TORONTO, March 15 /CNW/ - Sirit Inc. ("Sirit") (TSX: SI), a leading provider of radio frequency identification ("RFID") technology, today reported its financial results for the fourth quarter and year ended December 31, 2006. All amounts are stated in Canadian Dollars unless otherwise noted.
Total revenue for 2006 reached $21.7 million representing Sirit's highest reported revenue in the Company's thirteen year history. Overall, revenue grew by over 30% compared to 2005 with increases experienced across all applications. Revenue from Automatic Vehicle Identification (AVI) applications grew by 33% reaching $16.8 million and Radio Frequency Solutions (RFS) revenue experienced a 29% growth rate reaching $4.9 million in 2006. Comparative results for 2005 were $12.6 million for AVI and $3.8 million for RFS.
"Sirit has successfully managed a very active 2006 with the completion of two acquisitions, a $12.6 million public offering and new product releases while focusing on revenue growth. These efforts have enabled the Company to attain its highest sales levels in its history," commented Anastasia Chodarcewicz, Chief Financial Officer, Sirit Inc. "Sirit is evolving into a position of strength within the RFID market. A solid financial position and strong portfolio of products will allow Sirit to focus on execution and continued growth in 2007."
Fourth Quarter Ended December 31, 2006
Sirit reported total revenue of $5.7 million for the fourth quarter ended December 31, 2006, its best quarter to date. AVI revenue was $4.3 million or 75% of total sales and RFS revenue reached $1.4 million or 25% of total sales. This reflects a 12% increase over the third quarter 2006 revenue of $5.1 million and a 34% increase over the $4.3 million reported in the fourth quarter of 2005. Increased demand for toll tags during the quarter, increased volumes from RFS customers as well as new Parking and Access Control (PACS) customers all contributed to the fourth quarter results.
Gross profit in the fourth quarter was impacted by a $0.4 million inventory write-down from a product rationalization effort. This involved eliminating duplicate product offerings resulting from the acquisitions, mandated changes to the metal composition of components (RoHS Directives) and market assessments culminating in certain products reaching end of life. Without this item, gross profit would have been 34.7% compared to 35.8% reported in the last quarter of 2005.
Total expenses for the fourth quarter were $3.8 million, including $0.4 million of termination costs. Operating expenses have decreased from the reported $5.2 million in the second quarter and $4.4 million in the third quarter of 2006 as integration of the acquisitions was completed in the fourth quarter. The full benefit of the integration efforts is anticipated to be realized in the first quarter of 2007.
Operating loss for the quarter was $2.2 million compared to a $1.2 million loss in the same period last year.
The Company spent $1.9 million in cash during the fourth quarter; however, this was offset by the receipt of $2.3 million (US$1.8 million) of proceeds from the sale of its investment in Medsite, Inc. As a result, Sirit closed the year with $9.4 million in cash.
Twelve Months Ended December 31, 2006
Total revenue for 2006 reached a record high of $21.7 million (US$19.1 million) compared to $16.4 million (US$13.6 million) in 2005. While 2005 was impacted by some one-time items, the growth achieved in 2006 exceeded the Company's historical best results. This was also significant in light of continued downward pressure on the US Dollar which lost another 6%, relative to the Canadian Dollar, in 2006, being the third consecutive year of negative foreign exchange impacts.
AVI revenue reached $16.8 million for 2006 compared to $12.6 million in 2005. This included $14.0 million from tolling related sales and $2.8 million from PACS sales. The overall growth was supported by a return to normal utilization rates of toll transponders, development revenue from the DSRC project and new PACS customers. As in 2005, Sirit has not lost a single toll transponder customer and has been the hardware provider of choice to several new toll road integration projects during the year.
RFS revenue reached $4.9 million compared to $3.8 million in 2005, representing a 29% annual growth rate. Revenue generated from products acquired from the acquisitions in April 2006, contributed to the growth.
The total gross profit for fiscal 2006 was 34.6%, excluding the previously discussed inventory impact, compared to 35.0% in 2005. Overall margins have been slightly impacted by price reductions in toll transponders during 2006.
