Intrinsyc Software International, Inc.
TSX : ICS

Intrinsyc Software International, Inc.

August 09, 2012 16:00 ET

Intrinsyc Reports 2012 Second Quarter Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 9, 2012) - Intrinsyc Software International, Inc. (TSX:ICS) ("Intrinsyc" or the "Company"), developer of intelligent connected devices, today announced its financial results for the second quarter ended June 30, 2012, reported in United States dollars and in accordance with International Financial Reporting Standards ("IFRS"). The Company's results are presented in comparison to the three months ended March 31, 2012 and the three months ended June 30, 2011, also in accordance with IFRS.

Intrinsyc achieved revenue of approximately $2.2 million in the second quarter, consistent with the previous quarter, with lower core business operating expenses, excluding administrative expenses related to strategic activities. The Company reported negative EBITDA(1) of $143,703 and a Net Loss of $73,183.

"We made significant progress in the design and development of new platform solutions and made our first delivery of "Internet of Everything" ("IEM") modules in production quantities," stated Tracy Rees, Chief Executive Officer, Intrinsyc Software International. "The delivery of these modules, wireless development kits and legacy computing modules resulted in an increase in revenue from hardware sales from $9,305 or less than 1% of total revenue in the previous quarter to $121,201 or 6% of total revenue in the second quarter."

Three Month Comparative Results

The Company reported revenue of approximately $2.2 million for three months ended June 30, 2012 as compared to approximately $2.2 million for the three months ended March 31, 2012 and approximately $2.4 million in the period ended June 30, 2011. Total revenue attributable to the Company's Software Solutions was 18% of revenues, including software licensing, maintenance/support and software-related services, as compared to 22% and 30% in the respective comparative quarters ended March 31, 2012 and June 30, 2011. Gross margin(2) was 43% in the three months ended June 30, 2012, which was higher than 39% in the three months ended March 31, 2012 but lower than the gross margin experienced of 50% in the three months ended June 30, 2011.

Total expenses (excluding other operating expenses)(3) for the three months ended June 30, 2012 were approximately $1.1 million which was an increase of 3% over the preceding three months ended March 31, 2012 but a 7% decrease over the three months ended June 30, 2011.

EBITDA for the three months ended June 30, 2012 was ($143,703) compared to ($204,060) in the previous three months ended March 31, 2012 and $53,776 for the three months ended June 30, 2011.

Six Month Comparative Results

The Company reported revenue of approximately $4.3 million for the six months ended June 30, 2012 as compared to approximately $5.0 million for the six months ended June 30, 2011. Total revenue attributable to the Company's Software Solutions decreased to 20% of revenues, including software licensing, maintenance/support and software-related services, as compared to 33% in the respective comparative period which is primarily due to the decline in the Company's navigation business. Gross margin was 41% for the six months ended June 30, 2012, a decrease from 53% for the six months ended June 30, 2011.

Total operating expenses (excluding other operating expenses) for the six months ended June 30, 2012 were approximately $2.1 million, compared to approximately $2.4 million for the six months ended June 30, 2011.

EBITDA for the six months ended June 30, 2012 was ($347,763) compared to $265,912 for the six months ended June 30, 2011.

Working capital(4) as of June 30, 2012 was approximately $11.6 million (which included cash and cash equivalents of approximately $6.5 million and short-term investments of approximately $5.1 million). This is compared to net working capital of approximately $11.9 million as of December 31, 2011 (which included cash and cash equivalents of approximately $9.4 million and short-term investments of approximately $2.7 million).

Business Highlights

Notable events, developments, and achievements during the second quarter include the following:

  • Signed a software license agreement with a major Silicon Vendor for RapidRIL™ telephony technology. The Silicon Vendor will integrate Intrinsyc's RapidRIL software into its market leading cellular modems for use in smartphones.
  • Exhibited at the Uplinq Conference and Freescale Technology Forum, including showcasing prototypes of the company's new development kits supporting leading edge application processors from Qualcomm and Freescale.

