VANCOUVER, BC–(Marketwired – March 08, 2017) – Intrinsyc Technologies Corporation (TSX: ITC) (OTC: ISYRF) (“Intrinsyc” or the “Company”), a leading provider of solutions for the development of intelligent connected devices, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2016. Intrinsyc achieved revenue growth of 7%, with revenue of US$4.3 million (CDN$5.7 million), net income of US$210,128 (CDN$327,171), and earnings per share of US$0.01 (CDN$0.02) in the three months ended December 31, 2016 over the same period in the prior year.
Increases in Embedded Computing Hardware revenue from the Company’s expanding client base led to revenue growth over the same period in the prior year, and annually. Revenue was US$4.3 million (CDN$5.7 million) which was an increase from US$4.0 million (CDN$5.3 million) in the fourth quarter of fiscal 2015. Fiscal 2016 revenue was US$17.5 million (CDN$ $23.1 million), which was an increase of 39% over the prior year. Net income for Fiscal 2016 was US$1.7 million (CDN$2.2 million), with earnings per share of US$0.08 (CDN$0.11).
“During the fourth quarter and overall in Fiscal 2016, we made strong progress in increasing revenue from Intrinsyc’s Open-Q™ computing modules, as existing customer’s products mature in the market, as well as in gaining new design wins and production clients,” stated Tracy Rees, President and Chief Executive Officer, Intrinsyc. “The Company increased design and production wins for Open-Q™ computing modules from 33 to 36 and 8 to 11, respectively, during the quarter. This contributed to a 44% increase in hardware revenue compared to the previous and year ago period. The increase in hardware revenue from production clients is an important measure of our progress as the company recently made a strategic shift to add products with repeat revenue potential to our existing non-recurring engineering services business. Adjusted EBITDA1 performance in the fourth quarter was negatively impacted by a combination of increased labor costs caused by the strengthening in the value of the Canadian dollar, additional costs to achieve long term client satisfaction on certain fixed-fee client projects and the reallocation of engineering resources to R&D development efforts to provide for the rapid advancement of several new computing platforms.”
Quarterly Business Highlights
- The Company announced that the subordinated, secured promissory note, valued at US$1.5 million, has been further amended to extend the maturity date from December 30, 2016 to March 30, 2017. In consideration for the extension Intrinsyc will receive 30,000 warrants convertible into Class A common shares in Stream TV Networks, Inc. on a 1 for 1 basis for a period of up to 5 years. The note was further amended on February 2, 2017 to extend the maturity date to February 1, 2018. Intrinsyc also received 120,000 warrants convertible into Class A common shares in Stream TV Networks Inc. on a 1 for 1 basis for a period of up to 5 years. In addition, Stream TV committed to acquire a minimum of US$2,000,000 in Intrinsyc products, services, and royalties to be purchased or generated between February 1, 2017 and February 1, 2018.
- Signed development and supply agreement with innovative IoT health provider, Knit Health, Inc.
- Received a follow-on order from an existing client valued at $572,500. Combined with two previous orders received over the last 60 days, the aggregate value exceeds $1.2 million. Delivery of the Open-Q™ embedded computing modules occurred in the fourth quarter of 2016, and first quarter of 2017.
- Signed an agreement with a new client valued at US$447,000 for Intrinsyc’s Open-Q™ 410 System on Module (“SOM”) and is expected to launch in the second half of 2017.
- Received orders from two new clients for Intrinsyc’s Open-Q™ 410 SOM valued at US$76,800, and also signed a product development services agreement with a new client valued at US$327,525, and an extension of a services agreement with an existing client valued at US$374,035. The orders began shipping in early 2017. The product development services agreements covers a range of product management and software development services to be performed over the next year.
- Received an initial order from Intrinsyc’s distribution partner for a new client for Intrinsyc’s Open-Q™ 410 SOM valued at US$66,000. The production order will ship during the first half of 2017. Intrinsyc also signed a product development services agreement with an existing client valued at $240,000, to be delivered in the first quarter of 2017.
- Introduced of the Company’s next generation Open‐Q™ 820 µSOM (micro) and its companion Open‐Q™ 820 µSOM Development Kit. Intrinsyc’s 820 µSOM is an ultra-small form-factor commercially available SOM based on the 64-bit Qualcomm®Snapdragon™ 820 processor, a product of Qualcomm Technologies, Inc., a subsidiary of Qualcomm Incorporated.
