AirIQ Inc V.IQ

Q2 Financials...

[billbarilko]

Well here they are...I think the mkt is going to hammer these guys today. Any opinions from the longs out there? AirIQ Announces Second Quarter Results, Surpasses 184,000 Subscribers 8/12/2005 TORONTO, ONTARIO, Aug 12, 2005 (CCNMatthews via COMTEX) -- 276% Increase in Year over Year Revenue AirIQ Inc. (TSX:IQ), a leader in the Telematics industry, reports results for the second quarter ended June 30, 2005. Financial Highlights for the quarter: - Expense to revenue ratio declined to 50.9% from 102.9% year over year - Total subscribers grew to over 184,000, representing a year over year increase of 426% - Revenue increased 276% to $10.1 million year over year - Gross profit improved 307% year over year to $4.2 million The improved results contributed to a significant improvement in the reduction of losses before other expenses and taxes (often described in terms of EBITDA). As a recurring revenue business, the key measures of the Company's progress relate to various trajectories, or trends. The Company's strategy is to aggressively acquire new subscribers and service revenues from a relatively fixed and scalable infrastructure. Technology Investment AirIQ is well positioned to become one of the global leaders in the Telematics industry. To achieve this, the Company annually invests approximately $3 million in technology initiatives beyond what is required for current operations. This investment does not directly contribute to revenues during the period the expenses are incurred; rather it advances the abilities of the technology and resulting service offerings in the future. "In order to take a strategic leadership position in the world, we are blessed with a highly specialized team that perhaps is the most capable in our field of expertise," explains Donald Simmonds, President and CEO of AirIQ. The value of AirIQ's technology investment can be demonstrated by several noteworthy endeavours: - The completion of the Company's consumer vehicle recovery and protection system. - The previously announced agreement to supply Directed Electronics the end-to-end consumer Telematics system for four of their prominent brands including Viper(R), Clifford(R), Python(R) and Automate(R). - The creation of a GSM solution that will enable access to international markets. - The development of a personal tracking device. Revenues Increased AirIQ reported revenue for the second quarter of $10.1 million, an increase of 276% compared to $2.7 million for the period ended June 30, 2004. Revenue for the period was 3.4% higher than the previous three months ended March 31, 2005. For the first six months of 2005, revenue of $19.8 million was a 298% increase from the same period in 2004. The increase in revenues resulted from continuing net additions to the Company's subscriber base and from the acquisition of the Aircept and Boatracs businesses, which occurred during June and October of 2004. "In the second quarter of 2005 we continued to build revenue and subscriber growth in what is historically a slower period for our industry," says Donald Simmonds, President and CEO of AirIQ. "Additionally, two specific challenges affected subscriber additions; a service provider disruption in Mexico and financial difficulties with a large private brand client". Gross Profit Improved Gross profit for the second quarter of 2005 was $4.2 million, an increase of 307% compared to gross profit of $1.0 million in the same period in 2004. As a percentage of revenues, gross profit improved to 42.2% from 38.9% for the second quarter of 2004, and management expects further improvements can be achieved as the Company's cost reduction strategy progresses. Expenses Decreased Expenses for the second quarter were $5.1 million, compared to $5.3 million for the previous quarter ended March 31, 2005. Expenses as a percentage of revenues were 50.9% in the second quarter, compared to 102.9% in the same quarter in 2005 and 55.1% for the quarter ended March 31, 2005. This decrease reflects improvements in operating efficiencies and execution of the Company's integration strategies related to the acquisition of the Aircept and Boatracs businesses. "Our ability to manage expenses during the quarter while adding subscribers and building revenue further demonstrates the validity of our business model," says Mark Kohler, Chief Financial Officer of AirIQ. Net Loss per Share The net loss for the three months ended June 30, 2005, was $2.6 million, or $0.02 per share, an improvement from