The Company experienced an undesired attrition of engineering personnel in recent months and this has impacted revenue from engineering services. While revenue from engineering services is expected to decline in the second half of the year, revenue from hardware, including wireless modules, development kits and system-on-modules ("SOM") is expected to increase in future quarters. These platform solutions are a crucial component to the Company's long-term revenue growth and profitability. A development kit and initial production-ready SOM will be officially launched upon completion of development, which is expected in the third quarter.

The introduction of leading edge system-on-module solutions by Intrinsyc represents a substantial offering of value for mobile and embedded device makers. By utilizing a system-on-module solution, device developers realize a fully customized electronics design, complete with custom interfaces and form factor without the effort of a ground-up electronics design. Customers can purchase an off-the-shelf SOM and combine it with an easy to develop carrier board to create a solution functionally identical to one that is fully custom-engineered. Other advantages include the ability for device developers to use off the shelf hardware with the same processing core as the finished product, enabling application development to be done earlier in the development cycle. Also, a SOM offers greater product flexibility, including the ability to swap in another computer SOM board to deal with end of life components or to upgrade to a new processor. In summary, the SOM approach reduces product development costs while decreasing time to market and technical risk.

Conference call

The Company will release its fiscal second quarter financial results on Thursday, August 9, 2012 at 4:00 p.m. Eastern Time (1:00 p.m. Pacific Time). The company will hold a conference call to discuss the financial results at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) the same day. On the call, Tracy Rees, President and 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 1-866-610-8602 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 (www.intrinsyc.com/investors/conference_calls.aspx). Analysts and investors are invited to participate on the call. Questions may be submitted to invest@intrinsyc.com prior to the call.

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

Non-IFRS Measures

The following and preceding discussion of financial results includes reference to Gross Margin, Total Expenses (excluding other operating expenses), 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. Total expenses excluding other operating expenses is provided as a proxy for cash expenses incurred from the operations of the business. EBITDA is defined as operating loss 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, share-based compensation and restructuring 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.

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 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; 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; 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, 2011. 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.

About Intrinsyc Software International, Inc.

Intrinsyc is a product development company that brings to market next generation intelligent connected devices, from smartphones and tablets, to emerging categories of M2M (Machine-to-Machine) solutions. Intrinsyc is helping to lead the way to a networked society with 50 billion intelligent connected devices expected by 2020. Intrinsyc is publicly traded (TSX:ICS) and is headquartered in Vancouver, Canada, with operations in Taiwan and the United States.

(1) 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. EBITDA referenced here relates to operating loss less other operating expenses. Please refer to the reconciliation of EBITDA to reported financial results attached to this press release.

(2) 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 here relates to revenues less cost of sales.

(3) Non-IFRS measure that does not have a standard meaning and may not be comparable to a similar measure disclosed by other issuers. Total Expenses excludes other operating expenses.

[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.

