ORBCOMM: Operating Loss Down, Subscriber Base Up

ORBCOMM PRESS RELEASE

ORBCOMM Inc., a global satellite data communications company focused on two-way Machine-to-Machine (M2M) communications, today announced financial results for the fourth quarter and the full year ended December 31, 2008.

Total Revenues for the twelve months ended December 31, 2008 were $30.1 million, an increase of 6.9% from the full year 2007 revenues. Service Revenues for the full year 2008 increased 34.4% to $23.8 million from the comparable period of 2007 due primarily to an increase in billable subscriber communicators, the inclusion of ORBCOMM Japan, and the commencement of Automatic Identification System (AIS) revenue.

Product Sales decreased for the full year 2008 by $4.2 million, or 39.8%, from the comparable twelve months of 2007, but would have declined 29.9% excluding the sale of a Gateway Earth Station (GES). Communicator unit sales in 2008 were also lower, driven by the decline in Product Sales, which were partially offset by Product Sales made by ORBCOMM Japan.

The 2008 results are consistent with the Company’s efforts to focus on Service Revenue growth and let the market select the appropriate hardware among all hardware manufacturers supporting the ORBCOMM business in an effort to retain and attract hardware vendors.

For the quarter ended December 31, 2008, Total Revenues were $8.5 million, a decrease of 1.5% from the fourth quarter of 2007. Service Revenues for the fourth quarter increased 37.3% to $6.9 million from the comparable period of 2007 due primarily to an increase in billable subscriber communicators, the inclusion of ORBCOMM Japan, and a contribution from AIS revenue. Product Sales decreased in the fourth quarter by $2.0 million, or 54.7%, from the fourth quarter of 2007. Excluding revenues from the sale of a Gateway Earth Station (GES) of $1.5 million recognized in the fourth quarter of 2007, Product Sales decreased by 24.1%. Declining subscriber communicator hardware sales in 2008 also contributed to lower Product Sales during the quarter.

Costs and Expenses for the full year 2008 decreased 6.0% to $34.6 million compared to the same period in the prior year. Costs and Expenses, excluding Cost of Product Sales, increased 6.5%, driven by higher Depreciation and Amortization expense, professional fees, and expenses related to the inclusion of ORBCOMM Japan and new hires throughout the year.

Costs and Expenses in the fourth quarter increased 13.9% to $9.7 million compared to the same period in the prior year. Costs and Expenses, excluding Cost of Product Sales increased 47.3%, driven by higher Depreciation and Amortization expense, professional fees, employee costs (including higher stock-based compensation), relocation expenses associated with moving our Dulles network operations center facility, and the addition of terrestrial network expenses in Cost of Service.

Operating loss for the twelve months ended December 31, 2008 improved by 48.1% year-over-year. However, a $3.7 million decline in interest income and $0.8 million of foreign exchange losses led to the increase in Net Loss compared to the same period in the prior year. Net Loss for the full year 2008 was $4.5 million versus $3.6 million in 2007. Net Loss for the fourth quarter was $2.0 million, versus Net Income of $1.1 million in the fourth quarter of 2007. During the fourth quarter of 2008 on a comparative basis, Net Loss was negatively impacted by the lack of a GES sale, lower interest income, and $0.6 million in foreign exchange losses.

At December 31, 2008, there were more than 460,000 billable subscriber communicators, a 31.0% increase over year-end 2007. For the full year 2008, more than 60% of net additions were attributable to installations by original equipment manufacturers (OEMs).

“Although we faced challenges in 2008 due to economic conditions in our end markets, I’m pleased with the successes we saw as well,” said Marc Eisenberg, ORBCOMM’s Chief Executive Officer. “Despite significant slowdowns at some of our transportation related VARs, the growth rate of our subscriber net additions slowed only slightly, due primarily to the strength in our OEM factory install business. Our ability to achieve our Service Revenue and Adjusted EBITDA targets for 2008 in the current environment is testament to the leverage in our business model and the hard work of our employees.”

