ORBCOMM Announces First Quarter 2012 Results

ORBCOMM Inc. (Nasdaq: ORBC), a global satellite data communications company focused on two-way Machine-to-Machine (M2M) communications, today announced financial results for the first quarter ended March 31, 2012.

The following financial highlights are in thousands of dollars, except per share amounts.
         

Three months ended March 31,
2012       2011
Total Revenues $15,879 $7,883
Service Revenues $11,531 $7,397
Product Sales $4,348 $486
Net Income (Loss) attributable to ORBCOMM Inc. $2,409 $(731)
Net Income (Loss) per Common Share $0.05 $(0.02)
EBITDA (1) (3) $3,809 $531
Adjusted EBITDA (2) (3) $4,209 $799
 

(1) EBITDA is defined as earnings attributable to ORBCOMM Inc. before interest income (expense), provision for income taxes and depreciation and amortization. (2) Adjusted EBITDA is defined as EBITDA, adjusted for stock-based compensation expense and noncontrolling interests. (3) A table presenting EBITDA and Adjusted EBITDA, reconciled to GAAP Net Income (Loss), is among other financial tables at the end of this release.

Total Revenues for the quarter ended March 31, 2012, were $15.9 million, an increase of 101% over total revenues of $7.9 million reported in the comparable period of 2011.

Service Revenues for the quarter ended March 31, 2012 were $11.5 million versus $7.4 million in the first quarter of 2011, an increase of 56%. The increase in service revenues was due to an increase in the number of billable units and higher usage in core service, the inclusion of AIS revenues as a result of our recent launches of AIS satellites, and increases attributable to the acquisitions of StarTrak Systems, LLC (StarTrak), completed on May 17, 2011, and PAR Logistics Management Systems (LMS), on January 12, 2012.

Product Sales in the first quarter of 2012 increased to $4.3 million from $0.5 million in the comparable period last year, due to the addition of the acquisitions, and increased sales at our Japanese subsidiary.

Costs and Expenses in the first quarter of 2012 were $14.1 million compared to $8.6 million during the same period in the prior year. The increases were mostly due to costs associated with higher product sales, and costs and expenses related to the operations of the acquisitions which were not present in the year-ago period. Cost of Product Sales increased to $3.1 million in the first quarter of 2012 compared to $290,000 during the prior year period due to higher Product Sales in 2012. Costs of Service, Product Development, and Selling, General and Administrative Expenses were $10.6 million for the first quarter of 2012 compared to $8.1 million in the prior year first quarter, increasing $2.5 million primarily related to the addition of operating expenses for the acquired companies. Acquisition costs in the amount of $423,000 relating to the LMS asset purchase increased $166,000 over Acquisition-related costs for the StarTrak asset purchase in the first quarter of 2011 due to the timing of the transactions.

In the first quarter of 2012, ORBCOMM’s majority owned subsidiary, Satcom International Group plc (Satcom), extinguished debts of $1.6 million for $381,000 in cash, generating a gain of $1.2 million of which $1.1 million was recorded as Extinguishment of Debt and $128,000 was booked as a reduction of Selling, General, and Administrative expenses.

Income Before Income Taxes for the first quarter ended March 31, 2012 was $2.9 million compared to a Loss Before Income Taxes of $0.6 million in the first quarter of 2011.

Net Income Attributable to ORBCOMM Inc. Common Stockholders was $2.4 million in the first quarter of 2012 compared to a Net Loss of $0.7 million in the prior year period.

At March 31, 2012, there were approximately 689,000 billable subscriber communicators, a 17% increase over the first quarter of 2011. Total net additions during the quarter were 42,000, including 19,000 subscribers added through the acquisition of LMS, as previously announced.

“We’re pleased to report the integration of LMS and StarTrak is progressing as planned. The breadth of complimentary products has been well received by our customers as demonstrated by our strong product sales in the first quarter – a precursor to service revenue.” said Marc Eisenberg, CEO of ORBCOMM. “At the same time, shipments to our heavy equipment/OEM customers remain strong. We are seeing incremental revenue growth due to the return of our AIS business which is providing industry-leading service and strengthening ORBCOMM’s market leadership position in AIS market.”

