ROCHELLE PARK, N.J., Oct. 28, 2020 (GLOBE NEWSWIRE) -- ORBCOMM Inc. (NASDAQ: ORBC), a global provider of Internet of Things (IoT) solutions, today announced financial results for the third quarter ended September 30, 2020.

“We’re pleased that our third quarter results for revenue and Adjusted EBITDA exceeded expectations despite a difficult macro environment,” said Marc Eisenberg, ORBCOMM’s Chief Executive Officer. “Our Company’s integration plan, which has delivered enhanced efficiencies and greater scale, led to third quarter Adjusted EBITDA margin of 23.2% and a record $18.7 million in cash flow from operations, an $8.8 million increase over the prior year. We’re seeing the convergence of our investments in innovation positioning ORBCOMM to further expand its customer base and gain incremental market share. I’m excited about the next phase of ORBCOMM’s evolution, which builds on the integration framework in place, leverages key strategic partnerships and sets the stage to achieve long-term organic revenue and Adjusted EBITDA growth.”

Financial Results

Revenues

Total Revenues for the third quarter of 2020 were $61.7 million compared to $56.7 million in the second quarter this year.

Service Revenues increased to $39.7 million in the third quarter of 2020 compared to $38.4 million in the prior quarter this year. Recurring Service Revenues were $36.4 million in the third quarter, a $0.6 million decline from the second quarter as certain customers in the oil and gas and heavy equipment markets limited usage of our services in response to the ongoing COVID-19 pandemic. Other Service Revenues were $3.3 million in the third quarter, an increase of $2 million over the prior year period largely driven by one-time software license revenues. As of September 30, 2020, total billable subscriber communicators were about 2.17 million as a result of adding approximately 40,000 net subscribers in the quarter, and deactivating 90,000 subscribers, which were predominantly not generating revenue but incurring costs, as part of the Company’s platform integration efforts.

Product Sales were $22 million in the third quarter of 2020 compared to $18.3 million in the second quarter, as several large, existing customers within the Company’s North American transportation business increased hardware deployments.

Gross Margin ⁽¹⁾

GAAP Service Gross Margin, inclusive of depreciation and amortization expense, was 56.9% in the third quarter of 2020 compared to 58.6% in the prior year period. Non-GAAP Service Gross Margin, excluding depreciation and amortization expense, was 67.4% in the third quarter of 2020 compared to 69% in the prior year period. The year-over-year decline was largely due to the acceleration of deferred revenues recognized in the prior year period associated with the expired AT&T contract.

GAAP Product Gross Margin, inclusive of depreciation and amortization expense, was 26.5% in the third quarter of 2020 compared to 28.9% in the prior year period. Non-GAAP Product Gross Margin, excluding depreciation and amortization expense, was 29% in the third quarter of 2020 compared to 31.4% in the same period last year. The year-over-year decline was primarily due to lower product revenue on approximately $2 million of fixed costs.

Operating Expenses

Operating Expenses for the third quarter of 2020 were $32.5 million compared to $34.7 million for the same period in 2019. The $2.2 million decrease was primarily driven by reductions in travel and entertainment, professional fees, labor costs, and marketing expenses, as well as lower product development costs.

Net Income (Loss) and Earnings Per Share

Net Loss Attributable to ORBCOMM Inc. Common Stockholders for the third quarter of 2020 was $5.5 million, or $0.07 per share, compared to a Net Loss of $4 million, or $0.05 per share in the third quarter of 2019.

EBITDA and Adjusted EBITDA ⁽¹⁾

EBITDA for the third quarter of 2020 was $12.9 million compared to $15.1 million in the prior year period.

Adjusted EBITDA for the third quarter of 2020 was $14.3 million compared to $16.9 million in the prior year period but increased from the $11.9 million in the prior quarter. The year-over-year decline was primarily due to the flow-through impact from lower revenue, mainly product sales, partially offset by reduced operating expenses. The Company’s Adjusted EBITDA Margin was 23.2% in the third quarter of 2020, slightly down versus the prior year period but up sequentially as the Company recovers from the pandemic.

Balance Sheet and Cash Flow

As of September 30, 2020, Cash and Cash Equivalents totaled $76.3 million, an increase of $14 million in the quarter. Cash Flow from Operations totaled $18.7 million for the third quarter of 2020, an increase of about $9 million over the prior year period primarily driven by improvements in working capital. Capital Expenditures were $4.9 million in the third quarter of 2020. Subsequent to the third quarter, the Company repurchased $30 million of its senior secured notes and is actively exploring refinancing options.

Strategic Partnership Update

On October 27, 2020, the Company announced that its long-standing strategic partnership with Inmarsat, the world leader in global mobile satellite communications, has been enhanced and extended through at least 2035. The two companies will collaborate on joint product innovation and distribution of next-generation IoT satellite services, telematics devices and end-to-end solutions that offer the best-in-class combination of high bandwidth data packets with low-cost terminals. As part of this partnership, ORBCOMM and Inmarsat are developing a next-generation service called OGx, which is expected to become available in 2022 and features two new offerings to address future customer demand. The first is a higher data rate service designed to be nearly 40 times faster than the current IsatData Pro service, allowing for much larger messages and faster delivery times. The second offering is designed to be extremely power-efficient to support daily messages for multiple years on a satellite terminal utilizing a single AA battery, making it ideal for remote monitoring and environmental sensing applications. In addition to supporting the OGx service through its L-band constellation, Inmarsat will distribute ORBCOMM’s portfolio of OGx telematics devices globally through its extensive commercial and government sales channels. The Company looks forward to continuing to work with Inmarsat to deliver the industry’s best satellite offering with the broadest geographic coverage, the most regulatory authorizations and best value to users.

Outlook ⁽²⁾

Many areas around the world are seeing a rise in COVID-19 cases, making it difficult to anticipate future business trends. In addition, customer demand for the Company’s subscription model offering affects hardware sales near-term but benefits service revenues long-term. Taking these factors into consideration, the Company expects fourth quarter Total Revenues to be between $60 million and $64 million and anticipates Adjusted EBITDA margin to be between 22.5% and 23.5%. The Company intends to provide first quarter 2021 guidance during the earnings conference call in late February.

⁽²⁾ The Company’s outlook includes non-GAAP measures, such as Adjusted EBITDA and Adjusted EBITDA Margin, which exclude charges or credits not indicative of core operations, which may include but not be limited to stock-based compensation expense, acquisition-related and integration costs, impairment loss, and other significant items that currently cannot be predicted. The exact amount of these charges or credits are not currently determinable, but may be significant. Accordingly, the Company is unable to provide equivalent reconciliations from GAAP to non-GAAP for these financial measures.

About ORBCOMM Inc.

ORBCOMM (Nasdaq: ORBC) is a global leader and innovator in the industrial Internet of Things, providing solutions that connect businesses to their assets to deliver increased visibility and operational efficiency. The company offers a broad set of asset monitoring and control solutions, including seamless satellite and cellular connectivity, unique hardware and powerful applications, all backed by end-to-end customer support, from installation to deployment to customer care. ORBCOMM has a diverse customer base including premier OEMs, solutions customers and channel partners spanning transportation, supply chain, warehousing and inventory, heavy equipment, maritime, natural resources, and government. For more information, visit www.orbcomm.com.