Press Releases
Intrinsyc Reports Transition Period Financial Results
Vancouver, BC – March 20, 2008 – Intrinsyc Software International, Inc. (TSX: ICS), a global wireless software solutions provider, today announced its financial results for the four-month transition period ended December 31, 2007, reported in Canadian dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP). As previously reported, Intrinsyc has changed its fiscal year-end from August 31 to December 31. Accordingly, the Company is required to report financial results for the four-month transition period ended December 31, 2007. The comparative periods are the three months ended August 31, 2007 and November 30, 2006.
Total revenue for the four-month transition period was $5.2 million compared to $4.5 million in the three months ended August 31, 2007 and $5.0 million in the three months ended November 30, 2006. Gross margin for the transition period was 36 percent compared to 49 percent in the three months ended August 31, 2007 and 46 percent in the three months ended November 30, 2006. The slower rate of revenue growth and commensurate gross margin decline compared to the prior quarter was due primarily to the weakening of the U.S. dollar versus the Canadian dollar as well as a delay in signing an engineering services agreement. The impact of the weakening U.S. dollar in the period had a negative impact on revenue and gross margin of approximately $425,000 from what the revenue and gross margin would have been had the exchange rates remained consistent with the three month period ended August 31, 2007. The gross margin decline caused by the depreciation of the U.S. dollar equated to an approximate 5 percent decline compared to what the gross margin would have been had the exchange rates remained consistent with the quarter ended August 31, 2007.
“During the transition period, services revenues were relatively consistent with the prior period when factoring in currency impact and the effect of a services engagement with a major OEM which was underway but due to a delay in contract signing limited our ability to recognize the revenue. Our priority remained the ramp of our Soleus™ business and our progress included securing two additional design wins and signing our first silicon vendor distribution agreement. We also launched support services with three Soleus customers which, while billed at lower rates than our non-Soleus engineering rates, helped our customers accelerate their product development,” commented Glenda Dorchak, Chairman and Chief Executive Officer of Intrinsyc Software. “In early 2008, we continued to build upon our momentum by securing a win for Soleus with Samsung Semiconductor System LSI Division. We believe this relationship has the potential to expand over time and accelerate the deployment of Soleus internationally. Additionally, we announced the launch of the first consumer product based on our Soleus software platform, which was developed by Micro-Star International Co., Ltd., and were able to demonstrate that product, along with several other customer prototypes, at our booth at Mobile World Congress in Barcelona.”
Ms. Dorchak continued, “While we expect growth in our services revenues in the coming quarter, as compared to the transition period on a time comparable basis, the slower growth of that business was the reason we made the decision to invest in Soleus. During calendar 2007, we aligned our operations in support of our wireless software solutions business by closing our United Kingdom engineering operation which was completed by December, ramping our Asia Pacific operations by opening an office in Taipei, and deploying a sales and business development operation that over the course of the year closed five Soleus wins as well as a strategic development alliance with a leading Japanese OEM to develop new user interface technologies. Our confidence in Soleus remains unchanged, and we look forward to the release of a number of Soleus-based products and the commencement of royalty revenues in the second quarter of 2008.”
The EBITDA loss for the transition period was $6.9 million, compared to $3.9 million in the three months ended August 31, 2007 and $2.9 million in the three months ended November 30, 2006. The EBITDA loss in the transition period includes a restructuring charge of approximately $650,000 related to the previously announced closure of the Company’s United Kingdom engineering services operation which was completed during the transition period. EBITDA loss for the transition period also includes Soleus-related research and development expenditures of $3.3 million compared to $2.7 million in the three months ended August 31, 2007 and $2.9 million in the three months ended November 30, 2006. Expenditures for sales and marketing were $2.4 million in the transition period compared to $1.8 million in the three months ended August 31, 2007 and $1.3 million in the three months ended November 30, 2006. The calculation of EBITDA excludes stock-based compensation expense. See further discussion on EBITDA under the heading “Supplemental Information” later in this press release.
Cash on hand at the end of the transition period was $12.0 million, compared to $19.6 million as of August 31, 2007. Subsequent to December 31, 2007, the Company closed a bought deal offering of 28,600,000 new common shares at an offering price of $1.05 per share, resulting in gross proceeds of approximately $30.0 million.
Accounting Changes
As of the first quarter of 2008, Intrinsyc intends to report its financial results in U.S. currency, which is more reflective of its status as a global company and is the currency in which Intrinsyc receives the majority of its revenue. Intrinsyc will continue to report in accordance with Canadian GAAP.
Supplemental Information
In addition to results disclosed in accordance with Canadian GAAP, Intrinsyc discloses a non-GAAP measure of EBITDA as a method to evaluate the Company’s operating performance. This non-GAAP measure should not be considered a substitute for measurements required by accounting principles generally accepted in Canada such as loss and loss per share. Management believes that this non-GAAP metric provides additional information allowing comparability regarding the Company’s ongoing operating performance and the items excluded are considered to be non-operational and/or non-recurring. EBITDA is defined as earnings before interest, tax, depreciation and amortization. This non-GAAP measure is not necessarily comparable to non-GAAP information provided by other issuers. A reconciliation of the Company’s EBITDA loss to the loss under Canadian GAAP is provided in the table attached. .