“ORBCOMM utilized its operating leverage to drive Adjusted EBITDA to a $1.6 million gain, which was in-line with guidance, from a loss of $1.8 million the prior year,” said Robert Costantini, ORBCOMM’s Chief Financial Officer. “Service revenues grew 34.4% for the full year 2008 over the same period a year ago, while total Costs and Expenses, excluding Cost of Product Sales and Depreciation and Amortization, rose a modest 3.8% in 2008. For the year, ORBCOMM was within its Service Revenue guidance of $22 to $25 million.”

Business Highlights

Selected recent business highlights include:

  • ORBCOMM signed its first Automatic Identification System (AIS) distribution agreement with Lloyd’s Register – Fairplay (LRF), which integrates the only commercially available global satellite AIS data offering with the international terrestrial based network that has made LRF a leader in the AIS position monitoring market. The agreement with LRF includes a minimum annual license fee to ORBCOMM and enables access to global satellite AIS offerings beginning in January 2009.
  • ORBCOMM’s satellite based data communications network will be used by Doosan Infracore America (DIA). DIA selected MobileNet’s TrakPak application as the GPS system to be included as standard equipment on new qualifying Excavators and Loaders. MobileNet, Inc. offers telematics applications and solutions using the ORBCOMM network.
  • ORBCOMM has received regulatory authorizations for its services in Indonesia, Greece, Albania, and Latvia. The Company pursues regulatory authorizations in regions where they are most helpful to its IVARs including OEMs. In many cases, these IVARs have established sales and distribution channels in these focus markets. The new territories also provide ORBCOMM the opportunity to grow its reseller base.

Financial Results and Highlights

Revenue

Total Revenues for the full year 2008 were $30.1 million, an increase of $1.9 million, or 6.9%, from the full year 2007. Service Revenues for 2008 were $23.8 million, an increase of $6.1 million, or 34.4%, over the 2007 Service Revenues, due primarily to an increase in billable subscriber communicators, the inclusion of ORBCOMM Japan, and a slight contribution from the commencement of AIS revenue. Product Sales for the full year were $6.3 million, a 39.8% decrease from the comparable period in 2007. Excluding revenues from the sale of a Gateway Earth Station (GES) of $1.5 million recognized in the fourth quarter of 2007, Product Sales would have decreased 29.9%. Lower communicator unit sales in 2008 drove the decline in Product Sales, which were partially offset by Product Sales made by ORBCOMM Japan.

Total Revenues for the fourth quarter of 2008 were $8.5 million, a decrease of 1.5% from the fourth quarter of 2007. Excluding the sale of the GES in the fourth quarter of 2007, total revenue increased 18.6% due to higher Service Revenues. Service Revenues for the fourth quarter were $6.9 million, an increase of $1.9 million, or 37.3%, over the prior-year’s fourth quarter due primarily to an increase in billable subscriber communicators, the inclusion of ORBCOMM Japan, and a contribution from the commencement of AIS revenue. Product Sales decreased in the fourth quarter by $2.0 million, or 54.7%, from the fourth quarter of 2007. Excluding revenues from the sale of a GES of $1.5 million recognized in the fourth quarter of 2007, Product Sales would have decreased 24.1%. Subscriber communicator unit sales declines also contributed to lower Product Sales during the quarter.

Billable Subscriber Communicators

Billable subscriber communicators are defined as subscriber communicators that are shipped and activated for usage and billing at the request of the customer, without forecasting a timeframe for when individual units will be generating usage and billing. It includes terrestrial as well as satellite units.

As of December 31, 2008, there were more than 460,000 billable subscriber communicators, compared to approximately 351,000 billable subscriber communicators as of December 31, 2007, an increase of 31.0%. Net additions of billable subscriber communicators in 2008 were slowed by no growth at a key VAR, partially offset by an increase in penetration of OEMs.