“ORBCOMM’s Adjusted EBITDA of $4.2 million in the first quarter represents a 427% improvement over the first quarter of 2011” said Robert Costantini, CFO. “After adjusting for one-time items of the debt repayment and Acquisition-related costs, Adjusted EBITDA was a notable improvement over the first quarter of 2011, and illustrative of the operating leverage underlying our business model and potential for incremental margin expansion as we build our subscriber base.”

Business Highlights:
  • ORBCOMM acquired PAR Logistics Management Systems on January 12, 2012, the Company’s second acquisition in the last 12 months. These assets complement ORBCOMM’s StarTrak acquisition and help to solidify ORBCOMM’s position as a leader in cold chain and transportation management solutions.
  • ORBCOMM acquired the remaining 48% interest in its Satcom International Group plc subsidiary on March 28, 2012. The transaction supports ORBCOMM’s plans to reorganize and expand the marketing and distribution of services in Europe and the Middle East, two regions that will benefit significantly from the planned launch of ORBCOMM’s next generation satellites.
  • In the first quarter of 2012, ORBCOMM increased hardware shipments to a Japanese OEM of heavy machinery. This OEM is focused on smaller machines and has a regional orientation.

Financial Results and Highlights

Revenues

Service Revenues for the first quarter ended March 31, 2012 were $11.5 million versus $7.4 million in the first quarter of 2011. This year-over-year increase of 56% was driven by increases in core services due to increases in the number of billable units and increased usage, AIS revenues from the recent re-establishment of our AIS services, and benefits from the acquisitions of StarTrak and LMS. Product Sales in the first quarter increased to $4.3 million from $486,000 in the first quarter of 2011, due to the acquisitions and additional hardware sold by ORBCOMM’s Japanese subsidiary. Total Revenues for the three month period ended March 31, 2012, increased to $15.9 million from $7.9 million recorded during the comparable three month period in 2011, an increase of 101%.

Billable Subscriber Communicators

In the first quarter, the Company added 42,000 net new subscribers, including 19,000 subscribers acquired with the LMS transaction that closed on January 12, 2012. As of March 31, 2012, there were approximately 689,000 billable subscriber communicators, compared to 589,000 billable subscriber communicators at the end of the first quarter of 2011, an annual increase of 17%.

Costs and Expenses

Costs and Expenses in the first quarter of 2012 were $14.1 million, up 64% from the prior year period. Cost of Product Sales increased $2.8 million as the result of increased Product Sales. Selling, General, and Administrative expenses and Product Development costs rose $0.9 million and $0.4 million, respectively, compared to the year-ago period primarily due to the inclusion of the acquisitions. Acquisition-related costs of $0.4 million were incurred during the first quarter of 2012 associated with the acquisition of the PAR Logistics Management Systems business.

Income (loss) Before Income Taxes, Net Income (loss), and Earnings Per Share

Income Before Income Taxes for the first quarter ended March 31, 2012 was $2.9 million compared to a loss of $0.6 million in the first quarter of 2011, improving significantly over 2011.

Net Income Attributable to ORBCOMM Common Stockholders for the three months ended March 31, 2012 was $2.4 million compared to a Net Loss of $0.7 million in the prior year period. Net Income Attributable to ORBCOMM Inc. was $0.05 per share for first quarter of 2012 compared to Net Loss Attributable to ORBCOMM Inc. of $0.02 per share during the same period in 2011.

Adjusted EBITDA and EBITDA

EBITDA for the first quarter of 2012 was $3.8 million, compared to $0.5 million in the first quarter of 2011 increasing $3.3 million. Adjusted EBITDA for the first quarter of 2012 was $4.2 million, compared to Adjusted EBITDA of $0.8 million in the first quarter of 2011 increasing $3.4 million or 427%. Adjusted EBITDA for the first quarter of 2012 included a Gain on the Extinguishment of Debt of $1.1 million and settlement of trade payables for $0.1 million less than face value. After removing these items from the first quarter of 2012, and Acquisition-related costs of $0.4 million and $0.3 million from the first quarter of 2012 and 2011 respectively, there is a significant improvement over the year earlier period.

