 

 

406

 

Common stock, par value $0.001; 250,000,000 shares authorized; 78,525,184 and

   78,062,451 shares issued at March 31, 2020 and December 31, 2019, respectively

 

78

 

 

 

78

 

Additional paid-in capital

 

449,431

 

 

 

447,681

 

Accumulated other comprehensive loss

 

(907

)

 

 

(1,013

)

Accumulated deficit

 

(217,917

)

 

 

(210,942

)

Less treasury stock, at cost; 836,904 shares and 0 shares at March 31, 2020

   and December 31, 2019, respectively

 

(2,502

)

 

 

 

Total ORBCOMM Inc. stockholders' equity

 

228,589

 

 

 

236,210

 

Noncontrolling interests

 

1,401

 

 

 

1,306

 

Total equity

 

229,990

 

 

 

237,516

 

Total liabilities and equity

$

583,703

 

 

$

580,980

 

 

 


 

ORBCOMM Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 


 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(6,837

)

 

$

(5,396

)

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

 

 

 

 

 

 

 

 

Change in allowance for doubtful accounts

 

 

1,301

 

 

 

144

 

Change in the fair value of acquisition-related contingent consideration

 

 

 

 

 

(2,063

)

Amortization and write-off of deferred financing fees

 

 

194

 

 

 

194

 

Depreciation and amortization

 

 

13,364

 

 

 

12,678

 

Stock-based compensation

 

 

1,679

 

 

 

2,082

 

Foreign exchange (gain) loss

 

 

106

 

 

 

(256

)

Deferred income taxes

 

 

(20

)

 

 

(1,042

)

Other

 

 

580

 

 

 

752

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

823

 

 

 

(2,852

)

Inventories

 

 

(608

)

 

 

(785

)

Prepaid expenses and other assets

 

 

2,424

 

 

 

(1,549

)

Accounts payable and accrued liabilities

 

 

(3,160

)

 

 

7,439

 

Deferred revenue

 

 

(1,005

)

 

 

351

 

Other liabilities

 

 

(634

)

 

 

(679

)

Net cash provided by operating activities

 

 

8,207

 

 

 

9,018

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(4,843

)

 

 

(4,515

)

Net cash used in investing activities

 

 

(4,843

)

 

 

(4,515

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Purchases of common stock under share repurchase program

 

 

(2,527

)

 

 

 

Proceeds from revolving credit facility

 

 

15,000

 

 

 

 

Net cash provided by financing activities

 

 

12,473

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

17

 

 

 

(191

)

Net increase in cash and cash equivalents

 

 

15,854

 

 

 

4,312

 

Beginning of period

 

 

54,258

 

 

 

53,766

 

End of period

 

$

70,112

 

 

$

58,078

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Interest

 

$

 

 

$

 

Income taxes

 

$

2,666

 

 

$

 

 


 


 

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

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

(In thousands and unaudited)

 

 

 

 

 

 

 

 

Net loss attributable to ORBCOMM Inc.

 

$

(6,975

)

 

$

(5,490

)

Provision (benefit) for income taxes

 

 

553

 

 

 

710

 

Net interest (income) expense

 

 

(416

)

 

 

(392

)

Interest expense

 

 

5,246

 

 

 

5,241

 

Depreciation and amortization

 

 

13,364

 

 

 

12,678

 

EBITDA

 

$

11,772

 

 

$

12,747

 

Stock-based compensation

 

 

1,679

 

 

 

2,082

 

Net income attributable to noncontrolling interests

 

 

138

 

 

 

94

 

Acquisition-related and integration costs

 

 

91

 

 

 

215

 

Adjusted EBITDA

 

$

13,680

 

 

$

15,138

 

 

The following tables reconcile GAAP Service Gross Margin to Non-GAAP Service Gross Margin and GAAP Product Gross Margin to Non-GAAP Product Gross Margin for the periods shown:

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

(In thousands except margin data and unaudited)

 

 

 

Service revenues

 

$

40,524

 

 

$

39,007

 

Minus - Cost of services, including depreciation and amortization

   expense

 

 

17,360

 

 

 

17,297

 

GAAP Service gross profit

 

$

23,164

 

 

$

21,710

 

Plus - Depreciation and amortization expense

 

 

4,279

 

 

 

4,250

 

Non-GAAP Service gross profit

 

$

27,443

 

 

$

25,960

 

GAAP Service gross margin

 

 

57.2

%

 

 

55.7

%

Non-GAAP Service gross margin

 

 

67.7

%

 

 

66.6

%

 

 

 

Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

(In thousands except margin data and unaudited)

 

 

 

Product sales

 

$

25,655

 

 

$

27,028

 

Minus - Cost of product, including depreciation and amortization

   expense

 

 

17,791

 

 

 

19,721

 

GAAP Product gross profit

 

$

7,864

 

 

$

7,307

 

Plus - Depreciation and amortization expense

 

 

510

 

 

 

693

 

Non-GAAP Product gross profit

 

$

8,374

 

 

$

8,000

 

GAAP Product gross margin

 

 

30.7

%

 

 

27.0

%

Non-GAAP Product gross margin

 

 

32.6

%

 

 

29.6

%

 

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, Adjusted EBITDA Margin, Non-GAAP Service Gross Margin and Non-GAAP Product Gross Margin are not performance measures

 


 

calculated in accordance with GAAP and are therefore considered non-GAAP measures. Reconciliation tables are presented above.

 

The Company’s outlook includes non-GAAP measures, such as Adjusted EBITDA Margin, which exclude charges or credits not indicative of core operations, which may include but not be limited to stock-based compensation expense, acquisition-related and integration costs, impairment loss, and other significant items that currently cannot be predicted. The exact amount of these charges or credits are not currently determinable, but may be significant. Accordingly, the Company is unable to provide equivalent reconciliations from GAAP to non-GAAP for these financial measures.

 

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 is defined as Adjusted EBITDA divided by Total Revenues.

 

Non-GAAP Service Gross Margin is defined as Non-GAAP Service gross profit divided by Service Revenue. Non-GAAP Service gross profit is defined as Service Revenue, minus costs of services (including depreciation and amortization expense) plus depreciation and amortization expense. Non-GAAP Product Gross Margin is defined as Non-GAAP Product gross profit divided by Product Sales. Non-GAAP Product gross profit is defined as Product Sales, minus cost of product (including depreciation and amortization expense) plus depreciation and amortization expense. The Company believes that Non-GAAP Service Gross Margin and Non-GAAP Product Gross Margin are useful to evaluate and compare the results of the Company’s operations from period to period on a consistent basis by removing the depreciation and amortization impact of capital investments from its operating results.