Financial Highlights
Three Month Comparative Results
The Company reported revenue of US$4.3 million (CDN$5.7 million), up 7% over the same period in the prior year of US$4.0 million (CDN$5.3 million). The increase in revenue over the same period in the prior year was due primarily to increased revenue from the sale of hardware products.
The Company had net income of US$210,128 (CDN$327,171) in the three months ended December 31, 2016 compared to net income of US$805,347 (CDN$1,110,513) in the same period in the prior year.
Gross margin2 in the fourth quarter of fiscal 2016 was 36%, which was lower than the 49% gross margin in the same period in the prior year and 43% in the previous second quarter of fiscal 2016. Decrease in gross margin over the same period in the prior year was due to the change in revenue mix, which saw a significant increase in revenues from the Company’s Embedded Computing Hardware business which has a much lower gross margin and decrease in engineering services revenues. As well, gross margins in the Company’s engineering services segment decreased due to increased labor costs due to the strengthening in the value of the Canadian dollar against the US dollar and higher cost on a couple of fixed-fee projects. Adjusted EBITDA was as follows:
| Three months ended December 31, 2016 |
Three months ended December 31, 2015 |
|||||||||
| Operating income | US$ 252,203 | CDN$ 336,541 | US$ 814,767 | CDN$ 1,062,940 | ||||||
| Add: revenue recognized as interest income as per IFRS | 33,750 | 45,036 | 33,750 | 45,063 | ||||||
| Add back: Other operating expenses | (39,780 | ) | (53,082 | ) | 116,677 | 152,221 | ||||
| Adjusted EBITDA | US$ 246,173 | CDN$ 328,495 | US$ 965,194 | CDN$ 1,260,224 | ||||||
Annual Comparative Results
The Company reported revenue of US$17.5 million (CDN$23.1 million), up 39% over the same period in the prior year of US$12.5 million (CDN$16.0 million). The increase in revenue was due to increased revenue from the sale of product development engineering services, as well as hardware products.
The Company had net income of US$1,662,782 (CDN$2,232,617) in the twelve months ended December 31, 2016, compared to net income of US$722,773 (CDN$1,000,312) in the same period in the prior year.
Gross margin for the twelve months ended December 31, 2016 was 39%, which was lower than the 44% gross margin in the same period in the prior year. Adjusted EBITDA was as follows:
| Twelve months ended December 31, 2016 |
Twelve months ended December 31, 2015 |
|||||||
| Operating income | US$ 1,321,830 | CDN$ 1,746,385 | US$ 1,193,951 | CDN$ 1,546,125 | ||||
| Add: revenue recognized as interest income as per IFRS | 135,000 | 178,862 | 135,000 | 172,614 | ||||
| Add back: Other operating expenses | 304,342 | 402,030 | 373,952 | 475,550 | ||||
| Adjusted EBITDA | US$ 1,761,172 | CDN$ 2,327,277 | US$ 1,702,903 | CDN$ 2,194,289 | ||||
Financial Position as at December 31, 2016
Working capital3 as of December 31, 2016 was US$11.7 million (CDN$15.7 million) inclusive of cash and short term investments of US$7.6 million (CDN$10.1 million). This is compared to net working capital of US$9.8 million (CDN$13.6 Million) as of December 31, 2015 inclusive of cash and short-term investments of US$7.0 million (CDN$9.7 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 months and year ended December 31, 2016 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.
Conference call
The Company will hold a conference call to discuss its fiscal fourth quarter and full year 2016 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 (http://www.intrinsyc.com/company/investors/). Analysts and investors are invited to participate on the call. Questions may be submitted to invest@intrinsyc.com prior to the call.
Financial information is reported in United States dollars and in accordance with International Financial Reporting Standards (“IFRS”).
Non-IFRS Measures
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.
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; 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) (OTC: ISYRF) and is headquartered in Vancouver, BC, Canada.
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 closet comparable IFRS financial measure is Operating Income (Loss). Adjusted EBITDA referenced here relates to operating income (loss) inclusive of revenue reclassified as interest income (as per IFRS) less other operating expenses.
2 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.
3 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.
For more information, please contact:
George W. Reznik, CPA-CA, CBV, CFE
Chief Financial Officer
Intrinsyc Technologies Corporation
Email: greznik@intrinsyc.com
Phone: +1-604-678-3734