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 and Cash Equivalents, Restricted Cash, and Marketable Securities were $73.8 million as of March 31, 2012, decreasing $10.4 million from $84.3 million at December 31, 2011. During the quarter, cash of $4.0 million was used for the acquisition of LMS. Cash of $7.1 million was also used for capital expenditures, including two milestone payments totaling $5.3 million for the ORBCOMM Generation 2 (OG2) satellite program. The cash generated from operating activities was $1.7 million in the first quarter. Total ORBCOMM Inc. stockholders’ equity was $175.4 million at March 31, 2012.

Investment Community Conference Call

ORBCOMM will host a conference call and webcast for the investment community this morning at 10:30 AM ET. Senior management will review the results, discuss ORBCOMM’s business, and address questions.

Domestic participants should dial 1-877-941-8631 at least ten minutes prior to the start of the call. International callers should dial 1-480-629-9867. To hear a live web simulcast or to listen to the archived webcast following completion of the call, please visit the Company’s website at www.orbcomm.com, select the “About us” tab, then the investor relations tab, then select “Presentations and Webcasts,” to access the link to the call. To listen to a telephone replay of the conference call, please dial 1-800-406-7325 domestically or 1-303-590-3030 internationally and enter reservation identification number 4537682. The replay will be available from approximately 12:00 PM ET on May 10, 2012, through 11:59 PM ET on May 17, 2012.

About ORBCOMM Inc.

ORBCOMM is a leading global satellite data communications company, focused on Machine-to-Machine (M2M) communications. Its customers include Caterpillar Inc., Doosan Infracore America, Hitachi Construction Machinery, and Hyundai Heavy Industries, Asset Intelligence (a subsidiary of I.D. Systems, Inc.), Komatsu Ltd., Manitowoc Crane Companies, Inc., and Volvo Construction Equipment among other industry leaders. By means of a global network of low-earth orbit (LEO) satellites and accompanying ground infrastructure, ORBCOMM’s low-cost and reliable two-way data communication services track, monitor and control mobile and fixed assets in our core markets: commercial transportation; heavy equipment; industrial fixed assets; marine; and homeland security. ORBCOMM based products are installed on trucks, containers, marine vessels, locomotives, backhoes, pipelines, oil wells, utility meters, storage tanks and other assets. ORBCOMM is an innovator and leading provider of solution services for the refrigerated and transportation markets. Under its ReeferTrak, ® GenTrak, TM and CargoWatch TM brands, the Company provides customers with the ability to proactively monitor, manage and remotely control their refrigerated and transportation assets. Additionally, ORBCOMM provides Automated Identification System (AIS) data services for vessel tracking and to improve maritime safety to government and commercial customers worldwide. ORBCOMM is headquartered in Fort Lee, New Jersey and has its network control center in Dulles, Virginia. 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, objectives and expectations for future events and include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Such forward-looking statements, including those concerning the Company’s expectations, are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from the results, projected, expected or implied by the forward-looking statements, some of which are beyond the Company’s control, that may cause the Company’s 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: ongoing global economic instability and uncertainty; substantial losses we have incurred and may continue to incur; demand for and market acceptance of our products and services and the applications developed by our resellers; we may need additional capital to pursue our growth strategy; loss or decline or slowdown in the growth in business from our key customers, such as Caterpillar Inc., (“Caterpillar”), Komatsu Ltd., (“Komatsu”), Hitachi Construction Machinery Co., Ltd., (“Hitachi”), and Asset Intelligence, a subsidiary of I.D. Systems, Inc. (“AI”), other value added resellers or VARs and international value-added resellers or IVARs; loss or decline or slowdown in growth in business of any of the specific industry sectors the Company serves, such as transportation, heavy equipment, fixed assets, and maritime; dependence on a few significant customers; our acquisition of the assets of StarTrak Systems LLC and PAR Logistics Management Systems may expose us to additional risks; litigation proceedings; technological changes, pricing pressures and other competitive factors; the inability of our international resellers and licensees to develop markets outside the United States; the inability to obtain or maintain the necessary regulatory approvals or licenses for particular countries or to operate our satellites; market acceptance and success of our Automatic Identification System (“AIS”) business; satellite launch and construction delays and cost overruns of our next-generation satellites and launch vehicles; in-orbit satellite failures or reduced performance of our existing satellites; significant liabilities created by products we sell; the failure of our systems or reductions in levels of service due to technological malfunctions or deficiencies or other events; our inability to renew or expand our satellite constellation; political, legal regulatory, government administrative and economic conditions and developments in the United States and other countries and territories in which we operate; and changes in our business strategy. In addition, specific consideration should be given to various factors described in Part I, Item 1A. “Risk Factors” and Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2011, and other documents, on file with the Securities and Exchange Commission. The Company undertakes no obligation to publicly revise any forward-looking statements or cautionary factors, except as required by law.
               
