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September 17th, 2021
exactEarth Announces Q3 Fiscal 2021 Financial Results and Agreement to be Acquired by Spire Global

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– exactEarth has entered into an agreement to be acquired by Spire Global for $204.2 million in cash and equity

– Consideration of $3.90 per share represents a premium of 171% to exactEarth’s 10-day VWAP of $1.4417 per share

CAMBRIDGE, Ontario – exactEarth Ltd. (“exactEarth” or “the Company”), a leading provider of Satellite-AIS data services, announces its financial results for the three- and nine-month periods ended July 31, 2021. All financial figures are in Canadian dollars unless otherwise stated.

Q3 and Year-to-Date Fiscal 2021 Highlights:

  • Revenue was $6.0 million, up 26% compared to $4.8 million in Q3 2020; revenue Year-to-Date (“YTD”) was $17.3 million, up 30% compared to $13.3 million in the same period last year.
  • Subscription Services1 revenue was $5.3 million, up 18% compared to $4.5 million in Q3 2020; Subscription Services revenue YTD was $15.3 million, up 26% compared to $12.2 million in the same period last year.
  • Adjusted EBITDA2 was a gain of $661 thousand compared to a loss of ($130) thousand in Q3 2020; Adjusted EBITDA YTD was a gain of $2.4 million compared to a loss of ($429) thousand in the same period last year.
  • Cash generated from operations was $395 thousand compared to $134 thousand in Q3 2020; Cash generated from operations YTD was $70 thousand compared to cash used in operations of ($3.0) million in the same period last year.
  • Cash, cash equivalents and short-term investments were $7.0 million at the end of Q3 2021 compared to $7.5 million at the end of Fiscal 2020.

“Q3 was another strong quarter and a continuation of the positive momentum we have generated since last year,” said Peter Mabson, CEO at exactEarth. “We continue to execute on our objectives to drive top-line and Adjusted EBITDA growth, and to build a strong base of recurring revenue from which to grow from.”

Proposed Acquisition by Spire Global
On September 13, 2021, the Company entered into a definitive arrangement agreement with Spire Global Inc. (“Spire”) under which Spire will acquire 100% of the Company’s common shares for $204.2 million in cash and equity (the “Transaction”). Pursuant to the transaction, holders of exactEarth common shares will receive $2.50 in cash and 0.1 shares of Spire for each exactEarth common share held. Spire shares are listed for trading on the New York Stock Exchange (“NYSE”) under the ticker symbol SPIR. Based on the 10-day volume weighted average price (“VWAP”) of Spire’s shares on the NYSE on September 13, 2021, the total consideration per share is $3.90 and represents a premium of 171% to the Company’s 10-day VWAP of $1.4417.

The Transaction is subject to shareholder, applicable regulatory approvals and customary closing conditions. The Company’s Board of Directors unanimously approved the Transaction and will recommend that the shareholders of the Company accept this transaction. The directors, officers and certain shareholders of exactEarth, collectively holding approximately 60% of its outstanding common shares, have entered into voting support agreements under which they have agreed to support and vote in favor of the Transaction. The Transaction is expected to close in the fourth quarter of calendar 2021 or the first quarter of calendar 2022. Additional details on the transaction can be found in a joint press release issued earlier today by Spire and exactEarth.

Mr. Mabson added: “We will continue to provide world leading services to our existing customers and by joining forces with the Spire team we will be able to bring a new level of enhanced service performance and capabilities to the global maritime market. We believe this transaction provides significant value for our shareholders and reflects positively on the execution by our team to build a leader in the Satellite-AIS industry.”

Q3 and Year-to-Date Fiscal 2021 Financial Review
Total revenue in the three- and nine-month periods ended July 31, 2021 (“Q3 2021” and “YTD 2021”) was $6.0 million and $17.3 million, which were increases of 26% and 30% compared to the respective periods in the prior year.

Subscription Services revenue was $5.3 million (87% of total revenue) in Q3 2021 and $15.3 million (89% of total revenue) in the YTD 2021 period. These were increases of 18% and 26% compared to the respective periods in the prior year.

Data Products revenue and Other Products & Services revenue combined in Q3 2021 was $762 thousand and $1.9 million for the YTD 2021 period, compared to $324 thousand and $1.1 million in the respective prior year periods. Data Products revenue and Other Products & Services revenue is typically generated from on-demand customer requests and/or projects, including the sale of historical datasets, which results in variability in quarter-to-quarter revenue levels from these segments.

Revenue growth for Q3 2021 and for the YTD 2021 period was driven by customer growth in both the commercial and government market segments. Commercial market revenue was up 27% in Q3 2021 and 35% for the YTD 2021 period. Government market revenue was up 22% in Q3 2021 and up 9% for the YTD 2021 period. Reported revenue growth numbers would have been higher had it not been for the strengthening of the Canadian dollar, as the majority of the Company’s contracts are transacted in U.S. dollars.

