FinancialsSirit Reports Financial Results for the Third Quarter Ended September 30, 2005
TORONTO, Nov. 10 /CNW/ - Sirit Inc. (TSX: SI), a leading provider of
radio frequency identification (RFID) technology, today reported its financial
results for the third quarter ended September 30, 2005. All amounts are stated
in Canadian Dollars unless otherwise noted.
Third Quarter 2005 Financial Highlights
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- Total revenue of $3.1 million in Q3 2005 compared to $5.2 million
in Q3 2004.
- For the third quarter, sales of modules supporting RF Solutions (RFS)
applications contributed $0.5 million or 16% of revenue. Fluctuations
in quarterly results continue to be reflective of early stage market
adoption within supply chain management.
- Sales of products for Automatic Vehicle Identification applications
(AVI) contributed $2.6 million or 84% of quarterly revenue. Company
wins $4.0 million toll tag supplier contract in early October with
deliveries commencing in the fourth quarter.
- Net loss for Q3 2005 of $2.8 million, including the write-down of a
non-core investment of $0.9 million, compared to a net loss of
$2.6 million in Q2 2005.
- Cash utilization of $0.9 million during third quarter 2005 compared to
$1.5 million in the second quarter 2005.
Three and Nine Months Ended September 30, 2005
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Revenue for the nine months ended September 30, 2005 totaled
$12.2 million, a 21.8% or $3.4 million decrease from $15.6 million in the
first nine months of 2004. The year-to-date decline is due to foreign exchange
fluctuations of approximately $1.0 million, a decline in AVI revenue resulting
from customers building inventory levels in the prior year which did not recur
in the current year and the consolidation of three toll agency customers.
Revenue from sales of RFS related products was $0.5 million during the
quarter compared to $1.0 million in the 2004 third quarter. Sales of RFS
products remain unpredictable and are expected to fluctuate on a quarterly
basis as customers continue to roll out pilots and tests which vary in timing,
size and value.
Revenue from sales of AVI related products was $2.6 million for the third
quarter and $9.3 million year-to-date. Sirit maintains strong supplier
relationships with all of its AVI customers evidenced by the recent
$4.0 million win with the Bay Area Transportation Authority ("BATA"). Revenue
from all applications is expected to be within guidance provided during the
third quarter for the remainder of 2005.
Gross margin for the third quarter of 2005 was 33.4% compared to 43.3% in
the third quarter of 2004. Gross margin declined both on a quarterly and
yearly comparative basis due to the portion of overhead costs which represent
a larger percentage of the lower sales base for the periods. On a year-over-
year comparison, gross margin in 2005 was 34.7%, a decline of 7.3 basis points
from the same period in 2004.
Total operating expenses during the third quarter were $2.9 million
compared to $4.2 million in the second quarter. The decrease is attributable
to management's decision during the third quarter to reduce 2005 year end
bonuses whereas the second quarter included a one-time retirement charge of
$0.8 million. R&D expenditures remain consistent with the second quarter of
2005.
"Sirit is focused on maintaining a strong financial position as evidenced
in the reduction in our cash utilization as well as the cost cutting efforts
undertaken during the third quarter," commented Anastasia Chodarcewicz, Vice
President Finance and CFO. "We are committed to controlling discretionary
spending while we continue to invest in marketing and product development
efforts to broaden the reach of our offerings."
The Company utilized $0.9 million to fund ongoing operations and
development efforts ending the quarter with $7.0 million in cash compared to
$7.9 million at the beginning of the quarter. The working capital balance at
September 30, 2005 remains solid at $11.6 million with the change from June
30, 2005 attributable to the reclassification of investments to short-term and
use of cash to fund operations during the quarter. The Company has undertaken
activities to divest of its interest in its non-core assets and will utilize
any cash generated from the disposition of these investments to support its
RFID operations. The Company believes that it has sufficient resources to fund
operations through the balance of 2006.
"We have taken decisive actions to streamline our teams and to focus on
all application areas in which Sirit has had historical successes and
demonstrated technical expertise," said Norbert Dawalibi, President and CEO,
Sirit Inc. "Combined with the recently announced supplier contract win with
our long standing customer, BATA, and as other AVI customers return to normal
ordering patterns, we remain confident that our business is solid and will
experience growth in 2006."
Conference Call
Sirit will host a conference call to discuss the quarterly results on
Thursday, November 10, 2005 at 10:00 a.m. EDT. The conference call will be
accessible at www.sirit.com.