Intrinsyc Reports Fourth Sequential Quarter of Revenue Growth
Intrinsyc Reports Fourth Sequential Quarter of Revenue Growth
Quarterly revenue increased 6% from previous quarter and 19% from previous year
Vancouver, BC – November 8, 2017 –– Intrinsyc Technologies Corporation (TSX: ITC and OTC: ISYRF) (“Intrinsyc” or the “Company”), a leading provider of solutions for the development of embedded and IoT products, today announced its financial results for the third quarter of fiscal 2017 ended September 30, 2017. Revenue was US$4.8 million (CDN$6.0 million) in the third quarter of fiscal 2017 with Adjusted EBITDA of US$64,115 (CDN$80,321), and net income for the period being US$93,006 (CDN$112,859).
“The Company continued its steady progress with our fourth consecutive quarter of revenue growth and we followed up last quarter’s strong order booking with another excellent quarter; positioning the Company for accelerated revenue growth in the fourth quarter,” stated Tracy Rees, Chief Executive Officer, Intrinsyc Technologies Corporation. “As a reminder, in the second quarter, we received an order valued at $2,990,000 for memory components, which are planned for use in building computing modules for a Global 500 company. Revenue from the sale of memory components will be in approximately even installments in Q4 of 2017, and Q1 and Q2 of 2018. The Company is also garnering strong interest from recently introduced products and has additional products in the pipeline that will serve as a catalyst for growth,” added Rees.
Quarterly Business Highlights
- The Company increased design and production wins for Open-Q™ computing modules from 42 to 44 and 18 to 19, respectively, during the quarter. Design and production wins are important metrics to track progress in building Intrinsyc’s business with scalable repeat revenue.
- Received an order, from an existing client, that is valued at US$916,000. The non-cancellable order incorporates memory purchased by the client under a previous order valued at US$100,000, resulting in a net value of US$816,000. This order is expected to ship in the fourth quarter.
- Received orders that are in aggregate valued at US$623,000. One order is from a medical device company that plans to use a next-generation design of the Company’s Open-Q™ embedded computing modules, currently in development; and the second order is for the development of a custom designed embedded computing module. The second order includes a provision for a per-unit royalty fee as the client ships their product. Product development services are expected to be completed in 2017.
- Ken Tough, Director of Engineering Services at Intrinsyc, wrote a blog: https://www.intrinsyc.com/future-wearables-open-q-2100/, “The Future of Wearables” In this blog Ken addresses the technical challenges in the wearables market and how Intrinsyc’s Open-Q™ 2100 platform, is the ideal platform for small form factor wearables; such as smartwatches, fitness trackers, elderly and kid trackers, and more. The wearable computing market is forecasted to be worth over $34 billion by 2020, by CCS Insight in their February 2016 “Global Wearable Forecast.”
- Intrinsyc launched its first development kit and System on Module (“SOM”), the Open-Q™ 2100, to target the wearable computing market in the second quarter. By July, the Company received its first design win for use in a pet tracking device. Intrinsyc expects to start shipping modules for commercial products beginning in the first quarter, 2018.
- Announced the availability of the Open-Q™ 626 System on Module (“SOM”) and Development Kit and signed its first agreement for product development services based on this module. The Open-Q™ 626 is ideal for connected camera devices and the trend toward putting more computing power in devices near the edges of networks, like sensor modules and gateways. Higher processing power in IoT devices is less expensive because filtering and analytics where the data is collected can reduce communications costs, and it enables faster decisions, rather than waiting for computations and analytics to take place in the cloud.
- Received approval from the TSX regarding the notice filed by the Company to establish a normal course issuer bid (“NCIB”) program to purchase, for cancellation, up to 500,000 common shares or approximately 2.4% of Intrinsyc’s issued and outstanding common shares, as at September 21, 2017. The NCIB program commenced on October 4, 2017 and will terminate on October 3, 2018, or on such earlier date as the Company may complete its purchases pursuant to a Notice of Intention filed with the TSX. To date, the Company has purchased and canceled 90,000 common shares for CDN$146,528.