Order Bookings backlog at July 31, 2021 was $25.4 million compared to $30.8 million at the end of Q3 2020. Order Bookings backlog can fluctuate depending on the timing of the signing of new sales agreements. The strengthening of the Canadian dollar has had the effect of reducing the YTD 2021 backlog number by more than $1.0 million. Revenue of $5.0 million from the current revenue backlog is forecasted to be earned in the remainder of Fiscal 2021.

Gross margin for Q3 2021 and the YTD 2021 period was 52% and 51%, compared to 37% and 40% in the respective periods of the prior year. Gross margin improved year-over-year due primarily to revenue growth. Cost of revenue, excluding a favourable one-time $648 thousand net adjustment recognized in Q1 2020 related to the completion of the amended L3Harris agreement, was lower for both periods in 2021.

Selling, general and administrative (“SG&A”) expense for Q3 2021 and the YTD 2021 period was $3.0 million and $7.7 million, compared to $1.6 million and $6.0 million in the respective periods of the prior year. The Q3 2021 increase was primarily due to investment in sales and marketing resources, bad debt expense related to one customer, management incentive compensation and strategic initiative expenses. The YTD 2021 increase in SG&A includes the aforementioned factors as well as an increase in the value of directors’ fees paid in DSUs arising from the appreciating stock price and strategic initiative expenses.

Product development and research and development (“R&D”) expense for Q3 2021 and for the YTD 2021 period was $258 thousand and $781 thousand, compared to $116 thousand and $628 thousand in the respective periods of the prior year. The year-over-year increases primarily reflect the Company’s ongoing development of web-based functionality and new analytics-based product offerings.

Adjusted EBITDA gains for Q3 2021 and the YTD 2021 period were $661 thousand and $2.4 million, compared to losses of ($130) thousand and ($429) thousand in the respective periods of the prior year. Adjusted EBITDA improved year-over-year primarily due to higher revenue and increased gross margin, offset in part due to higher operating expenses.

Adjusted EBITDA Three months ended July 31 Nine months ended July 31
2021 2020 2021 2020
Net loss $ (249 ) $ (941 ) $ (1,483 ) $ (4,432 )
Interest income (17 ) (13 ) (43 ) (67 )
Interest expense 57 461 703 1,321
Income tax expense 109 119
Depreciation and amortization 170 178 525 669
Unrealized foreign exchange (gain) loss (224 ) (72 ) 596 (440 )
Long-term incentive plan expense 327 422 1,491 876
Strategic initiative expenses 530 530
(Recovery) loss on disposal (13 ) 825
Share of equity investment loss 450 450
COVID-19-related ECL 67 (602 ) (26 ) 250
Adjusted EBITDA $ 661 $ (130 ) $ 2,402 $ (429 )

Net loss for Q3 2021 was ($249) thousand, or ($0.00) per basic and diluted share, compared to a net loss of ($941) thousand, or ($0.04) per basic and diluted share, in Q3 2020. Net loss for the YTD 2021 period was ($1.5) million, or ($0.03) per basic and diluted share, compared to a net loss of ($4.5) million, or ($0.20) per basic and diluted share in the same period last year. Net loss improved year-over-year due to higher revenue and higher gross margin, offset in part due to higher operating expenses.

Cash generated from operations in Q3 2021 and for the YTD 2021 period was $395 thousand and $70 thousand, compared to cash generated from operations of $134 thousand and cash used in operations of ($3.0) million in the respective periods of the prior year. exactEarth’s cash, cash-equivalents and short-term investments were $7.0 million at July 31, 2021 compared to $6.7 million at April 30, 2021 and $7.5 million at October 31, 2020.

As of September 13, 2021, the number of basic and fully-diluted issued and outstanding common shares was 49,816,065 and 52,323,627, respectively.

1,2Non-IFRS Measures
We measure Adjusted EBITDA as earnings before interest expense, taxes, depreciation and amortization (“EBITDA”), unrealized foreign exchange losses, share based compensation costs, loss on disposal, strategic initiative expenses, share of equity investment loss, and COVID-19 related expected credit loss (“ECL”), less interest income, recovery on disposal and unrealized foreign exchange gains. We believe that Adjusted EBITDA provides useful supplemental information as it provides an indication of the income generated by our main business activities before taking into consideration how they are financed or taxed and exclude the impact of items that are considered by management to be outside of the Company’s ongoing operating results. Adjusted EBITDA should not be construed as an alternative to net income (loss) determined in accordance with IFRS as an indicator of our performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows.

