Cantronic Systems Inc.
TSX VENTURE : CTS
PINK SHEETS : CRIXF

Cantronic Systems Inc.

September 19, 2011 07:00 ET

Cantronic Reports Results for Q2 Ended July 31, 2011: Revenue Increased 31.5%, Adjusted EBITDA by 52% and Net Income by 405%

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 19, 2011) - Cantronic Systems Inc., ("Cantronic" or the "Company") (TSX VENTURE:CTS)(PINK SHEETS:CRIXF) today announced its financial results for the second quarter of fiscal year 2012, ended July 31, 2011. All amounts are reported in Canadian dollars unless otherwise stated. Selected highlights of the quarter and subsequent events:

Financial:

  • Revenue of $7.3 million, an increase of 31.5% compared to $5.6 million for the corresponding quarter of the previous fiscal year.
  • Adjusted EBITDA (a non-GAAP term) of $1.15 million, an increase of 52% compared to $0.76 million for the corresponding quarter of the previous fiscal year. The Company uses adjusted EBITDA (a non-GAAP financial measure) internally to make strategic decisions, forecast future results and evaluate its performance, defined as net income before interest, income taxes, depreciation, amortization, stock based compensation expenses, foreign currency loss, and minority interest.
  • Gross margin of $2.7 million (37% of revenue) compared to $2.3 million (41% of revenue) for the corresponding quarter of the previous fiscal year.
  • Net Income (after minority interest) was $741K or $0.008 per basic share and $0.007 per diluted share, an increase of 405% compared to $147K or $0.003 per basic and diluted share in the corresponding quarter of the previous fiscal year.
Operating results
($000's except per share amounts)
Q2 Fiscal 2012
Quarter
ended July 31,
2011
Q2 Fiscal 2011
Quarter
ended July
31, 2010
Revenue from continuing operations 7,294 5,548
Adjusted EBITDA 1,153 760
Net income to shareholders 741 147
Net earnings per share, basic 0.008 0.003
Net earnings per share, diluted 0.007 0.003

Business:

  • On June 14, 2011 it had entered into an arrangement as an Original Design Manufacturer ("ODM") with Digital China Holdings Limited of Beijing ("Digital China") to design and manufacture a customized version of Cantronic's most popular digital IP (Internet Protocol) video camera under Digital China's AMPON brand of security products.
  • On July 18, 2011, Cantronic announced that it was awarded a contract to provide video security and protection systems in China's Jiangsu province totalling RMB 30 million (approximately Canadian $4.7 million). The project begins in September 2011 with duration of one to two years. Cantronic will supply and install complete solutions that will integrate video surveillance with smart building systems, such as video intercom, access control and alarm monitoring. Cantronic will receive 10% of payment in advance with milestone payments to be made as the project progresses and 90% of payment to be received by the project completion date.
  • In August 2010, Cantronic was awarded a RMB 25 million (approximately $3.9 million) contract to act as the primary contractor for a city-wide networked video surveillance system under China's Safe City program for the city of Haicheng, Liaoning Province. Less than half of the project has been completed and the rest of the project is expected to be completed within 3 – 6 months.
  • Subsequent to the quarter end, on September 13, 2011, the Cantronic wholly-owned subsidiary,
    Cantronic Security Systems (China) Co., Ltd of Shanghai, China ("CSSC"), signed an agreement to sell its 51% interest in Shenzhen Huanghe Digital Technology Co. Ltd., of Shenzhen, China ("Yellow River") to an investor in China. Under the agreement, CSSC will sell all of the 51% interest it holds in Yellow River. Closing of the sale is conditional on completing all applicable regulatory procedures in China and Canada and a satisfactory valuation report issued by a qualified business valuator or appraiser as well as being subject to the usual terms and conditions. The transaction is expected to close before the end of October, 2011 for cash consideration of approximately RMB 10.71 million or approximately $1.65 million.

"Revenue, adjusted EBITDA and net income increased significantly in Q2, reflecting efforts the company has made in marketing. In the quarter, Cantronic announced a $4.5 million integration contract for a private video security system with excellent payment terms and the Company is completing a Safe City contract announced earlier. The company will continue to seek additional integration contracts while producing product under OEM and ODM agreements and selling to our local customers. We also plan to develop distribution of our high-speed IP dome cameras, IP cameras and software in North America," remarked James Zahn, President and CEO of Cantronic Systems Inc.

"The planned sale of Yellow River will improve our working capital and makes it unnecessary for the Company to raise additional equity in the immediate near-term. We have had several consecutive quarters of profitability and positive adjusted EBITDA. With positive cash flow from operations and positive working capital at the end of the second quarter, this will enable us to seek more integration contracts for networked video surveillance systems, which generally have higher gross margin than product sales," said Mr. Zahn.

Regulatory Filings

The material will be available through SEDAR at www.sedar.com and on the Company's website, www.cantronicsecurity.com

About Cantronic Systems Inc.

Cantronic Systems Inc. manufactures, distributes, and provides training and services in the fields of IP- based networked video security surveillance technologies, specializing in networked video management software and video analytics, IP cameras, speed dome cameras, high definition video surveillance cameras and night vision surveillance systems for demanding security and surveillance applications.

Cantronic, through its China subsidiaries Cantronic Security Systems (China) Co. Ltd., Beijing Advanced Videoinfo Technology Co. Ltd. ("AVINFO"), Shenzhen Huanghe Digital Technology Co. Ltd. ("Yellow River") and Actiontop Electronics (Shenzhen) Co. Ltd. ("Actiontop") provides high-speed and digital networked video surveillance solutions to government and corporate customers in China.

Cantronic is a Tier 1 issuer on the TSX-V exchange, trading under the symbol CTS. For further information about Cantronic and Cantronic China, please visit our websites at www.cantronicsecurity.com and www.cantronics.com.cn.

Forward-looking statements

This news release contains forward-looking statements, within the meaning of applicable securities legislation, concerning Cantronic Systems Inc. and the markets in which it operates. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance and achievements of Cantronic to be materially different from any future results, performance or achievements expressed or implied by said forward-looking statements.

Forward-looking statements include, but are not limited to: the completion of the Proposed Transaction, anticipated share capital following completion of the Proposed Transaction, expectations, opinions,forecasts, projections and other similar statements concerning anticipated future events, conditions or results that are not historical facts. In certain cases, forward-looking statements can be identified by the use of words such as "plans," "expects" or "does not expect," "is expected," "budget," "scheduled," "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved."

Readers are cautioned not to place undue reliance on such forward-looking statements. Forward- looking information is provided as of the date of this news release, and Cantronic Systems Inc. assumes no obligation to update or revise them to reflect new events or circumstances, except as may be required under applicable securities laws.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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