IQ NEWS!!!!!!!!!!AirIQ Reports Record Breaking Results for the Year Ended December 31, 2004
3/23/05
TORONTO, ONTARIO, Mar 23, 2005 (CCNMatthews via COMTEX) --
AirIQ Inc. (TSX:IQ)
Subscribers Exceed 152,000, Q4 Revenues Increase 326%, Q4 Gross Profit Grows 296%
AirIQ Inc. (TSX:IQ), a leader in the Telematics industry, reports strong growth in key financial success measurements, including a surging active subscriber count of over 152,000; increase in revenues of 326.2% and, growth in gross profit of 296.2% for the fourth quarter ended December 31, 2004, year over year. Quarterly gross profit as a percentage of revenue grew to 43.8% in the fourth quarter of 2004 while AirIQ reduced its operating expenses as a percentage of revenue to 64.6% from 130.7% in the previous year's fourth quarter.
"Wireless connectivity to machines is one of the few remaining wireless markets yet to be tapped," says Donald Simmonds, President and Chief Executive Officer of AirIQ. "Having accomplished our key objectives, 2004 was a great year of progress for AirIQ. The Company has emerged as one of an elite group of leading Telematics service providers in North America."
"The end of 2004 marked a period of successful integration of the Aircept and Boatracs businesses acquired during the year," explains Mark Kohler, Chief Financial Officer of AirIQ. "In 2005 we would expect to build upon this strong foundation with further improvements to our key financial measurements and through possible acquisition opportunities."
AirIQ customers use a suite of services to communicate with many types of vehicles and vessels, providing them with improved visibility, security, efficiency, safety and utilization.
Noteworthy Highlights
During 2004, the Company met its three primary objectives; steady progress in the commercial fleet business, the launch of its consumer solution and expedited growth through two strategic business acquisitions.
As a recurring revenue business, the key measures of the Company's progress relate to various trajectories or trends. Since the Company's strategy is to aggressively acquire new subscribers and service revenues from a relatively fixed and scalable infrastructure, the recognition of the trajectories in AirIQ's business model is the key to understanding its opportunity for the future.
Measures of Progress
On December 31st, 2004, the Company had:
- Over 152,000 active subscribers, an increase of 388% from December 31st, 2003, of which approximately 35,000 were the result of organic subscriber growth in the last two quarters;
- Annualized year over year revenue growth (based upon Q4) of 326.2%;
- Annualized year over year margin growth (based upon Q4) of 296.2%; and
- A reduced expense to revenue ratio (based upon Q4) from 130.7% to 64.6%.
Integrated Organization
One of the strong benefits of the acquisitions completed in 2004 is the addition of two groups of very capable individuals. The Company has taken the following steps to integrate operations and organize itself for strategic advantage:
- A single 24/7 call centre now supports all three businesses;
- High competency areas have been identified and duplication eliminated;
- The Company is migrating to a single inventory, staging and shipping operation;
- All technology projects have been integrated into a single plan for the future; and
- One accounting system is now in use by all three operations.
Overview
The accompanying condensed consolidated statements of loss and deficit are presented for the years and quarters ended December 31, 2004 and December 31, 2003, comparatively, and include the operating results of AirIQ Inc. and its subsidiaries. The Company's audited consolidated financial statements as at and for the year ended December 31, 2004, including notes thereto, the accompanying Management's Discussion and Analysis, and the Company's 2004 Annual Report, will be filed with the Canadian securities regulatory authorities on or before Wednesday, March 30th, 2005; and will be available on the Company's website (www.airiq.com) and on the System for Electronic Document Analysis and Retrieval ("SEDAR") website (www.sedar.com).
Unless otherwise noted herein, all references to dollar amounts are in Canadian dollars.
Summary of Operating Results
Revenues
Revenues for the year ended December 31, 2004 increased 166.4% to $21,779,260 from $8,175,468 for the comparative year ended December 31, 2003.
Revenues for the three months ended December 31, 2004 increased by 326.2% to $9,040,690 from $2,121,103 for the three months ended December 31, 2003, and increased by $1,277,656, or 16.5%, compared with the previous three months ended September 30, 2004. The revenue increase reflects the Company's ability to grow both organically and through the successful integration of the business acquisitions completed during the year.
Gross Profit
Gross profit for the year ended December 31, 2004 was $8,736,671, an increase of 140.4% compared to gross profit of $3,634,421 for the year ended December 31, 2003. The year over year quarterly gross profit improvement was primarily attributable to higher revenues. The Company expects gross profit as a percentage of revenues to trend upwards as the Company continues to consolidate purchasing activities, improve technologies, add new services, reduce wireless costs and take advantage of lower equipment costs.
