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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, 2020  

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, 2020 is 77,952,878.

 

 


TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Condensed Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019

3

Condensed Consolidated Statements of Operations (unaudited) for the quarters and six months ended June 30, 2020 and June 30, 2019

4

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the quarters and six months ended June 30, 2020 and June 30, 2019

5

Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2020 and June 30, 2019

6

Condensed Consolidated Statements of Changes in Equity (unaudited) for the quarters and six months ended June 30, 2020 and June 30, 2019

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

35

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

38

Item 3. Defaults Upon Senior Securities

38

Item 4. Mine Safety Disclosures

38

Item 5. Other Information

38

Item 6. Exhibits

39

SIGNATURES

40

 

 

 


PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ORBCOMM Inc.

Condensed Consolidated Balance Sheets

(in thousands, except par value and share data)

 

 

June 30,

 

 

 

 

 

 

2020

 

 

December 31,

 

 

(Unaudited)

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

62,355

 

 

$

54,258

 

Accounts receivable, net of allowance for doubtful accounts of $6,666

   and $4,480, respectively

 

48,273

 

 

 

60,595

 

Inventories

 

38,297

 

 

 

39,881

 

Prepaid expenses and other current assets

 

16,886

 

 

 

18,003

 

Total current assets

 

165,811

 

 

 

172,737

 

Satellite network and other equipment, net

 

137,021

 

 

 

145,553

 

Goodwill

 

166,129

 

 

 

166,129

 

Intangible assets, net

 

66,912

 

 

 

73,280

 

Other assets

 

20,783

 

 

 

23,149

 

Deferred income taxes

 

144

 

 

 

132

 

Total assets

$

556,800

 

 

$

580,980

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

10,654

 

 

$

16,722

 

Accrued liabilities

 

33,360

 

 

 

36,951

 

Current portion of deferred revenue

 

6,486

 

 

 

3,865

 

Total current liabilities

 

50,500

 

 

 

57,538

 

Note payable - related party

 

1,275

 

 

 

1,275

 

Notes payable, net of unamortized deferred issuance costs

 

247,071

 

 

 

246,683

 

Deferred revenue, net of current portion

 

2,844

 

 

 

6,771

 

Deferred tax liabilities

 

14,482

 

 

 

14,894

 

Other liabilities

 

15,055

 

 

 

16,303

 

Total liabilities

 

331,227

 

 

 

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 June 30, 2020 and

   December 31, 2019

 

406

 

 

 

406

 

Common stock, par value $0.001; 250,000,000 shares authorized; 77,952,878 and

  78,062,451 shares issued at June 30, 2020 and December 31, 2019, respectively

 

78

 

 

 

78

 

Additional paid-in capital

 

448,908

 

 

 

447,681

 

Accumulated other comprehensive loss

 

(676

)

 

 

(1,013

)

Accumulated deficit

 

(224,587

)

 

 

(210,942

)

Total ORBCOMM Inc. stockholders' equity

 

224,129

 

 

 

236,210

 

Noncontrolling interests

 

1,444

 

 

 

1,306

 

Total equity

 

225,573

 

 

 

237,516

 

Total liabilities and equity

$

556,800

 

 

$

580,980

 

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)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service revenues

 

$

38,429

 

 

$

39,738

 

 

$

78,953

 

 

$

78,745

 

Product sales

 

 

18,303

 

 

 

27,365

 

 

 

43,958

 

 

 

54,393

 

Total revenues

 

 

56,732

 

 

 

67,103

 

 

 

122,911

 

 

 

133,138

 

Cost of revenues, exclusive of depreciation and amortization

   shown below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

 

12,559

 

 

 

13,508

 

 

 

25,640

 

 

 

26,555

 

Cost of product sales

 

 

13,211

 

 

 

19,607

 

 

 

30,492

 

 

 

38,635

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

17,474

 

 

 

17,452

 

 

 

37,204

 

 

 

34,631

 

Product development

 

 

2,784

 

 

 

3,732

 

 

 

6,604

 

 

 

7,699

 

Depreciation and amortization

 

 

12,409

 

 

 

12,526

 

 

 

25,773

 

 

 

25,204

 

Acquisition-related and integration costs

 

 

111

 

 

 

474

 

 

 

202

 

 

 

689

 

Loss from operations

 

 

(1,816

)

 

 

(196

)

 

 

(3,004

)

 

 

(275

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

265

 

 

 

572

 

 

 

681

 

 

 

964

 

Other income (expense)

 

 

(234

)

 

 

(300

)

 

 

(500

)

 

 

(58

)

Interest expense

 

 

(5,410

)

 

 

(5,322

)

 

 

(10,656

)

 

 

(10,563

)

Total other expense

 

 

(5,379

)

 

 

(5,050

)

 

 

(10,475

)

 

 

(9,657

)

Loss before income taxes

 

 

(7,195

)

 

 

(5,246

)

 

 

(13,479

)

 

 

(9,932

)

Income tax (benefit) expense

 

 

(554

)

 

 

1,140

 

 

 

(1

)

 

 

1,850

 

Net loss

 

 

(6,641

)

 

 

(6,386

)

 

 

(13,478

)

 

 

(11,782

)

Less: Net income attributable to noncontrolling

   interests

 

 

29

 

 

 

33

 

 

 

167

 

 

 

127

 

Net loss attributable to ORBCOMM Inc.

