Intermap Technologies' (ITMSF) CEO Todd Oseth on Q4 2015 Results - Earnings Call Transcript

| About: Intermap Technologies (ITMSF)

Intermap Technologies Corp.A (OTCPK:ITMSF) Q4 2015 Earnings Conference Call March 30, 2016 11:00 AM ET

Executives

Cory Pala - Investor Relations

Todd A. Oseth - President and Chief Executive Officer

Richard Mohr - Senior Vice President and Chief Financial Officer

Analysts

Operator

Good morning. My name is Sharon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Intermap Technologies Corporation Fourth Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session [Operator Instructions]

Thank you.

Mr. Cory Pala, Investor Relations, you may begin your conference.

Cory Pala

Thanks Sharon, good morning, everyone. Thank you for joining us for our 2015 fourth quarter and year-end conference call. This call is being recorded and a replay will be available for the call details outlined on our Q4 press release and also available via webcast archive in the investor section of our website.

Leading our call today is Intermap President and CEO, Todd Oseth along with our Chief Financial Officer, Rich Mohr. This conference call will contain forward-looking statements most specifically with regards to the finalization of large contract previously announced by the company. These forward-looking statements will include opinions, assumptions and management’s expectation of future plans and operations.

Although Intermap believes these statements are based on information and assumptions, which are current, and reasonable, these statements are necessarily subject to a variety of known and unknown risks and uncertainties. You can find a discussion of such risks and uncertainties in our annual securities regulatory filings on sedar.com.

I would now hand over the call to Todd Oseth, CEO.

Todd A. Oseth

Thank you, Cory. Good morning and welcome to Intermap’s 2015 year-end conference call. The year 2015 was slightly better than 2014 from an operational perspective with revenues at $8.6 million versus $8.2 million, but we also had greatly reduced operating costs. From a forward-looking perspective, I considered year a very big success. Most specifically representing the signing of $175 million award for our Spatial Data Infrastructure or the SDI that occurred in June of 2015 with the completion and execution of definitive contract following just last month.

The product and sales delivery on the project is scheduled to commence during the second quarter of this year. Large SDIs like these leverages the substantial intellectual property we’ve build up over the years. The implementation of the project incorporates all of Intermap’s specialized abilities.

As an example, this project calls for our airborne IFSAR technology to be used to create a new three domestically countrywide digital elevation model, our fusion technology will then be used combined LIDAR into the stem for critical areas such as cities and utility corridors and then we’ll also use the IFSAR [indiscernible] to also rectify satellite imagery over the entire country.

Lastly, the entire project is based on our Orion Platform software, so that the information can be managed with single infrastructure. This infrastructure allows for the geospatial data to be easily managed and manipulated in order to drive actual results from the data sets. The aggregation of Intermap’s products and services into an all encompassing solution for our nation is what [indiscernible] and SDI project delivers.

In 2015, our software revenue increased slightly from 1.2 to 1.3, as we licensed our InsitePro software to new flood insurance underwriters. Our InsitePro software is starting to make a real mark on the industry as it can easily be customize for a unique customer specific scoring. This scoring uses Intermap’s standard flood model analysis, but can also included an analysis occasion to water and other parallels. The application can also easily ingest specialized data from a customer, which allows for shore that is specific to the customer’s unique business plan.

Our mapping services revenue increased from 2.9 to 3.8, this increase was due to extended acquisition for [USGS] (Ph) customer. Our IFSAR technology continues to perform better than our competition and is expect to deliver further acquisitions for USGS in the coming years. Our agnostic approach to data acquisition truly differentiates our capabilities. We focus on the applications that drive the accuracy of the data required, not the sensor. This delivery recognition is the most cost effective demo approaching the industry and what we believe is in the best interest of our customers.

Our data licensing was fairly consistent year-over-year $3.3 million and as more countries put SDIs in place, we believe the demand for this archive will increase as a source for auto rectification of imaging. We've generated about a $0.5 million in professional services revenue for the year, but this area is expected to expand as the Orion Platform is put into place and customers require Intelligent Queries or IQ's to produce actionable results from their geospatial datasets.

The majority of our efforts in 2015 were focused on further development of the Orion Platform for our SDIs. The platform was further enhanced to handle more types of data and new analytics to address specific requirements of most recently announced $175 million SDI project. Remember, the Orion Platform operates as a platform as a service, and the service that provides is an analysis of geospatial data for non-geospatial experts. So that the end user can access actionable results.

For instance, in our InsitePro application, non-geospatial users can use the result to determine for properties in a flood zone and then take the appropriate action on pricing or deciding to quote or not quote on an occasion. Our recent large SDI win has taken a significant amount of effort across our entire company to make sure we are ready to execute as soon as the project financing is deployed and the project's launch. We've been structured to prepare for further concentrate on the second quarter of this year through the specific date, even though the date has not been confirmed as of this time.

Now, I would like to turn just over to Rich for discussion on our financials for the quarter and for the year. Rich.

Richard Mohr

Thank you, Todd. During today's call, I'm going to focus primarily on our full-year results for 2015. So I guess, let's get started. I'll first review the key operational takeaways for the year.

