Intrinsyc Technologies Corporation
TSX : ITC

Intrinsyc Technologies Corporation

August 06, 2015 07:30 ET

Intrinsyc Reports 2015 Fiscal Second Quarter Financial Results

Revenue increased 27% from the prior quarter to US$2.9 million

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 6, 2015) - Intrinsyc Technologies Corporation (TSX:ITC) ("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, 2015. Intrinsyc achieved strong annual and sequential revenue growth. Revenue was US$2.9 million in the second quarter 2015 which was an increase of 13% over the second quarter of 2014 and an increase of 27% quarter over quarter, from US$2.3 million. Gross margin1 improved to 41% from 37% from the second quarter of 2014. As a result of increased revenues, the Company achieved EBITDA2 of US$259,265, and net income of US$266,359. Financial information is reported in United States dollars and in accordance with International Financial Reporting Standards ("IFRS").

"I am pleased with our progress in improving revenue," stated Tracy Rees, President and CEO, Intrinsyc Technologies Corporation. "More importantly for our future success was getting back on track with revenue growth and strong sales during the quarter. The Company signed several new product development projects during the quarter that contributed to growth in our engineering services and overall revenue. Several of these projects are to design and develop intelligent connected devices that incorporate the Company's Open-Q™ computing modules. These projects have the added benefit of the potential for scalable revenue when development is complete and our client's products sell into their respective markets."

1 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.
2 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 income (loss) less other operating expenses.

Business Highlights

Notable developments and achievements during the quarter include:

  • Intrinsyc attained a net of nine new design wins year-to-date, as of June 30, with companies that signed development agreements during this period or have begun development independently to incorporate Intrinsyc's Open-Q System on Modules into their products.
  • In April, the Company announced that new design wins included recently signed agreements to provide product development services with two clients each valued at more than US$250,000 that also have significant aggregate expected annual unit volume of Intrinsyc's computing boards exceeding 50,000 units, beginning in the first half of 2016, subject to confirmation and release schedule from future purchase orders. Additionally, the Company recently signed two agreements to provide product development services with companies that exceed US$500,000 in value each.
  • In June, the Company announced four design wins for the Company's Open-Q embedded computing platforms with accompanying product development services in excess of US$900,000 in aggregate and a product development agreement with a Fortune 500 Company in excess of US$450,000. The Company expects production orders from these customers to begin in the fourth quarter of 2015, with volume ramping more significantly in 2016.
  • Launched the Open-Q 410 System on Module and Development Kit. The Open-Q 410 is a powerful, miniature, and cost effective embedded computing platform designed to enable the rapid commercial production of intelligent connected products across a variety of embedded computing and "Internet of Everything" ("IoE") industries. Products such as robotics, cameras, set-top-boxes, wearables, medical devices, vending machines, building and home automation, and industrial control are just some of the examples that will benefit from this best in class platform.
  • Signed a license agreement with a technology partner for a 64-bit, octa-core processor. The Company plans to release products based on this technology in the fourth quarter.
  • The Company's China legal entity, Intrinsyc Software (Beijing) Inc., was dissolved with the Company repatriating funds of US$409,912 to the Canadian parent company at this time, net of wind up related costs incurred.
  • Announced the resignation of Chris Ross, Vice President of Manufacturing and Chief Technical Officer ("CTO").

In order to accelerate the Company's strategic growth plan, Intrinsyc intends to increase investment in several areas over the next few quarters, including: hiring engineering personnel for delivery of our clients' projects as well as new product development, sales and marketing personnel and programs, facilities and labs, engineering equipment, and general administrative expenses to support expected growth. Further details of these investments including organization leadership changes are discussed in a separate release issued by the Company today.

Financial Highlights

Three Month Comparative Results

The Company reported revenue of US$2.9 million, up 13% over the same period in the prior year and up 27% quarter-over-quarter, from US$2.3 million. The increase in revenue was due to increased hardware sales as well as services revenue.

Gross margin was 41%, which was higher than the 37% gross margin in the same period in the prior year but lower than the 47% gross margin in the previous quarter. Gross margin improvement over the prior year period was attributable to the reduction of hardware revenue, and improvement in cost basis of engineering services due to lower value of Canadian currency versus the United States currency. The decline in gross margin over the prior period was due to the increase of hardware revenue and an increase in in cost basis of engineering services due to higher value of Canadian currency versus the United States currency.

EBITDA was US$259,265, an increase from US$113,786 in the same period in the prior year and an increase from US$86,826 in the prior quarter.

The Company had net income of US$266,359 compared to net income of US$199,868 in the same period in the prior year and a net loss of US$328,335 in the prior quarter.

Six Month Comparative Results

The Company reported revenue of US$5.1 million compared to US$4.8 million for the six months ended June 30, 2014.

Gross margin was 44% for the six months ended June 30, 2015 compared to gross margin of 39% for the six months ended June 30, 2014. Gross margin improvement over the prior year period was attributable to revenue mix and improvement in cost basis of engineering services partially attributable to the lower value of Canadian currency versus the United States currency.

EBITDA for the six months ended June 30, 2015 was US$346,091 compared to US$215,917 for the six months ended June 30, 2014.

The Company had a net loss of US$61,976 during the six months ended June 30, 2015 compared to net income of US$40,143 during the six months ended June 30, 2014.

Financial Position as at June 30, 2015

Working capital3 as of June 30, 2015 was US$9.0 million (which included cash and cash equivalents of US$4.3 million and short term investments of US$2.3 million). This is compared to net working capital of US$8.8 million as of December 31, 2014 (which included cash and cash equivalents of US$4.3 million and short-term investments of $2.5 million).

Financial Statements and Management Discussion & Analysis

Please see the audited consolidated financial statements and related Management's Discussion & Analysis ("MD&A") for more details. The unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2015 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.

Conference call

The Company will hold a conference call to discuss its fiscal second quarter 2015 financial results at 8:30 a.m. Eastern Time (5:30 a.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 1-800-952-4972, and internationally by dialing 1-416-340-9432 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 invest@intrinsyc.com prior to the call.

Non-IFRS Measures

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) 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.

3 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.

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; 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, 2014. 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 Technologies Corporation

Intrinsyc Technologies is a product development company that provides comprehensive and tailored solutions that enable the development and production of next-generation intelligent connected 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 is headquartered in Vancouver, BC, Canada.

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