Gross profit of $3,960,472, for the three months ended December 31, 2004, was $2,960,916 and $1,239,288 more than the $999,556 and $2,721,184 earned for the three months ended December 31, 2003, and the three months ended September 30, 2004, respectively. As a percentage of revenues, gross profit for the three months ended December 31, 2004, was 43.8% compared to 35.1% for the three months ended September 30, 2004.
Operating Expenses
Operating expenses totaled $15,838,362 and $9,614,432 for the years ended December 31, 2004 and December 31, 2003, respectively. The year over year increase in operating expenses is primarily due to the addition of the Aircept and Boatracs businesses, the Company's entry into the consumer market with a number of initiatives including its own brand (MobileIQ) and offering the Company's services under private label programs, and the Company's acquisition related activities as evidenced by the acquisition of Aircept and Boatracs.
Net Interest
Net interest expense for the year ended December 31, 2004 was $1,362,209, compared to $1,037,446 for the year ended December 31, 2003. Interest expense on the Company's term loan advanced in May, 2003 accounted for the majority of the change. Interest expense on the Company's term loan is comprised of interest on the loan balance at 12% per annum plus the amortized estimated value of the common share purchase warrants issued with the term loan.
Amortization
Amortization for the year ended December 31, 2004 was $2,015,053, compared with $1,728,063 for the year ended December 31, 2003.
Depreciation of capital assets and amortization of deferred development costs decreased due to the lower cost of assets. This decrease was offset by the amortization of the identifiable intangible assets, namely, purchased technology, customer contracts and tradenames, valued and recorded upon the acquisition of the Aircept and Boatracs businesses by the Company.
Other Charges
The Company has written-down a prepaid asset for future product deliverables based upon a change to its product development strategies in the fourth quarter. The Company anticipates that it will complete its technology planning strategies in the first quarter of 2005 and expects additional charges of approximately $200,000. These charges have not been accrued as at December 31, 2004 and will be expensed and paid for in 2005.
Provision for Income Taxes
The Company has recorded current and future income tax expenses in the fourth quarter resulting from earnings in its US subsidiaries and withholding taxes on interest earned from intercompany debt. Future income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Net Loss
The net loss for the year ended December 31, 2004 was $11,305,093, or $0.13 per share, compared with a net loss of $8,745,520, or $0.15 per share, for the year ended December 31, 2003. The increase in net loss is attributable primarily to an increase in operating expenses required to facilitate the Company's initiatives in the consumer market, and, with respect to the increase in net losses in the third and fourth quarters, the non-cash amortization of identifiable intangible assets in the Aircept and Boatracs businesses acquired by the Company and the non-cash provision for income taxes related to temporary differences resulting from the acquisitions completed in 2004.
The Company anticipates that it will incur losses in the future, but at a lesser magnitude as it continues to develop and expand its revenue base, and realize continued benefits from the businesses of Aircept and Boatracs and the Company's entry into the consumer market. The Company also anticipates that operating expenses can be further reduced upon fully integrating the acquired businesses with the Company.
Liquidity and Capital Resources
As at December 31, 2004, the Company had cash and cash equivalents of $4,902,089 and working capital of $5,288,130. Working capital is calculated as current assets less current liabilities, excluding deferred revenue and obligations for service contracts that are non-cash items.
During the fourth quarter the Company completed a private placement financing for net proceeds of $11,231,732 (net of $768,268 transaction costs) in exchange for 28,571,428 Subscription Receipts as previously disclosed on October 14, 2004.
Deferred Service Contract Costs
In accordance with Canadian GAAP, and as required in section 3070 - Deferred Charges of the CICA Handbook, all deferred service contract costs have been classified as non-current in the Company's financial statements regardless of their associated amortization period. Deferred service contract costs of $7,197,791 are to be amortized on a straight line basis over the next twelve months. The related deferred revenue and obligations for service contracts to be realized over the same twelve month period are $9,255,940 and $1,086,801, respectively, or $10,342,741 in total.
