Intrinsyc achieved Revenue of US $6.2 million (CDN $8.2 million) with EBITDA1 of US $473,865 (CDN $625,691)
VANCOUVER, British Columbia, Nov. 14, 2019 (GLOBE NEWSWIRE) — Intrinsyc Technologies Corporation (TSX: ITC and OTCQX: ISYRF) (“Intrinsyc” or the “Company”), a leading provider of edge computing solutions for the development of intelligent Internet of Things (“IoT”) products, today announced its financial results for the third quarter ended September 30, 2019. Intrinsyc achieved Revenue of US $6.2 million (CDN $8.2 million) with EBITDA of US $473,865 (CDN $625,691).
On October 31, the Company announced it entered into an agreement with Lantronix, Inc. (NASDAQ: LTRX) (“Lantronix”), a global provider of secure data access and management solutions for IoT assets, pursuant to which Lantronix will acquire 100% of Intrinsyc’s issued and outstanding common shares in a cash and share transaction valued at approximately US$27 million.
“I was pleased with the overall financial results achieved during the quarter, as well as operational performance in a number of key areas including: the improvement in hardware margin and order backlog, a significant increase in new production wins for our industry performance-leading edge AI computing modules, and continued product development and launches of advanced computing platforms,” stated Tracy Rees, Chief Executive Officer, Intrinsyc Technologies Corporation. “I believe we are well positioned to add value as part of a combined entity with Lantronix and that the combination has significant potential to unlock shareholder value through continued business momentum, with improvement in operational scale and other synergies.”
In addition to the achievement of excellent financial results in the quarter, the Company continued strong operational productivity, including:
- The Company achieved its highest ever number of new production wins with 8 in the quarter, bringing the total to 36 net active production wins. With these recent results, the number of production wins has nearly doubled in the past year. These production clients have excellent potential to provide future multi-year repeat revenue.
- Intrinsyc is currently developing a variety of next-generation intelligent IoT products, including robotics, drones, medical devices, video conferencing, intelligent cameras, in-flight entertainment, and more. We increased net design wins of companies developing their products or shipping commercial devices using the Company’s computing modules, increased from 71 to 73. With 36 net production wins, there are another 37 design wins with potential to enter future production which will significantly expand and diversify Intrinsyc’s repeatable revenue client base. The expanding client base is the foundation for future hardware product revenue growth.
- Intrinsyc develops and sells development kits, which contribute to our overall revenue, and they are also lead generators for our product development services and production-ready edge AI computing modules. We ship these products to over 500 customers in more than 50 countries on an annual basis. The Company began shipment of the third-generation Snapdragon™ Automotive Development Platform (“ADP”) based on the Qualcomm® Snapdragon™ SA8155P processor from Qualcomm® Technologies, Inc. (“QTI”). This platform provides OEMs and ecosystem partners with access to QTI’s high-performance automotive infotainment, advanced driver assist platform for developing, testing, optimizing and showcasing next-generation in-vehicle infotainment solutions. The launch of the Snapdragon 8155 Automotive Development kit during the quarter was a key contributor to our overall revenue and improved hardware margin in the quarter.
- One of Intrinsyc’s clients was highlighted by Qualcomm and Digital Trends as part of their “Tech for Change” initiative. Intrinsyc helped to develop life-changing electronic glasses designed for virtually impaired users to see the world around them, and for some, for the very first time. These devices are powered by Intrinsyc’s edge AI computing modules.
- Increased hardware gross margin due to the introduction of new higher margin products and increased economies of scale.
With the announcement of several hardware orders during the quarter, we increased our hardware backlog by 42% to US $7.5 million, at the end of the third quarter. The following were announcements regarding orders made during the quarter:
- Orders received for the Company’s Open-Q™ embedded computing modules valued at US $384,240 and included an initial stocking order for a new production client building medical devices. The Company also received orders from existing and new clients for product development services valued in aggregate at US $433,936.
- Received an order, that is valued at US $1,195,000. This initial stocking order is for the purchase of the Company’s Open-Q™ 835 edge AI computing modules to be used in a next-generation video collaboration product. Delivery is expected to occur in the fourth quarter of 2019.
- Received an order that is valued at US $513,000. This initial stocking order is for the purchase of the Company’s Open-Q™ 820 edge AI computing modules that will be used to enable commercial vehicle connectivity services provided by a Fortune 500 company. Delivery occurred in the third quarter of 2019.
- Received an order that is valued at US $1,120,000. This follow-on order is for the purchase of the Company’s Open-Q™ 835 edge AI computing modules to be used in a next-generation video collaboration product. Delivery is expected to occur in the first quarter of 2020.
