QuStream Corporation
TSX VENTURE : QVC

QuStream Corporation

March 26, 2007 18:36 ET

QuStream Corporation Announces Fourth Quarter and Full Year Fiscal 2006 Results

TORONTO, ONTARIO--(CCNMatthews - March 26, 2007) - QuStream Corporation ("QuStream") (TSX VENTURE:QVC) announces its fourth quarter and full year fiscal 2006 results.

The following chart highlights our revenue and backlog (note 1) performance in United States ("US") dollars for the three and twelve months ended December 31, 2006:



Revenue and backlog (In US$000s):
---------------------------------

Q4 Q4 Increase Q4 YTD Q4 YTD Increase
Fiscal 06 Fiscal 05 (Decrease) Fiscal 06 Fiscal 05 (Decrease)

Government 733 1,217 -40% 5,250 9,640 -46%
Commercial 5,288 3,024 75% 14,277 8,848 61%
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6,021 4,241 42% 19,527 18,488 6%
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Backlog 2,330 848
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In United States ("US") dollars, revenues were US$6.0 million for the fourth quarter of fiscal 2006 compared to US$4.2 million in the same period last year. Revenues for the twelve month period ended December 31, 2006 were US$19.5 million compared to US$18.5 million for the same period last year.

Backlog (note 1) at the end of fiscal 2006 was US$2.3 million, compared to US$0.8 million at the end of fiscal 2005.

Including the effects of translation to the Canadian dollar, sales for the fourth quarter of fiscal 2006 were $6.9 million, compared to $5.0 million in the same period last year. Sales for the twelve month period ended December 31, 2006 were $22.1 million compared to $22.4 million for the same period last year.

The Company has recorded commercial revenue of $6.1 million in the quarter, up 74% from the same period last year. Commercial revenues for fiscal 2006 totaled $16.2 million, up 51% from the $10.7 million generated last year. Government revenues totaled $0.8 million for the fourth quarter down 43% from the $1.4 million recorded in the same period last year. Government revenues were $5.9 million for 2006, down 50% from the $11.8 million generated last year.

The following chart highlights our bookings performance for the three and twelve months ended December 31:



Bookings performance (In US$000s):

Q4 Q4 Increase Q4 YTD Q4 YTD Increase
Fiscal 06 Fiscal 05 (Decrease) Fiscal 06 Fiscal 05 (Decrease)

Government 922 1,757 -48% 5,509 7,632 -28%
Commercial 2,561 2,392 7% 15,639 8,623 81%
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3,483 4,149 -16% 21,148 16,255 30%
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Bookings totaled US$3.5 million in the fourth quarter of fiscal 2006, down 16% from the same period last year. The Company has booked orders totaling US$21.1 million during 2006, this compares to US$16.3 million last year, an increase of 30%.

Commercial bookings were US$2.6 million in the fourth quarter, and US$15.6 million for fiscal 2006. This is an increase of 7% and 81% respectively over the US$2.4 million and US$8.6 million done in the previous year. US Government bookings were US$0.9 million in the fourth quarter, and US$5.5 million for 2006. This represents a decrease of 48% and 28% respectively compared to the US$1.8 million and US$7.6 million done last year.

The following chart highlights the business mix of our bookings:



The following chart highlights the business mix of our bookings:

Business mix (In US$000s):

Q4 Q4 Q4 YTD Q4 YTD
Fiscal 06 Mix Fiscal 05 Mix Fiscal 06 Mix Fiscal 05 Mix

Government 922 26% 1,757 42% 5,509 26% 7,632 47%
Commercial 2,561 74% 2,392 58% 15,639 74% 8,623 53%
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3,483 100% 4,149 100% 21,148 100% 16,255 100%
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We have previously stated that we are focusing our efforts on increasing the commercial aspect of our business. While the significant decrease in government revenues during the first half of the year has exaggerated the shift, we believe that our results indicate a successful penetration of our products in the commercial marketplace.

Gross margin for the fourth quarter was 57% compared to 57% in the same period last year. Gross margin for 2006 was 55% compared to 49% last year.