Conference Call
Consolidated unaudited financial statements are attached and a conference call to discuss these results will be held at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time), today.
To listen to the conference call live by telephone, dial +1-866-400-2280 toll free for participants in North America, and +1-416-850-9143 for Toronto area and international participants, approximately 10 minutes before the start time. A telephone playback will be available for three business days, beginning approximately two hours after the call. To listen to the telephone replay please dial +1-866-245-6755 toll free, and for international callers, dial +1-416-915-1035. Enter access code 462845.
The Audit Committee of the Company has reviewed the contents of this news release.
Transition Period Consolidated Financial Statements (PDF)
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About Intrinsyc Software International, Inc.
Intrinsyc provides wireless software solutions that enable next-generation handheld products, including mobile handsets, smart phones, and converged devices. The company’s software products include the Soleus™ software platform for consumer device development and the recently acquired Destinator® GPS/navigation technologies. Combined with award winning engineering services and years of systems integration expertise, these solutions help device makers, service providers, and silicon vendors deliver compelling wireless products with faster time-to-market and improved development cost. Intrinsyc is a Microsoft® Windows Embedded Gold Partner and a winner of Windows Embedded Excellence Awards in 2007 and 2008, a Symbian Competence Center and Symbian Platinum Partner. Intrinsyc is publicly traded (TSX:ICS) and headquartered in Vancouver, Canada, with offices in China, Israel, Taiwan, U.K., and the United States.
www.Intrinsyc.com
© 2008 Intrinsyc Software International, Inc. All rights reserved.
Intrinsyc, Soleus, Destinator and their respective logos are trademarks, registered and otherwise, of Intrinsyc Software International, Inc. in Canada, European Union, Taiwan, United States of America and other jurisdictions. Other products and services mentioned in this document are identified by the trademarks or service marks of their respective companies or organizations.
Forward Looking Statements
This press release contains statements which, to the extent that they are not recitations of historical fact, may constitute forward-looking information under applicable Canadian securities legislation. Such forward-looking statements or information may include financial and other projections as well as statements regarding the Company's future plans, objectives, performance, revenues, growth, profits, operating expenses or the company's underlying assumptions. The words "may", "would", "could", "will", "likely", "expect," "anticipate," "intend", "plan", "forecast", "project", "estimate" and "believe" or other similar words and phrases may identify forward-looking statements or information. Persons reading this press release are cautioned that such statements or information are only predictions, and that the Company's actual future results or performance may be materially different. Factors that could cause actual events or results to differ materially from those suggested by these forward-looking statements include, but are not limited to: the Company’s ability to continue to earn the revenue from Destinator products after the acquisition, and to integrate the acquired business into its own operations; the need to develop, integrate and deploy software solutions to meet our customer's requirements; the possibility of development or deployment difficulties or delays; the dependence on our customer's satisfaction; the timing of entering into significant contracts; our customers’ continued commitment to the deployment of our solutions; the risks involved in developing integrated software solutions and integrating them with third-party products and services; the performance of the global economy and growth in software industry sales; market acceptance of the Company’s products and services; customer and industry analyst perception of the Company and its technology vision and future prospects; the success of certain business combinations engaged in by the Company or by its competitors; political unrest or acts of war; possible disruptive effects of organizational or personnel changes; technological change, new products and standards; risks related to acquisitions and international expansion; reliance on large customers; concentration of sales; international operations and sales; management of growth and expansion; dependence upon key personnel and hiring; reliance on a limited number of suppliers; industry growth; competition; intellectual property; product defects and product liability; currency exchange rate risk; and including but not limited to other factors described in the Company’s reports filed on SEDAR, including its Annual Information Form and financial report for the year ended December 31, 2007. In drawing a conclusion or making a forecast or projection set out in the forward-looking information, the Company takes into account the following material factors and assumptions in addition to the above factors: the Company’s ability to execute on its business plan; the acceptance of the Company’s products and services by its customers; the timing of execution of outstanding or potential customer contracts by the Company; the sales opportunities available to the Company; the Company's subjective assessment of the likelihood of success of a sales lead or opportunity; the Company's historic ability to generate sales leads or opportunities; and that sales will be completed at or above the Company's estimated margins. This list is not exhaustive of the factors that may affect our forward-looking information. These and other factors should be considered carefully and readers should not place undue reliance on such forward-looking information. All forward-looking statements made in this press release are qualified by this cautionary statement and there can be no assurance that actual results or developments anticipated by the Company will be realized. The Company disclaims any intention or obligation to update or revise forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.
For more information, please contact:
David Fischer
Senior Director of Finance and Acting Chief Financial Officer
Intrinsyc Software International, Inc.
Phone: +1-604-648-4012
Email: dfischer@intrinsyc.com
For more information, please contact:
Tracy Rawa
Intrinsyc Software International, Inc.
Email: trawa@intrinsyc.com
Phone: (604) 678-3311
Investor Relations:
Beverly Twing
Shelton Group Investor Relations
Email: btwing@sheltongroup.com
Phone: (972) 239-5119 ext.126
Murray Duncan
Intrinsyc Software International, Inc.
Email: mduncan@intrinsyc.com
Phone: (604) 646-7971