The Company defines “Order Bookings” as the dollar sum of contracts for the supply of products and services to its customers. “Order Bookings backlog” is the dollar sum of revenue that is expected to be recognized derived from customer contracts. Order Bookings and Order Bookings backlog are indicative of firm future revenue streams; however, they do not provide a guarantee of future net income and provide no information about the timing of future revenue.

We define Subscription Revenue as the dollar sum of fully executed contracts for our products and/or services to our customers that are subscription-based, typically sold with a one-year period of service and recognized in our “Subscription Services” segmented revenue.

About exactEarth Ltd.
exactEarth is a leading provider of global maritime vessel data for ship tracking and maritime situational awareness solutions. Since its formation in 2009, exactEarth has pioneered a powerful new method of maritime surveillance called Satellite AIS and has delivered to its clients a view of maritime behaviours across all regions of the world’s oceans unrestricted by terrestrial limitations. exactEarth’s second-generation constellation, exactView RT, securely relays satellite-detected AIS vessel signals from any location on the earth’s surface to the ground in seconds – thus enabling global real-time vessel tracking. This unique capability consists of 58 advanced satellite payloads designed and built by L3Harris Technologies, Inc. under agreement with exactEarth and that are hosted onboard the Iridium NEXT constellation of satellites. www.exactearth.com

Contact information
INVESTORS:
Dave Mason
Investor Relations
Tel: +1 416-247-9652
investors@exactearth.com

Forward-Looking Statements
This news release contains statements that, to the extent they are not recitations of historical fact, may constitute “forward-looking statements” within the meaning of applicable Canadian securities laws. Forward-looking statements may include financial and other projections, as well as statements regarding exactEarth’s future plans, objectives or economic performance, or the assumptions underlying any of the foregoing, including statements regarding, among other things, expectations of our exactView RT offering relative to competitors, expectations of the exactView RT capabilities driving growth, growth opportunities for the Company in the maritime information services market, expectations related to subscription revenue, the benefits expected from the Transaction, the requirement to obtain necessary regulatory and shareholder approvals in connection with the Transaction and the anticipated closing thereof. exactEarth uses words such as “may”, “would”, “could”, “will”, “likely”, “expect”, “anticipate”, “believe”, “intend”, “plan”, “forecast”, “project”, “estimate” and similar expressions to identify forward-looking statements. Any such forward-looking statements are based on assumptions and analyses made by exactEarth in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors exactEarth believes are appropriate under the relevant circumstances. However, whether actual results and developments will conform to exactEarth’s expectations and predictions is subject to any number of risks, assumptions and uncertainties. Many factors could cause exactEarth’s actual results, historical financial statements, or future events to differ materially from those expressed or implied by the forward-looking statements contained in this news release. These factors include, without limitation: uncertainty in the global economic environment; fluctuations in currency exchange rates; delays in the purchasing decisions of exactEarth’s customers; the competition exactEarth faces in its industry and/or marketplace; the further delayed launch of satellites, the impact of the COVID-19 pandemic on customers and the market generally, the reduced scope of significant existing contracts; the possibility of technical, logistical or planning issues in connection with the deployment of exactEarth’s products or services; the ability to obtain necessary regulatory and shareholder approvals in connection with the Transaction; and the ability to close the Transaction. The forward-looking statements contained in this communication are also subject to other risks and uncertainties, including those more fully described under the caption “Risk Factors” in exactEarth’s filings on SEDAR, including its Annual Information Form for the year ended October 31, 2020 and financial statements and related Management’s Discussion and Analysis for the year three and nine months ended July 31, 2021. The forward-looking statements in this communication are based on information available to exactEarth as of the date hereof, and exactEarth disclaims any obligation to update any forward-looking statements, except as required by law.

