NovAtel Inc.
NASDAQ : NGPS

NovAtel Inc.

March 08, 2007 16:05 ET

NovAtel Inc. Reports Record Financial Results for the Full Year 2006

CALGARY, ALBERTA--(CCNMatthews - March 8, 2007) - NovAtel Inc. (NASDAQ:NGPS), a precise positioning technology company, today announced its financial results for the full year and fourth quarter ended December 31, 2006.

Revenues in the twelve months ended December 31, 2006 were CDN $77.6 million (US $68.3 million) compared to CDN $63.3 million (US $51.9 million) in 2005. The Company is reporting net income for the twelve months ended December 31, 2006 of CDN $21.5 million (US $18.9 million) or CDN $2.44 (US $2.15) per share (diluted) compared to a net income of CDN $16.7 million (US $13.7 million) or CDN $1.91 (US $1.57) per share (diluted), in 2005.

Revenues in the fourth quarter 2006 were CDN $19.2 million (US $17.1 million) compared to CDN $16.2 million (US $13.6 million) in the similar period a year ago. The Company is reporting net income for the fourth quarter 2006 of CDN $5.1 million (US $4.6 million) or CDN $0.58 (US $0.52) per share (diluted) compared to a net income of CDN $5.1 million (US $4.3 million) or CDN $0.58 (US $0.49) per share (diluted) in the similar period a year ago.

"We achieved another year of record results in 2006. For the full year, revenue increased by 23% and net income by 29%, compared to 2005," said Jon Ladd, President and CEO. The majority of the Company's revenue and net income growth in 2006 was driven by strong sales of its precision positioning system components into the survey/mapping market and by higher sales into Europe.

"It is important to note that we were able to achieve these results while investing 17.3% of our revenue, or CDN $13.5 million, in research and development during the year," added Ladd. "NovAtel is committed to ensuring its R&D investment is focused on advancements in precise global positioning technology, in order to provide our customers with innovative, highly-integrated and competitively-priced products."

"Our results for 2006 reflect strong customer acceptance of our latest generation of GPS+GLONASS technology, the OEMV™ family of receivers, which became available to our customers in March 2006," continued Ladd. "We also experienced a positive outcome from international expansion of our sales team in 2006, as part of our strategy to establish dedicated, regional resources to develop distribution and drive worldwide growth."

NovAtel's Executive Vice President and CFO, Werner Gartner, commented, "The 23% growth in year-over-year 2006 revenue was achieved after absorbing the impact of the lower US dollar relative to the Canadian dollar. Our full year 2006 revenues grew at approximately 32% in US dollars, the base currency of the majority of our revenues."

"Our fourth quarter 2006 revenue was our second-highest historical record, largely driven by the Special Applications category, which grew by 32% over the similar period in 2005," said Ladd. The majority of this year-over-year quarterly revenue increase is attributable to higher product shipments into the surveying, mapping and geomatics markets, which more than offset lower than expected shipments into the precision agriculture market.

Revenue in the Company's Geomatics category in the fourth quarter of 2006 increased by 51% over the similar period a year ago, fuelled by sales of the recently launched GSR2700IS survey product, which is manufactured for Point, Inc., the Company's joint venture with Sokkia Co., Ltd. of Japan.

Fourth quarter 2006 revenue from the Company's Aerospace and Defence category decreased by 50% over the similar period a year ago, largely due to the timing of milestones related to the Company's contract to develop the Navigation Ground Reference Receiver for Europe's future Galileo system.

"The fourth quarter 2006 revenue growth of 19% and continued strong gross margins of 62.2% were offset by increased operating costs, resulting in net income of $5.1 million, comparable to the fourth quarter of 2005. The fourth quarter of 2005 also benefited from $1.1 million future income tax assets, compared to $688 thousand in the fourth quarter of 2006," added Gartner. "We generated $4.7 million in positive operating cash flow during the fourth quarter of 2006, increasing our cash/short term investments balance to CDN $49.3 million. For the full year 2006, both operating income and net income increased by 29% over 2005, driven largely by our revenue growth and sustained strong gross margins."

