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Orbcomm, Inc. (ORBC)
Q4 2008 Earnings Call
March 16, 2009 10:30 am ET
Lucas Binder – V.P. Business Development, Investor Relations
Marc Eisenburg – Chief Executive Officer
Robert Constantini – Chief Financial Officer
Previous Statements by ORBC
» Orbcomm Inc. Q3 2009 Earnings Call Transcript.
» ORBCOMM, Inc. Q3 2008 Earnings Call Transcript
» ORBCOMM Inc. Q1 2008 Earnings Call Transcript
Good morning and thank you all for joining us. Earlier this morning we issued a press release announcing financial results for the fourth quarter and full year 2008. A full replay of this conference call will be available at 12 noon eastern time today until next Monday, March 23 at 12 noon. We have an accompanying audio webcast available on our website at www.orbcomm.com, an archive of which will be available for the week.
With me today are Marc Eisenberg, Orbcomm's Chief Executive Officer and Robert Constantini, Orbcomm's Chief Financial Officer.
Before we begin, I also want to point out that during the course of this conference call, we will make a number of forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to various risks and uncertainties and there are important factors that could cause actual outcomes to differ materially from those indicated in these statements.
Some of these factors are described in our SEC filings including the risk factor section of our Form 10-K. I want to remind you that Orbcomm assumes no duty to update any forward-looking statements. The financial information we will discuss today includes non-GAAP financial measures such as EBITDA and adjusted EBITDA. The company believes that these financial measures provide an enhanced understanding of our underlying operating performance. A reconciliation of EBITDA and adjusted EIBTDA to net loss of a GAAP basis is included in our earnings release, a copy of which is available on our website. With that aside, I will hand it over to Marc.
Good morning everyone and thank you for joining us. On the call today, I would like to provide you a quick overview of the full year 2008 and fourth quarter results, update you on recent business highlights and the current status of our new satellites, then I'll turn the call over to Robert who will provide a full year review and quarter, and I'll finish with some comments and thoughts about 2009.
When we look back at 2008 I would characterize it as a year with both some successes and disappointments. For the full year 2008, we're pleased to report that we have increased both service revenue and total revenue. Service revenues increased over 34% for the year and we had over 27% growth in service revenues in the fourth quarter of 2008 versus 2007.
We met our full year service revenue guidance of $22 million to $25 million with full year service revenues of $23.8 million. Additionally, we achieved positive adjusted EBITDA in each quarter of 2008, ending the year with $1.6 million in adjusted EBITDA which is also consistent of our guidance of achieving positive adjusted EBITDA.
Orbcomm generated nearly $4 million in cash flow from operations for the full year 2008. At year end, our total billable subscriber base was more than 460,000 which represents disappointing annual subscriber growth of 31% from the base at December 31, 2007. The growth in subscribers led to over 34% growth in service revenues and was aided by the commencement of AIS related activities during the later half of 2008.
We will discuss some of the factors that affected our billable subscriber growth as well as our outlook for 2009 later on this call.
Let me start with an overview of our key customers and OEM's. Early in 2008, there were a number of factors working in Orbcomm's favor. First, a number of VARS were progressing through the development process. In addition, there were several OEM's working on incorporation Orbcomm's standard equipment.
There were also resources that were directed to grow internationally and new satellites were being completed that would deliver additional capabilities including AIS and improved performance.
Despite the positive momentum based on these factors, we faced some challenges. We saw continued slowdowns at some of our transportation relation VARS which affected our billable subscriber communicator uptake. This meant that the rest of the company's distribution network needed to generate a significant number of additional net subscriber communicator additions to offset the loss of this growth.
Equally significant were the effects of the worsening economy which resulted in a contraction of the aftermarket business, a trend that dominated the second half of the year and was accentuated by the typical fourth quarter seasonal slowdowns.
In 2008 Orbcomm continued to expand our international business by offering services in more countries around the world with either regulatory authorizations added, far more than in any other prior year. In addition, the work we did in 2008 resulted in obtaining regulatory approval in 2009 for Indonesia which is a top priority among our OEM's.
Orbcomm also completed the acquisition of Orbcomm Japan in 2008. The transaction improved our profitability, strengthened our relationships with partners and customers in the regions.
In terms of new business development, we entered in many new reseller partnerships around the world. In addition, we were able to work toward solidifying and diversifying our customer base. Despite being disappointed with net subscriber additions, the company has lessened its dependence on its largest VAR by strengthening the number of significant active customers.