Net income for the fourth quarter of fiscal 2006 was $1.3 million or $0.06 per share compared with $0.1 million or $0.01 per share for the same period last year. Net income for 2006 was $0.4 million or $0.02 per share, compared with $0.1 million or $0.01 per share for the same period last year.

Net income includes a one time gain on the settlement and windup of the Company's defined benefit pension plan. This amount is $1.2 million pre tax or $0.7 million after tax.

"I am pleased with the level of commercial bookings that were generated this year" said Frederick L. Godard, Chairman, President and Chief Executive Officer of QuStream. "We set out to become a more dominant force in the mobile production market and we achieved that goal as evidenced by the significant amount of business we won in this area and the new partnerships we have built with our customers. For fiscal 2007 we have turned our attention to winning a larger share of business from fixed facility broadcasters. We plan on introducing several new products that will assist with this push and plan on aggressively pursuing profitable revenue growth. I am excited about the opportunities ahead of us and look forward to a rewarding year."

The Company has filed its audited Annual Financial Statements and Management's Discussion and Analysis on SEDAR. Please refer to these documents in connection with this press release.

The Company will be holding a teleconference on Wednesday March 27, 2007 at 5pm to discuss the fourth quarter and year-end results. Conference call information will be distributed in a separate press release.

Note 1:

The Company uses terms such as bookings, shipments and backlog. These terms are not defined by generally accepted accounting principles (GAAP). Our usage of these terms may vary from the usage adopted by other companies. We believe that the combination of bookings (purchase orders received by the company), shipments (orders shipped by the company and invoiced) and closing backlog (opening backlog, plus bookings less shipments) provides a useful indictor for determining how our products are being received by the market and the economic health of the market as it relates to demand for our products. Closing backlog is not a guarantee of future revenues and provides no information about the timing on which future revenue may be recorded. We report our bookings, shipments and backlog in US dollars to reflect the underlying currency of the majority of such contracts and, therefore, reduce the volatility that would result from converting the measure to Canadian dollars.

Forward-Looking Statements

The statements made in this press release that are not historical facts contain forward-looking information that involves risk and uncertainties. All statements, other than statements of historical facts, which address QuStream's expectations, should be considered forward-looking statements. Such statements are based on management's exercise of business judgment as well as assumptions made by and information currently available to management. When used in this document, the words "may", "will", "anticipate", "believe", "estimate", "expect", "intend" and words of similar import, are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statements reflect our current view of future events and are subject to certain risks and uncertainties as contained in the Company's filings with Canadian securities regulatory authorities, which in relation to this press release include, but are not limited to, our expected fiscal 2006 revenue growth rate of at least 25%, our expected future design wins, and our expected market share across various customers and product segments. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. We undertake no obligation, and do not intend, to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof, or to reflect the occurrence of any unanticipated events. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize.



QuStream Corporation
Condensed Consolidated Balance Sheets
(In thousands of Canadian dollars)
Unaudited

December 31, December 31,
2006 2005

Assets

Current assets:
Cash and cash equivalents $ 6,965 $ 2,510
Short term investments 434 -
Accounts receivable 5,599 3,900
Inventories 6,012 4,690
Future income taxes 709 131
Prepaid expenses & other current assets 440 427
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20,159 11,658

Property, plant and equipment, net 2,166 1,742
Goodwill 450 866
Intangible assets, net 4,099 6,159
Future income taxes 291 565
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$ 27,165 $ 20,990
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Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable $ 1,544 $ 1,840
Accrued liabilities 2,459 2,388
Deferred revenue 55 -
Warranty reserve 451 680
Income taxes payable 496 -
Future income taxes 245 267
Current portion of obligations under
capital lease 33 14
Current portion of notes payable 3,227 227
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8,510 5,416

Future income taxes 529 1,226
Notes payable, net of current portion - 3,206
Accrued pension obligation - 2,794
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9,039 12,642
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Shareholders' equity:
Share capital 17,040 8,367
Retained earnings (deficit) 685 251
Contributed surplus 756 162
Cumulative translation account (355) (432)
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18,126 8,348

Commitments and contingencies

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$ 27,165 $ 20,990
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QuStream Corporation
Condensed Consolidated Statements of Earnings
(In thousands of Canadian dollars,
except share and per share amounts)
Unaudited

