UrtheCast Reports Third Quarter 2019 Financial Results

VANCOUVER, Nov. 14, 2019 /CNW/ - UrtheCast Corp. (TSX:UR) ("UrtheCast" or the "Company"), a leading provider of information-rich products and services in the rapidly growing and evolving geospatial and geo-analytics markets, reported its financial results for the three and nine months ended September 30, 2019.

Highlights

• Adjusted EBITDA¹ from continuing operations improved by $3.0 million compared to the same quarter last year and improved by $8.8 million for the year-to-date. Total Adjusted EBITDA¹ for the Company improved by $6.0 million compared to the same quarter of 2018 and by $17.0 million for the year-to-date.
• The Company has received multiple indicative term sheets from institutional investors to finance the UrtheDaily Constellation project and the Company's growth. The Company is currently working with its financial advisors on completing due diligence with several potential investors and their respective advisors. The Company and the potential investors are targeting the fourth quarter of 2019 to secure a binding commitment.
• The Company has also received a number of non-binding bids to acquire all or substantially all of the Deimos Imaging business and continues to negotiate with these parties and complete due diligence activities as it seeks to complete a sale.

Q3 2019 Financial Results 

As a result of the planned sale of the Deimos Imaging business or its assets, the operations of Deimos Imaging have been classified as a discontinued operation for the three and nine months ended September 30, 2019 and the associated comparative prior periods. Unless otherwise noted, the financial information in this press release is based on the Company's continuing operations and all financial figures are in Canadian dollars.

As noted above, adjusted EBITDA from continuing operations of negative $1.2 million in the third quarter of 2019 improved by $3.0 million compared to the same quarter last year and improved by $8.8 million to negative adjusted EBITDA of $2.7 million for the year-to-date due to lower headcount, corporate overhead, professional fees and engineering subcontractor costs and a positive EBITDA contribution from Geosys, the Company's geo-analytics business which was acquired in January 2019.

Donald Osborne, CEO of UrtheCast, commented: "The continuing improvement in our quarterly and year-to-date results demonstrates the value of the restructuring and cost-reduction efforts that we have undertaken since Q4 2018, as well as our integration and expanded utilization of the powerful Geosys geo-analytics platform. We are simultaneously making important strides in advancing our initiatives to finance the UrtheDaily Constellation and we and our potential investors are targeting having a binding commitment in place by the end of the year."

Operating Results

UrtheCast recognized revenue of $4.4 million in the third quarter of 2019 and $13.9 million in the year-to-date, which was comprised entirely of geo-analytics products and services revenue resulting from the acquisition of Geosys, including revenue from the 13-year services contract with Geosys' former parent company, Land O'Lakes. The Company did not recognize any engineering and value-added services revenue in the year-to-date, compared to $1.2 million and $6.0 million in the three and nine months ending September 30, 2018, due to program delays incurred by its key subcontractors in completing milestones under its engineering and value-added services contract in 2019, compared to revenue recognized in the prior year under this contract and from certain other engineering customer contracts completed in 2018.

Operating costs of $8.8 million in the third quarter of 2019 and $24.4 million year-to-date increased by $1.2 million and $3.4 million compared to comparative prior year periods, respectively, primarily as a result of including Geosys' operating costs from the January 2019 acquisition date. The increase in operating costs attributable to the consolidation of Geosys was partially offset by the positive impact of our cost reduction initiatives and a decrease in engineering subcontractor costs related to the decrease in engineering services activities. Operating costs from continuing operations, exclusive of Geosys, have been reduced by approximately 50% in the third quarter and by 54% in the year-to-date compared to the prior year period and SG&A costs have decreased by approximately 55% in the third quarter and 62% in the year-to-date period from the prior year.

The net loss of $14.9 million in the third quarter of 2019 improved by $1.6 million compared to the net loss from the third quarter of 2018, and net loss of $26.6 million in the year-to-date improved by $14.3 million from the prior year, primarily due to higher revenue, lower non-Geosys operating costs and a reduction in net loss from our discontinued operation. The net loss includes a loss of $7.7 million for the quarter (2018 – loss of $1.8 million) and $4.6 million for the year-to-date (2018 – gain of $2.6 million) as a result of fair value adjustments on derivative financial instruments.

Business Developments

Deferral of Second Instalment Payable to Land O'Lakes

UrtheCast agreed with Land O'Lakes to defer US$4.25 million of the second instalment of the purchase price for the acquisition of Geosys to February 14, 2020, with the balance of US $0.75 million to be paid on January 1, 2020 through a setoff of amounts owed by Land O' Lakes under the above mentioned 13-year services agreement.

