AirIQ Announces Third Quarter Results
AirIQ Announces Third Quarter Results
Operating expense reductions fuel continued improvement in EBITDA results
Toronto, Ontario – November 10, 2006 – AirIQ Inc. (TSX: IQ), a leader in global wireless security, today announced its results for the third quarter and nine months ended September 30, 2006.
Third Quarter Highlights
• EBITDA improvement of 19% quarter over quarter; 60.5% quarterly year over year;
• Operating expense reduction of $278,728 quarter over quarter; $1,058,983 quarterly year over year;
• Expense to revenue ratio improvement to 42.5% from 51.3% in the third quarter of 2005;
• Slight revenue increase of $173,102 comparing the first nine months of 2006 to the same period in 2005;
• Launched into the Field Service Market with a new GSM solution;
• Placed 15th on Deloitte’s Technology Fast 50 (Canada) and placed 90th on the Deloitte Fast 500 (North America).
“The telematics industry is gaining momentum” said Donald E. Simmonds, President and Chief Executive Officer of AirIQ. “Although AirIQ has experienced growth of almost 10,000% over the past five years, 2006 has been a year of pruning and streamlining to best prepare for the opportunities that lie ahead.”
“Our focus on reducing operating expenses remained as one of our key priorities in the quarter and has had a positive impact on our EBITDA results,” elaborated Mark Kohler, Chief Financial Officer of AirIQ.
The accompanying unaudited interim condensed consolidated statements of loss and deficit are presented for the three months and nine months ended September 30, 2006 and September 30, 2005, comparatively, and include the operating results of AirIQ Inc. and its subsidiaries. The accompanying unaudited interim condensed consolidated balance sheets do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern. The Company’s unaudited interim consolidated financial statements as at and for the period ended September 30, 2006, including notes thereto and the accompanying Management’s Discussion and Analysis will be filed with the Canadian securities regulatory authorities by November 14, 2006; 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.
Revenues for the three months ended September 30, 2006, decreased 3.5% to $9,911,177 from $10,273,609 for the comparative three months ended September 30, 2005. The revenues decreased $306,510 as compared with the previous three months ended June 30, 2006.
The decrease in year over year quarterly revenues was the result of the strengthening Canadian dollar in comparison to the US dollar and the related impact on monthly service revenues. The impact of the strengthening Canadian dollar in comparison to the US dollar had a notional effect of reducing the Company’s third quarter revenues by approximately $390,000 year over year.
Revenue increased to $30,267,055 from $30,093,953 for the nine months ended September 30, 2006 and 2005, respectively.
Gross profit for the three months ended September 30, 2006 was $3,860,732, representing a decrease of 11.8% compared to gross profit of $4,375,475 for the three months ended September 30, 2005. Gross profit decreased by $195,041 from the gross profit for the previous three months ended June 30, 2006.
As a percentage of revenues, gross profit for the three months ended September 30, 2006, was 39.0% compared to 42.6% for the three months ended September 30, 2005 and 39.7% for the three months ended June 30, 2006.
The negative effect on revenue of the weakening of the US dollar relative to the Canadian dollar was partially offset by a decreased US dollar cost of sales. However, overall negative impact on gross profit from the year over year fluctuation in US dollar exchange rates is estimated to be approximately $120,000.
Gross profit decreased 4.7% to $12,086,066 from $12,682,132 for the nine months ended September 30, 2006 and 2005, respectively.
Expenses totaled $4,216,015 for the three months ended September 30, 2006, compared to $5,274,998 for the three months ended September 30, 2005.
Included in expenses for the three months ended September 30, 2006 is approximately $105,000 of unusual legal expenses related primarily to the Company’s efforts to defend and file a cross-complaint related to the previously disclosed claim of a former component supplier.
Expenses as a percentage of revenues were further reduced in the three months ended September 30, 2006 to 42.5% compared with 51.3% for the three months ended September 30, 2005.
Expenses totaled $13,433,712 for the nine months ended September 30, 2006; a $2,338,589 reduction compared to $15,772,301 for the nine months ended September 30, 2005.
