Intrinsyc Software International, Inc.
TSX : ICS

Intrinsyc Software International, Inc.

November 10, 2010 16:00 ET

Intrinsyc Reports Third Quarter Financial Results

Sequential quarterly revenue growth and sixth consecutive quarter of positive EBITDA achieved

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 10, 2010) - Intrinsyc Software International, Inc. (TSX:ICS) (the "Company'), a leading provider of software solutions for mobile devices, today announced its financial results for the third quarter ended September 30, 2010, reported in United States dollars and in accordance with Canadian Generally Accepted Accounting Principles ("GAAP"). The Company's results are presented in comparison to the three-month period ended June 30, 2010 and the three-month period ended September 30, 2009.

Revenue for the quarter was approximately $3.2 million compared to approximately $3.0 million in the previous quarter and compared to approximately $4.4 million in the three months ended September 30, 2009. The overall gross margin was 55% compared to 50% in the previous quarter and compared to 59% in the three months ended September 30, 2009. Revenue for the quarter represents an increase of 7% from the previous quarter and was driven primarily from improved revenue from the company's Device Development Solutions, including royalty from an Android tablet project completed in the second quarter of 2010.

Total operating expenses, excluding amortization, stock-based compensation, Technology Partnerships Canada ("TPC") funding investment, restructuring charges and loss/gain on disposal of equipment, for the three months ended September 30, 2010 were approximately $1.7 million representing an increase of 13 percent from approximately $1.5 million in the quarter ended June 30, 2010 but a decrease of 26% from the quarter ended September 30, 2009. Earnings before interest, amortization, stock-based compensation expense, restructuring, loss/gain on disposal of equipment, foreign exchange loss/gain, TPC funding investment, extraordinary expense/income and income tax ("EBITDA") for the three months ended September 30, 2010 was $62,711 compared to EBITDA of $11,012 for the three months ended June 30, 2010 and $271,762 for the three months ended September 30, 2009. This represents the sixth consecutive quarter that the Company has been EBITDA positive. Cash and cash equivalents were $10.4 million with net working capital of $11.2 million as of September 30, 2010 compared to cash and cash equivalents of $11.7 million with net working capital of $11.3 million as of December 31, 2009.

The Company reported revenue of approximately $9.8 million for the nine month period ended September 30, 2010 as compared to approximately $13.6 million for the nine month period ended September 30, 2009. Total revenue attributable to the Company's software solutions decreased to 34 percent of revenues, including software licensing, maintenance/support and software-related services, as compared to 42 percent in the respective comparative period. The decline in software revenue was primarily attributable to lower revenue from the Company's Destinator® navigation software and the J-Integra® Enterprise Interoperability Software ("EIS") product. Gross margin was 55 percent for the nine month period ended September 30, 2010, consistent with the gross margin for the nine months ended September 30, 2009.

Total operating expenses, excluding amortization, stock-based compensation, TPC funding investment, restructuring charges and loss/gain on disposal of equipment, for the nine months ended September 30, 2010 were approximately $5.2 million, compared to approximately $8.0 million for the nine months ended September 30, 2009. EBITDA for the nine months ended September 30, 2010 was $176,717 compared to ($608,398) for the nine months ended September 30, 2009.

Tracy Rees, President and Chief Executive Officer, commented, "Although the intensely competitive navigation software market, including several free offerings in the North America market, resulted in declining revenue from our Destinator product line, we made progress in improving our overall revenue, through improvement in our Device Development Solutions business. Revenue from our Device Development Solutions business was up substantially from the previous quarter, $2.2 million versus $1.5 million, due to the signing of new software and services agreements and royalty revenue from an Android tablet device developed in collaboration with a Taiwan based Original Design Manufacturer (ODM)."

"During the quarter, we announced new agreements to assist in development of an Android tablet device with ASRT Corporation and a software and services agreement with a major silicon vendor to license and integrate our RapidRIL™ software into their platform. We are currently in negotiations with multiple wireless companies for similar agreements."

"As a result of several customer engagements during the past two years, Intrinsyc is establishing a very strong reputation for development of Android devices, particularly in the hot device category of e-readers and wireless tablets. We continue to work closely with Barnes and Noble with the launch of highly innovative e-reader devices, including the recently introduced nook colour device."

Business Highlights

  • Launched Destinator 9 application for the Apple iPhone™ in China.
  • Signed a long-term agreement with MLS Multimedia SA. 
  • Licensed RapidRIL telephony software to Tattu Mobile for integration in an Android based wireless tablet device.
  • Signed a RapidRIL license and engineering services agreement with an industry leading silicon vendor. Intrinsyc's software and services will accelerate development and availability of the company's next generation mobility solutions.
  • Signed an Android tablet services agreement with ASRT Corporation.