Foreign Exchange

Although approximately 95% of the Company's revenues in 2006 were earned in US dollars, the Company's financial results are reported in Canadian dollars and in accordance with Canadian generally accepted accounting principles. The CDN/US dollar exchange rate has declined from an average rate of approximately CDN $1.22 per US dollar in all of 2005 to a rate of CDN $1.17 per US dollar as of December 31, 2006.

The US dollar financial information presented above is translated from the Canadian dollar financial information at the average rates in effect during the relevant reporting periods, as follows:



Three months ended Twelve months ended
------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2006 2005 2006 2005
------------------------------------------
Canadian dollar per US dollar $ 1.125 $ 1.186 $ 1.136 $ 1.218


During the conference call scheduled for this afternoon, the Company will be providing updates and further information on the Special Applications, Aerospace & Defence and Geomatics revenue categories, and near- and long-term business trends.

The Company will have a conference call today at 4:30 p.m. ET. Participants may access the NovAtel Inc. conference call by dialing 1-866-507-1212 (North America) or 416-695-5261 (International). This call is also being webcast by VCall and can be accessed at NovAtel's web site www.novatel.com or at www.InvestorCalendar.com.

A replay of the conference call will be available until March 15, 2007 by dialing 1-888-509-0081 (North America) or 416-695-5275 (International), Verbal Passcode 641235, or until July 15, 2007 at the web addresses noted above.

About NovAtel

NovAtel Inc. (NASDAQ:NGPS) is a leading provider of precision Global Navigation Satellite System (GNSS) components and subsystems that afford its customers rapid integration of precise positioning technology. The Company's mission is to provide exceptional return on investment and outstanding service to our customers. An ISO 9001 certified company, NovAtel is focused on developing quality OEM products including receivers, antennas, enclosures and software that are integrated into high precision positioning applications worldwide. These applications include surveying, Geographical Information System (GIS) mapping, precision agriculture machine guidance, port automation, mining, marine and defence industries. NovAtel's reference receivers are also at the core of national aviation ground networks in the USA, Japan, Europe, China and India. The Company is committed to providing its customers with advanced positioning technology through significant R&D investment focusing on the modernized Global Positioning System (GPS), the revitalized Russian GLONASS and the emerging European Galileo satellite systems, as well as the integration of additional complementary technologies such as Inertial Measurement Units (IMUs). For more information, visit www.novatel.com.

Certain statements in this news release, including those about the Company's future plans and intentions, long-term growth prospects, levels of activity or other future events, are forward-looking statements. These forward-looking statements are not based on historical facts but rather on management's current expectations regarding NovAtel's future growth, results of operations, performance, future capital and other expenditures, competitive advantages, business prospects and opportunities. Wherever possible, words such as "anticipate", "believe", "expect", "may", "could", "will", "potential", "intend", "estimate", "should", "plan", "predict", "forecast" or the negative or other variations of these words, or similar words or phrases, have been used to identify these forward-looking statements. Forward-looking statements involve significant known and unknown risks, uncertainties and assumptions. Many factors could cause actual results, performance or achievements to differ materially from the results discussed or implied in the forward-looking statements, including operating results of the Company's joint venture Point, Inc. ("Point"), impact and timing of large orders, U.S. dollar to Canadian dollar exchange rate fluctuations, establishing and maintaining effective distribution channels, certification and market acceptance of NovAtel's new products, credit risks of customers and the Company's joint venture Point, pricing pressures in the market and other competitive factors, maintaining technological leadership, timing of revenue recognition in connection with certain contracts, the ability to maintain supply of products from subcontract manufacturers, the procurement of components to build products, product defects, the impact of industry consolidations, vulnerability to general economic, market and business conditions, competition, environmental and other actions by governmental authorities, reliance on key personnel and other factors described in the Company's Form 20-F for the year ended December 31, 2005 and other SEC filings, many of which are beyond the control of NovAtel. These factors should be considered carefully and undue reliance should not be placed on the forward-looking statements. These forward-looking statements are made as of the date of this news release, and NovAtel assumes no obligation to update or revise them to reflect new events or circumstances.



CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, Canadian dollars)
(Unaudited)
Dec. 31, Dec. 31,
2006 2005
----------------------
ASSETS

Current assets:
Cash and cash equivalents $ 3,853 $ 2,721
Short-term investments 45,454 32,363
Accounts receivable 13,697 10,694
Related party receivables 920 1,331
Related party notes receivable 378 1,552
Inventories 8,075 5,436
Prepaid expenses and deposits 578 599
Future income tax asset 3,356 2,370
----------------------
Total current assets 76,311 57,066

Capital assets 6,079 3,095
Intangible assets 6,719 4,722
Goodwill 1,494 1,494
Deferred development costs 1,253 1,657
Other assets 816 -
Future income tax asset 4,296 3,221
----------------------
Total assets $ 96,968 $ 71,255
----------------------
----------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued liabilities $ 12,336 $ 9,784
Related party payables 72 15
Notes payable 541 1,552
Deferred revenue and customer deposits 692 752
Provision for future warranty costs 816 693
----------------------
Total current liabilities 14,457 12,796

Deferred gain on sale/leaseback of capital assets 231 342
Licence fee payable 691 -
----------------------
Total liabilities 15,379 13,138
----------------------

Shareholders' equity:
Capital stock 40,953 39,667
(Common shares issued and outstanding: 8,529 at
Dec. 31, 2006 and 8,365 at Dec. 31, 2005)
Contributed surplus 1,647 953
Retained earnings 38,989 17,497
----------------------
Total shareholders' equity 81,589 58,117
----------------------
Total liabilities and shareholders' equity $ 96,968 $ 71,255
----------------------
----------------------


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in Canadian $ thousands, except per share data)
(Unaudited)

Three months Twelve months
ended ended
----------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2006 2005 2006 2005
----------------------------------------------
Revenues:
Product sales $ 18,062 $ 14,501 $ 72,972 $ 59,306
NRE fees 1,134 1,656 4,662 3,989
----------------------------------------------
Total revenues 19,196 16,157 77,634 63,295
----------------------------------------------

Cost of sales:
Cost of product sales 6,544 5,050 27,228 22,323
Cost of NRE fees 709 855 2,879 2,313
----------------------------------------------
Total cost of sales 7,253 5,905 30,107 24,636
----------------------------------------------

Gross profit 11,943 10,252 47,527 38,659
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Operating expenses:
Research and development 3,447 3,056 13,450 10,882
Selling and marketing 2,060 1,480 7,692 6,387
General and administration 2,392 1,928 8,009 7,082
Foreign exchange loss 119 19 198 255
----------------------------------------------
Total operating expenses 8,018 6,483 29,349 24,606
----------------------------------------------

Operating income 3,925 3,769 18,178 14,053

Interest income, net 545 246 1,680 787
Other income (expense) 53 (12) (86) (72)
Benefit of investment tax
credits - 556 - 1,592
----------------------------------------------

Income from operations
before
income taxes 4,523 4,559 19,772 16,360

Income taxes
Current provision 65 549 341 2,046
Future income tax expense
(benefit) (688) (1,121) (2,061) (2,402)
----------------------------------------------

Net income $ 5,146 $ 5,131 $ 21,492 $ 16,716
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Net income per share
(basic) $ 0.60 $ 0.61 $ 2.54 $ 2.01
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Weighted average shares
outstanding
(basic) 8,513 8,352 8,450 8,298
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Net income per share
(diluted) $ 0.58 $ 0.58 $ 2.44 $ 1.91
----------------------------------------------
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Weighted average shares
outstanding
(diluted) 8,839 8,825 8,825 8,763
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