Total operating expenses reached $16.3 million in 2006 compared to $12.6 million in 2005. Increased staff levels for over half the year, acquisition related integration costs and increased development efforts contributed to the increased expenditures in 2006 when compared to 2005.
The net operating loss for the year is $9.3 million compared to $6.8 million for fiscal 2005. This excludes the activities associated with the long-term investments both in 2005 and 2006. Net loss for the year is $9.0 million or $0.07 per share compared to $8.7 million or $0.09 per share in 2005. Total shares outstanding at December 31, 2006 are 145.5 million compared to 93.3 million at December 31, 2005.
Cash utilized in 2006 included $7.7 million from operating activities plus $2.7 million associated with the acquisitions. This was offset by a net $11.5 million received from the public offering plus $2.3 million received from the sale of Medsite, Inc. The Company started the year with $6.1 million in cash and ended the year with $9.4 million. Based on anticipated operating costs, the Company believes it has sufficient cash to fund operations into the foreseeable future.
"We are confident we have put in place very solid building blocks to be a key participant during the next stages in the evolution of the RFID market. We have the right people, a strong product portfolio and solid financial position from which to achieve growth across all applications in 2007 as well as increase shareholder value," stated Norbert Dawalibi, President and CEO, Sirit Inc.
Subsequent Event
On January 10, 2007 the Company announced the sale of its second long-term investment. Cash received from the sale was US$1.7 million, a gain of over 3 times the historical book value.
Conference Call and Webcast
Sirit will host a conference call to discuss the quarterly and year end results on Thursday March 15, 2007 at 10:00am EST. The call will be Webcast on the Internet and is accessible at www.sirit.com.
About Sirit Inc.
Sirit Inc. (TSX: SI) is a leading provider of Radio Frequency Identification (RFID) technology worldwide. Harnessing the power of Sirit's enabling-RFID technology, customers are able to more rapidly bring high quality RFID solutions to the market with reduced initial engineering costs. Sirit's products are built on more than 13 years of RF domain expertise addressing multiple frequencies (LF/HF/UHF), multiple protocols and are compliant with global standards. Sirit's broad portfolio of products and capabilities are easily customized to address new and traditional RFID market applications including Supply Chain & Logistics, Cashless Payment (including Electronic Tolling), Access Control, Automatic Vehicle Identification, Inventory Control & Management, Asset Tracking and Product Authentication. For more information, visit www.sirit.com.
Cautionary Note Regarding Forward Looking Statements
Safe Harbor Statement under the United States Private Securities Litigation Reform Act of 1995: Except for the statements of historical fact contained herein, the information presented constitutes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement of Sirit to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of risks and uncertainties impacting Sirit's business which are discussed in the section entitled "Description of the Business - Risks Factors" in Sirit's Annual Information Form dated March 16, 2006 as filed with the securities regulatory authorities in Canada via SEDAR. Although Sirit has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. Sirit does not undertake any obligation to update any forward-looking statements contained in this document as a result of new information, further events or otherwise.
"Sirit", the Sirit Design and "vision beyond sight" are all trademarks of Sirit Inc. All other names of actual companies and products mentioned herein may be the trademarks of their respective owners.
Sirit Inc.
Interim Consolidated Balance Sheets
(expressed in thousands of Canadian dollars)
Unaudited
December 31
2006 2005
--------- ---------
Assets
Current Assets
Cash and cash equivalents $ 9,397 $ 6,079
Accounts receivable 3,957 2,941
Inventory 2,997 2,020
Prepaids and deposits 348 108
--------- ---------
16,699 11,148
Long-term investments 849 3,182
Property and equipment 1,095 838
Intangible assets 1,734 370
Deferred development costs - 59
Goodwill 3,905 2,829
--------- ---------
$ 24,282 $ 18,426
--------- ---------
--------- ---------
Liabilities
Current Liabilities
Accounts payable and accrued liabilities $ 4,954 $ 3,526
Deferred revenue 800 815
Warranty obligations 298 290
--------- ---------
6,052 4,631
--------- ---------
Shareholders' Equity
Share capital 47,830 35,195
Contributed surplus 2,075 1,316
Deficit (31,675) (22,716)
--------- ---------
18,230 13,795
--------- ---------
$ 24,282 $ 18,426
--------- ---------
--------- ---------
Sirit Inc.