Three months Three months Twelve months Twelve months
ended ended ended ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005

Revenues $ 6,916 $ 4,952 $ 22,131 $ 22,407
Cost of goods sold 2,984 2,154 9,882 11,384
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Gross profit 3,932 2,798 12,249 11,023
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Operating expenses:
Research and development 957 852 3,948 2,807
Selling and marketing 1,261 1,003 4,882 4,733
General and
administrative 633 534 2,721 2,196
Amortization of
intangibles 149 241 871 830
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Total operating expenses 3,000 2,630 12,422 10,566
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Earnings (loss) from
operations before the
following 932 168 (173) 457
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Other income (expense):
Interest income 72 33 215 79
Interest expense -
notes payable (134) (74) (434) (310)
Interest expense -
capital lease (5) (1) (16) (4)
Foreign exchange gain (loss) 104 9 48 3
Other 1,220 - 1,220 (1)
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1,257 (33) 1,033 (233)
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Earnings (loss) from
operations before
income taxes 2,189 135 860 224
Provision for (recovery
of) income taxes 877 40 426 112
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Net earnings (loss) $ 1,312 $ 95 $ 434 $ 112
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Earnings (loss)
per share:
Basic $ 0.06 $ 0.01 $ 0.02 $ 0.01
Diluted $ 0.06 $ 0.00 $ 0.02 $ 0.01

Weighted average
number of shares
outstanding (000s):
Basic 23,477 19,220 22,004 17,796
Diluted 24,012 19,752 22,626 18,272


QuStream Corporation
Condensed Consolidated Statements
of Retained Earnings
(In thousands of
Canadian dollars)
Unaudited

December 31, December 31,
2006 2005
Retained earnings, beginning of period $ 251 $ 139
Net earnings (loss) 434 112
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Retained earnings (deficit), end of period $ 685 $ 251
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QuStream Corporation
Condensed Consolidated Statements of Cash Flows
(In thousands of Canadian dollars)
Unaudited

Three months Three months Twelve months Twelve months
ended ended ended ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005

Cash flows provided
by (used in):

Operating activities:
Net earnings (loss)
for the period $ 1,312 $ 95 $ 434 $ 112
Add (deduct) items
not affecting cash:
Depreciation and
amortization of
property plant and
equipment 131 104 561 451
Amortization of
intangible assets 131 214 871 830
Stock-based
compensation 32 22 138 86
Future income taxes 351 (228) (93) (265)
Loss on disposal of
capital assets - 6 - 11
Gain on settlement
of pension plan (1,220) - (1,220) -
Net change in
non-cash working
capital balances
related to operations (684) (1,244) (3,966) (1,619)
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Cash flows (used in)
provided by
operating activities 53 (1,031) (3,275) (394)
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Investing activities:

Purchase of property,
plant and equipment (295) (85) (718) (768)
Purchase of short term
investments (434) - (434) -
Acquisitions, net of cash - (1,654) 54 (1,654)
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Cash flows provided by
(used in)investing
activities (729) (1,739) (1,098) (2,422)
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Financing activities:
Capital lease payments (28) (4) (85) (26)
Issuance of common shares
in connection with Maklyn
reverse takeover, net of
issuance costs - - - 1,365
Repayment of notes payable (51) - (205) -
Issuance of common shares,
net of issuance costs (2) 100 9,129 339
Exercise of options for cash - 8 - 79
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Cash flows provided by
(used in) financing
activities (81) 104 8,839 1,757
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Effect of exchange rate
changes on cash 14 6 (11) (127)
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Increase (decrease)
in cash & cash equivalents (743) (2,660) 4,455 (1,186)

Cash & cash equivalents,
beginning of period 7,708 5,170 2,510 3,696

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Cash & cash equivalents,
end of period $ 6,965 $ 2,510 $ 6,965 $ 2,510
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Supplementary cash
flow information:
Taxes paid - 47 - 47
Property, plant and
equipment acquired
by capital lease - - 94 -
Interest paid 79 302 318 304
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The TSX Venture Exchange Inc. has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • QuStream Investor Contact:
    Frederick L. Godard
    Chairman, President and CEO
    (416) 385-2323 x 200
    Email: godard@qustream.com