TORONTO, ON – May 7, 2019 BSM Technologies Inc. (TSX: GPS) (“BSM” or the “Company”), a leading provider of Internet of Things (IoT) enabled telematics and asset management solutions, today announced its unaudited consolidated financial and operating results for the three months ended March 31, 2019 (the “Second Quarter”). The Second Quarter is reported in accordance with the newly adopted IFRS 15 accounting standard, Revenue from Contracts with Customers (IFRS 15). The adoption of this standard has had a significant impact on the Company’s reported results. For further information and a description of the Company’s revenue recognition policy under IFRS 15, refer to the Company’s condensed interim consolidated financial statements on SEDAR at www.sedar.com, under the Company’s issuer profile. Comparable amounts for the second quarter of fiscal 2018 have been restated to conform with the adoption of IFRS 15.  All amounts are in Canadian dollars unless otherwise stated.

Second Quarter Highlights:

  • Total revenue of $15.4 million, a decrease of 1% compared to $15.5 million in the second quarter of fiscal 2018 (“Q2 FY2018”) and a decrease of 2% compared to $15.7 million in the first quarter of fiscal 2019 (“Q1 FY2019”).
  • Subscription Fee Revenue(i) of $11.6 million, an increase of 4% compared to $11.2 million in Q2 FY2018 and an increase of 2% compared to $11.4 million Q1 FY2019.
  • Adjusted EBITDA(i) of $6 million, a decrease of 16% compared to $1.9 million in Q2 FY2018 and unchanged compared to $1.6 million in Q1 FY2019.
  • Subscriber Gross Additions(ii) of 2,600 and Subscriber Churn(ii) of 3,200, resulting in a March 31, 2019 Subscriber(ii) base of 167,300 as compared to 168,100 as at December 31, 2018.
  • Average Revenue Per Subscriber (“ARPU”)(ii) was $23.05 compared to $23.25 in Q2 FY2018 and $22.92 in Q1 FY2019, calculated on a constant currency basis(iii).

Financial Highlights for the Second Quarter:

(unaudited)

($ thousands, except margin and per share data)

Three months ended March 31

Six months ended March 31

2019

2018 (restated)(iv)

2019

2018 (restated)(iv)

Total revenue

$  15,418

$  15,479

$  31,087

$  30,870

Subscription Fee Revenue(i)

11,580

11,221

22,944

22,472

Hardware Revenue(i) and Professional Services Revenue(i)

3,838

4,258

8,143

 8,398   

Gross profit

8,855

9,122

17,938

18,223

Gross profit margin %

57%

59%

58%

59%

Net income (loss)

(486)

 1,918

(571)

(90)

Earnings (loss) per share – basic

(0.006)

 0.024

(0.007)

(0.001)

Earnings (loss) per share – diluted

(0.006)

0.023

(0.007)

(0.001)

Adjusted EBITDA(i)

1,564

  1,896

3,184

3,608

Notes:

  • Subscription Fee Revenue, Hardware Revenue, Professional Services Revenue, and Adjusted EBITDA are non-GAAP financial measures and do not have standardized meanings under IFRS; therefore, they are unlikely to be comparable to similar measures presented by other companies. See the “Non-GAAP Financial Measures and KPIs” section below for more details, including a reconciliation of these measures to their most comparable GAAP financial measure.
  • Subscriber, Subscriber Gross Additions, Subscriber Churn and Average Revenue Per Subscriber (ARPU) are key performance indicators of the Company and are therefore unlikely to be comparable to similar measures presented by other companies. Refer to the “Non-GAAP Financial Measures and KPIs” section below for more details.
  • In the calculation of ARPU on a constant currency basis, United States dollar (“USD”) denominated revenues have been translated to Canadian dollars (“CAD”) using the average effective USD to CAD exchange rate for the Second Quarter for all periods presented. ARPU on a constant currency basis removes the impact of foreign currency fluctuations from the calculation of ARPU on a Canadian dollar consolidated basis.  Refer to the “Non-GAAP Financial Measures and KPIs” section below for more details.
  • Results for the three and six months ended March 31, 2018 have been restated to conform with Company’s adoption of IFRS 15 which has had a significant impact on the Company’s reported results. For more information regarding the impact of adopting IFRS 15, refer to the Company’s condensed interim consolidated financial statements (unaudited) for the three and six months ended March 31, 2019 and 2018.

