ORBCOMM Inc., a global provider of Machine-to-Machine (M2M) solutions, has announced financial results for the fourth quarter and full year ended December 31, 2014.
- For the fourth quarter of 2014, Total Revenues were up 53% year-over-year to $29.5 million. Service Revenues were up 3% over the prior year to $15.2 million, with over 25,000 units shipped in the latter part of 2014, which have yet to be installed on customer equipment and will generate Service Revenues in 2015. Fourth quarter 2014 Product Sales of $14.3 million were 220% higher than the prior year. Total Revenues for the full year were $96.2 million, up 30% over the prior year.
- Adjusted EBITDA for the fourth quarter of 2014 was $5.2 million, $0.5 million or 11% higher than the prior year. Adjusted EBITDA for the full year was $17.7 million, up $1.0 million or 6% from the prior year. ORBCOMM’s basic EPS is ($0.09) for the fourth quarter of 2014 compared to $0.02 for the comparable period last year, lower largely due to higher Depreciation and Amortization expense of $4.4 million related to additional satellites put into service and a number of generally non-recurring expenses including debt refinancing costs of $2.6 million, Acquisition-Related and Integration costs of $2.2 million, an Impairment Loss of $0.6 million related to an AIS satellite and an inventory write-off of $0.4 million. For the full year 2014, ORBCOMM’s basic EPS is ($0.08) versus $0.10 in the prior year period.
- Net subscriber communicator additions for ORBCOMM were 39,000 in the fourth quarter of 2014 and 113,000 for the full year, bringing the total billable subscriber communicators to 976,000 at December 31, 2014, compared to 863,000 at the end of the fourth quarter last year. This does not include the over 250,000 new subs added in the first quarter of 2015 from the acquisitions of SkyWave and InSync. Billable subscriber communicators increased 13% year-over-year.
- ORBCOMM announced that it completed the acquisition of SkyWave Mobile Communications (SkyWave) on January 1, 2015. SkyWave is the largest M2M service provider on the Inmarsat (LSE: ISAT.L) global L-band satellite network. With the addition of SkyWave, ORBCOMM now has one of the largest combined engineering teams in the M2M industry and gains significant economies of scale in operations and manufacturing. ORBCOMM gains access to new geographies in Eastern Europe and Asia while adding diverse vertical markets such as security and marine. The addition of SkyWave’s higher bandwidth, low-latency satellite products and services that leverage the IsatDataPro technology, which is now jointly owned by ORBCOMM and Inmarsat, also further expands the breadth of ORBCOMM’s solutions portfolio.
- On January 20, 2015, ORBCOMM announced that it completed the acquisition of InSync Software Inc. (InSync) on January 16, 2015. InSync is a premier provider of Internet of Things enterprise solutions across a broad spectrum of vertical markets, applications and customers. Headquartered in San Jose, CA, InSync’s software powers global sensor-driven asset tracking and remote monitoring applications that allow end users, managed service providers and independent software vendors to increase asset visibility, improve operational efficiencies and reduce risk. The acquisition of InSync supports ORBCOMM’s strategy to provide the most complete set of applications and capabilities in the M2M industry, while broadening ORBCOMM’s market access to a wide range of industries.
- On February 26, 2015, ORBCOMM announced that it signed a multi-year services agreement with Komatsu to continue providing wireless data services for their heavy equipment telematics applications. The renewed agreement will build upon Komatsu’s long-time success with its KOMTRAX and VHMS on-board machine monitoring and communications systems, which utilize ORBCOMM’s global satellite network.
- On January 13, 2015, ORBCOMM announced that Werner Enterprises Inc. (Werner) selected ORBCOMM to provide an industry-leading tracking and monitoring solution for its over-the-road refrigerated trailers. Founded in 1956, Werner is a premier transportation and logistics company, providing services throughout North America, Asia, Europe, South America, Africa and Australia. This solution includes ORBCOMM’s proprietary hardware along with a robust web application with data reporting and analytics capabilities to increase in-transit visibility and efficiency of Werner’s refrigerated transport operations.
- On March 3, 2015, ORBCOMM announced at the Mobile World Congress held in Barcelona, Spain that SkyWave introduced the dual-mode IDP-782 communications terminal. The IDP-782 provides fleet managers with a single device for both cellular and satellite network coverage so they can stay connected to assets, sensors and people in the most cost-effective way possible.
- On January 13, 2015, ORBCOMM announced that it received Compass Intelligence’s A List in M2M Award for M2M Satellite Provider of the Year at the 2015 International CES trade show in Las Vegas.
“We’ve been focused on expanding our core capabilities, technical skill sets and global distribution channels through three accretive acquisitions, product innovation as well as strategic partnerships with our fellow industry peers and have become the leader not only in satellite-based M2M but also in global M2M,” says Marc Eisenberg, ORBCOMM’s Chief Executive Officer. “In addition, many of the product programs we heavily invested in this year hit their stride, such as the GT 1100 shipping in large volumes, Hub placing their largest order to date and Doosan standardizing their telematics platform, which lead to record-breaking fourth quarter revenues. We expect the momentum to continue in 2015 as we leverage our incremental talent, technology and market access to provide the most complete set of applications and capabilities in the M2M industry.”