Costs and Expenses

For the full year 2008, Costs and Expenses decreased 6.0% to $34.6 million compared to the same period in the prior year. Costs and Expenses, excluding Cost of Product Sales, increased 6.5%, driven by higher Depreciation and Amortization expense, professional fees, and expenses related to the inclusion of ORBCOMM Japan and employee costs for new hires in 2007 and 2008.

During the fourth quarter of 2008, Costs and Expenses increased 13.9% to $9.7 million compared to the same period in the prior year. Costs and Expenses, excluding Cost of Product Sales, increased 47.3%, driven by higher Depreciation and Amortization expense, professional fees, employee costs (including higher stock-based compensation), relocation expenses associated with moving our Dulles network operations center facility, and the addition of terrestrial network expenses in Cost of Service.

Net Loss

Net Loss widened to $4.5 million for the full year 2008 compared to a Net Loss of $3.6 million in the prior year period. While Operating Loss improved by $4.2 million, lower interest income and foreign exchange losses led to a greater Net Loss for the year. For the fourth quarter 2008, Net Loss of $2.0 million was recorded versus the 2007 fourth quarter Net Income of $1.1 million, which benefited from the sale of a GES. The comparative loss was due to the lack of a comparable GES sale in the fourth quarter of 2008, lower interest income, and the foreign exchange losses during the fourth quarter of 2008.

ORBCOMM’s Net Loss per Common Share was $0.11 for the full year 2008 compared to Net Loss per Common Share of $0.09 for 2007. ORBCOMM’s Net Loss per Common Share was $0.05 for the three months ended December 31, 2008 compared to Net Income per Common Share of $0.03 for the prior year quarter.

EBITDA and Adjusted EBITDA

EBITDA for the full year 2008 was negative $2.7 million, compared to an EBITDA of negative $6.2 million for the full year 2007. EBITDA for the fourth quarter of 2008 was negative $1.0 million, compared to an EBITDA of positive $0.7 million in the fourth quarter of 2007.

Adjusted EBITDA for the full year 2008 was positive $1.6 million, compared to an Adjusted EBITDA of negative $1.8 million for the full year 2007. Adjusted EBITDA for the fourth quarter of 2008 was positive $0.2 million, compared to an Adjusted EBITDA of positive $1.3 million in the fourth quarter of 2007.

EBITDA and Adjusted EBITDA are non-GAAP financial measures used by the Company. Please see the financial tables at the end of the release for a reconciliation table.

Balance Sheet

Cash and Cash Equivalents as of December 31, 2008 decreased $40.2 million to $75.4 million from $115.6 million at December 31, 2007. The decline is attributable to $40.3 million in capital expenditures mainly related to the Quick Launch satellites and payments on the next generation satellite contract. In addition, the Company has categorized $5.0 million of restricted cash in escrow for collateralizing a performance bond required by the FCC. For the full year 2008, net cash generated by operating activities was $3.9 million as described in the accompanying Consolidated Statements of Cash Flows.

2009 Guidance

In view of the uncertain economic environment ORBCOMM will not be providing guidance for fiscal year 2009, at this time.

Investment Community Conference Call

ORBCOMM will host a conference call and webcast for the investment community this morning at 10:30 AM ET. Senior management will review the results, discuss ORBCOMM’s business, and address questions.

Domestic participants should dial 800-762-8795 at least ten minutes prior to the start of the call. International callers should dial 480-248-5085. The conference call identification number is 4010073. To hear a live web simulcast or to listen to the archived webcast following completion of the call, please visit the Company’s web site at www.orbcomm.com, click on investor relations tab, then select “Presentations and Webcasts,” to access the link to the call. To listen to a telephone replay of the conference call, please dial 800-406-7325 domestically or 303-590-3030 internationally and enter reservation identification number 4010073. The replay will be available from approximately 12:00 PM ET on Monday, March 16, 2009, through 11:59 PM ET on Monday, March 23, 2009.

Alternatively, to access the live webcast, please visit the Company’s website at www.orbcomm.com, click on “Investor Relations” and select “Presentations and Webcasts.” An archive of the webcast will be available following the call for one week.