As Todd mentioned, our goal for this year was to further develop our software platform and close at least one major Spatial Data Infrastructure contract. We certainly made major advancements on both fronts including the announcement of the $175 million SDI tender win in June with the final contract announced last month, we also spend a great deal of time, preparing to deliver on our SDI capabilities. We're now waiting for the financing on the announced SDI project to be finalized and deployed, which we have been instructed will occur during the second quarter of this year.

Our P&L showed an operating loss of $9.2 million for the year, primarily as a result of our investment in our software and SDI capabilities. This operating loss of $9.2 million was a reduction from the previous year's operating loss of $13.7 million. We really concentrate on operating loss, because net loss on our income statement is muddied up by sophisticated accounting for a lot of the debt instruments and the once that are outstanding, much of which are really non-cash items.

Our top-line results were slightly higher than the prior year, but with significantly lower operating cost by the year-over-year basis. Operating costs were down by 19% to roughly $3.9 million during the year. This reduction in operating cost includes $1.1 million decrease in personnel cost, $2 million decrease in purchase services materials and $0.5 million decrease in travel related cost.

Our revenue components for data and software stayed relatively consistent on a year-over-year basis, but our mapping services revenue increased by almost to $1 million and our professional services revenue decreased by $0.5 million. Neither one of these two categories of revenue occur on a consistent basis as both our project driven and as such these types of contracts occurred on regular basis and therefore year-over-year comparisons are less meaningful.

As you can see, we continue to aggressively manage our operating cost as we wait for the commencement of the SDI contract. We can then begin to increase cost, once an SDI project is in full swing to support the project's requirement. Our adjusted EBITDA improved dramatically during the last half of the year with Q4 showing a positive $200,000 amount, following Q3 at a negative $500,000 amount. This virtually breakeven performance in the last half of the year was definite improvement from the first half of the year where we showed a negative $7.3 million in adjusted EBITDA.

We've been very active on the financing front, closing six deferred related transactions during the year with gross proceeds to the company at $14.8 million. $6.3 million of these proceeds were used to retire promissory notes from prior years that came due during the current year, leaving us with the net of $8.5 million in new working capital during 2015.

Since the end of the year, we've announced revised terms on $10.8 million of the outstanding debt that came due during the first quarter of 2016, extending the due dates and lowering the interest rates. These extensions coincide with the delays that were incurred on the SDI project. During the year, we've recorded $2.4 million of the interest expense on these notes and $1.1 million of royalty expense associated with debt.

These financing costs totaled $3.8 million during the year or roughly 24% of the outstanding principal amount of the debt. We’re expecting cash flows from SDIs and other portions of our business to service the outstanding debt that we currently have in place.

Okay I'm now going to move onto the key takeaways regarding the balance sheet and the cash flows. Our cash and accounts receivable position totaled $3.1 million at year-end, compared to $2 million at the end of the previous year. Our cash balance at year-end was restricted to pay down the outstanding debt of the company pursuant to the terms of the debt. However, to-date none of the company’s money has been used to service the outstanding debt.

We used $8.2 million in cash for operating activities during the year and invested minimally in cash. Based on an SDI launch in 2016, we expect to have positive cash flows from operations during this coming year. One last thing, the accounts payable and accrued liabilities balance of $6.9 million at the end of the year was compose of trade payables totaling $2.4 million and accrued liabilities totaling $4.5 million.

Accrued liabilities are primarily made up of convertible no interest of $2.4 million, the royalty on net revenues of $1.1 million, personal related costs of $218,000 and project related accruals of $202,000. That covers the financial update for the year and I will now turn the call back over to Todd for further comments. Todd.

Todd A. Oseth

Great. Thanks, Rich. 2015s operational improvement was good and we were able to get much closer to the end goal launching the substantial Orion SDI project. The SDIs are very complex both technically and politically and many different fractions are involved to make sure they can benefit from the end results of the project.

We are marching towards the launch and I believe that our future looks very bright, I also believe that the success of this particular first major share program will motivate other perspective countries to launch their own Orion SDI programs, so they are not at a disadvantage when continue economically with the surrounding countries.

As we’ve communicated before, we continue to work on additional SDI opportunities beyond the contract announced last month. However, due to the complexity and the unique political aspects of each of these different projects, we are unable to provide any further guidance regarding the ultimate closing of any of these opportunities or the timing there of.

Once again, I would like to thank all of the investors for their continued support and look forward to meeting new investors as we start to execute on our SDI strategy. So at this time, let’s go ahead and turn it over operator to any questions.

Question-and-Answer Session

Operator

Todd A. Oseth

Great. I would like to - those investors that are interested in looking more at just Intermap’s business. The united nation has just recently published a second edition on their future trends in geospatial information management. And it clearly confirms our thesis of how this SDI will start to expand around the world. And again, I would encourage everyone to go to their website, look for this document and understand how they see the rest of the industry starting to get involved in the space of which at this time we are leading. Thank you again for your interest and we hope to be talking to all of you with the nuts of near future. Bye-bye.

Operator

This concludes today’s conference call. You may now disconnect.

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