EBITDA1 of US$450,091 (CDN$581,112) in FY18 Q2 Representing a 377% Increase from Prior Year
VANCOUVER, British Columbia, Aug. 09, 2018 (GLOBE NEWSWIRE) — Intrinsyc Technologies Corporation (TSX: ITC and OTC: ISYRF) (“Intrinsyc” or the “Company”), a leading provider of solutions for the development of intelligent connected devices, today announced its financial results for the second quarter ended June 30, 2018. Intrinsyc achieved year over year revenue growth of 40% in the second quarter of fiscal 2018, with EBITDA of US$450,091 (CDN$581,112).
The strong revenue growth was a result of increased revenue from both embedded computing hardware and product development services. Revenue was US$6.4 million (CDN$8.3 million) which was an increase from US$4.6 million (CDN$6.2 million) in the second quarter of fiscal 2017.
“Our Q2 financial results show exceptionally strong growth year-on-year,” stated Tracy Rees, Chief Executive Officer, Intrinsyc Technologies Corporation. “We also had record booked sales during the quarter in excess of US$8.0 million; increasing the Company’s backlog and setting a solid base for future revenue performance. Backlog was further strengthened with the material order of $5,431,000 announced subsequent to the quarter end, on July 31.” Rees added, “Continuing the buildout of our embedded computing platforms, we recently announced the Open-Q™ 2500 Development Kit and production-ready System on Module (“SOM”) targeted at wearable and tracking applications. These products were also mentioned in a news release from our strategic technology partner and at their partner event at Mobile World Congress Asia. In a significant expansion of our relationship with our partner, we signed a patent license that will enable Intrinsyc to build computing modules that contain an integrated LTE cellular modem. The first product powered by a combined processor and modem chip will be a version of the Open-Q™ 2500 SOM. We believe having the capability to build cellular based embedded computing modules for IoT markets provides the Company with compelling differentiation and will expand our market opportunities.”
Business Highlights – Second Quarter of Fiscal 2018
- Announced the receipt of orders from two existing and two new clients, that are in aggregate valued at US$700,260. Orders for the Company’s Open-Q™ embedded computing modules and related hardware components are valued at US$426,800. The Company also received orders for software and product development services from clients valued at US$273,460.
- Announced the receipt of an order valued at US$940,000 for the Company’s Open-Q™ 410 embedded computing modules. The order is a follow-on production order from an existing IoT client. Shipment of the modules is expected to occur in the second half of 2018, and first quarter of 2019.
- Announced the receipt of orders totaling US$1,877,000. Orders include embedded computing modules from an existing Global 500 client, valued at US$1,104,000, and development platforms and modules from a new client that is building electric vehicles valued at US$119,000. The Global 500 Client also signed agreements earlier in the month for product development services valued at US$654,000. Hardware shipments and product development services are expected to be provided in the current quarter, through the end of 2018.
- Announced that two Original Equipment Manufacturers (“OEM”) have selected Intrinsyc’s Open-Q™ SOM to power their innovative medical devices. One of the design wins involves a medical device with an integrated camera and will utilize Intrinsyc’s Open-Q™ 626 SOM. The other client will be using a custom version of the Company’s Open-Q™ 820 SOM designed by Intrinsyc specifically to the client’s unique requirements. The total value of the services agreements is approximately US$642,000.
- Announced that two companies have selected Intrinsyc’s Open-Q™ 820 µSOM to power their IoT devices; one a medical diagnostic device, and the other an Industrial IoT (“IIoT”) device. In addition to these new design wins, the Company received orders that are in aggregate valued at over US$1.0 million.
- Made a strategic equity investment in Stream TV Networks through the conversion of the subordinated, secured promissory note and interest accrued for a total amount of US$1,661,384 into 415,346 common shares. The agreements between the parties also include Stream TV providing a commitment of US$1,500,000 in services to be purchased directly or through connected party referrals during the eighteen (18) month period beginning May 1, 2018.
- Announced the introduction of the Company’s Open‐Q™ 2500 SOM and its companion Open‐Q™ 2500 Development Kit. This product was also featured in a press release issued by our key partner and announced at their wearable technology event at Mobile World Congress Asia.
- Introduced the Connected Card Application Reference Design (“CCARD”); a reference design and software development platform for automotive telematics platforms. The CCARD provides a near commercial-grade Telematics Control Unit (“TCU”) that provide high-speed wide area networking (“WAN”) connectivity from an automobile.