Conference call

The Company will release its fiscal third quarter 2010 financial results on Wednesday, November 10, 2010 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 in North America, toll-free, by dialing 1-866-610-8602, and internationally by dialing +1-212-401-8152 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.

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, 2009. 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 empowers device makers, mobile operators, and silicon vendors to deliver compelling, next generation mobile devices faster with higher quality, and differentiating innovation. We help our customers deliver compelling products using our unmatched expertise with the leading OS platforms including Android, Apple, Blackberry, Linux, Symbian, Windows® CE and Windows Phone. Intrinsyc delivers Destinator, the most feature rich navigation application with the best integration for leading smart phones, including from OEMs like Motorola and LG Electronics. Destinator is also available through leading application stores and Intrinsyc's own navigation store www.destinatornavstore.com. Intrinsyc is publicly traded (TSX:ICS) and headquartered in Vancouver, Canada, with offices in China and the United States.

www.intrinsyc.com

INTRINSYC SOFTWARE INTERNATIONAL, INC.
Consolidated Balance Sheets
As at September 30, 2010 December 31, 2009
  (Unaudited)  
ASSETS    
Current assets    
  Cash and cash equivalents $ 10,372,175 $ 11,710,227
  Accounts receivable 3,415,153 3,401,467
  Inventory 2,379 14,269
  Prepaid expenses - current 224,100 313,528
Total current assets 14,013,807 15,439,491
     
Restricted cash - 95,147
Prepaid expenses 43,612 47,063
Equipment 625,496 735,807
Intangible assets 3,287,678 3,880,481
Total assets $ 17,970,593 $ 20,197,989
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current liabilities    
  Accounts payable and accrued liabilities $ 2,279,161 $ 3,574,134
    Current portion of long-term payable to Technology Partnerships Canada 72,885 -
  Capital lease obligation – current 14,995 45,179
  Deferred revenue 440,980 526,169
Total current liabilities 2,808,021 4,145,482
     
Long-term payable to Technology Partnerships Canada 238,671 -
Long-term capital lease obligation - 7,388
Total liabilities 3,046,692 4,152,870
     
Shareholders' equity    
  Share capital 108,288,585 108,288,585
  Warrants and underwriters' options 270,046 4,029,953
  Contributed surplus 9,171,914 5,230,217
  Accumulated other comprehensive (loss) income 2,398,558 2,068,103
  Deficit (105,205,202) (103,571,739)
Total shareholders' equity 14,923,901 16,045,119
Total liabilities and shareholders' equity $ 17,970,593 $ 20,197,989

 

INTRINSYC SOFTWARE INTERNATIONAL, INC.
Consolidated Statements of Operations and Deficit
(Unaudited and expressed in U.S. dollars)
For the Three months ended September 30, 2010 Three months ended September 30, 2009 Nine months ended September 30, 2010 Nine months ended September 30, 2009
         
Revenues $ 3,244,199 $ 4,355,340 $ 9,775,654 $ 13,630,768
Cost of sales 1,461,819 1,770,971 4,350,542 6,196,334
  1,782,380 2,584,369 5,425,112 7,434,434
         
Expenses        
    Sales and marketing 484,480 750,233 1,498,812 2,638,750
    Research and development 478,510 939,057 1,958,297 3,443,139
    Administration 756,679 623,317 1,791,286 1,960,943
    Amortization 286,716 305,797 866,461 964,543
    Stock-based compensation 64,998 167,903 181,790 361,282
        Technology Partnerships Canada Funding Investment - 63,986 287,192 342,055
        Restructuring - - 485,478 -
        Loss (gain) on disposal of equipment - (39,810) (2,150) 180,535
  2,071,383 2,810,483 7,067,166 9,891,247
         
      Loss before other expense (earnings) and income taxes 289,003 226,114 1,642,054 2,456,813
Other expense (earnings)        
    Foreign exchange (gain) loss 129,586 304,694 98,083 501,772
    Interest expense (income) (19,462) (12,904) (36,258) (46,835)
    Extraordinary expense (income) - (166,171) - (166,171)
Loss before income taxes 399,127 351,733 1,703,879 2,745,579
         
Income tax recovery        
    Current (1,187) (135,990) (70,416) (196,704)
         
Net loss for the period 397,940 215,743 1,633,463 2,548,875
         
Deficit, beginning of period 104,807,262 102,974,766 103,571,739 100,641,634
         
Deficit, end of period $105,205,202 $103,190,509 $105,205,202 $103,190,509
         
Loss per share (basic and diluted) $0.00 $0.01 $0.01 $0.02
         
  Weighted average number of shares outstanding 163,259,070 163,259,025 163,259,070 163,256,969
INTRINSYC SOFTWARE INTERNATIONAL, INC.
Consolidated Statements of Comprehensive Loss
(Unaudited and expressed in U.S. dollars)
For the Three months ended September 30, 2010 Three months ended September 30, 2009 Nine months ended September 30, 2010 Nine months ended September 30, 2009
         
