ORBCOMM Inc. (ORBC)
Q1 2008 Earnings Call
May 8, 2008 10:30 am ET
Robert Costantini - CFO
Marc Eisenberg - CEO
Tom Watts - Cowen & Co
Chris Quilty - Raymond James
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It is now my pleasure to turn the floor over to your host, Mr. Robert Costantini, CFO. Sir, you may begin your conference.
Thank you. Good morning and thank you all for joining us. As we normally do, we'll start with a few housekeeping items. Early this morning we issued a press release announcing financial results for the first quarter of 2008. A replay of this conference call will be available beginning at 12:00 noon Eastern Time today until next Thursday, May 15 to 12:00 noon. We have an accompanying audio webcast available on our website at www.orbcomm.com, as well as an archive which will be available for the week. With me today is Marc Eisenberg, ORBCOMM's Chief Executive Officer.
Now, before I turn this over to Marc, I want to point out during the course of this conference call we may make a number of forward-looking statements as defined by 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 Factors" section of our Form 10-K. I want to remind you that ORBCOMM assumes no duty to update any forward-looking statements.
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 EBITDA to net loss on a GAAP basis is included in our earnings release, a copy of which is available on our website.
With that taken care, I'd like to now hand it over to Marc.
Thanks, Robert. Good morning, everyone, and thank you for joining us today on the call. This morning, we reported our financial results for the first quarter. We increased our service revenue and narrowed our net loss significantly, compared to the first quarter of 2007. In addition, we achieved positive adjusted EBIDTA for the second straight quarter. We reported a slight decrease in total revenues compared to the first quarter last year, due to an anticipated decrease in product sales as more modems enter the market from third-party suppliers.
We reported an 8% increase in billable subscriber communicators over our bases at December 31, 2007, increasing our base to more than 380,000. Robert will take you through the numbers in more detail shortly.
These results demonstrate the progress we are making in executing on our business strategy of increasing high margin service revenues, which continues to be the key driver of profitability, while moderating our costs. Before we expand more on our business strategy, I'd like to give you an update on our satellites.
The Coast Guard satellite is complete and ready to be shipped to the launch site. Four of the five Quick Launch satellites have completed all system and environmental tests. The last satellite is expected to be complete in its final testing by the end of the week.
Following this, we'll conduct a comprehensive pre-shipment review. If all goes well upon completion of this review, we expect to announce the shipment date of these satellites from Germany to Russia by the end of this month and launch approximately one month thereafter. The Cosmos 3M rocket has been transported from the manufacturing facility to the Kapustin Yar launch site awaiting the arrival of the satellites. While we received an extension from the U.S. Coast Guard to launch the Coast Guard satellite by August 15th, we anticipate launching well before that date.
Yesterday we announced an agreement for the manufacturing of 18 of ORBCOMM's second generation or OG2 satellites, which I will get in to in greater detail in just a few moments.
A key component to our strategy is the ability to add OEM subscribers to our base of billable subscriber communicators and we are pleased to report that over 60% of the net additions this quarter came from OEM customers.
Growth from OEMS is steady and predictable, providing strong service revenue foundation for the company. Growth from aftermarket sales is somewhat choppier and less predictable, but offers significant upside opportunity. These two revenue streams compliment each other well and serve as the basis for our service revenue growth expectations.
We are pursuing additional OEM business in three ways. First, by adding new OEMS, second by working with existing OEM customers to increase the number of products for which they standardize ORBCOMM services, and third by adding additional territories in which they can grow. We have had success on all of these fronts.
We are continuing to expand into new geographical territories and signing new value-added resellers. ORBCOMM's network of ground infrastructure enables VARS, IVARS, and OEMs to develop a product using a single global standard and received worldwide operation with a single airtime agreement and no roaming charges.
ORBCOMM uses 14 operational GES sites, providing near real-time messaging service in North America, South America, Central America, North Africa, Asia, and Europe.