- Introduced a Cellular Vehicle to Everything (“CV2X”) Development Platform. The CV2X Development Platform enables demonstrations of V2V/V2I/V2P (vehicle to vehicle, vehicle to infrastructure, vehicle to pedestrian) functionalities. CV2X or Cellular Vehicle to Everything is the latest, cutting-edge technology aimed at collision avoidance and value-added services. CV2X will enable vehicles to communicate critical messages with everything around them, including other vehicles and infrastructure.
- Signed a 3G/4G patent license agreement with the Company’s key technology partner. Under the terms of the agreement, Intrinsyc was granted a royalty-bearing patent license, to develop, manufacture and sell embedded modules for use in complete terminals; including M2M, Telematics, and IoT Devices. With this agreement, Intrinsyc will be able to expand its product lineup to include modules that incorporate the industry’s leading cellular technology.
- In June, George Reznik, Chief Financial Officer, presented and met with investors and analysts at the MicroCap Conference in Toronto, ON. The MicroCap Conference is an exclusive event dedicated to connecting small and micro-cap companies with high-level, institutional and retail investors.
- Design wins remained constant at 53, as new designs were offset by attrition in other programs, and production clients increased from 24 to 26, during the second quarter.
Financial Highlights – Second Quarter of Fiscal 2018
Three Month Comparative Results
The Company reported second quarter revenue of US$6.4 million (CDN$8.3 million), up 40% over the same period in the prior year of US$4.6 million (CDN$6.2 million) and up 6% over the prior period of US$6.1 million (CDN$7.7 million). The increase in revenue over the comparative periods was due primarily to increased revenue from the sale of hardware products.
Gross margin2 for the three months ended June 30, 2018 was 34%, which was slightly higher than the 32% gross margin for the three months ended March 31, 2018 and the 33% gross margin for the three months June 30, 2017. Increase in gross margin over the three months ended March 31, 2018 and June 30, 2017 was due to an increase in service revenue which has a higher gross margin. EBITDA was as follows:
| Three months ended
June 30, 2018
|Three months ended
March 31, 2018
| Three months ended
June 30, 2017
|Operating income (loss)||$265,104||$342,274||$148,980||$188,416||($40,939)||($55,059)|
|Add: revenue recognized as interest income as per IFRS||–||–||–||–||33,750||45,390|
|Add back: Other operating expenses||184,987||238,838||158,651||200,645||101,457||136,451|
Net income for the three months ended June 30, 2018 was US$85,492 (CDN$115,975) or US$0.00 earnings per share (CDN$0.01) compared to net loss of US$12,432 (CDN$15,322) or US$0.00 (CDN$0.00) loss per share in the same period in the prior year and net income of US$124,149 (CDN$160,080) or US$0.01 (CDN$0.01) earnings per share in the prior quarter.
Six Month Comparative Results
The Company reported revenue of US$12.5 million (CDN$16.0 million), up 38% over the same period in the prior year of US$9.1 million (CDN$12.1 million). The increase in revenue over the comparative period was due primarily to increased revenue from the sale of hardware products.
Gross margin for the six months ended June 30, 2018 was 33%, which was slightly lower than the 34% gross margin in the same period in the prior year. The decrease was due to an increase in sales of hardware products. EBITDA was as follows:
| Six months ended
June 30, 2018
| Six months ended
June 30, 2017
|Operating income (loss)||$ 414,084||$ 530,690||($ 26,288)||($ 35,664)|
|Add: revenue recognized as interest income as per IFRS||–||–||67,500||90,068|
|Add back: Other operating expenses||343,638||439,483||165,986||221,874|
|EBITDA||$ 757,722||$ 970,173||$ 207,198||$ 276,278|
The Company had net income of US$209,641 (CDN$276,055) or US$0.01 (CDN$0.01) earnings per share during the six months ended June 30, 2018, compared to net income of US$84,534 (CDN$109,706) or US$0.01 (CDN$0.01) during the same period in the prior year.
Financial Position as at June 30, 2018
Working capital4 as of June 30, 2018 was US$10.8 million (CDN$14.2 million) inclusive of cash, cash equivalents and short-term investments of US$7.4 million (CDN$9.8 million). This is compared to net working capital of US$12.5 million (CDN$15.7 Million) as of December 31, 2017 inclusive of cash, cash equivalents and short-term investments of US$7.3 million (CDN$9.1 million).