Consolidated Financial StatementsConsolidated Balance SheetsAs at December 31 2004 2003------------------------------------------------------------------------------------------------------------------------------------------AssetsCurrent assets Cash and cash equivalents $ 4,902,089 $ 15,421,700 Accounts receivable 5,072,938 2,013,945 Inventory 3,808,331 2,056,594 Future tax asset 100,000 - Prepaid expenses 494,301 467,184---------------------------------------------------------------------Total current assets 14,377,659 19,959,423Capital assets, net 5,749,246 6,554,710Deferred development costs, net - 300,518Intangibles, net 9,468,691 275,012Goodwill 9,646,817 -Deferred financing costs, net 102,778 141,970Deferred service contract costs, net 9,911,855 3,417,131--------------------------------------------------------------------- $ 49,257,046 $ 30,648,764------------------------------------------------------------------------------------------------------------------------------------------Liabilities and Shareholders' EquityCurrent liabilities Accounts payable and accrued liabilities $ 6,854,983 $ 2,982,309 Income taxes payable 165,000 - Term loan 1,932,980 880,516 Deferred revenue 9,255,940 261,196 Obligations for service contracts 1,086,801 1,584,351 Obligations under capital lease 136,566 130,241---------------------------------------------------------------------Total current liabilities 19,432,270 5,838,613Term loan 3,027,978 4,687,238Obligations under capital lease 69,098 8,994National Research Council loan 201,081 293,110Deferred revenue 1,696,016 714,996Obligations for service contracts 1,451,792 2,756,365---------------------------------------------------------------------Total liabilities 25,878,235 14,299,316---------------------------------------------------------------------Shareholders' equity Share capital 78,121,413 60,548,261 Other paid-in capital 3,610,254 3,302,913 Contributed surplus 567,080 113,117 Deficit (58,919,936) (47,614,843)---------------------------------------------------------------------Total shareholders' equity 23,378,811 16,349,448--------------------------------------------------------------------- $ 49,257,046 $ 30,648,764------------------------------------------------------------------------------------------------------------------------------------------Consolidated Statements of Loss and Deficit Three months ended Year ended December 31 December 31 2004 2003 2004 2003---------------------------------------------------------------------Revenues $ 9,040,690 $ 2,121,103 $ 21,779,260 $ 8,175,468Direct cost of sales 5,080,218 1,121,547 13,042,589 4,541,047---------------------------------------------------------------------Gross profit 3,960,472 999,556 8,736,671 3,634,421---------------------------------------------------------------------Expenses Sales and marketing 1,804,309 860,937 4,821,834 2,744,958 Engineering and research 1,315,761 903,086 3,728,939 2,323,250 General and admin- istration 2,542,501 1,382,725 6,894,737 4,277,687 Scientific research and experimental development tax refund - (369,662) - (369,662) Stock-based compensation 127,403 113,117 453,963 113,117 Loss (gain) on foreign exchange 51,939 107,550 (61,111) 525,082--------------------------------------------------------------------- 5,841,913 2,997,753 15,838,362 9,614,432---------------------------------------------------------------------Loss before the following (1,881,441) (1,998,197) (7,101,691) (5,980,011)---------------------------------------------------------------------Other expenses Net interest expense 293,895 338,420 1,362,209 1,037,446 Other charges 296,140 - 296,140 - Amortization 760,602 405,322 2,015,053 1,728,063--------------------------------------------------------------------- 1,350,637 743,742 3,673,402 2,765,509---------------------------------------------------------------------Loss before income taxes (3,232,078) (2,741,939) (10,775,093) (8,745,520)Provision for income taxes Current income tax 165,000 - 165,000 - Future income tax 365,000 - 365,000 ---------------------------------------------------------------------- 530,000 - 530,000 ----------------------------------------------------------------------Net loss for the year (3,762,078) (2,741,939) (11,305,093) (8,745,520)Deficit, beginning of year (55,157,858) (44,872,904) (47,614,843) (38,869,323)---------------------------------------------------------------------Deficit, end of year $ (58,919,936) $ (47,614,843) $ (58,919,936) $ (47,614,843)------------------------------------------------------------------------------------------------------------------------------------------Loss per share - basic and diluted $ (0.03) $ (0.05) $ (0.13) $ (0.15)------------------------------------------------------------------------------------------------------------------------------------------Weighted average number of common shares used in computing loss per share, basic and diluted 111,324,675 58,773,432 84,691,011 57,134,587------------------------------------------------------------------------------------------------------------------------------------------Consolidated Statements of Cash Flows Three months ended Year ended December 31 December 31 2004 2003 2004 2003---------------------------------------------------------------------Cash provided by (used