Intrinsyc Software International, Inc.
TSX : ICS

Intrinsyc Software International, Inc.

November 08, 2007 16:01 ET

Intrinsyc Reports Fourth Quarter and Fiscal Year 2007 Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 8, 2007) - Intrinsyc Software International, Inc. (TSX:ICS), a global wireless software solutions provider, today announced its financial results for the fourth quarter and fiscal year ended August 31, 2007, reported in Canadian dollars and in accordance with Canadian Generally Accepted Accounting Principles (GAAP).

Total revenue for the fourth quarter of fiscal 2007 was $4.5 million, as compared to $5.1 million in the third quarter of 2007, and $4.9 million in the fourth quarter of 2006. The sequential decline in revenues of 11 percent was in line with the Company's previously provided guidance of a 10 to 20 percent quarter-over-quarter decline in revenue due to the transition out of legacy embedded services businesses. Total revenue for fiscal year 2007 was $19.7 million, compared to $18.7 million in fiscal year 2006, representing a 6 percent year-over-year revenue growth rate.

Gross margin during the quarter was 49 percent as compared to 52 percent in the previous quarter, and 47 percent in the same quarter last year. Gross margin for fiscal 2007 was $9.7 million, an improvement of 32 percent over 2006.

"Our results this quarter reflect the transition of our business towards becoming a growth-oriented wireless software solutions provider," commented Glenda Dorchak, Chairman and Chief Executive Officer of Intrinsyc Software. "In 2007 we launched our Soleus software business, expanded operations to Asia and improved the strategic alignment of our services business. With the release of Soleus version 1.0 in December and 1.01 in August and the two design wins which followed in fiscal 2007, we proved the value of our technology by commercializing Soleus. The recent third design win serves as further evidence that our software business has traction."

The EBITDA loss for the fourth quarter of fiscal 2007 was $3.9 million, compared to $3.8 million in the fourth quarter in fiscal 2006. The fourth quarter EBITDA loss includes research and development expenditures on Soleus of $2.7 million in fiscal 2007, versus $3.6 million in the fourth quarter of fiscal 2006. Expenditures for sales and marketing were $1.8 million in the fourth quarter of fiscal year 2007, compared to $0.9 million in the fourth quarter of fiscal year 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 used in operations was $3.3 million in the fourth quarter of fiscal year 2007, representing a decrease when compared with the $3.8 million of cash used in operations in the fourth quarter of fiscal year 2006. Cash on hand at the end of the fourth quarter was $19.6 million, compared to $21.4 million at the end of the third quarter of fiscal year 2007.

Fiscal Year 2007 Review

Revenue of $19.7 million for fiscal 2007 reflects growth in the engineering services business in North America, which more than offset a decline in revenue from the legacy hardware business and engineering services out of Intrinsyc's UK operation. It also reflects initial licensing revenue attributable to Soleus. Gross margin increased to 49 percent for the fiscal year, up from 39 percent in fiscal 2006. Gross margin as a percentage of revenue improved with more efficient execution on engineering services engagements and the focus on higher margin wireless systems integration over traditional embedded services.

For fiscal year 2007, the EBITDA loss of $14.6 million increased as compared to the EBITDA loss of $13.2 million in 2006. Research and development expenditures for Soleus were $11.9 million, compared to $10.6 million in 2006 as the Company completed the development phase of Soleus version 1.0 and subsequently launched Soleus 1.01 in August 2007. The calculation of EBITDA excludes stock-based compensation expense. See further comments on EBITDA under the heading "Supplemental Information" later in this press release.

Cash used in operations during the full fiscal year 2007 increased approximately $1.4 million to $14.2 million, compared to cash used in operations of $12.8 million in fiscal 2006 primarily as a result of the payment and drawdown of accounts payable and accrued liabilities in the current year and the increased expenditure on the sales and marketing of Soleus. The Company's cash balance at the end of the fourth quarter was $19.6 million compared to $22.5 million at the end of fiscal year 2006.

Commenting on the year, Ms. Dorchak stated, "Fiscal year 2007 was a pivotal one for Intrinsyc as we improved engineering efficiency in our North American operation, successfully executed a strategic services engagement with a leading handset OEM, recorded our first Soleus license revenue and set the stage for upside growth once our customers begin to ship Soleus-based products. Additionally, we expanded our global reach by opening a permanent office in Asia. A fundamental building block of our transition was the hiring of experienced industry executives for key positions in sales, marketing, product and corporate development to strengthen our leadership and accelerate our growth."

