ORBCOMM Announces First Quarter 2010 Results

10 May 2010

ORBCOMM Inc. announced financial results for the first quarter ended March 31, 2010. 

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

Total Revenues for the quarter ended March 31, 2010 were $7.4 million, an increase of 10.3% from the first quarter of 2009. Service Revenues for the first quarter of 2010 increased 3.9% to $6.9 million from the comparable period of 2009 and represents 92.8% of Total Revenues. Product Sales increased in the first quarter to $535,000 from $105,000 in the first quarter of 2009 attributable to increases in OEM product sales at our Japanese subsidiary.

Costs and Expenses in the first quarter of 2010 were $7.8 million, decreasing $7.5 million compared to the same period in the prior year, which includes a $7.0 million Impairment Charge-Satellite Network. Costs and Expenses in the first quarter, excluding Costs of Product Sales and excluding last year’s satellite Impairment Charge, decreased 9.1% or $751,000. The lower costs are associated with SG&A savings, including lower bad debt expense and lower professional service fees in the quarter.

Operating loss for the first quarter ended March 31, 2010 was $368,000 compared to $8.6 million loss in the first quarter of 2009, with the improvement of $8.2 million driven by the growth in Total Revenues, reductions in Costs and Expenses, and the absence of last year’s $7.0 million Impairment Charge. These factors also contributed to significant improvement of $8.4 million in Net Loss attributable to ORBCOMM Inc. to $735,000 or $0.02 per share, versus $9.1 million or $0.22 per share, in the first quarter of 2009. Excluding the impact of the Impairment Charge in the first quarter 2009 Net Loss, the first quarter 2010 Net Loss still improved by 64.8% or $1.4 million versus the first quarter 2009. The Company achieved positive EBITDA for the first quarter of 2010 of $673,000. Adjusted EBITDA for the quarter was $1.3 million versus a loss of $290,000 in the first quarter of 2009.

At March 31, 2010, there were more than 525,000 billable subscriber communicators, a 10.2% increase over the first quarter of 2009. Net subscriber additions during the quarter were about 10,000, comprised of over 7,500 satellite additions and over 2,000 terrestrial additions.

“We are pleased that subscriber additions have increased for the second quarter in a row and believe this trend signals the beginning of recovery among many of our resellers,” said Marc Eisenberg, ORBCOMM’s Chief Executive Officer. “Additionally, ORBCOMM continues to grow its AIS business with $0.7 million in revenue in the first quarter of 2010, up 65% from the prior year period. We expect service revenues will continue to represent most of ORBCOMM’s total revenue, consistent with the Company’s high margin growth strategy.”

“Total Revenue growth and cost control efforts drove $1.3 million in Adjusted EBITDA for the first quarter of 2010,” said Robert Costantini, ORBCOMM’s Chief Financial Officer. “Total Revenues increased 10.3% coupled with a decline of 12.5% in Costs of Services, SG&A, and Product Development, excluding Depreciation and Amortization in the first quarter of 2010, which led to a $1.5 million improvement in Adjusted EBITDA over the prior year results.”

Business Highlights

Selected recent business highlights include:

• Quake Global, Inc. a leading manufacturer of ORBCOMM modems, announced its next generation of satellite modems for the ORBCOMM satellite network with the addition of Q4000 and Q-Pro series of products. These robust, rugged, and highly configurable devices should bring new customers to the ORBCOMM network.
• Alanco Technologies, Inc., (NASDAQ: ALAN) and ORBCOMM Inc. announced a strategic investment by ORBCOMM in which 500,000 shares of Alanco Series E Convertible Preferred Stock was purchased for a total investment of $2,250,000 ($4.50 per preferred share convertible into 12 common shares). A Product/Software Development Cooperation Agreement was entered into with Alanco’s StarTrak Systems subsidiary to develop, manufacture and market new products featuring dual-mode cellular and ORBCOMM satellite communications capabilities, to operate over the global ORBCOMM communications networks.
• In April, 2010, ORBCOMM commenced the construction of a Gateway Earth Station (GES) in Hartebeesthoek, South Africa. In addition, ORBCOMM signed an agreement with CSIR Satellite Applications Center for the establishment, installation and maintenance operation at the site. This new GES is an important terrestrial link to ORBCOMM’s network of low-Earth orbit satellites providing low-cost, near real-time, two-way machine-to-machine (M2M) satellite communications in southern region of the African continent.

Financial Results and Highlights

Revenue

Total Revenues for the first quarter of 2010 were $7.4 million, an increase of 10.3% from the first quarter of 2009. Service Revenues for the first quarter were $6.9 million, an increase 3.9%, over the prior-year’s first quarter. The increase in Service Revenues were primarily due to an increase in AIS revenues of $0.3 million and an increase in satellite and terrestrial revenue of $0.3 million from an increase in the number of billable subscriber communicators activated on our communications system, less customer credits of $0.3 million. Product Sales increased in the first quarter of 2010 by $430,000, or over 400%, from the first quarter of 2009 due to product sales from our Japanese subsidiary.

Billable Subscriber Communicators

As of March 31, 2010, there were more than 525,000 billable subscriber communicators, compared to over 476,000 billable subscriber communicators as of March 31, 2009, an increase of 10.0%.

Costs and Expenses

Costs and Expenses in the first quarter of 2010 were $7.8 million, decreasing $7.5 million compared to the same period in the prior year, which included the $7.0 million Impairment Charge in the prior year period. Costs and Expenses in the first quarter, excluding Costs of Product Sales and excluding last year’s Impairment Charge, decreased 9.1% or $751,000. Excluding the impact of Depreciation and Amortization, the year-over-year decline would have been 12.5% or $864,000. The lower costs are associated with SG&A savings, including lower bad debt expense and lower professional service fees in the quarter.

Net Loss

Net Loss improved significantly to $735,000 for the first quarter of 2010 compared to a Net Loss of $9.1 million for the first quarter of 2009. The growth in Total Revenues and improvement in Costs and Expenses, as well as the absence this year of the Impairment Charge recorded in the first quarter of 2009 also drove the improvement in Net Loss for the quarter. Excluding the impact of the Impairment Charge in the first quarter 2009 Net Loss, the first quarter 2010 Net Loss still improved by 64.8% or $1.4 million versus the first quarter 2009.

ORBCOMM’s Net Loss per Common Share was $0.02 for the three months ended March 31, 2010 compared to Net Loss per Common Share of $0.22 for the prior year quarter. Excluding the Impairment Charge, ORBCOMM’s Net Loss per Common Share in the first quarter of 2009 would have been $0.05, with this year’s Net Loss per Common Share improving 65% compared to the first quarter of 2009.

EBITDA and Adjusted EBITDA

EBITDA was positive for the first quarter of 2010 totaling $673,000, compared to an EBITDA of negative $7.8 million in the first quarter of 2009. Excluding the Impairment Charge in the first quarter of 2009, EBITDA was a negative $0.8 million, representing an improvement in this year’s EBITDA by over $1.5 million compared to the prior year period.

Adjusted EBITDA was positive for the first quarter of 2010 totaling $1.3 million, compared to an Adjusted EBITDA of negative $290,000 in the first quarter of 2009. Adjusted EBITDA excludes the non-cash Impairment Charge experienced in the first quarter of 2009.

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.