the $2.9 million net loss in the first quarter of 2005. This compares to a net loss of $2.4 million or $0.03 per share for the three months ended June 30, 2004. The year-over-year increase was due primarily to a non-cash provision for income taxes of $204,000, amortization of intangible assets of $590,000 resulting from the businesses acquired in 2004, and the remaining unamortized accreted notional interest expensed in the amount of approximately $250,000 related to the term loan paid back on May 2, 2005. Otherwise, the Company marked a significant year-over-year improvement in net loss. The Company expects to continue to incur operating losses at steadily reducing levels in the near future as its revenue base continues to grow. Liquidity and Capital Resources As at June 30, 2005, the Company had cash and cash equivalents of $3.9 million and working capital of approximately $3.0 million. On April 25, 2005, the Company entered into a $10,000,000 364 day non-revolving credit facility with a Canadian chartered bank. The funds available under this facility will be used for corporate purposes and a portion, as described below, was used to repay all remaining amounts owing under the Company's secured term loan debts. On May 2, 2005, the Company issued 5,580,100 common shares from treasury in a private placement for aggregate proceeds of $2,982,508. Simultaneously with the private placement subscription, the Company drew approximately $2 million from the credit facility. The funds from the credit facility, together with the common share subscription proceeds, were used to repay all amounts owing under the Company's secured term loan debts (bearing interest at 12% per annum), totalling approximately $4,980,000. The subscription price for the common shares was $0.53449 per share, being the weighted average trading price per common share calculated in accordance with the rules of the Toronto Stock Exchange on April 19, 2005. The 5,580,100 common shares issued in the private placement are subject to a statutory four-month hold period. All of the term loan lenders, VenGrowth, Lenbrook and Aquilon (formerly MMI Group) participated in the subscription. Consolidated Financial Statements The following unaudited interim consolidated financial statements are presented for the three months and six months ended June 30, 2005 and June 30, 2004, and include the operating results of AirIQ Inc. and its US subsidiaries. Consolidated Balance Sheets June 30, December 31,(As at June 30, 2005, Unaudited) 2005 2004------------------------------------------------------------------------------------------------------------------------------------------AssetsCurrent assets Cash and cash equivalents $ 3,865,361 $ 4,902,089 Accounts receivable 5,756,679 5,072,938 Inventory 4,517,570 3,808,331 Future tax asset 215,000 100,000 Prepaid expenses 864,591 494,301---------------------------------------------------------------------Total current assets 15,219,201 14,377,659Property, plant and equipment, net 5,143,042 5,749,246Intangibles, net 8,287,057 9,468,691Goodwill 9,196,817 9,646,817Deferred financing costs, net - 102,778Deferred service contract costs, net 10,491,765 9,911,855--------------------------------------------------------------------- $ 48,337,882 $ 49,257,046------------------------------------------------------------------------------------------------------------------------------------------Liabilities and Shareholders' EquityCurrent liabilities Accounts payable and accrued liabilities $ 7,554,782 $ 6,854,983 Income taxes payable 303,531 165,000 Term loan - 1,932,980 Bank financing 4,110,968 - Deferred revenue 10,241,304 9,255,940 Obligations for service contracts 944,563 1,086,801 Obligations under capital lease 240,338 136,566---------------------------------------------------------------------Total current liabilities 23,395,486 19,432,270Term loan - 3,027,978Obligations under capital lease 306,928 69,098National Research Council loan 157,425 201,081Deferred revenue 2,308,930 1,696,016Obligations for service contracts 999,125 1,451,792---------------------------------------------------------------------Total liabilities 27,167,894 25,878,235---------------------------------------------------------------------Shareholders' equity Share capital 81,095,655 78,121,413 Other paid-in capital 3,610,254 3,610,254 Contributed surplus 862,080 567,080 Deficit (64,398,001) (58,919,936)---------------------------------------------------------------------Total shareholders' equity 21,169,988 