US$1.5 Million Term Loan Financing

As announced on July 26, 2019, the Company entered into a US$1.5 million secured term loan with Lunar Ventures Inc. which accrues interest at 17% per annum and has a maturity date of January 15, 2020.

$6.6 Million Financing

On September 11, 2019, the Company announced the closing of a $6.6 million financing with Vine Rose Limited consisting of a $3.0 million senior unsecured convertible debenture of the Company and a $3.6 million senior unsecured non-convertible debenture of the Company. The debentures, which accrue interest at a rate of 17% per annum, had a maturity date of October 31, 2019. The debentures were subsequently amended with an extended maturity date of December 31, 2019 whereby the non-convertible debenture became convertible into Common Shares of the Company on the same terms as the convertible debenture. In addition, the Company agreed to issue 6,034,745 common share purchase warrants to Vine Rose Limited, which have a five-year term to maturity and an exercise price of $0.48 per common share, subject to adjustment in certain circumstances.

Payment Deferral under €25 Million Secured Term Loan

In October 2019, Banco de Sabadell, S.A. ("Sabadell"), a lender to UrtheCast in connection with a secured term loan which is secured against the assets of the Deimos Imaging business, agreed to defer €1.35 million of the previously deferred €1.5 million principal payment to January 31, 2020 in exchange for a partial principal repayment of €0.15 million plus accrued interest. Furthermore, Sabadell agreed to defer the €4.0 million principal repayment that will be due in December 2019 to January 31, 2020 in order to provide the Company with additional time to complete the proposed sale of the Deimos Imaging business.

Technology Development Funding

In July 2019, the Company signed a project funding agreement with Canada's Digital Technology Supercluster to receive up to approximately $1.4 million in non-repayable funding to reimburse costs incurred to advance development of its UrthePipeline ground segment systems. The Company filed its first claim during the three months ended September 30, 2019.

Outlook & Going Concern

We refer you to the Company's interim condensed consolidated financial statements for the three and nine months ended September 30, 2019 and the related Management's Discussion & Analysis for further details relating to the Company's liquidity position. The Company has continued to take steps to ensure that it is able to continue as a going concern and that it has adequate liquidity in the near term.

SELECTED FINANCIAL INFORMATION

The following table provides selected financial information of the Company, which was derived from, and should be read in conjunction with, the interim condensed consolidated financial statements for the three and nine months ended September 30, 2019. All financial information is in thousands of Canadian dollars, unless otherwise noted, and except for number of shares and per share amounts.

NON-IFRS EARNINGS MEASURES

The following table reconciles our Non-IFRS earnings measures to Net Loss prepared in accordance with IFRS.

About UrtheCast

UrtheCast Corp. is a Vancouver-based company that serves the rapidly growing and evolving geospatial and geo-analytics markets with a wide range of information-rich products and services.

For more information, visit UrtheCast's website at www.urthecast.com.

Non-IFRS Financial Measures

The Company prepares its financial statements in accordance with International Financial Reporting Standards ("IFRS"), as issued by the International Accounting Standards Board. This release includes certain non-IFRS financial measures, such as EBITDA, adjusted EBITDA, and adjusted EBITDA from continuing operations. The Company uses these non-IFRS financial measures as supplemental indicators of its operating performance and financial position. These measures do not have any standardized meanings prescribed by IFRS and therefore are unlikely to be comparable to the calculation of similar measures used by other companies and should not be viewed as alternatives to measures of financial performance calculated in accordance with IFRS or considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-IFRS financial measures should be read in conjunction with the Company's financial statements and accompanying MD&A. An explanation of how the Company calculates these measures is set out in the Company's MD&A under the heading "Non-IFRS Earnings Measures" for the three and nine months ending September 30, 2019, a copy of which is available on the Company's SEDAR profile and website.