Interim Consolidated Statements of Operations
(expressed in thousands of Canadian dollars except per share amounts)
December 31
Unaudited
Three Months Ended Twelve Months Ended
2006 2005 2006 2005
--------- --------- --------- ---------
Revenue $ 5,709 $ 4,254 $ 21,715 $ 16,419
Cost of sales 4,144 2,731 14,624 10,680
--------- --------- --------- ---------
Gross profit 1,565 1,523 7,091 5,739
--------- --------- --------- ---------
Expenses
Selling, general and
administrative 1,933 1,664 9,130 7,713
Stock-based compensation 163 201 759 987
Development 1,473 704 5,517 3,185
Amortization 251 188 872 645
Foreign exchange loss (50) (18) 69 47
--------- --------- --------- ---------
3,770 2,739 16,347 12,577
--------- --------- --------- ---------
Operating loss (2,205) (1,216) (9,256) (6,838)
Write-down of long-term
investments - (1,109) - (2,009)
Other income 78 - 78 -
Loss on disposal of assets (34) - (34) -
Interest income, net 87 46 253 149
--------- --------- --------- ---------
Net loss for the period $ (2,074) $ (2,279) $ (8,959) $ (8,698)
Deficit, beginning of period (29,601) (20,437) (22,716) (14,018)
--------- --------- --------- ---------
Deficit, end of period $(31,675) $(22,716) $(31,675) $(22,716)
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic and diluted loss per
share $ (0.01) $ (0.02) $ (0.07) $ (0.09)
--------- --------- --------- ---------
--------- --------- --------- ---------
Basic and diluted weighted
average number of common
shares ('000s) 145,533 92,958 124,859 92,641
Sirit Inc.
Interim Consolidated Statements of Cash Flows
(expressed in thousands of Canadian dollars)
December 31
Unaudited
Three Months Ended Twelve Months Ended
2006 2005 2006 2005
--------- --------- --------- ---------
Cash provided by/(used in):
Operating Activities
Net loss for the period $ (2,074) $ (2,279) $ (8,959) $ (8,698)
Items not involving cash
and cash equivalents 448 1,498 1,665 3,641
--------- --------- --------- ---------
(1,626) (781) (7,294) (5,057)
Net change in non-cash
working capital items (246) (102) (387) 1,074
--------- --------- --------- ---------
(1,872) (883) (7,681) (3,983)
--------- --------- --------- ---------
Investing Activities
Additions to property and
equipment (8) (82) (282) (320)
Acquisitions, net of cash
acquired - - (2,667) -
Proceeds on sale of
long-term investment 2,333 - 2,333 -
--------- --------- --------- ---------
2,325 (82) (616) (320)
--------- --------- --------- ---------
Financing Activities
Public offering of common
shares, net of associated
expenses (17) - 11,506 -
Issuance of common shares
upon exercise of stock
options - 51 109 361
--------- --------- --------- ---------
(17) 51 11,615 361
--------- --------- --------- ---------
Exchange rate impact on cash
and cash equivalents - (21) - -
--------- --------- --------- ---------
Increase/(Decrease) in cash
and cash equivalents 436 (935) 3,318 (3,942)
Cash and cash equivalents,
beginning of period 8,961 7,014 6,079 10,021
--------- --------- --------- ---------
Cash and cash equivalents,
end of period $ 9,397 $ 6,079 $ 9,397 $ 6,079
--------- --------- --------- ---------
--------- --------- --------- ---------
Cash and cash equivalents
consist of:
Cash $ 1,277 $ 251 $ 1,277 $ 251
Short-term commercial paper 8,120 5,828 8,120 5,828
--------- --------- --------- ---------
$ 9,397 $ 6,079 $ 9,397 $ 6,079
--------- --------- --------- ---------
--------- --------- --------- ---------