23,378,811--------------------------------------------------------------------- $ 48,337,882 $ 49,257,046------------------------------------------------------------------------------------------------------------------------------------------Consolidated Statements of Loss and Deficit(Unaudited) Three months Six months ended ended June 30, June 30, June 30, June 30, 2005 2004 2005 2004---------------------------------------------------------------------Revenues $ 10,077,283 $ 2,681,260 $ 19,820,344 $ 4,975,536Direct cost of sales 5,828,262 1,637,997 11,515,075 2,920,521---------------------------------------------------------------------Gross profit 4,249,021 1,043,263 8,305,269 2,055,015---------------------------------------------------------------------Expenses Sales and marketing 1,475,516 925,165 3,056,334 1,624,642 Engineering and research 1,275,942 675,431 2,535,433 1,303,492 General and administration 2,255,766 1,145,389 4,587,698 2,298,820 Stock-based compensation 175,000 102,000 295,000 203,375 Loss (gain) on foreign exchange (50,982) (88,698) 21,451 (114,418)--------------------------------------------------------------------- 5,131,242 2,759,287 10,495,916 5,315,911---------------------------------------------------------------------Loss before other expenses and taxes (882,221) (1,716,024) (2,190,647) (3,260,896)---------------------------------------------------------------------Other expenses Net interest expense 578,666 360,128 857,385 702,487 Other charges 52,667 - 248,759 - Amortization 899,346 280,881 1,710,274 675,093--------------------------------------------------------------------- 1,530,679 641,009 2,816,418 1,377,580---------------------------------------------------------------------Loss before income taxes (2,412,900) (2,357,033) (5,007,065) (4,638,476)Provision for income taxes Current income tax 54,000 - 136,000 - Future income tax 150,000 - 335,000 ---------------------------------------------------------------------- 204,000 - 471,000 ----------------------------------------------------------------------Net loss for the period (2,616,900) (2,357,033) (5,478,065) (4,638,476)Deficit, beginning of period (61,781,101) (49,896,286) (58,919,936) (47,614,843)---------------------------------------------------------------------Deficit, end of period $ (64,398,001)$(52,253,319) $(64,398,001)$(52,253,319)------------------------------------------------------------------------------------------------------------------------------------------Loss per share - basic and diluted $ (0.02) $ (0.03) $ (0.05)$ (0.07)------------------------------------------------------------------------------------------------------------------------------------------Weighted average number of common shares used in computing loss per share, basic and diluted 119,100,946 70,356,876 117,254,856 70,168,002------------------------------------------------------------------------------------------------------------------------------------------Consolidated Statements of Cash Flows(Unaudited) Three months Six months ended ended June 30, June 30, June 30, June 30, 2005 2004 2005 2004---------------------------------------------------------------------Cash provided by (used in)Operating activities Net loss for the period $ (2,616,900) $(2,357,033) $ (5,478,065) $(4,638,476) Add items not involving cash Future tax recovery 215,000 - 450,000 - Stock-based compensation 175,000 102,000 295,000 203,375 Interest accreted on term loan 296,625 70,711 358,526 138,208 Amortization of property, plant and equipment 654,639 506,549 1,312,295 907,037 Amortization of deferred service contract costs 3,445,255 633,623 6,962,649 998,013 Amortization of intangibles 590,815 8,652 1,181,634 17,304 Amortization of deferred development costs - 116,021 - 300,518 Amortization of deferred financing costs 92,980 9,798 102,778 19,596 Changes in non-cash working capital related to operations Accounts receivable (158,771) 236,893 (683,741) 71,459 Future tax asset (65,000) - (115,000) - Inventory 1,045 181,407 (709,239) (338,483) Prepaid expenses (289,696) (134,335) (370,290) (30,484) Accounts payable and accrued liabilities (648,803) 24,155 699,799 (182,833) Income taxes payable 55,709 - 138,531 - Deferred revenue 181,584 1,090,556 1,598,278 1,806,496--------------------------------------------------------------------- 1,929,482 488,997 5,743,155 (728,270)---------------------------------------------------------------------Investing activities Purchase of net assets - (13,388,500) - (13,388,500) Cash acquired - 