ORBCOMM Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(Unaudited)
March 31, December 31,
2012 2011
ASSETS
 
 
Current assets:
Cash and cash equivalents $ 24,735 $ 35,061
Restricted cash - 1,000
Marketable securities 46,888 45,973
Accounts receivable, net of allowances for doubtful accounts of $285 and $299 9,420 7,946
Inventories 3,680 2,815
Prepaid expenses and other current assets 1,806 1,660
Deferred tax assets   892     912  
Total current assets 87,421 95,367
 
Satellite network and other equipment, net 83,135 79,771
Goodwill 14,030 11,131
Intangible assets, net 8,559 7,125
Restricted cash 2,195 2,220
Deferred tax assets 128 136
Other assets   1,501     1,419  
Total assets $ 196,969   $ 197,169  
 
LIABILITIES AND EQUITY
 
Current liabilities:
Accounts payable $ 2,594 $ 2,641
Accrued liabilities 8,574 14,127
Current portion of note payable 262 250
Current portion of deferred revenue   2,193     2,099  
Total current liabilities 13,623 19,117
Note payable - related party 1,514 1,480
Note payable, net of current portion 3,306 3,376
Deferred revenue, net of current portion 1,738 1,570
Deferred tax liabilities 888 823
Other liabilities   1,020     226  
Total liabilities   22,089     26,592  
 
Commitments and contingencies
 
Equity:
ORBCOMM Inc. stockholders' equity
Preferred Stock Series A, par value $0.001; 1,000,000 shares authorized;
176,756 and 186,265 shares issued and outstanding 1,766 1,861
Common stock, par value $0.001; 250,000,000 shares authorized; 46,715,861 and
45,668,527 shares issued and outstanding 47 46
Additional paid-in capital 246,753 244,543
Accumulated other comprehensive income 992 1,352
Accumulated deficit   (74,239 )   (76,629 )
Total ORBCOMM Inc. stockholders' equity 175,319 171,173
Noncontrolling interests   (439 )   (596 )
Total equity   174,880     170,577  
 
Total liabilities and equity $ 196,969   $ 197,169  
 
ORBCOMM Inc.    
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
           
Three months ended
March 31,
2012 2011
 
Revenues:
Service revenues $ 11,531 $ 7,397
Product sales 4,348 486
Total revenues 15,879 7,883
 
Costs and expenses (1) :
Costs of services 4,706 3,463
Costs of product sales 3,103 290
Selling, general and administrative 5,341 4,421
Product development 559 174
Acquisition-related costs 423 257
Total costs and expenses 14,132 8,605
 
Income (loss) from operations 1,747 (722)
 
Other income (expense):
Interest income 27 54
Other income 47 101
Gain on extinguishment of debt, net of expenses 1,062 -
Interest expense (24) (48)
Total other income 1,112 107
 
Income (loss) before income taxes 2,859 (615)
 
Income taxes 394 111
 
Net income (loss) 2,465 (726)
 
Less: Net income attributable to the noncontrolling interests 56 5
 
Net income (loss) attributable to ORBCOMM Inc. $ 2,409 $ (731)
 
Net income (loss) attributable to ORBCOMM Inc. common stockholders $ 2,390 $ (731)
 
Per share information-basic:
Net income (loss) attributable to ORBCOMM Inc. $ 0.05 $ (0.02)
 
Per share information-diluted:
Net income (loss) attributable to ORBCOMM Inc. $ 0.05 $ (0.02)
 
Weighted average common shares outstanding:
Basic 46,351 42,726
Diluted 46,898 42,726
 
(1) Stock-based compensation included in costs and expenses:
Costs of services $ 44 $ 35
Costs of product sales 8 -
Selling, general and administrative 271 225
Product development 21 3
$ 344 $ 263
 