“ORBCOMM’s fourth quarter record high Total Revenues of $29.5 million increased 53% over the prior year quarter driven by robust Product Sales of $14.3 million,” says Robert Costantini, Chief Financial Officer of ORBCOMM. “It’s been a busy quarter at ORBCOMM with the significant shipments of our products and the recently announced acquisitions of SkyWave and InSync. We have already realized a significant amount of synergies from the SkyWave acquisition and head into 2015 with solid momentum.”
Financial Results and Highlights
For the fourth quarter ended December 31, 2014, Service Revenues were up 3% over the prior year period in 2013 to $15.2 million. The increase in Service Revenues in Q4 of 2014 was driven by core network revenues, AIS and Euroscan. For the year ended December 31, 2014, Service Revenues were $59.7 million compared to $56.0 million during the same period last year, an increase of $3.7 million or 7%.
Product Sales during the fourth quarter of 2014 were $14.3 million compared to $4.5 million during the same period last year, increasing $9.8 million, more than a three times increase. The quarterly year-over-year increase in Product Sales was driven by large customer orders for our solutions, augmented by sales from Euroscan. Product Sales for the year ended December 31, 2014 were $36.5 million compared to $18.3 million in the prior year period.
Total Revenues for the quarter ended December 31, 2014 were $29.5 million compared to $19.2 million during the same period of 2013, an increase of 53%. Total Revenues for the year ended December 31, 2014 were $96.2 million compared to $74.2 million in the prior year period, an increase of 30%.
Direct Costs and Operating Expenses
Total direct costs and operating expenses for the fourth quarter of 2014 were $32.7 million compared to $17.7 million during the same period in 2013. Direct costs, exclusive of depreciation and amortization, increased year-over-year largely due to increases in Product Sales, an inventory write-off of $0.4 million related to obsolete 2G inventory and costs to operate the companies acquired. Gross Profit increased by $1.6 million or 16% to $11.9 million for the quarter ended December 31, 2014 compared to $10.3 million for the prior year quarter due to the increase in Service Revenues and Product Sales. Operating Expenses were higher primarily due to expenses supporting the companies acquired such as employees and professional services, and higher depreciation and amortization from acquired intangible assets and the six operational OG2 satellites. Operating Expenses also include Acquisition-Related and Integration costs of $2.2 million, and an Impairment Loss of $0.6 million related to an AIS micro-satellite that stopped downloading AIS messages in late October. As all six of the recently launched OG2 satellites are equipped with AIS technology, the failure of one AIS micro-satellite has no material impact on our services.
Total direct costs and operating expenses for the year ended December 31, 2014 were $97.8 million compared to $68.5 million during the same period in 2013. Acquisition-Related and Integration costs were $3.8 million for 2014 compared to $1.7 million in 2013.
Income (Loss) Before Income Taxes, Net Income (Loss), and Earnings Per Share
Income (Loss) Before Income Taxes for the fourth quarter of 2014 was a ($5.9) million loss compared to $1.5 million income for the fourth quarter of 2013 due to higher costs, including an inventory write-off, Acquisition-Related and Integration costs and an Impairment Loss, as described above. Income (Loss) Before Income Taxes also includes $2.6 million of debt refinancing expenses consisting of pre-payment fees to AIG and deferred fees related to the AIG loan, both of which were expensed when the credit agreement with Macquarie was funded. Income (Loss) Before Income Taxes for the year ended December 31, 2014 was a ($4.1) million loss compared to $6.1 million income for the prior year period.
Net Income (Loss) attributable to ORBCOMM Inc. Common Stockholders was a ($5.6) million loss for the three months ended December 31, 2014 compared to $0.8 million income for the same three-month period in 2013. For the full year ended December 31, 2014, Net Income (Loss) attributable to ORBCOMM Inc. Common Stockholders was a ($4.7) million loss, compared to $4.5 million income in the prior year period. Basic Earnings Per Share were ($0.09) for the fourth quarter of 2014 versus $0.02 for the fourth quarter of 2013. For the 12 months ended December 31, 2014, Basic Earnings Per Share were ($0.08) versus $0.10 in the same twelve month period in 2013.
EBITDA and Adjusted EBITDA
EBITDA for the fourth quarter of 2014 was $1.2 million compared to $3.3 million in the fourth quarter of 2013 and includes $2.2 million in Acquisition-Related and Integration costs. EBITDA for the year ended December 31, 2014 was $9.3 million compared to $11.9 million in 2013 and includes $3.8 million in Acquisition-Related and Integration costs.
Adjusted EBITDA was $5.2 million for the fourth quarter of 2014 compared to $4.7 million in the fourth quarter of 2013, an increase of 11%. Adjusted EBITDA for the year ended December 31, 2014 was $17.7 million compared to $16.7 million in the prior year, an increase of 6%.
EBITDA and Adjusted EBITDA are non-GAAP financial measures used by the company.
Balance Sheet & Cash Flow
At December 31, 2014, Cash and Cash Equivalents, Cash Held for Acquisition and Restricted Cash were $215.8 million, compared to $70.5 million at December 31, 2013, increasing $145.2 million. Cash increased primarily due to the debt refinancing and proceeds from the January and November equity issuances. Significant uses of cash in 2014 include working capital, Capital Expenditures mostly related to OG2 of $45.2 million and the purchase of Euroscan. In January 2015, $122.5 million in cash was used to complete the SkyWave transaction.