Business News
Sirit Reports First Quarter 2008 Results
Wednesday 14. May 2008 - Sirit Inc. ("Sirit") (TSX: SI), a leading provider of radio frequency identification ("RFID") technology, reports its financial results for the first quarter ended March 31, 2008. All amounts are stated in Canadian Dollars unless otherwise noted.
As previously announced, the first quarter of 2008 reflects a decline in total revenue from the same period last year. Total revenue for the three months ended March 31, 2008 reached $4.3 million, (US$4.3 million) compared to $6.5 million (US$5.5 million) in the prior year. The decline is due primarily to lower toll transponder sales during the quarter as well as foreign exchange impacts when compared to the prior year first quarter. The total decline, in US Dollars, is 22% compared to the prior year. This trend is expected to continue through the second quarter of 2008.
Sirit’s Automatic Vehicle Identification (“AVI”) applications contributed $3.3 million (US$3.3 million) or 77% of the total revenue down from $5.2 million (US$4.4 million) or 79% in the first quarter of 2007. Radio Frequency Solutions (“RFS”) applications revenue contributed $1.0 million (US$1.0 million) compared to $1.3 million (US$1.2 million) in the first quarter of 2007. RFS revenue was impacted by quarterly fluctuations due to the timing of specific deliveries and deployments by our customers.
“The first quarter results were within our expectations as our largest toll customer significantly scaled back on deliveries. We effectively maintained operating expenses at the same level compared to last year and as a result had to fund operations during the quarter,” commented Anastasia Chodarcewicz, Chief Financial Officer, Sirit Inc. “From a business perspective, the first quarter was very successful with the announcement of our acquisition of RSI ID Technologies, Inc., which closed on April 1, 2008 and several product and partner announcements. We are working closely with our partners and customers to ensure we make the best investment decisions today to improve results for the latter part of the year.”
Gross profit in the first quarter of 2008 reached 36.2% up from the 34.8% in the first quarter of 2007. This reflects a change in the mix of toll customers during the quarter.
Operating expenses during the quarter, excluding foreign exchange, were $3.2 million, the same level as the first quarter of 2007. Development expenses increased during the first quarter of 2008 as the Company invests in key developments and people in an effort to improve future product costs and enhance product performance and offerings.
Operating loss for the quarter was $1.4 million compared to a $1.0 million loss in the same period last year. Net loss for the quarter was $1.3 million compared to a net income of $0.5 million in the first quarter of 2007 which included a gain on sale of $1.4 million from the sale of its long-term investment in Applied Data Systems, Inc.
Sirit ended the quarter with $6.8 million in cash compared to $8.9 million at December 31, 2007. Cash was used to fund operations and working capital during the quarter due to the lower sales levels experienced.
Q1 2008 Corporate Highlights
The following highlights key activities during the quarter:
– Sirit announced the signing of a cooperative marketing agreement
(“CMA”) with 3M’s Traffic Safety Systems Division. The CMA is a
global distribution agreement to offer RFID reader and tag technology
based on open architecture protocols to support comprehensive
solutions developed for the transportation market.
– The Company announced the acquisition of RSI ID Technologies, Inc.
(“RSI”). RSI is an industry leading, vertically integrated
manufacturer of antennas, inlays and tags for specialized, passive
RFID applications. The deal has been structured in an all stock
transaction with an initial payment of 10 million Sirit Common Shares
plus additional shares to be issued over a 21 month period based on
achieving certain financial targets. The deal closed on April 1,
2008.
– The Company announced a comprehensive OEM partnership with TAGSYS, a
global leader in item-level RFID infrastructure, to supply Sirit’s
UHF Infinity 510 platform within TAGSYS’ RXU-400 UHF fixed reader.
– Sirit received its compliance certificate from the State Radio
Regulation Committee (“SRRC”) in China which confirms the IN510 meets
the qualifications of compliance under the operational bandwidth,
interoperability and performance standards established in March 2007.
– Sirit announced its collaboration with Microsoft Corporation to bring
near field communication and contactless support to the Windows
Mobile(R) operating system. The companies aim to speed the adoption
of NFC and contactless technology in Windows Mobile(R) powered
smartphones and the development of Windows Mobile(R) powered NFC
applications.
“We have had a strong quarter in terms of new partnerships and a key acquisition with RSI. As anticipated we are experiencing some short-term revenue fluctuations due to timing of specific orders from our largest customer. We continue to work on an increasing number of opportunities and are investing in our operations. If realized, these prospects are expected to convert into major announcements throughout 2008 and provide a basis to achieve profitability in 2009,” added Norbert Dawalibi, President and CEO, Sirit Inc.