The Company’s condensed interim consolidated financial statements (unaudited) for the three and six months ending March 31, 2019 and 2018, together with its corresponding management’s discussion and analysis can be found under the Company’s profile on SEDAR at www.sedar.com and on the Company’s website at http://www.bsmtechnologies.com.

Subsequent Events:

On April 8, 2019, BSM announced that it had entered into a definitive arrangement agreement dated April 7, 2019, with Geotab Inc. (“Geotab“) and 2689285 Ontario Inc. (“Geotab Subco“), a wholly-owned subsidiary of Geotab, pursuant to which Geotab Subco has agreed to acquire all of the issued and outstanding common shares of BSM (the “BSM Shares“) not already owned by Geotab, in exchange for cash consideration of CDN $1.40 per BSM Share (the “Arrangement“). The purchase price of CDN $1.40 per BSM Share represents a total equity value, on a fully-diluted basis, of approximately CDN $117.3 million.  The Arrangement will be completed by way of statutory plan of arrangement under the Business Corporations Act (Ontario).

The Arrangement requires the approval of shareholders of BSM (“BSM Shareholders”) at a special meeting taking place on May 23, 2019 (the “BSM Meeting“). In order to become effective, the Arrangement must be approved at the BSM Meeting by at least 66⅔ percent of the votes cast by BSM Shareholders. As described below, BSM Shareholders who own or control, directly or indirectly, approximately 23% of the outstanding BSM Shares have entered into a voting support agreement with Geotab to, among other things, vote their BSM Shares in favour of the Arrangement, subject to the provisions thereof.

In addition, the Arrangement is subject to, among other things, (i) the approval of the Toronto Stock Exchange, (ii) the approval of the Ontario Superior Court of Justice (Commercial List) by way of interim and final orders, and (iii) the satisfaction or waiver of certain closing conditions customary in transactions of this nature, including the absence of material adverse changes in the business and affairs of BSM.

The Arrangement is expected to close in late May 2019. 

Concurrent with the announcement of the Arrangement, on April 8, 2019, the Company announced that it had cancelled its automatic securities repurchase plan (the “ASRP Plan“) with Paradigm Capital Inc., effective as of April 8, 2019. Except for the termination of the ASRP Plan and the obligations contained therein, BSM’s current normal course issuer bid, which is scheduled to terminate on December 26, 2019, will continue upon the same previously-announced terms and conditions.

About BSM Technologies:

With more than 20 years of experience, BSM Technologies Inc., through its subsidiaries and affiliates, is a leading provider of Internet of Things (IoT) enabled telematics and asset management solutions. Focused on the Government, Service, Rail and Construction markets, BSM provides the technology, tools and services required to connect, analyze and optimize fleets, equipment and people – empowering data-driven operational decision-making. BSM illuminate, BSM’s software platform, enables companies to leverage data insights, analytics and optimization tools for competitive advantage.  

For more information, please visit http://www.bsmtechnologies.com. The Toronto Stock Exchange has neither approved nor disapproved of the information contained in this news release.

Non-GAAP Financial Measures and KPIs:

This news release refers to “Subscription Fee Revenue”, “Hardware Revenue”, “Professional Services Revenue” and “Adjusted EBITDA”, which are “non-GAAP financial measures” under applicable securities laws. Non-GAAP financial measures do not have any standardized meaning under the Company’s GAAP determined in accordance with IFRS and therefore may not be comparable to similar measures presented by other issuers. Readers are cautioned that that the disclosure of these items are meant to add to, and not replace, the discussion of financial results or cash flows from operations as determined by the Company’s GAAP under IFRS. These non-GAAP financial measures are identified and defined as follows:

Non-GAAP Measure:

Why We Use It

How We Calculate or Define It

Most Comparable IFRS Financial Measure

Subscription Fee Revenue

 

Hardware Revenue

 

Professional Services Revenue

·  The Company believes that separately disclosing these revenue categories helps to explain period-over-period variation in the Company’s financial performance.  Furthermore, gross profit margin generated by each revenue category varies and the Company believes disclosure of these different categories helps investors to better understand the composition of the Company’s total revenue and the impact of relative changes in revenue categories on total gross profit.