Recent Business Updates

On November 7, 2007, Intrinsyc's Board of Directors approved two financial reporting changes that the Company believes will enhance corporate efficiencies. First, the Company intends to change its fiscal year end from August 31 to December 31, effective January 1, 2008. This change will better align Intrinsyc's business cycle with that of its customers, as well as align Intrinsyc with the majority of public companies, thereby allowing investors to better assess Intrinsyc's performance in relation to its peers. As a result of this year end change, Intrinsyc will have a four month stub period running from September 1 to December 31, 2007. Intrinsyc expects to report on this stub period in March 2008. Intrinsyc's next full fiscal year will run from January through December 2008. The Company is in the process of securing the necessary approvals from the Toronto Stock Exchange and Canada Revenue Agency for this change.

Additionally, commencing with the fiscal period beginning January 1, 2008, Intrinsyc will begin reporting in U.S. currency. This change is reflective of Intrinsyc's operations as a global company and will enable the Company to report in the currency in which the Company is receiving the majority of its revenue and incurring expenses. Intrinsyc will continue to report in accordance with Canadian GAAP.

The Company has also reported that it has entered into a consultation period for its engineering operation in the United Kingdom, as required under UK law, whereby the Company will propose to close the operation before the end of 2007. Alternatives will continue to be considered over the course of the consultation period. The company plans to continue providing services to the European market through Intrinsyc's more cost-effective operations in Taipei and Vancouver and will continue to have a sales and business development presence in the region.

Business Outlook

Building on the momentum established for the Company's software and services businesses, Intrinsyc's primary focus going forward is the continued expansion of commercial operations around its software products and growing presence in Asia. Additionally, Intrinsyc continues to further develop Soleus in order to capitalize on next generation mobile handset opportunities and drive additional engineering services business. In accordance with Company policy, the company does not provide forward guidance on future financial results.

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), November 8, 2007.

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 845884.

The Audit Committee of the Company has reviewed the contents of this news release.

About Intrinsyc Software International, Inc.

Intrinsyc provides software and solutions that enable next-generation handheld and embedded products, including mobile handsets, smart phones and converged devices. The company's mobile software products, engineering services, and years of expertise help OEMs, service providers, and silicon providers deliver compelling wireless products with faster time-to-market and improved development cost. Intrinsyc is the licensor of the Soleus™ platform based on Windows® Embedded CE for consumer handset development. Intrinsyc is a Microsoft® Windows® Embedded Gold Partner, the 2007 Windows Embedded Excellence Award winner for Systems Integrator, and a Symbian Platinum Partner. Intrinsyc is publicly traded on the Toronto Stock Exchange (symbol: ICS) and headquartered in Vancouver, Canada with regional offices in the United States, Taiwan, the United Kingdom and Barbados.

Intrinsyc and the Intrinsyc logo are registered trademarks, and Soleus and the Soleus logo are trademarks in Canada, the European Community and the U.S.A. of Intrinsyc Software International, Inc. All other marks are the trademarks of the respective owners and are hereby acknowledged.

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. Such forward-looking statements 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 are intended to identify forward-looking statements. Estimates made regarding future results assume the Company will continue to generate business for its engineering services at historical rates. If demand for the Company's services declines, or demand for engineering services declines generally, revenue may be affected. Additionally, any statements made pertaining to growth potential within a specific geographic region are made based upon current knowledge and understanding of the market environments and are subject to the risks and uncertainties applicable to each market region and the probability of adopting Intrinsyc's technology and/or utilizing the Company's engineering services. Persons reading this press release are cautioned that such statements are only predictions, and that the Company's actual future results or performance may be materially different.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include the risk factors set out in the Company's Annual Information Form.

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.



Intrinsyc Software International, Inc.
CONDENSED OPERATING STATEMENTS AND GAAP LOSS RECONCILIATION
(in Canadian dollars, Canadian GAAP)

Three months ended Years ended

August 31 May 31 August 31 August 31 August 31
2007 2007 2006 2007 2006
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
-------------------------------------------------------------------------
$ $ $ $ $
-------------------------------------------------------------------------

Revenue 4,536,376 5,111,900 4,923,932 19,705,794 18,657,717
Cost of sales 2,310,346 2,464,238 2,625,080 10,033,615 11,318,054
-------------------------------------------------------------------------
2,226,030 2,647,662 2,298,852 9,672,179 7,339,663

