Orbcomm Inc. (ORBC)
Q3 2009 Earnings Call
November 09, 2009; 10:30 am ET
Marc Eisenburg - Chief Executive Officer
Robert Constantini - Chief Financial Officer
Lucas Binder - Vice President of Business Development & Investor Relations
Chris Quilty - Raymond James & Associates
[James Leventhal - Leventhal & Company]
Good morning ladies and gentlemen and welcome to Orbcomm’s third quarter 2009 financial results conference call. (Operator instructions).
Previous Statements by ORBC
» Orbcomm, Inc. Q4 2008 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 third quarter 2009. A replay of this conference call will be available beginning at 12 noon Eastern Time today until next Monday, November 16 at 12 noon. We have an 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 on 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.
Thank you Lucas. Good morning everyone and thank you for joining us. On the call today, I would like to provide you with an overview of the third quarter 2009 results, update you on recent business highlights and discuss the status of our satellites. I’ll then turn the call over to Robert who will provide a full financial review of the quarter, and an update on the satellite insurance claim. We will conclude the call with any questions you may have.
For the third quarter 2009 service revenues increased 10%, while total revenues declined 6.6% on anticipated lower product sales compared to third quarter of 2008. The reported adjusted EBITDA of $1 million, which is up 58% from $646,000 reported in the prior year quarter.
The year-to-date adjusted EBITDA is $2.1 million, which represents a 46% increase over the year-to-date adjusted EBITDA in 2008. The company generated $1.3 million in cash flow from operations during the quarter and year-to-date cash flow from operations of $3.3 million.
At the end of the third quarter, our total billable subscriber communicator base or subs was about 509,000, which represents annual sub growth of more than 15% from the base of September 30, 2008. The growth in subs was the key driver of service revenue growth of 10%, which was also aided by the AIS related activities during the quarter.
We added approximately 26,000 net subs consisting of 2,000 satellite adds and 24,000 terrestrial adds during the third quarter. Orbcomm experienced exceptionally high disconnects led by a few of our transportation VARS, which we have not seen repeated thus far in the fourth quarter.
The quarter reflected the migration of GE Asset Intelligences terrestrial subscribers to the Orbcomm system. While satellites subscriber growth was slow this quarter, we believe based on our conversations with the OEMs they are working through inventory levels, which has limited some of our growth in the short term. Once the OEMs worked through this inventory and starts to ramp up production again we expect this to benefit the satellite additions.
Let’s talk about our dual mode efforts. A big step forward in our efforts to offer a complete dual mode solution as the recent partnership with Sierra Wireless, which is meant to deliver some key components of our upcoming web services portal. This portal will enable our users to manage their wireless devices with more sophisticated control, which we believe positions us as a leader in the M2M device management.
Many aspects of this portal represent significant steps ahead of the offerings of our competition. Comprehensive device management and diagnostic capabilities are critical for anyone deploying M2M applications. Among the key features included in this offering are the ability to remotely administer firmware and software updates, provide detailed usage and diagnostic information, troubleshoot application or connectivity issues and manage key aspects of their data communications.
Orbcomm’s unique multi-network capabilities, which has been brought together is the ideal companion to this M2M operating portal. This portal also enables dual mode services allowing the user to combine satellite and terrestrial wireless networks. Combined with new hardware offering from Sierra wireless, Digi and Quake offers end users a complete dual mode solution maximizing terrestrial and satellite benefits while cutting time to market. We expect this portal to be available in the first quarter of 2010.