INTRINSYC SOFTWARE INTERNATIONAL, INC.
Interim Condensed Consolidated Statements of Financial Position
(Unaudited and Expressed in U.S. dollars)
As at June 30,
2012
December 31,
2011
ASSETS
Current assets
Cash and cash equivalents $ 6,510,506 $ 9,382,653
Short-term investments 5,065,079 2,688,814
Trade and other receivables 1,927,499 1,268,700
Inventory 58,909 17,702
Prepaid expenses 53,894 174,490
13,615,887 13,532,359
Non-Current Assets
Prepaid expenses 49,111 59,553
Equipment 340,543 355,955
Intangible assets 19,515 -
Total assets $ 14,025,056 $ 13,947,867
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade and other payables $ 1,336,494 $ 933,873
Government assistance 196,444 189,233
Deferred revenue 510,098 488,976
Total liabilities 2,043,036 1,612,082
Shareholders' equity
Share capital 108,288,585 108,288,585
Other capital reserves 9,798,793 9,750,619
Translation of foreign operations reserve 506,624 514,748
Deficit (106,611,982 ) (106,218,167 )
Total shareholders' equity 11,982,020 12,335,785
Total liabilities and shareholders' equity $ 14,025,056 $ 13,947,867
INTRINSYC SOFTWARE INTERNATIONAL, INC.
Interim Condensed Consolidated Statements of Operations and Deficit
(Unaudited and Expressed in U.S. Dollars)
For the Three months ended
June 30, 2012
Three months ended
June 30, 2011
Six months ended
June 30, 2012
Six months ended
June 30, 2011
Revenues $ 2,169,146 $ 2,415,228 $ 4,329,150 $ 4,968,395
Cost of sales 1,234,862 1,196,550 2,555,588 2,337,375
934,284 1,218,678 1,773,562 2,631,020
Expenses
Sales and marketing 283,935 435,848 755,812 1,027,816
Research and development 52,835 124,400 106,601 235,978
Administration 741,217 604,654 1,258,912 1,101,314
Other operating expenses 38,554 524,082 104,530 760,060
1,116,541 1,688,984 2,225,855 3,125,168
Operating loss 182,257 470,306 452,293 494,148
Other expenses (earnings)
Foreign exchange loss (gain) (80,996 ) 38,274 4,100 133,516
Interest income (28,078 ) (27,055 ) (63,575 ) (46,688 )
(109,074 ) 11,219 (59,475 ) 86,828
Loss before income taxes 73,183 481,525 392,818 580,976
Income tax expense - - 997 787
Net loss for the period 73,183 481,525 393,815 581,763
Deficit, beginning of period 106,538,799 106,137,914 106,218,167 106,037,676
Deficit, end of period $ 106,611,982 $ 106,619,439 $ 106,611,982 $ 106,619,439
Loss per share (basic and fully diluted) $ 0.00 $ 0.00 $ 0.00 $ 0.00
Weighted average number of shares outstanding 163,259,070 163,259,070
163,259,070
163,259,070
INTRINSYC SOFTWARE INTERNATIONAL, INC.
Interim Condensed Consolidated Statements of Comprehensive Loss
(Unaudited and Expressed in U.S. Dollars)
For the Three months ended
June 30, 2012
Three months ended
June 30, 2011
Six months ended
June 30, 2012
Six months ended
June 30, 2011
Net loss for the period $ (73,183 ) $ (481,525 ) $ (393,815 ) $ (581,763 )
Other comprehensive income:
Translation of foreign operations reserve (248,287 ) 66,445 (8,124 ) 390,427
Comprehensive loss for the period $ (321,470 ) $ (415,080 ) $ (401,939 ) $ (191,336 )
INTRINSYC SOFTWARE INTERNATIONAL, INC.
Interim Condensed Consolidated Statements of EBITDA and Loss
(Unaudited and Expressed in U.S. Dollars)
For the Three months
ended
June 30, 2012
Three months
ended
June 30, 2011
Six months
ended
June 30, 2012
Six months
ended
June 30, 2011
Revenues $ 2,169,146 $ 2,415,228 $ 4,329,150 $ 4,968,395
Cost of sales 1,234,862 1,196,550 2,555,588 2,337,375
934,284 1,218,678 1,773,562 2,631,020
Expenses
Sales and marketing 283,935 435,848 755,812 1,027,816