Administra-
tion 1,268,825 1,415,617 1,446,636 5,219,400 5,407,944
Marketing and
sales 1,827,283 1,734,161 865,986 6,590,745 3,456,723
Research and
development 2,795,014 2,952,947 3,676,425 12,025,934 10,969,692
Technology
Partnerships
Canada
Funding
Investment 136,092 153,358 136,767 291,175 260,905

Foreign
exchange
loss (gain) 61,394 488,818 (22,528) 125,911 428,220

EBITDA loss 3,862,578 4,097,239 3,804,434 14,580,986 13,183,821
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-------------------------------------------------------------------------

Amortization 225,696 204,247 192,207 821,282 1,061,174
Stock-based
compensation 163,068 95,899 158,054 668,618 915,115
Loss on
disposal of
equipment 2,599 - 671 2,599 671
Interest
income (197,122) (93,105) (234,313) (532,603) (551,785)
Accretion and
amortization -
long-term debt -- -- 205,547 927,778 744,098
Interest
expense -
long-term debt -- -- 252,056 213,699 909,590
Income tax
expense
(recovery)
Current 41,647 107,879 65,265 392,014 202,929
Future 11,091 (29,001) (14,306) (76,051) (72,279)
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Loss under
Canadian
GAAP 4,109,557 4,383,158 4,429,615 16,998,322 16,393,334
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Intrinsyc Software International, Inc.
CONSOLIDATED BALANCE SHEETS
(in Canadian dollars, Canadian GAAP)
(unaudited)

2007 2006
As at August 31 $ $
-------------------------------------------------------------------------

ASSETS
Current
Cash and cash equivalents 19,629,335 22,487,076
Accounts receivable 3,080,974 3,789,743
Inventory 15,872 110,996
Prepaid expenses - current 540,605 385,816
-------------------------------------------------------------------------
Total current assets 23,266,786 26,773,631
-------------------------------------------------------------------------
Prepaid expenses 156,627 61,769
Equipment 1,479,407 1,360,832
Goodwill 14,189,478 14,189,478
Intangible assets 240,790 556,120
Deferred financing costs -- 516,599
-------------------------------------------------------------------------
Total assets 39,333,088 43,458,429
-------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 3,563,078 4,010,542
Taxes payable 422,840 218,912
Capital lease 15,396 --
Deferred revenue 702,949 542,515
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Total current liabilities 4,704,263 4,771,969
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Debentures -- 7,617,946
Long term capital lease 32,570 --
Future income taxes 151,816 229,655
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Total liabilities 4,888,649 12,619,570
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Shareholders' equity
Share capital 94,089,090 74,623,739
Warrants and underwriters' options 5,736,316 5,229,997
Contributed surplus 3,584,107 2,951,875
Cumulative translation adjustment (27,792) (27,792)
Deficit (68,937,282) (51,938,960)
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Total shareholders' equity 34,444,439 30,838,859
-------------------------------------------------------------------------
Total liabilities and shareholders' equity 39,333,088 43,458,429
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-------------------------------------------------------------------------


Intrinsyc Software International, Inc.
CONSOLIDATED STATEMENTS OF
OPERATIONS AND DEFICIT
(in Canadian dollars, Canadian GAAP)
(unaudited)

Three months ended Years ended

August 31 May 31 August 31 August 31 August 31
2007 2007 2006 2007 2006
$ $ $ $ $
-------------------------------------------------------------------------

Revenues 4,536,376 5,111,900 4,923,932 19,705,794 18,657,717
Cost of sales 2,310,346 2,464,238 2,625,080 10,033,615 11,318,054
2,226,030 2,647,662 2,298,852 9,672,179 7,339,663

Expenses
Administra-
tion 1,268,825 1,415,617 1,446,636 5,219,400 5,407,944
Marketing and
sales 1,827,283 1,734,161 865,986 6,590,745 3,456,723
Research and
development 2,795,014 2,952,947 3,676,425 12,025,934 10,969,692
Amortization 225,696 204,247 192,207 821,282 1,061,174
Stock-based
compensation 163,068 95,899 158,054 668,618 915,115
Technology
Partnerships
Canada
Funding
Investment 136,092 153,358 136,767 291,175 260,905
-------------------------------------------------------------------------
6,415,978 6,556,229 6,476,075 25,617,154 22,071,553
-------------------------------------------------------------------------