Net loss for the period ($ 397,940) ($ 215,743) ($1,633,463) ($2,548,875)
         
Other comprehensive gain (loss):        
         
Unrealized gains (losses) on translating financial statements from functional currency to reporting currency 506,902 1,271,508 330,455 1,929,331
         
Comprehensive income (loss) $ 108,962 $ 1,055,765 ($1,303,008) ($ 619,544)

 

INTRINSYC SOFTWARE INTERNATIONAL, INC.
Consolidated Statements of EBITDA and Loss
(Unaudited and expressed in U.S. dollars)
For the Three months ended September 30, 2010 Three months ended September 30, 2009 Nine months ended September 30, 2010 Nine months ended September 30, 2009
         
Revenues $ 3,244,199 $ 4,355,340 $ 9,775,654 $ 13,630,768
Cost of sales 1,461,819 1,770,971 4,350,542 6,196,334
  1,782,380 2,584,369 5,425,112 7,434,434
         
Expenses        
      Sales and marketing 484,480 750,233 1,498,812 2,638,750
      Research and development 478,510 939,057 1,958,297 3,443,139
      Administration 756,679 623,317 1,791,286 1,960,943
  1,719,669 2,312,607 5,248,395 8,042,832
         
EBITDA Income (Loss) 62,711 271,762 176,717 (608,398)
         
  Amortization 286,716 305,797 866,461 964,543
  Stock-based compensation 64,998 167,903 181,790 361,282
    Technology Partnerships Canada Funding Investment - 63,986 287,192 342,055
          Restructuring - - 485,478 -
        Loss (gain) on disposal of equipment - (39,810) (2,150) 180,535
  Foreign exchange (gain) loss 129,586 304,694 98,083 501,772
  Interest expense (income) (19,462) (12,904) (36,258) (46,835)
  Extraordinary expense (income) - (166,171) - (166,171)
Income tax recovery        
      Current (1,187) (135,990) (70,416) (196,704)
  460,651 487,505 1,810,180 1,940,477
         
    Net loss for the period under Canadian GAAP ($ 397,940) ($ 215,743) ($ 1,633,463) ($ 2,548,875)

 

INTRINSYC SOFTWARE INTERNATIONAL, INC.
Consolidated Statements of Cash Flows
(Unaudited and expressed in U.S. dollars)
For the Three months ended September 30, 2010 Three months ended September 30, 2009 Nine months ended September 30, 2010 Nine months ended September 30, 2009
         
OPERATING ACTIVITIES        
Net loss for the period ($ 397,940) ($ 215,743) ($1,633,463) ($2,548,875)
Items not involving cash:        
      Amortization 286,716 305,797 866,461 964,543
      Future income taxes - - - (2,603)
      Stock-based compensation 64,998 167,903 181,790 361,282
      Loss on disposal of equipment - - - 220,345
  Changes in non-cash operating working capital:        
      Accounts receivable (191,769) 377,622 48,742 2,316,640
      Inventory 24,042 (27,603) 11,864 (13,267)
      Prepaid expenses (69,449) (67,382) 100,804 160,527
      Accounts payable and accrued liabilities 140,273 (802,194) (1,368,422) (3,918,209)
          Current portion of long-term payable to Technology Partnerships Canada - - 72,936 -
      Deferred revenue 1,900 (270,003) (95,391) (277,831)
Cash used in operating activities (141,229) (531,603) (1,814,679) (2,737,448)
         
INVESTING ACTIVITIES        
Purchase of equipment (69,783) (32,658) (69,783) (58,599)
Cash used in investing activities (69,783) (32,658) (69,783) (58,599)
         
FINANCING ACTIVITIES        
Issuance of Common Shares Repayment of capital lease obligation - (24,109) 251 (7,897) - (38,381) 251 (72,215)
    Long-term payable to Technology Partnerships Canada 4,502 - 238,784 -
Restricted cash - 127,621 97,248 139,725
        Cash provided by (used in) financing activities (19,607) 119,975 297,651 68,761
         
Effect of exchange rate changes on cash        
        and cash equivalents 352,281 909,536 248,759 1,405,158
         
        Increase (decrease) in cash and cash equivalents 121,662 465,250 (1,338,052) (1,322,128)
        Cash and cash equivalents, beginning of period 10,250,513 10,604,324 11,710,227 12,391,452
Cash and cash equivalents, end of period $10,372,175 $11,069,324 $10,372,175 $11,069,324

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