in)Operating activities Net loss for the year $ (3,762,078) $ (2,741,939) $ (11,305,093) $ (8,745,520) Add items not involving cash Future tax recovery 365,000 - 365,000 - Stock-based compen- sation 127,403 113,117 453,963 113,117 Interest accreted on term loan 65,935 152,305 273,720 152,305 Amortization of capital assets 507,539 660,151 2,018,209 2,548,025 Amortization of deferred service contract costs 3,151,652 336,833 7,304,969 1,211,166 Amortization of intangibles 556,157 8,652 956,321 28,389 Amortization of deferred development costs - 200,108 300,518 848,968 Amortization of deferred financing costs 9,798 9,798 39,192 22,878 Changes in non-cash working capital related to operations Accounts receivable (599,628) 177,051 (460,602) 709,628 Inventory 936,060 515,037 (706,378) (619,807) Prepaid expenses 508,217 (27,215) 74,871 (367,069) Accounts payable and accrued liabilities (841,160) 435,281 1,481,947 1,037,787 Income taxes payable 165,000 - 165,000 - Deferred revenue 1,052,662 976,192 2,868,171 976,192--------------------------------------------------------------------- 2,242,557 815,371 3,829,808 (2,083,941)---------------------------------------------------------------------Investing activities Purchase of net assets including transaction costs (7,309,301) - (14,061,801) - Cash acquired 647,431 - 647,431 - Additions to capital assets (300,619) (103,936) (149,673) (954,496) Deferred development costs - 619,915 - 394,915 Patents acquired - 6,889 - (159,851) Deferred service contract costs (3,902,969) (479,269) (9,028,385) (1,934,822)--------------------------------------------------------------------- (10,865,458) 43,599 (22,592,428) (2,654,254)---------------------------------------------------------------------Financing activities Repayment of obligations under capital lease (50,889) (68,522) (226,816) (511,148) Repayment of National Research Council loan (22,724) (23,487) (92,029) (86,624) Proceeds (repayment) of term loan (447,058) 696,676 (880,516) 6,200,000 Proceeds from obligations for service contracts - (351,036) - 1,914,010 Repayment of obligations for service contracts (413,594) (387,967) (1,802,123) (1,615,014) Deferred financing costs - (8,064) - (164,848) Share issuance costs (768,268) (553,632) (768,268) (553,632) Issuance of common shares and equity instruments 12,005,011 5,229,470 12,012,761 6,014,021--------------------------------------------------------------------- 10,302,478 4,533,438 8,243,009 11,196,765---------------------------------------------------------------------Net increase (decrease) in cash and cash equivalents 1,679,577 5,392,408 (10,519,611) 6,458,570Cash and cash equivalents, beginning of year 3,222,512 10,029,292 15,421,700 8,963,130---------------------------------------------------------------------Cash and cash equivalents, end of year $ 4,902,089 $ 15,421,700 $ 4,902,089 $ 15,421,700------------------------------------------------------------------------------------------------------------------------------------------Supplementary disclosureCash paid for Interest $ 187,316 $ (77,283) $ 788,437 $ 152,160Non-cash transactions Capital assets purchased under capital leases 11,588 - 293,245 - Common shares issued on acquisition - - 6,636,000 -------------------------------------------------------------------------------------------------------------------------------------------
AirIQ will hold its Annual and Special Meeting of Shareholders on Tuesday, April 26th, 2005, at 10:00 a.m. (Eastern Standard Time) at The Toronto Stock Exchange Conference Centre, The Exchange Tower, 130 King Street West, Toronto, Ontario, M5X 1J2.
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, and the recent acquisitions of the business of Aircept.com, LLC, and Boatracs, LLC, please visit the Company's website at www.airiq.com or call 1(888) 606-6444.
Forward-looking Statements
This news release contains forward-looking information based on management's best estimates and the current operating environment. These forward-looking statements are related to, but not limited to, AirIQ's operations, anticipated financial performance, business prospects and strategies. Forward-looking information typically contains words such as "anticipate", "believe", "expect", "plan" or similar words suggesting future outcomes. Such forward-looking statements are as of the date which such statement is made and are subject to a number of known and unknown risks, uncertainties and other factors which could cause actual results or events to differ materially from future results expressed, anticipated or implied by such forward-looking statements. Such factors include, but are not limited to, changes in market and competition, technological and competitive developments and potential downturns in economic conditions generally. Therefore, actual outcomes and results may differ materially from those expressed in such forward-looking statements. AirIQ disclaims any intention or obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise.
AirIQ Corporate: Mary Catherine Telemaque Manager, Corporate Communications 905-831-6444, Ext. 4326 mctelemaque@airiq.com or AirIQ Financial: Mark Kohler Chief Financial Officer 905-831-6444, Ext. 4250 mkohler@airiq.com NEWS RELEASE TRANSMITTED BY CCNMatthews
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