ORBCOMM Inc.    
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
           
Three months ended
March 31,
  2012     2011  
Cash flows from operating activities:
Net income (loss) $ 2,465 $ (726 )
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Change in allowance for doubtful accounts (14 ) 73
Change in the fair value of acquisition-related contingent consideration 30 -
Depreciation and amortization 1,009 1,157
Stock-based compensation 344 263
Foreign exchange gains (47 ) (42 )
Amortization of premium on marketable securities 176 450
Increase in fair value of indemnification assets (112 ) -
Deferred income taxes 85 -
Gain on extinguishment of debt (1,214 ) -
Amortization of shared services 49 -
Accretion on note payable-related party - 33
Dividend received in common stock for other investment - (56 )
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (288 ) (1,195 )
Inventories 455 (38 )
Prepaid expenses and other assets 107 (25 )
Accounts payable and accrued liabilities (1,511 ) (209 )
Deferred revenue 181 (230 )
Other liabilities   (20 )   (30 )
Net cash provided by (used in) operating activities   1,695     (575 )
 
Cash flows from investing activities:
Capital expenditures (7,113 ) (2,121 )
Purchases of marketable securities (14,511 ) (23,848 )
Proceeds from maturities of marketable securities 13,420 30,245
Issuance of note receivable to Alanco - (300 )
Change in restricted cash 1,025 810
Acquisition of net assets of LMS   (4,000 )   -  
Net cash (used in) provided by investing activities   (11,179 )   4,786  
 
Cash flows from financing activities
Purchase of noncontrolling ownership interests in Satcom
International Group plc (192 ) -
Repayment of Satcom notes payable (253 ) -
Principal payment of note payable   (63 )   -  
Net cash used in financing activities   (508 )   -  
 
Effect of exchange rate changes on cash and cash equivalents   (334 )   (11 )
 
Net increase (decrease) in cash and cash equivalents (10,326 ) 4,200
 
Cash and cash equivalents:
Beginning of period   35,061     17,026  
 
End of period $ 24,735   $ 21,226  
 
Supplemental disclosures of cash flow information:
Cash paid for
Interest $ 56   $ -  
Income taxes $ 753   $ -  
 
Supplemental schedule of noncash investing and financing activities
Noncash investing and financing activities:
Capital expenditures incurred not yet paid $ 581   $ 853  
Stock-based compensation included in capital expenditures $ 18   $ 14  
Series A convertible preferred stock dividend paid in-kind $ 19   $ -  
Issuance of common stock in connection with the acquisition of LMS $ 2,123   $ -  
Issuance of common stock in connection with the purchase of Satcom's
shares from noncontrolling ownership interests $ 1,000   $ -  
AIS satellites accounted for as a capital lease $ 903   $ -  
Acquisition related contingent consideration $ 740   $ -  
Gateway and components recorded in inventory in prior years which were used
for construction under satellite network and other equipment in 2011 $ -   $ 25  
Common stock issued as a form of payment for bonus $ -   $ 125  
 

The following table reconciles our Net Income (Loss) attributable to ORBCOMM Inc. to EBITDA and Adjusted EBITDA for the periods shown:
         
Three months ended
March 31,

(in thousands)

2012
     

2011
Net Income (Loss) attributable to ORBCOMM Inc. $2,409 $(731)
Net interest (income) expense (3) (6)
Provision for income taxes 394 111
Depreciation and amortization 1,009 1,157
 
EBITDA 3,809 531
Stock-based compensation 344 263
Noncontrolling interests 56 5
Adjusted EBITDA $4,209 $799
 

EBITDA is defined as earnings attributable to ORBCOMM Inc. before interest income (expense), provision for income taxes and depreciation and amortization. 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 EBITDA, adjusted for Stock-based compensation expense and Noncontrolling interests is useful to investors to evaluate the Company’s core operating results and financial performance and its capacity to fund capital expenditures, because it excludes items that are significant non-cash expenses reflected in the Condensed Consolidated Statements of Operations. EBITDA and Adjusted EBITDA are not performance measures calculated in accordance with accounting principles generally accepted in the United States, or GAAP. While ORBCOMM considers EBITDA and Adjusted EBITDA to be important measures of operating performance, they should be considered in addition to, and not as a substitute for, or superior to, Net Income (loss) or other measures of financial performance prepared in accordance with GAAP and may be different than EBITDA and Adjusted EBITDA measures presented by other companies. A reconciliation table is presented above.

Copyright Business Wire 2010

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