Well here it is...Sirit Announces Second Quarter 2005 Financial Results
Record volumes of EPC UHF handheld modules shipped during first half
Toronto, ON – August 11, 2005 – Sirit Inc. (TSX: SI), a leading provider of radio frequency identification (RFID) technology, today reported its financial results for the second quarter ended June 30, 2005. All amounts are stated in Canadian Dollars unless otherwise noted.
Q2 2005 Financial Highlights
Total revenue of $4.6 million (net of one-time adjustment of $0.4 million) in Q2 2005 increased from $4.4 million in Q1 2005
For the second quarter, sales of modules supporting RF Solutions (RFS), previously referred to as Supply Chain Management group (SCM), applications contributed $1.3 million or 28% of revenue, the highest quarterly total in Company history
RFS revenue included a single order of over 1,000 ‘INfinity 200’ modules for deployment into a large US retailer for an item level inventory management application
Sales of products for Automatic Vehicle Identification applications (AVI) contributed $3.3 million or 72% of quarterly revenue; delays in integration projects shift revenue earning potential into 2006
Net loss for Q2 2005 was $2.6 million including one-time adjustments of $1.2 million: this is compared to a net loss of $1.0 million in the first quarter of 2005
Three and Six Months Ended June 30, 2005
Revenue for the six months ended June 30, 2005 totaled $9.1 million, a 13.3% or $1.4 million decrease from $10.5 million in the first half of 2004. The decline is due to a negative impact from foreign exchange fluctuations of $0.7 million, a decline in AVI revenue (before foreign exchange impact) by $1.5 million offset by an increase in RFS revenue (before foreign exchange impact) of $0.8 million.
Revenue from sales of our RFS related products was $1.3 million during the quarter, the Company’s highest quarterly RFS revenue to date. Year-to-date, RFS revenue totaled $2.4 million. The Company supports the view that the overall RFID market in the supply chain remains in the very early stages of implementation. It is, therefore, impossible to reasonably estimate future deployment wins and associated revenue potential.
Revenue from sales of our AVI related products was $3.3 million for the second quarter, including a one-time adjustment of $0.4 million to cover a potential liability related to old orders, and $6.7 million year-to-date. Sirit continues to supply tags and readers to all of its AVI customers and those customers who built inventory levels in 2004 have not required the same volumes in the current year. The Company continues to see a solid pipeline for integration opportunities, but delays in this pipeline have reduced the earnings potential for the current year. As a result, for the remainder of the year, revenue from AVI applications is expected to be below prior year level.
Gross margin for the second quarter of 2005 was 32.8%. This includes the $0.4 million one-time adjustment to cover a potential liability regarding old orders. Without this adjustment, the margin for the second quarter would have been 37.8%, in-line with margins for the first quarter of 2005. Year-to-date gross margin would have been 37.6%.
Total operating expenses during the second quarter were $4.2 million compared to $2.7 million in the first quarter. The increase is primarily attributable to $0.8 million of non-recurring salary costs, as well as increased development, sales and marketing costs. The resultant net loss was $2.6 million in the second quarter compared to $1.0 million in the first quarter.
The Company utilized $1.5 million to fund ongoing operations and development efforts ending the quarter with $7.9 million in cash compared to $9.4 million at the beginning of the quarter. The working capital balance at June 30, 2005 remains solid at $8.9 million with the change from March 31, 2005 primarily attributable to the use of cash during the quarter. The Company remains financially secure and has sufficient resources to fund operations.
“Sales of Sirit’s embedded ‘INfinity’ series of RFID modules demonstrated strong growth in the quarter led by the supply chain win in which Sirit’s technology outperformed the incumbant’s offering,” noted Anastasia Chodarcewicz, Chief Financial Officer, Sirit Inc. “Our overall financial position remains stable as we experience delays in revenue generating opportunities with some of our AVI related products and services. We are confident these delays are temporary and will not have a long-term impact on the future of our AVI applications.”
“We are excited by the Company’s largest shipment to date of its EPCTM-compliant UHF modules supporting a retail supply chain application. Sirit has once again demonstrated its ability to take a product from concept stage to successful implementation,” said Norbert Dawalibi, President and CEO, Sirit Inc. “Sirit continues to make significant strides in the development of its next generation of products including UHF modules which will meet/read the EPC Gen2 standard. We remain encouraged by the overall potential in our AVI and RFS applications as we continue to participate in new proposals, evaluations, tests and pilots.”
Conference Call
Sirit will host a conference call to discuss the quarterly results on Thursday, August 11, 2005 at 10:00 am EDT. The conference call will be accessible at www.sirit.com.
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