·  Subscription Fee Revenue is comprised of recurring software application subscription fees which are charged to customers for access to the Company’s data portal and for the data reported from their monitored assets.  Subscription fees are generally invoiced monthly and are charged to customers on a per asset basis where those assets are vehicles, equipment or other types of stationary and mobile equipment.

·  Hardware Revenue is defined by the Company as revenue from the sale of the Company’s proprietary and third-party telematics devices.

·  Professional Services Revenue is defined by the Company as revenue from installation fees, project management fees, custom development fees, fees for integration of systems and other one-time fees for services provided to the Company’s customers.

Revenue

 

These categories of revenue, when added together, are equivalent to total revenue as reported by the Company under IFRS.

Adjusted EBITDA

·  The Company believes that Adjusted EBITDA provides useful information to the Company’s investors because it excludes transactions not related to the core cash operating business activities and normalizes for certain non-recurring charges recognized in net income, allowing for a meaningful analysis of the performance of the Company’s core operating activities.

·  The Company believes Adjusted EBITDA provides a meaningful continuity with respect to the comparison of the Company’s operating results over time.

·  Adjusted EBITDA is defined by the Company as net income adjusted for the impact of:

o   financing activities;

o   depreciation of capital assets and the amortization of intangible assets;

o   taxes with respect to various jurisdictions;

o   acquisition, integration and restructuring related costs;

o   share-based compensation expenses;

o   write-off of goodwill or other impairments to any financial and non-financial assets;

o   fair value adjustments;

o   costs related to certain legal actions; and

o   foreign exchange gains and losses recognized in net income.

Net Income (loss)

 

See below for a reconciliation of Adjusted EBITDA to net income (loss) as disclosed in the Company’s interim consolidated statement of income (loss) and comprehensive income (loss).

Reconciliation of Adjusted EBITDA to Net Income (Loss):

 

Three months ended March 31

Six months ended March 31

($ thousands)

2019

2018

(restated)

Change

($)

Change

(%)

2019

 

2018

(restated)

Change

($)

Change

(%)

Net income (loss) as reported

$  (486)

$  1,918

$  (2,404)

(125%)

$  (571)

$  (90)

$  (481)

534%

Add (deduct):

    Net interest expense

45

126

(81)

(64%)

98

268

(170)

(63%)

    Amortization of intangible assets

961

1,936

(975)

(50%)

1,913

3,977

(2,064)

(52%)

    Depreciation of capital assets

212

222

(10)

(5%)

423

517

(94)

(18%)

    Tax (recovery) expense

250

(98)

348

(355%)

745

168

577

343%

    Share-based compensation expense

299

400

(101)

(25%)

590

816

(226)

(28%)

    Foreign exchange (gain) loss

136

(101)

237

(235%)

(161)

(237)

76

(32%)

Acquisition, integration and restructuring

expenses

147

147

147

696

(549)

(79%)

Fair value adjustment on contingent

consideration

(2,507)

2,507

(100%)

(2,507)

2,507

(100%)

Adjusted EBITDA

$  1,564

$  1,896

$  (332)

(18%)

$  3,184

$  3,608

$  (424)

(12%)

                   

Key Performance Indicators:

In addition to the non-GAAP financial measures previously described, the Company uses a number of key performance indicators (KPIs). The Company believes these KPIs allow the Company to appropriately measure its performance against the Company’s operating strategy. The following KPIs are not measurements in accordance with GAAP and should not be considered as an alternative to any other measure of performance under GAAP.