exactEarth™ Ltd.
Interim Condensed Consolidated Statements of Financial Position
(in thousands of Canadian dollars)
(unaudited)
As at As at
July 31, October 31,
2021 2020
$ $
ASSETS
Current assets
Cash and cash equivalents 7,041 7,423
Short-term investments 29
Accounts receivable 3,153 3,215
Unbilled revenue 1,547 1,698
Prepaid expenses 605 392
Other current assets 329 359
Total current assets 12,675 13,116
Property, plant and equipment 5,037 5,272
Intangible assets 1,155 1,286
Other long-term assets 412 566
Total assets 19,279 20,240
LIABILITIES & SHAREHOLDERS’ EQUITY (DEFICIENCY)
Current liabilities
Accounts payable and accrued liabilities 5,315 6,402
Deferred revenue 2,685 2,548
Total current liabilities 8,000 8,950
Loans payable 1,748 11,131
Long-term incentive plan liability 2,202 1,124
Other long-term liabilities 51 1,660
Total liabilities 12,001 22,865
Shareholders’ equity (deficiency)
Share capital 138,936 123,923
Contributed surplus 1,332 4,956
Accumulated other comprehensive loss (158 ) (155 )
Deficit (132,832 ) (131,349 )
Total shareholders’ equity (deficiency) 7,278 (2,625 )
Total liabilities and shareholders’ equity (deficiency) 19,279 20,240
exactEarth™ Ltd.
Interim Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficiency)
(in thousands of Canadian dollars)
(unaudited)
For the nine months ended July 31, 2021 Total Deficit Accumulated
Other
Comprehensive
Loss
Share
Capital
Contributed
Surplus
$ $ $ $ $
Balance at October 31, 2020 (2,625 ) (131,349 ) (155 ) 123,923 4,956
Stock-based compensation 143 13 130
Stock options exercised 2 2
Restricted share units (3,243 ) 511 (3,754 )
Debenture conversion 14,487 14,487
Comprehensive loss (1,486 ) (1,483 ) (3 )
Balance at July 31, 2021 7,278 (132,832 ) (158 ) 138,936 1,332
For the nine months ended July 31, 2020
$ $ $ $ $
Balance at October 31, 2019 2,119 (126,238 ) (113 ) 123,823 4,647
Stock-based compensation 128 11 117
Restricted share units 140 89 51
Comprehensive loss (4,549 ) (4,432 ) (117 )
Balance at July 31, 2020 (2,162 ) (130,670 ) (230 ) 123,923 4,815
exactEarth™ Ltd.
Interim Condensed Consolidated Statements of Loss and Comprehensive Loss
(in thousands of Canadian dollars except for per share figures)
(unaudited)
Three months ended Nine months ended
July 31, July 31, July 31, July 31,
2021 2020 2021 2020
$ $ $ $
Revenue 6,022 4,789 17,262 13,329
Cost of revenue 2,917 3,005 8,439 8,048
Gross profit 3,105 1,784 8,823 5,281
Selling, general and administrative 3,014 1,617 7,688 5,957
Product development and research and development 258 116 781 628
Depreciation and amortization 170 178 525 669
(Recovery) loss on disposal (13 ) 825
Loss from operations (337 ) (114 ) (171 ) (2,798 )
Other expenses
Other expense 9 36
Foreign exchange (gain) loss (137 ) (71 ) 507 (189 )
Share of equity investment loss 450 450
Interest income (17 ) (13 ) (43 ) (67 )
Interest expense 57 461 703 1,321
Total other expenses (88 ) 827 1,203 1,515
Income tax expense 109 119
Net loss (249 ) (941 ) (1,483 ) (4,432 )
Other comprehensive loss
Item that may be subsequently reclassified to net loss:
Foreign currency translation, net of income tax expense of nil (50 ) (53 ) (3 ) (117 )
Total other comprehensive loss (50 ) (53 ) (3 ) (117 )
Comprehensive loss (299 ) (994 ) (1,486 ) (4,549 )
Loss per share
Basic and diluted loss per share (0.00 ) (0.04 ) (0.03 ) (0.20 )
exactEarth™ Ltd.
Interim Condensed Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
(unaudited)
Three months ended Nine months ended
July 31, July 31, July 31, July 31,
2021 2020 2021 2020
$ $ $ $
Operating activities
Net loss (249 ) (941 ) (1,483 ) (4,432 )
Add (deduct) items not involving cash
Non-cash interest 43 151 358 400
Depreciation and amortization 170 178 525 669
(Recovery) loss on disposal (13 ) 825
Share of equity investment loss 450 450
Operating grant recognized on SIF loan (96 ) (237 ) (252 ) (598 )
Long-term incentive plan expense 327 373 1,491 759
Stock-based compensation 49 117
Net change in non-cash balances 215 124 (554 ) (1,207 )
Other operating cash flows
Settlement of restricted share units (15 ) (15 )
Cash flows from (used in) operating activities 395 134 70 (3,017 )
Investing activities
Acquisition of property, plant and equipment (19 ) (213 ) (686 ) (1,786 )
Reimbursement of acquisition costs of property, plant and equipment 331
Net change in non-cash working capital related to investing activities (450 ) (450 )
Cash flows used in investing activities (19 ) (663 ) (686 ) (1,905 )
Financing activities
Government loan repayment (205 )
Government loan advance 439 688 1,647
Payment of principal portion of lease obligations (39 ) (37 ) (115 ) (110 )
Debenture transaction costs (91 )
Cash flows (used in) from financing activities (39 ) 402 482 1,332
Effect of exchange rate changes on cash 12 32 (248 ) 143
Net increase (decrease) in cash 349 (95 ) (382 ) (3,447 )
Cash, beginning of the period 6,692 6,836 7,423 10,188
Cash, end of the period 7,041 6,741 7,041 6,741

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