Financial Statements and Management Discussion & Analysis
Please see the unaudited interim condensed consolidated financial statements and related Management’s Discussion & Analysis (“MD&A”) for more details. The unaudited interim condensed consolidated financial statements for the three months and six months ended June 30, 2018 and related MD&A have been reviewed and approved by Intrinsyc’s Audit Committee and Board of Directors. Intrinsyc recognizes that the majority of its investors are now accessing Intrinsyc’s corporate and financial information either through pushed news services, directly from www.intrinsyc.com or SEDAR. Thus, Intrinsyc has prepared this truncated news release to alert investors to its results and that a more detailed explanation and analysis is readily available in the MD&A. These reports have been filed on SEDAR at www.sedar.com and also posted at www.intrinsyc.com.
The Company will hold a conference call to discuss its fiscal second quarter of 2018 financial results at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) today. On the call, Tracy Rees, Chief Executive Officer and George Reznik, Chief Financial Officer, will discuss the financial results announced. This conference call may be accessed, toll-free, by dialing 1-800-273-9672, and internationally by dialing 1-416-340-2216 approximately 10 minutes prior to the start of the call. This conference line is operator assisted and an access PIN is not required. The conference call will also be broadcast live over the Internet and available for replay on the Company’s Investor Relations Conference Calls web page (http://www.intrinsyc.com/company/investors/). Analysts and investors are invited to participate on the call. Questions may be submitted to [email protected] prior to the call.
Financial information is reported in United States dollars and in accordance with International Financial Reporting Standards (“IFRS”).
The following and preceding discussion of financial results includes reference to Gross Margin, EBITDA and Working Capital, which are all non-IFRS financial measures. The measure of gross margin is provided as management believes this is a good indicator in evaluating the operating performance of the Company. EBITDA is defined as operating income (loss) inclusive of revenue reclassified as interest income (as per IFRS) less other operating expenses. The measure is provided as a proxy for the cash earnings from the operations of the business as operating loss for the Company includes non-cash amortization and depreciation expense and share-based compensation which are classified as other operating expenses. The measure of working capital is provided as management believes this is a good indicator of the operating liquidity available to the Company.
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 that involve risks and uncertainties. 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 need to develop, integrate and deploy software solutions to meet the Company’s customer’s requirements; the possibility of development or deployment difficulties or delays; a customer’s decision to cancel or fail to proceed with a commitment to purchase units of the Company’s products contained in an executed purchase order; the dependence on the Company’s customer’s satisfaction; the timing of entering into significant contracts; customers’ continued commitment to the deployment of the Company’s solutions; reliance on products manufactured by other companies for resale or distribution and reliance on third-party suppliers; the performance of the global economy and growth in software industry sales; market acceptance of the Company’s products and services; the success of certain business combinations engaged in by the Company or by its competitors; possible disruptive effects of organizational or personnel changes; technological change, new products and standards; risks related to international expansion; concentration of sales; international operations and sales; 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 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, 2017. This list is not exhaustive of the factors that may affect the Company’s 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.
The Company has agreements with certain technology partners that prevent the use of their name and trademarks without pre-approval. It is not practical to get such approval due to time and other constraints and therefore company names and product trademarks are excluded from this release.
About Intrinsyc Technologies Corporation
Intrinsyc Technologies Corporation is a product development company that provides comprehensive and tailored solutions that enable the development and production of next-generation embedded and IoT devices. Solutions span the development life cycle from concept to production and help device makers and technology suppliers create compelling differentiated products with faster time-to-market. Intrinsyc is publicly traded (TSX: ITC and OTC: ISYRF) and is headquartered in Vancouver, BC, Canada.
For more information, please contact:
George W. Reznik, CPA-CA, CBV, CFE
Chief Financial Officer
Intrinsyc Technologies Corporation
Email: [email protected]
1 Non-IFRS measure that does not have a standardized meaning and may not be comparable to a similar measure disclosed by other issuers. The closest comparable IFRS financial measure is Operating Income (Loss). EBITDA referenced here relates to operating income (loss) inclusive of revenue reclassified as interest income (as per IFRS) less other operating expenses.
2 Gross Margin is a non-IFRS measure that does not have a standard meaning and may not be comparable to a similar measure disclosed by other issuers. Gross margin referenced herein relates to revenues less cost of sales.
3 These numbers have been restated to account for the impact of IFRS 15. Additional details on IFRS 15 are discussed in the Critical Accounting Policies and Estimates section of the MD&A and Note 3 to the Interim Condensed Consolidated Financial Statements.
4 Non-IFRS measure that does not have a standardized meaning and may not be comparable to a similar measure disclosed by other issuers. This measure does not have a comparable IFRS measure. Working capital is defined as current assets less current liabilities.