Loss before
other expense
(income) and
income taxes 4,189,948 3,908,567 4,177,223 15,944,975 14,731,890
Other expense
(income)
Foreign
exchange loss
(gain) 61,394 488,818 (22,528) 125,911 428,220
Loss on
disposal of
equipment 2,599 -- 671 2,599 671
Interest
income (197,122) (93,105) (234,313) (532,603) (551,785)
Accretion and
amortization
- long-term
debt -- -- 205,547 927,778 744,098
Interest
expense -
long-term debt -- -- 252,056 213,699 909,590
-------------------------------------------------------------------------
(133,129) 395,713 201,433 737,384 1,530,794
-------------------------------------------------------------------------

Loss before
income taxes 4,056,819 4,304,280 4,378,656 16,682,359 16,262,684
Income tax
expense
(recovery)
Current 41,647 107,879 65,265 392,014 202,929
Future 11,091 (29,001) (14,306) (76,051) (72,279)
-------------------------------------------------------------------------
52,738 78,878 50,959 315,963 130,650
-------------------------------------------------------------------------

Loss for the
period 4,109,557 4,383,158 4,429,615 16,998,322 16,393,334

Deficit,
beginning of
period 64,827,725 60,444,567 47,509,345 51,938,960 35,545,626
-------------------------------------------------------------------------
Deficit, end
of period 68,937,282 64,827,725 51,938,960 68,937,282 51,938,960
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Loss per
share (basic
and diluted) 0.03 0.05 0.05 0.18 0.24
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Weighted
average
number of
shares
outstand-
ing 119,261,618 91,014,543 83,041,249 94,181,525 67,618,153
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Intrinsyc Software International, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in Canadian dollars, Canadian GAAP)
(unaudited)

Three months ended Years ended

August 31 May 31 August 31 August 31 August 31
2007 2007 2006 2007 2006
$ $ $ $ $
-------------------------------------------------------------------------
OPERATING
ACTIVITIES
Loss for the
period (4,109,557) (4,383,158) (4,429,615) (16,998,322) (16,393,334)
Items not
involving
cash
Amortization 225,696 204,247 192,207 821,282 1,061,174
Future
income
taxes 10,522 (33,758) (14,122) (77,839) (31,770)
Stock-based
compensation 163,068 95,899 158,054 668,618 915,115
Accretion
and
amortization
- long
term debt -- -- 205,547 222,322 744,098
Accretion
and
amortization
realized
on early
redemption
of debentures -- -- -- 705,456 --
Changes in
non-cash
operating
working
capital
Income taxes
payable 18,628 109,038 112,680 203,928 (44,470)
Accounts
receivable (81,680) 983,249 (203,624) 708,769 119,853
Inventory 73,703 39,735 23,936 95,124 23,322
Prepaid
expenses (233,934) 96,409 (197,872) (249,647) (101,823)
Accounts
payable and
accrued
liabilities 430,677 304,203 390,951 (447,465) 1,220,468
Deferred
revenue 242,950 (98,657) (61,857) 160,434 (294,145)
-------------------------------------------------------------------------
Cash used in
operating
activities (3,259,927) (2,682,793) (3,823,715) (14,187,340) (12,781,512)
--------------------------------------------------------------------------

INVESTING
ACTIVITIES
Purchase of
equipment (208,179) (103,708) (106,587) (575,046) (784,969)
-------------------------------------------------------------------------
Cash used in
investing
activities (208,179) (103,708) (106,587) (575,046) (784,969)
-------------------------------------------------------------------------

FINANCING
ACTIVITIES
Issuance of
common
shares and
warrants 1,864,507 20,000,400 4,125 21,864,907 24,123,936
Share
issuance
costs (154,619) (1,775,004) (23,251) (1,929,623) (2,344,984)

Repayment of
capital
lease
obligation (1,514) -- -- (1,514) --
Debentures -- -- -- (8,000,000) 8,000,000
Debentures
issuance
costs -- -- -- (29,125) (1,043,605)
-------------------------------------------------------------------------
Cash
provided
by financing
activities 1,708,374 18,225,396 (19,126) 11,904,645 28,735,347
-------------------------------------------------------------------------

Increase
(decrease)
in cash
and cash
equivalents (1,759,732) 15,438,895 (3,949,428) (2,857,741) 15,168,866
Cash and
cash
equivalents,
beginning
of period 21,389,067 5,950,172 26,436,504 22,487,076 7,318,210
------------------------------------------------------------
Cash and
cash
equivalents,
end of
period 19,629,335 21,389,067 22,487,076 19,629,335 22,487,076
------------------------------------------------------------
------------------------------------------------------------

Supplementary
information
Interest
paid 996 -- 237,599 214,893 903,749
Interest
received 205,294 97,096 235,422 551,840 503,329
Income taxes
paid -- -- 11,937 211,076 117,630
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