 

$

(6,670

)

 

$

(6,419

)

 

$

(13,645

)

 

$

(11,909

)

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(6,670

)

 

$

(6,419

)

 

$

(13,645

)

 

$

(11,909

)

Per share information-basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(0.09

)

 

$

(0.08

)

 

$

(0.17

)

 

$

(0.15

)

Per share information-diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to ORBCOMM Inc.

   common stockholders

 

$

(0.09

)

 

$

(0.08

)

 

$

(0.17

)

 

$

(0.15

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

78,071

 

 

 

79,688

 

 

 

78,192

 

 

 

79,538

 

Diluted

 

 

78,071

 

 

 

79,688

 

 

 

78,192

 

 

 

79,538

 

 

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)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(6,641

)

 

$

(6,386

)

 

$

(13,478

)

 

$

(11,782

)

Other comprehensive income (loss) - foreign currency translation

   adjustments

 

 

245

 

 

 

297

 

 

 

308

 

 

 

(218

)

Other comprehensive income (loss)

 

 

245

 

 

 

297

 

 

 

308

 

 

 

(218

)

Comprehensive loss

 

 

(6,396

)

 

 

(6,089

)

 

 

(13,170

)

 

 

(12,000

)

Less: Comprehensive income attributable to

   noncontrolling interests

 

 

(43

)

 

 

(25

)

 

 

(138

)

 

 

(110

)

Comprehensive loss attributable to ORBCOMM Inc.

 

$

(6,439

)

 

$

(6,114

)

 

$

(13,308

)

 

$

(12,110

)

 

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,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(13,478

)

 

$

(11,782

)

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

 

 

 

 

 

 

 

 

Change in allowance for doubtful accounts

 

 

3,033

 

 

 

477

 

Change in the fair value of acquisition-related contingent consideration

 

 

 

 

 

(2,063

)

Amortization and write-off of deferred financing fees

 

 

388

 

 

 

388

 

Depreciation and amortization

 

 

25,773

 

 

 

25,204

 

Stock-based compensation

 

 

3,150

 

 

 

3,743

 

Foreign exchange loss

 

 

338

 

 

 

21

 

Deferred income taxes

 

 

(464

)

 

 

(446

)

Other

 

 

1,109

 

 

 

968

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

9,345

 

 

 

(2,592

)

Inventories

 

 

1,592

 

 

 

672

 

Prepaid expenses and other assets

 

 

1,840

 

 

 

(2,587

)

Accounts payable and accrued liabilities

 

 

(9,416

)

 

 

(2,418

)

Deferred revenue

 

 

(1,313

)

 

 

(287

)

Other liabilities

 

 

(1,113

)

 

 

1,637

 

Net cash provided by operating activities

 

 

20,784

 

 

 

10,935

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(10,517

)

 

 

(10,550

)

Capital expenditures associated with the subscription model

 

 

(217

)

 

 

 

Net cash used in investing activities

 

 

(10,734

)

 

 

(10,550

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Purchases of common stock under share repurchase program

 

 

(2,527

)

 

 

 

Payments under revolving credit facility

 

 

(15,000

)

 

 

 

Proceeds under revolving credit facility

 

 

15,000

 

 

 

 

Payments under the Paycheck Protection Program

 

 

(7,588

)

 

 

 

Proceeds under the Paycheck Protection Program

 

 

7,588

 

 

 

 

Proceeds from issuance of common stock under employee stock purchase plan

 

 

430

 

 

 

604

 

Net cash (used in) provided by financing activities

 

 

(2,097

)

 

 

604

 

Effect of exchange rate changes on cash and cash equivalents

 

 

144

 

 

 

40

 

Net increase in cash and cash equivalents

 

 

8,097

 

 

 

1,029

 

Beginning of period

 

 

54,258

 

 

 

53,766

 

End of period

 

$

62,355

 

 

$

54,795

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Interest

 

$

10,000

 

 

$

10,000

 

Income taxes

 

$

2,745

 

 

$

1,763

 

Supplemental schedule of noncash investing and financing activities

 

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Capital expenditures incurred not yet paid

 

$

1,446

 

 

$

854

 

Stock-based compensation related to capital expenditures

 

$

247

 

 

$

458

 

 

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, 2020 and 2019

(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, 2020

 

 

40,624

 

 

$

406

 

 

 

78,525,184

 

 

$

78

 

 

$

449,431

 

 

$

(907

)

 

$

(217,917

)

 

 

836,904

 

 

$

(2,502

)

 

$

1,401

 

 

$

229,990

 

Vesting of restricted

   stock units

 

 

 

 

 

 

 

 

98,018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,549

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,549

 

Issuance of common stock

   under employee stock

   purchase plan

 

 

 

 

 

 

 

 

166,580

 

 

 

 

 

 

430

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

430

 

Common stock repurchased

   and retired under share

   repurchase program

 

 

 

 

 

 

 

 

(836,904

)

 

 

 

 

 

(2,502

)

 

 

 

 

 

 

 

 

(836,904

)

 

 

2,502

 

 

 

 

 

 

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,670

)

 

 

 

 

 

 

 

 

29

 

 

 

(6,641

)

Foreign currency

   translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

231

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

 

2