620,459 - 620,459 (Additions)/ reductions to property, plant and equipment (133,356) (166,301) (282,977) 226,361 Deferred service contract costs (3,436,486) (1,398,744) (7,542,559) (2,098,008)--------------------------------------------------------------------- (3,569,842) (14,333,086) (7,825,536) (14,639,688)---------------------------------------------------------------------Financing activities Repayment of obligations under capital lease (37,746) (61,372) (81,512) (124,273) Repayment of National Research Council loan (22,075) (24,765) (43,656) (46,003) Repayment of term loan (4,858,398) - (5,319,484) - Proceeds from bank financing 4,110,968 - 4,110,968 - Repayment of obligations for service contracts (297,935) (510,036) (594,905) (914,800) Issuance of common shares and equity instruments 2,963,093 6,636,000 2,974,242 6,643,750--------------------------------------------------------------------- 1,857,907 6,039,827 1,045,653 5,558,674---------------------------------------------------------------------Net increase/ (decrease) in cash and cash equivalents 217,547 (7,804,262) (1,036,728) (9,809,284)Cash and cash equivalents, beginning of period 3,647,814 13,416,678 4,902,089 15,421,700---------------------------------------------------------------------Cash and cash equivalents, end of period $ 3,865,361 $ 5,612,416 $ 3,865,361 $ 5,612,416------------------------------------------------------------------------------------------------------------------------------------------Supplementary disclosureCash paid for Interest $ 167,087 $ 210,556 $ 339,835 $ 199,493Non-cash transactions Capital assets purchased under capital leases 326,400 108,360 423,114 173,297 Common shares issued on acquisition - 6,636,000 - 6,636,000------------------------------------------------------------------------------------------------------------------------------------------ The Company's quarterly report, including financial statements, accompanying notes and Management's Discussion and Analysis will be available on the Company's website (www.airiq.com) on Friday, August 12th, 2005 and on the System for Electronic Document Analysis and Retrieval ("SEDAR") website (www.sedar.com) after Friday, August 12th, 2005. AirIQ will hold its second quarter conference call on Friday, August 12th, 2005, at 10 a.m. EST. To access the call please dial 416-640-4127 or 1-800-814-4862. A replay of the conference call will be available at noon on August 12th until midnight August 19th, 2005. To access the replay, dial 416-640-1917 or 1-877-289-8525 followed by the passcode 21131840#. The call will also be webcast live on the Company's website at www.airiq.com. About AirIQ AirIQ trades on the Toronto Stock Exchange under the symbol IQ. A leader in the Telematics marketplace, AirIQ is headquartered in Pickering, near Toronto, Canada. The Company operates as a wireless Internet applications service provider specializing in Telematics. Telematics is the name given to information and control messages sent wirelessly to and from vehicles and vessels. AirIQ's services are offered to five primary markets: Commercial Fleets; Consumer; Vehicle Finance; Indirect Distribution; and Marine Fleets. AirIQ gives vehicle and vessel owners the abilities to manage and protect their mobile assets. AirIQ's services include: vehicle locating, boundary notification, automated inventory, maintenance reminders, security alerts, vehicle disabling, unauthorized movement alerts and many more features. For additional information on AirIQ, its products and services, please visit the Company's website at www.airiq.com. Non-GAAP Disclosure EBITDA is defined by the Company as operating income before interest expense, income taxes, other charges, depreciation and amortization. The Company has included information concerning EBITDA because it believes that it may be used by certain investors as one measure of the Company's financial performance. EBITDA is not a measure of financial performance under Canadian GAAP and is not necessarily comparable to similarly titled measures used by other companies. EBITDA should not be construed as an alternative to operating income or to cash flows from operating activities (as determined in accordance with Canadian GAAP) as a measure of liquidity. AirIQ Finance Mark Kohler Chief Financial Officer [phone], Ext. 4250 [e-mail] or AirIQ Corporate Mary-Catherine Telemaque Manager, Corporate Communications [phone], Ext. 4326 [e-mail] NEWS RELEASE TRANSMITTED BY CCNMatthews Copyright (C) 2005, CCNMatthews. All rights