Net interest expense for the three months and nine months ended September 30, 2006, was $322,737 and $1,084,073, respectively, compared to $192,399 and $1,049,785 for the three months and nine months ended September 30, 2005, respectively.
Included in the net interest expense for the three months ended September 30, 2006 is the amount of $46,066 related to the accreted fair market value of warrants issued in connection with the term loan and secured debenture financings during the second quarter of 2006.
Amortization for the three months and nine months ended September 30, 2006 was $543,187 and $2,067,891, respectively, compared with $762,159 and $2,472,433, for the three months and nine months ended September 30, 2005 respectively.
Commencing August 1, 2006, there was a reduction of approximately $68,000 in monthly amortization expenses related to the end of the two year amortization periods for “purchased technology” and “tradenames”, which were purchased as part of the Company’s acquisition of the assets of Aircept in 2004.
Net loss for the three months ended September 30, 2006 was $1,221,207, or $0.01 per share, compared with $1,943,081 or $0.02 per share, for the three months ended September 30, 2005. The improvement relates primarily to the implementation of the Company’s integration strategy and the Company’s initiatives to reduce operating expenses during 2006.
Liquidity and Capital Resources
As at September 30, 2006, the Company had cash and cash equivalents of $1,739,564 and negative working capital of $901,476. Working capital has been calculated by netting current assets and current liabilities, and excluding deferred revenue and obligations for service contracts that are non-cash items.
On July 4, 2006, the Company reduced the outstanding balance on its operating loan by repaying $1,100,000 of the outstanding loan amount, required as a result of the consolidated accounts receivable margin test calculations under the loan. The maximum principal amount available under the revolving operating loan remains at $5,000,000, subject to the consolidated accounts receivable margin test.
In accordance with Canadian GAAP, and as required in section 3070, Deferred Charges, of the Canadian Institute of Chartered Accountants (“CICA”) handbook, all deferred service contract costs have been classified as non-current in the accompanying unaudited interim condensed consolidated financial statements regardless of their associated amortization period. Deferred service contract costs, as at September 30, 2006, in the amount of $8,545,092 (September 30, 2005 - $7,533,431) are to be amortized on a straight-line basis over the next twelve months. The related deferred revenue and obligations for service contracts, as at September 30, 2006, to be realized over the same twelve month period amounts to $9,904,517 ($9,242,168 and $662,349, respectively) compared with $10,607,735 ($9,775,291 and $832,444, respectively) as at September 30, 2005.
Interim Consolidated Statements
Conference Call and Webcast
AirIQ will hold a conference call today, Friday, November 10, 2006, at 10 a.m. ET. To access the call, please dial 416-695-9753 or 1-800-766-6630. A replay of the conference call will be available as of noon the same day until midnight November 17, 2006. To access the replay, dial 416-695-5275 or 1-888-509-0081 followed by the pass code 634080. The call will also be webcast live on the Company’s web site at www.airiq.com.
“EBITDA” is defined by the Company as net 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 net income or to cash flows from operating activities (as determined in accordance with Canadian GAAP) or as a measure of liquidity.
In addition, the Company has included information concerning adjustments to gross profit, expenses and working capital because it believes that it may be used by certain investors as further measures of the Company’s financial performance, and such adjustments to expenses or assets and liabilities are highlighted due to their nature or to their magnitude.
The accompanying unaudited interim consolidated statements of loss and deficit are presented for the three months and nine months ended September 30, 2006 and 2005, comparatively, and include the operating results of AirIQ Inc. and its subsidiaries.
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. Other than as may be required by law, 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 trades on the Toronto Stock Exchange under the symbol IQ. A leader in Global Wireless Security, AirIQ is headquartered in Pickering, near Toronto, Canada, with offices in Lake Forest and San Diego, California, U.S.A. The Company operates as a wireless Internet applications service provider specializing in location-based services. AirIQ’s services are offered to four primary markets: Commercial Fleets; Consumer; Vehicle Finance; 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 or its products and services, please visit the Company’s website at www.airiq.com.
- Contact Information
- Mark Kohler
- Chief Financial Officer
- AirIQ Finance
- Contact via E-mail
This news content was configured by WebWire editorial staff. Linking is permitted.
News Release Distribution and Press Release Distribution Services Provided by WebWire.