Forward Looking Information

This release contains certain information which, as presented, constitutes "forward-looking information" or "forward-oriented financial information" within the meaning of applicable Canadian securities laws. Forward-looking information involves statements that relate to future events and often addresses expected future business and financial performance, containing words such as "anticipate", "plan", "explore", "target", "is seeking" and "expect", statements that an action or event "may", "should" are "going" to occur or "will" be taken or occur, or other similar expressions and includes, but is not limited to, statements relating to:  UrtheCast's expectations with respect to its ability to raise capital and to continue as a going concern and management's plans to improve the Company's financial position; expectations regarding UrtheCast's ability to meet its obligations and satisfy its liabilities under its existing indebtedness; expectations underlying the Company's financial statements, including that they have been prepared on a going concern basis, meaning that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations; expectations regarding discussions of, and the  proposed and/or planned sale or other monetization of all or substantially all of Deimos Imaging and its related business and the negotiations with interested parties in respect thereof; UrtheCast's expectations with respect to its ability to enter into a financing arrangement to advance the build, launch and commissioning of the proposed UrtheDaily financing, and to otherwise raise proceeds from a  debt or equity offering, achieve the required leverage and contracted value ratios and satisfy the conditions of its indebtedness and business needs generally, and the status and timing of any discussions in respect thereof; UrtheCast's ability to fully integrate Geosys into the Company's other operations and achieve the expected synergies and other benefits therefrom on an ongoing basis and to complete the second closing of the acquisition of Geosys on the terms set forth in the definitive purchase agreement or at all, as well as the Company's ability to service and obtain additional revenues from the Service Level Agreement with Winfield, a subsidiary of Land O' Lakes; UrtheCast's ability to meet its obligations and satisfy its liabilities under its existing indebtedness including but not limited to the previously announced financings with Bolzano Investments Limited, Lunar Ventures Inc. and Vine Rose Limited; UrtheCast's ability to satisfy the conditions precedent to certain contracts related to the purchase of imagery data from the UrtheDaily satellite constellation; expectations regarding the performance of key subcontractors and the completion of certain customer contracts or achievement of payment milestones under the Company's engineering services contract which depends on its key subcontractors meeting certain delivery obligations; new product functionality and suitability; projected operating expenses and ongoing efforts to reduce capital expenditures and fixed costs including engineering subcontractor costs and other professional costs; UrtheCast's ability to secure additional customer contracts for the planned UrtheDaily™ Constellation project in a commercially reasonable and timely manner or at all; and the expectations regarding its build, launch and operations and the timing of the UrtheDaily Constellation. 

Such statements reflect UrtheCast's current views with respect to future events, and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by UrtheCast as at the date of this press release, are inherently subject to significant uncertainties and contingencies. Many factors could cause UrtheCast's actual results or performance to be materially different from expectations that may be expressed or implied by such forward-looking statements, including, among others: the Company's ability, or inability, to rectify its current cash constraints and to continue as a going concern; the Company's ability to enter into a financing arrangement for the UrtheDaily Constellation, and any delays or failures in the design, development, construction, launch and operational commissioning of the such constellation; the Company's ability to comply with debt and repayment obligations and avoid the exercise of lenders' rights, including with respect to seizing secured assets; substantial dilution of the Company's Common Shares as a result of conversion of outstanding debentures or the exercise of outstanding warrants; unexpected increases in fixed or variable costs; lower than expected revenues from Geosys or the Company's other products and services in the remainder of 2019; the loss of key personnel; unexpected delays in operations caused by key subcontractors; the Company's ability to fund its future operations, which is contingent on its efforts to raise additional financing and/or sell certain assets of the Company; an adverse outcome in the Company's litigation with Eastwood Capital Corp and William Holland, or additional claims made by lenders, shareholders or suppliers of the Company in connection with its operations and/or performance; the Company's ability to successfully complete a sale of, or other transaction that would monetize, Deimos Imaging on commercially reasonable terms, or at all, or a significant further delay in the sale process; UrtheCast's ability to fund the remaining two installments for the purchase price of the Geosys transaction or otherwise successfully complete the second closing of the Geosys acquisition; loss, reduction in scope, termination, failure to satisfy conditions precedent or decline in general of the Company's agreements or relationships with its key partners, including Land O' Lakes, Inc. and purchasers of advance data purchase subscription agreements for the data expected to be provided by the UrtheDaily constellation; risks related to the government funding received by UrtheCast and risks arising from breach or default of obligations under the related agreements with certain government agencies; delays or disputes with customers regarding the payment milestones under the Company's data imagery, engineering services or value-added services contracts, which often include complex criteria and/or performance by third parties to successfully complete the contract and obtain payment; legal and regulatory changes, or the Company's failure to comply with listing requirements and other rules of the TSX and/or regulations of applicable securities authorities in Canada; and; as well as those factors and assumptions discussed in UrtheCast's Annual Information Form dated March 29, 2019 and Management's Discussion & Analysis for the three and nine months ended September 30, 2019, both of which are available under UrtheCast's SEDAR profile at www.sedar.com. UrtheCast cautions readers that such factors and uncertainties are not exhaustive and that should certain risks or uncertainties materialize, or should underlying estimates or assumptions prove incorrect, actual results, performance or achievements may vary significantly from those expected. There can be no assurance that the actual strategies, results, performance, events or activities anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company.

UrtheCast undertakes no obligation to update forward-looking statements except as required by Canadian securities laws. Readers are cautioned against attributing undue certainty to forward-looking statements.

SOURCE UrtheCast Corp.