Research and development 52,835 124,400 106,601 235,978
Administration 741,217 604,654 1,258,912 1,101,314
1,077,987 1,164,902 2,121,325 2,365,108
EBITDA (143,703 ) 53,776 (347,763 ) 265,912
Other operating expenses 38,554 524,082 104,530 760,060
Foreign exchange loss (gain) (80,996 ) 38,274 4,100 133,516
Interest income (28,078 ) (27,055 ) (63,575 ) (46,688 )
Income tax expense - - 997 787
(70,520 ) 535,301 46,052 847,675
Net loss for the period under IFRS $ (73,183 ) $ (481,525 ) $ (393,815 ) $ (581,763 )
INTRINSYC SOFTWARE INTERNATIONAL, INC.
Interim Condensed Consolidated Statements of Changes in Shareholders' Equity
(Unaudited and Expressed in U.S. Dollars)
Share
Capital
Other
Capital
Reserves
Deficit Translation of
Foreign
Operations
Reserve
Total
Shareholders'
Equity
Balance, January 1, 2012 $ 108,288,585 $ 9,750,619 $ (106,218,167 ) $ 514,748 $ 12,335,785
Net loss for the period - - (393,815 ) - (393,815 )
Stock-based compensation - 48,174 - - 48,174
Translation of foreign operations into U.S. dollars - - -
(8,124
) (8,124 )
Balance, June 30, 2012 $ 108,288,585 $ 9,798,793 $ (106,611,982 ) $ 506,624 $ 11,982,020
Balance, January 1, 2011 $ 108,288,585 $ 9,566,250 $ (106,037,676 ) $ 794,984 $ 12,612,143
Net loss for the period - - (581,763 ) - (581,763 )
Stock-based compensation - 76,050 - - 76,050
Translation of foreign operations into U.S. dollars - - -
390,427
390,427
Balance, June 30, 2011 $ 108,288,585 $ 9,642,300 $ (106,619,439 ) $ 1,185,411 $ 12,496,857
INTRINSYC SOFTWARE INTERNATIONAL, INC.
Interim Condensed Consolidated Statements of Cash Flows
(Unaudited and Expressed in U.S. Dollars)
For the Three months
ended
June 30, 2012
Three months
ended
June 30, 2011
Six months
ended
June 30, 2012
Six months
ended
June 30, 2011
Cash provided by (used in):
Operating Activities
Net loss for the period $ (73,183 ) $ (481,525 ) $ (393,815 ) $ (581,763 )
Adjustments to reconcile net loss to net cash flows:
Depreciation 29,805 55,386 55,794 109,070
Amortization 562 146,386 562 301,630
Non-cash interest 3,772 5,122 7,507 10,056
Stock-based compensation 8,187 49,000 48,174 76,050
Non-cash restructuring - 98,124 - 98,124
(30,857 ) (127,507 ) (281,778 ) 13,167
Working capital adjustments:
Trade and other receivables (547,957 ) 593,627 (666,302 ) 1,182,095
Inventory (10,784 ) (169 ) (41,830 ) 8,481
Prepaid expenses 41,855 83,338 132,626 106,771
Trade and other payables 229,700 (727,064 ) 408,368 (910,627 )
Deferred revenue 150,108 150,704 20,610 24,128
(137,078 ) 100,436 (146,528 ) 410,848
Cash provided by (used in) operating activities (167,935 ) (27,071 ) (428,306 ) 424,015
Investing Activities
Redemption (purchase) of short-term investments 491,913 1,023,809 (2,424,433 ) (2,943,698 )
Purchase of equipment (37,231 ) (2,059 ) (40,441 ) (2,059 )
Purchase of intangible assets (20,226 ) - (20,226 ) -
Cash provided by (used in) investing activities 434,456 1,021,750 (2,485,100 ) (2,945,757 )
Financing Activities
Repayment of capital lease obligation - - - (7,890 )
Cash used in financing activities - - - (7,890 )
Effect of exchange rate changes on cash and cash equivalents (131,003 ) 45,154 41,259 274,548
Increase (decrease) in cash and cash equivalents 135,518 1,039,833 (2,872,147 ) (2,255,084 )
Cash and cash equivalents, beginning of period 6,374,988 7,857,522 9,382,653 11,152,439
Cash and cash equivalents, end of period $ 6,510,506 $ 8,897,355 $ 6,510,506 $ 8,897,355

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