A “Subscriber” is defined by the Company as a customer’s individual asset monitored by a telematics device.  A Subscriber is an important metric for the Company’s investors because it provides an indication of the Company’s ability to generate Subscription Fee Revenue from providing subscription services to the Company’s customers.  Subscriber additions occur when the Company invoices Subscription Fee Revenue for a new device not previously in the Company’s Subscriber base, and Subscriber churn occurs when the Company no longer invoices the Subscriber for Subscription Fee Revenue due to cancellation or expiry of the subscription services.

Average Revenue Per User or Subscriber” or “ARPU” is calculated monthly as Subscription Fee Revenue divided by the average number of Subscribers during the month. The Company believes ARPU helps to identify trends and to indicate whether the Company has been successful in attracting and retaining higher value Subscribers. ARPU calculated on a constant currency basis is presented in Canadian dollars (the Company’s presentation currency) using the effective average foreign exchange rate from the current period for all prior periods presented. Calculating ARPU on a constant currency basis removes the impact of foreign currency fluctuations on foreign denominated revenue when ARPU is presented in the Company’s consolidated currency.

Subscriber Gross Additions” is the gross number of Subscribers added to the Company’s Subscriber base in a given period and “Subscriber Churn” is the gross number of Subscribers reduced from the Company’s Subscriber base due to either a temporary or permanent deactivation of subscription services for a monitored asset.

Cautionary Note Regarding Forward-Looking Statements:

This news release contains “forward-looking information” and “forward-looking statements” (collectively, “forward-looking statements“) within the meaning of the applicable Canadian, U.S. and other securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate, among other things, to: the anticipated benefits of the Arrangement to BSM and BSM Shareholders; the timing and receipt of the required shareholder, court, stock exchange and other regulatory approvals for the Arrangement; the timing and ability of BSM and Geotab to satisfy the conditions precedent to completing the Arrangement; and the closing of the Arrangement.

These forward-looking statements are based on reasonable assumptions and estimates of management of BSM, as the case may be, at the time such statements were made. Actual future results may differ materially as forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of BSM, as the case may be, to materially differ from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors, among other things, include: satisfaction or waiver of all applicable conditions to closing of the Arrangement (including receipt of all necessary shareholder, court, stock exchange and regulatory approvals or consents and the absence of material changes with respect to the parties and their respective businesses, all as more particularly set forth in the arrangement agreement dated April 7, 2019, among BSM, Geotab and Geotab Subco); adverse changes in general economic or market conditions or changes in political conditions or federal, provincial or state laws and regulations; the ability of the parties to satisfy all of the conditions precedent in order to consummate the Arrangement (including receipt of all necessary stock exchange, regulatory approvals or consents and BSM Shareholder approval for the Arrangement); and changes in national and local government, legislation, taxation, controls, regulations and political or economic developments. In addition, the failure of BSM to comply with the terms of the arrangement agreement dated April 7, 2019, among BSM, Geotab and Geotab Subco may result in BSM being required to pay a termination fee to Geotab, the result of which could have a material adverse effect on BSM’s financial position and future performance. Although the forward-looking statements contained in this news release are based upon what management of BSM, as the case may be, believes, or believed at the time, to be reasonable assumptions, BSM, as the case may be, cannot assure BSM Shareholders that actual results will be consistent with such forward-looking statements, as there may be other factors that cause results not to be as anticipated, estimated or intended.

Any forward-looking statement speaks only at the date on which it is made. Readers should not place undue reliance on the forward‐looking statements and information contained in this news release. Except as required by law, BSM assumes no obligation to update the forward‐looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law. New factors emerge from time to time, and it is not possible to predict all of them; nor can BSM assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement.

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

For inquiries, please contact:

Louis De Jong

Craig MacPhail

President & CEO

Investor Relations

BSM Technologies Inc.

NATIONAL Capital Markets

(416) 675-1201

(416) 586-1938

louis.dejong@bsmtechnologies.com

cmacphail@national.ca