ORBCOMM Inc. (NASDAQ: ORBC), a global provider of Internet of Things (IoT) solutions, today announced financial results for the second quarter ended June 30, 2021.
The following financial highlights are in thousands of dollars and unaudited.
| Three Months Ended | Six Months Ended | ||||||||||||||
| June 30, | June 30, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Recurring Service Revenues | $ | 36,355 | $ | 37,006 | $ | 72,596 | $ | 76,859 | |||||||
| Other Service Revenues | 1,187 | 1,423 | 2,696 | 2,094 | |||||||||||
| Total Service Revenues | 37,542 | 38,429 | 75,292 | 78,953 | |||||||||||
| Product Sales | 28,386 | 18,303 | 54,331 | 43,958 | |||||||||||
| Total Revenues | 65,928 | 56,732 | 129,623 | 122,911 | |||||||||||
| Net Loss Attributable to ORBCOMM Inc. Common Stockholders | (7,658 | ) | (6,670 | ) | (18,232 | ) | (13,645 | ) | |||||||
| Basic EPS | (0.10 | ) | (0.09 | ) | (0.23 | ) | (0.17 | ) | |||||||
| EBITDA (1) | 6,890 | 10,330 | 11,214 | 22,102 | |||||||||||
| Adjusted EBITDA (1) | $ | 11,062 | $ | 11,941 | $ | 24,562 | $ | 25,621 |
(1) Non-GAAP financial measure. See “Non-GAAP Financial Measures” for a reconciliation of GAAP to Non-GAAP financial measures included with the financial tables at the end of this release.
“We’re pleased with our revenues returning to pre-pandemic levels and Product Sales growing significantly compared to the prior year period. We shipped 90 thousand devices in the quarter despite a challenging environment due to the continued global component shortage, which resulted in higher product costs impacting product margins. Demand for our products remains strong, and we enter Q3 with a robust pipeline of orders,” said Marc Eisenberg, ORBCOMM’s Chief Executive Officer. “We are still on track to close the transaction with GI Partners in the second half of 2021, pending receipt of the remaining regulatory approvals, which are proceeding as anticipated.”
Financial Results
Revenues
Total Revenues for the second quarter of 2021 were $65.9 million compared to $56.7 million in the prior year period.
Service Revenues were $37.5 million in the second quarter of 2021 compared to $38.4 million in the same period last year. Recurring Service Revenues were $36.4 million in the second quarter of 2021 compared to $37.0 million in the prior year period. Other Service Revenues, comprised of installation services, professional services, and software licenses, were $1.2 million in the quarter. The Company added over 60,000 net billable subscribers in the second quarter bringing the total billable subscriber communicators to approximately 2.34 million as of June 30, 2021. We expect Service Revenues to recover and trend higher based on the increasing levels of hardware shipments and subsequent subscriber growth.
Product Sales were $28.4 million in the second quarter of 2021, an increase of 55.1% compared to the prior year period and up 9.4% sequentially from the first quarter of 2021 as hardware shipments to customers continued to improve.
Gross Margin ( 1 )
GAAP Service Gross Margin, inclusive of depreciation and amortization expense, was 55.6% in the second quarter of 2021 compared to 56.4% in the prior year period. Non-GAAP Service Gross Margin, excluding depreciation and amortization expense, was 66.0% in the second quarter of 2021 compared to 67.3% in the prior year period. The year-over-year decline was primarily due to $0.9 million of non-recurring low margin installation service revenue recognized in the second quarter of 2021 compared to $0.2 million of installation service revenue in the prior year period.
GAAP Product Gross Margin, inclusive of depreciation and amortization expense, was 19.3% in the second quarter of 2021 compared to 25.0% in the prior year period. Non-GAAP Product Gross Margin, excluding depreciation and amortization expense, was 20.6% in the second quarter of 2021 compared to 27.8% in the same period last year. The year-over-year decline was largely due to higher component costs as a result of the global electronic component supply shortage and higher shipping costs, and to a lesser extent a mix of lower margin Product sales. We expect this component shortage pressure to ease over the upcoming quarters and product margins to return to normalized levels.
Operating Expenses
Operating Expenses for the second quarter of 2021 were $35.3 million compared to $32.8 million for the same period in 2020. The $2.5 million year-over-year increase was primarily due to Acquisition-related costs of $2.7 million in the second quarter of 2021, compared to $0.1 million in the prior year period. Excluding the Acquisition-related costs, operating expenses improved $0.1 million compared to the prior year period.
Net Income (Loss) and Earnings Per Share ( 1 )
Net Loss Attributable to ORBCOMM Inc. Common Stockholders for the second quarter of 2021 was $7.7 million, or $0.10 per share, compared to a Net Loss Attributable to ORBCOMM Inc. Common Stockholders of $6.7 million, or $0.09 per share in the second quarter of 2020. Excluding the Acquisition-related costs, Adjusted Net Loss Attributable to ORBCOMM Inc. Common Stockholders for the second quarter of 2021 was $5.0 million, or $0.06 per share.
EBITDA and Adjusted EBITDA ( 1 )
EBITDA for the second quarter of 2021 was $6.9 million compared to $10.3 million in the prior year period. This was predominantly driven by Acquisition-related costs relating to the merger with GI Partners that were recorded in this year’s quarter.
Adjusted EBITDA for the second quarter of 2021 was $11.1 million compared to $11.9 million in the prior year period. The Company’s Adjusted EBITDA Margin decreased to 16.8% in the second quarter of 2021, a decrease of 420 basis points over the prior year on a comparable basis driven largely by lower Product margins and a higher mix of Product revenues compared to Service revenues.
Balance Sheet & Cash Flow
As of June 30, 2021, Cash and Cash Equivalents totaled $29.6 million and Debt outstanding totaled $205.0 million, a $45.0 million decrease from June 30, 2020. Cash Flow from Operations for the first six months of 2021 totaled $16.6 million and Capital Expenditures were $12.6 million in the quarter, inclusive of $2.4 million associated with subscription model investments.
Proposed Merger Agreement
The transaction is expected to close in the second half of 2021 following the satisfaction of customary closing conditions, including the receipt of required regulatory approvals. The waiting period under the Hart-Scott-Rodino Act expired at 11:59 p.m. EST on June 14, 2021. Various other regulatory approvals – including CFIUS approval, approval by the FCC and certain applicable foreign telecommunications regulatory entities, and approvals from applicable investment and national security regulatory entities in foreign jurisdictions – remain in process. These are proceeding as anticipated, and we continue to expect the remaining approvals to be granted sometime in the second half of 2021. ORBCOMM’s shareholders approved the merger on July 8, 2021. Additional information, including the definitive merger agreement filed and the proxy statement filed with the Securities and Exchange Commission in connection with the vote of ORBCOMM’s shareholders, are available in the Investors section of the Company’s website.
ORBCOMM WILL NOT HOST A SECOND QUARTER 2021 EARNINGS CONFERENCE CALL OR PROVIDE A FINANCIAL OUTLOOK.
About ORBCOMM Inc.
ORBCOMM (Nasdaq: ORBC) is a global leader and innovator in the industrial Internet of Things industry, 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.