Three Month Comparative Results
The Company reported revenue of US$4.8 million (CDN$6.0 million) which increased by 6% over the prior quarter of US$4.6 million (CDN$6.2 million) and by 19% over the same period in the prior year of US$4.1 million (CDN$5.3 million). The increase in revenue over the comparable periods was due to increased revenues attributable to the Company’s Embedded Computing Hardware offset by a decrease in its Services and Software businesses.
The Company had net income of US$93,006 (CDN$112,859) during the three months ended September 30, 2017, compared to a net loss of US$22,432 (CDN$31,905) for the prior quarter and net income of US$362,048 (CDN$496,711) in the same period in the prior year.
Gross margin in the third quarter of fiscal 2017 was 30% which was lower than the 33% gross margin in the prior quarter and gross margin of 43% in the same period in the prior year. Decrease in gross margin over the comparable periods was due to the change in revenue mix, which saw a significant increase in revenues from the Company’s Embedded Computing Hardware business which has lower gross margin and decrease in engineering services revenues. Adjusted EBITDA was as follows:
|Three months ended September 30, 2017||Three months ended June 30, 2017||Three months ended September 30, 2016|
|Operating income (loss)||US$
|Add: revenue recognized as interest income as per IFRS||33,750||42,282||33,750||45,390||33,750||44,030|
|Add back: Other operating expenses||168,146||210,654||101,457||136,451||108,245||141,216|
|Adjusted EBITDA||$64,115||$80,322||$84,268||$113,333||$ 508,569||$663,478|
Nine Month Comparative Results
The Company reported revenue of US$13.9 million (CDN$18.1 million), up 5% over the same period in the prior year of US$13.2 million (CDN$17.4 million). The increase in revenue is attributable to increased revenues attributable to the Company’s Embedded Computing offset by a decrease in its Services and Software businesses.
The Company had net income of US$157,540 ($CDN196,610) during the nine months ended September 30, 2017, compared to net income of US$1,452,654 (CDN$1,905,447) during the same period in the prior year.
Gross margin for the nine months ended September 30, 2017, was 33%, which was lower than the 41% gross margin in the same period in the prior year. The decrease in margin was due to decreased revenue from the sale of product development engineering services, offset by an increase in sales of hardware products. Adjusted EBITDA was as follows:
|Nine months ended
September 30, 2017
| Nine months ended
September 30, 2016
|Operating income (loss)|| US$
|Add: revenue recognized as interest income as per IFRS||101,250||132,351||101,250||133,826|
|Add back: Other operating expenses||334,132||432,527||344,122||455,111|
|Adjusted EBITDA||$ 251,313||$ 329,912||$ 1,514,999||$ 1,998,780|
Financial Position as at September 30, 2017
Working capital as of September 30, 2017 was US$12.1 million (CDN$15.1 million) inclusive of cash and short-term investments of US$7.7 million (CDN$9.6 million). This is compared to net working capital of US$11.7 million (CDN$15.7 Million) as of December 31, 2016 inclusive of cash and short-term investments of US$7.6 million (CDN$10.1 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 audited consolidated financial statements for the three and nine months ended September 30, 2017 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.
The Company will hold a conference call to discuss its fiscal year 2017 third quarter financial results at 5:00 p.m. Eastern Time (2:00 p.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 1-877-340-8005, and internationally by dialing 1-416-641-6110 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 (https://www.intrinsyc.com/company/investors/). Analysts and investors are invited to participate on the call. Questions may be submitted to firstname.lastname@example.org prior to the call.
Financial information is reported in United States dollars and in accordance with International Financial Reporting Standards (“IFRS”).
The following and preceding discussion of financial results includes reference to Gross Margin, Adjusted 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. Adjusted EBITDA is defined as operating income (loss) inclusive of revenue reclassified as interest income (as per IFRS) 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.
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 involves 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, 2016. 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 Corporation is a product development company that provides comprehensive and tailored solutions that enable the development and production of next-generation embedded and IoT 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 OTC: ISYRF) and is headquartered in Vancouver, BC, Canada.
For more information, please contact:
George W. Reznik, CPA-CA, CBV, CFE
Chief Financial Officer
Intrinsyc Technologies Corporation
 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. Adjusted EBITDA referenced here relates to operating income (loss) inclusive of revenue reclassified as interest income (as per IFRS) less other operating expenses.
 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.
 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.