ORBCOMM Inc., a global provider of Machine-to-Machine (M2M) solutions, has announced financial results for the second quarter ended June 30, 2015.
Recent Highlights:
For Q2 of 2015, Total Revenues were up 85% year-over-year to $44.9 million. Service Revenues were up 61% over the prior year to $24.0 million. Second quarter 2015 Product Sales of $20.9 million were 122% higher than the prior year. ORBCOMM completed the acquisitions of SkyWave and InSync in the first quarter of 2015 which had a positive impact on year-over-year comparisons. Organic revenue growth for the second quarter of 2015 was 20%.
Adjusted EBITDA for the second quarter of 2015 was $10.3 million, adding $5.2 million or 102% higher than the prior year. ORBCOMM’s basic EPS is a loss of ($0.17) for the second quarter of 2015 compared to $0.03 for the comparable period last year, lower largely due to an Impairment Loss of $12.7 million related to an OG2 satellite that lost communication (see Impairment Loss-satellite network below), Depreciation and Amortization expense of $6.6 million, higher by $4.5 million, related to additional satellites put into service in late-2014 and acquired intangible assets, higher Interest Expense of $1.3 million and Acquisition-Related and Integration costs of $1.1 million related to the recent acquisitions. Excluding Acquisition-Related and Integration costs of $1.1 million and the Satellite Impairment Loss of $12.7 million, Net Income (Loss) – Ex-Items, attributable to ORBCOMM Inc. Common Stockholders was $1.6 million and Basic EPS – Ex-Items was $0.02 for the second quarter of 2015 compared to Net Income (Loss) – Ex-Items, attributable to ORBCOMM Inc. Common Stockholders of $1.6 million and Basic EPS Ex-Items of $0.03 for the comparable period last year.
Net subscriber communicator additions for ORBCOMM were 35,000 in the second quarter of 2015, bringing the total billable subscriber communicators to 1,297,000 at June 30, 2015, compared to 915,000 at the end of the second quarter last year. Billable subscriber communicators increased 42% year-over-year.
ORBCOMM has been selected by a large transportation OEM to provide a customized global telematics platform for refrigeration units. This OEM’s cold chain monitoring solution will provide its customers with a leading-edge, global wireless solution comprised of a full suite of products including a new version of hardware, sensors and connectivity. The company expects to start deploying in North America in the first quarter of 2016 with other regions following thereafter.
In Q2 of 2015, ORBCOMM received a number of prestigious Internet of Things (IoT) and M2M industry awards recognizing the company’s technological innovation and leadership.
- On June 26, 2015, ORBCOMM announced that it was recognized by the 13th Annual American Business Awards with two 2015 Silver Stevie Awards for the Most Innovative Company of the Year as well as the Communications Team of the Year. More than 3,300 nominations were submitted to The 2015 American Business Awards, and more than 200 executives nationwide participated in judging.
- On June 4, 2015, ORBCOMM announced that it was named a winner of two Internet of Things (IoT) Evolution Product of the Year Awards for the ORBCOMM GT 1000 and the SkyWave IDP-782 by TMC, a global, integrated media company. The TMC award honors the best systems and solutions in IoT technology that are delivering on the promise of gathering information regardless of proximity.
- On May 28, 2015, ORBCOMM announced that it won Connected World magazine’s inaugural 2015 Internet of Things (IoT) Innovations Award for both the ORBCOMM GT 1100 and the SkyWave IDP-782 hardware solutions. The winning business and consumer products were selected based on a variety of criteria, including most creative and technologically advanced products, services and platforms.
“We’ve been extremely active in product development, creating a number of award-winning solutions. As these solutions have hit the market, it’s led to record quarters for revenues. We are shipping a significant amount of new product, which we expect to lead to strong Service Revenues in the second half of the year,” says Marc Eisenberg, ORBCOMM’s Chief Executive Officer. “We are pleased to see that our work at integrating our most recent acquisitions, and building scale across the business is making an impact on our business. Large deployments such as Hub, Doosan and now the large transportation OEM, are continuing to solidify our market leadership position in the global M2M industry.”
“Results for the second quarter were operationally very strong with record Total Revenues, significant organic revenue growth of 20%, and good cost controls driving Adjusted EBITDA to $10.3 million at a margin of 23%,” says Robert Costantini, Chief Financial Officer of ORBCOMM. “Excluding the satellite Impairment Loss and the Acquisition-Related and Integration costs, we had Net Income – Ex-Items of $1.6 million and Basic EPS – Ex-Items of $0.02 per share.”