- Received orders from multiple clients, that in aggregate are valued at US $1,263,000. These orders consist of US $1,002,000 for hardware and US $261,000 for product development services. Hardware and services will be delivered in the third quarter, ending September 30, 2019 and fourth quarter, ending December 31, 2019.
Three Month Comparative Results
The Company reported third quarter revenue of US $6.2 million (CDN $8.2 million), up 13% over the prior period of US $5.5 million (CDN $7.2 million) and 1% over the same period in the prior year of US $6.1 million (CDN $8.0 million).
Gross margin2 for the three months ended September 30, 2019 was 35%, which slightly higher than the gross margin in the prior period but lower than the same period in the prior year. EBITDA was as follows:
|Three months ended
September 30, 2019
| Three months ended
June 30, 2019
| Three months ended
September 30, 2018 (Restated)3
|Operating income (loss)||$292,072||$385,651||($47,412)||($63,423)||$382,522||$499,957|
|Add back: Other operating expenses||181,793||240,040||216,841||290,067||171,351||223,956|
The Company had net income of US $332,386 (CDN $359,844), and earnings per share of US $0.02 (CDN $0.02) compared to net income of US $66,247 (CDN $83,377), or US $0.00 (CDN $0.00) earnings per share in the prior quarter and net income of US $314,046 (CDN $405,838) or US $0,01 (CDN $0.02) earnings per share in the same period in the prior year.
Nine Month Comparative Results
The Company reported revenue of US $17.8 million (CDN $23.6 million), down 4% over the same period in the prior year of US$18.6 million (CDN$24.0 million). The decrease in revenue over the comparative periods was due primarily to decreased revenue from the sale of services.
Gross margin for the nine months ended September 30, 2019 was 34%, which was slightly lower than the 35% gross margin in the same period in the prior year. EBITDA was as follows:
|Nine months ended
September 30, 2019
| Nine months ended
September 30, 2018 (Restated)
|Add back: Other operating expenses||586,371||779,704||591,271||760,921|
The Company had net income of US $226,778 (CDN $300,320) or US $0.01 (CDN $0.01) earnings per share during the nine months ended September 30, 2019, compared to net income of US $582,601 (CDN $746,413) or US $0.03 (CDN $0.04) during the same period in the prior year.
Financial Position as at September 30, 2019
Working capital4 as of September 30, 2019 was US $10.4 million (CDN $13.1 million) inclusive of cash and short-term investments of US $3.6 million (CDN $5.0 million). This is compared to net working capital of US $10.3 million (CDN $14.1 million) as at December 31, 2018 inclusive of cash and short-term investments of US $6.0 million (CDN $8.1 million). The decrease in working capital was due primarily to shares repurchased by the Company under its normal course issuer bid (“NCIB”), which was subsequently terminated October 3, 2019, and the leasehold improvements pertaining to the opening of its new Taiwan office facility in May 2019 offset by the positive EBITDA generated by the Company during fiscal 2019 to date.
Financial Statements and Management Discussion & Analysis
Please see the unaudited condensed consolidated financial statements and related Management’s Discussion & Analysis (“MD&A”) for more details. The unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2019 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.
Financial information is reported in United States dollars and in accordance with International Financial Reporting Standards (“IFRS”).
Due to the proposed transaction with Lantronix, the Conference Call previously scheduled for November 14, 2019, will be cancelled.
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.
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, 2018. 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 provides comprehensive product development services, as well as the industry’s highest-performance edge computing modules, to enable rapid commercialization of intelligent Internet of Things (“IoT”) products. Intrinsyc has successfully delivered over 1,400 client projects including sophisticated consumer and industrial IoT products like: robotics, connected cameras, smart displays, augmented reality, smart buildings, wearables, in-vehicle infotainment, and many others. Intrinsyc’s Open-Q™ System on Modules incorporate the industry’s most advanced processor technology, and help OEMs to rapidly bring industry leading products, with rich functionality and high performance, to market. Intrinsyc is publicly traded (TSX: ITC and OTCQX: ISYRF) and is headquartered in Vancouver, BC, Canada; with additional product development centers in Taipei, Taiwan, and Bangalore, India.
For more information, please contact:
George W. Reznik, CPA-CA, CBV, CFE
Chief Financial Officer
Intrinsyc Technologies Corporation
|1 Non-IFRS measure that does not have a standardized meaning and may not be comparable to a similar measure disclosed by other issuers. The closest comparable IFRS financial measure is Operating Income (Loss). EBITDA referenced here relates to operating income (loss) less other operating expenses.
2 Gross Margin is a 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 herein relates to revenues less cost of sales.
3 These numbers have been restated to account for the impact of IFRS 16. Additional details on IFRS 16 are discussed in the Critical Accounting Policies and Estimates section of the MD&A and Note 3 to the Interim Condensed Consolidated Financial Statements.
4 Working Capital is a 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.