Financial Results and Highlights
Revenues
For the second quarter ended June 30, 2015, Service Revenues were up 61% over the prior year period in 2014 to $24.0 million. The increase in Service Revenues in Q2 of 2015 was driven by both organic growth and the recent acquisitions.
Product Sales during the second quarter of 2015 were $20.9 million compared to $9.4 million during the same period last year, increasing $11.5 million or 122%. The quarterly year-over-year increase in Product Sales was driven by large customer orders for our solutions, and was aided by sales from the acquired companies.
Total Revenues for the quarter ended June 30, 2015 were $44.9 million compared to $24.3 million during the same period of 2014, an increase of 85%.
Direct Costs and Operating Expenses
Total direct costs and operating expenses for the second quarter of 2015 were $56.4 million compared to $22.5 million during the same period in 2014. Direct costs, exclusive of Depreciation and Amortization, increased year-over-year largely due to increases in both Service Revenues and Product Sales and costs to operate the companies acquired. Gross Profit for the quarter ended June 30, 2015 was $21.8 million compared to $13.1 million for the prior year quarter, increasing $8.7 million or 66% due to the increase in Service Revenues and Product Sales. Operating Expenses were higher than the prior year period primarily due to expenses from the companies acquired such as acquired employees, an Impairment Loss of $12.7 million related to an OG2 satellite that lost communication, higher Depreciation and Amortization, and higher Acquisition-Related and Integration costs of $1.1 million related to the recent acquisitions.
Impairment Loss-satellite network
In June 2015, the company lost communication with one of the in-orbit OG2 satellites. While ORBCOMM is still trying to recover the satellite, due to the extended period without communication it is recording an impairment charge of $12.7 million to write-off the net book value of this satellite as of June 30, 2015. The loss of this one satellite is not expected to have a material adverse effect on network communications services. Prior to losing communication, this satellite experienced two short outages. Since the other OG2 satellites have not exhibited this problem, the company believes the loss of communication is likely a workmanship or piece part issue, specific to this one satellite. Under the terms of its in-orbit insurance program, this satellite would be the first of three satellite deductibles across both OG2 launch missions.
Income (Loss) Before Income Taxes, Net Income (Loss), and Earnings Per Share
Income (Loss) Before Income Taxes for the second quarter of 2015 was a loss of ($12.6) million compared to income of $1.9 million for the second quarter of 2014, lower primarily due to higher costs as described above and higher Interest Expense of $1.3 million.
Net Income (Loss) attributable to ORBCOMM Inc. Common Stockholders was a loss of ($12.2) million for the three months ended June 30, 2015 compared to income of $1.4 million for the same three-month period in 2014. Basic Earnings Per Share were a loss of ($0.17) for the second quarter of 2015 versus $0.03 for the second quarter of 2014. Excluding Acquisition-Related and Integration costs of $1.1 million and the Satellite Impairment Loss of $12.7 million, Net Income (Loss) – Ex-Items, attributable to ORBCOMM Inc. Common Stockholders was $1.6 million and Basic EPS – Ex-Items was $0.02 for the second quarter of 2015 compared to Net Income (Loss) – Ex-Items, attributable to ORBCOMM Inc. Common Stockholders of $1.6 million and Basic EPS Ex-Items of $0.03 for the comparable period last year.
Net Income (Loss) – Ex-Items, attributable to ORBCOMM Inc. Common Stockholders and Basic EPS – Ex-Items are non-GAAP financial measures used by the Company. Please see the financial tables at the end of the release for a reconciliation of Net Income (Loss) – Ex-Items, attributable to ORBCOMM Inc. Common Stockholders and Basic EPS – Ex-Items.
EBITDA and Adjusted EBITDA
EBITDA for the second quarter of 2015 was a loss of $4.7 million compared to a gain of $4.0 million in the second quarter of 2014 and includes a $12.7 million Impairment Loss and $1.1 million in Acquisition-Related and Integration costs.
Adjusted EBITDA was $10.3 million for the second quarter of 2015 compared to $5.1 million in the second quarter of 2014, an increase of 102%.
EBITDA and Adjusted EBITDA are non-GAAP financial measures used by the company. Please see the financial tables at the end of the release for a reconciliation of EBITDA and Adjusted EBITDA.
Balance Sheet & Cash Flow
At June 30, 2015, Cash and Cash Equivalents and Restricted Cash were $65.9 million, compared to $81.9 million at March 31, 2015, decreasing $16.0 million. Cash decreased primarily due to Capital Expenditures of $18.6 million mostly related to milestone payments for the OG2 program, offset by Cash from Operations of $2.5 million.
