AirIQ Announces Third Quarter Results, Gross Profit Increase of 61%
Improvements in key metrics and fruition of GSM strategy, positions AirIQ for growth.
TORONTO, ONTARIO – November 11, 2005 – AirIQ Inc. (TSX: IQ), a leader in Global Wireless Security specializing in Telematics services, reports results for the third quarter ended September 30, 2005.
Financial Highlights for the third quarter:
• Gross profit increased by 60.8% to approximately $4.4 million year over year
• Subscribers surpassed 194,000, an increase of 50% over the previous year
• Revenue increased 32.3% to $10.3 million year over year
• Expenses excluding accounting-related expenses for stock based compensation and the loss on foreign exchange decreased to $4.9 million from $5.0 million in the second quarter of this year
• Expense to revenue ratio improved to 51.3% compared to 64.6% in the fourth quarter of 2004, and to 47% from 63% over the same period if we exclude accounting-related expenses for stock based compensation and the loss on foreign exchange
As a recurring revenue business, the key measures of AirIQ’s progress relate to various trajectories, or trends. The Company’s strategy is to aggressively acquire new subscribers and service revenues from a relatively fixed and scalable infrastructure.
“We have made steady progress over the breadth of our business units that position the Company for the next phase of growth,” says Donald Simmonds, President and CEO of AirIQ. “Notably, the increasing quality of our revenues resulted in a year over year increase in gross profit of 60.8%. Although revenue dampened somewhat by the foreign exchange effect, we continued with steady progress in our business trajectories.”
Marine Business Growth
During the quarter the marine customer business, Boatracs, experienced the largest subscriber shipment month in its ten year history. New units shipped to these customers represented a 9% growth in that subscriber base. A number of vessels came under new fishing regulations and Boatracs is one of only two approved suppliers to this industry.
AirIQ launched its GSM (Global System for Mobile Communications) technology with two significant announcements. During the quarter a GSM agreement with Telefonica Moviles Mexico was announced and subsequent to the quarter end, an agreement with Cingular Wireless, the largest wireless carrier in the United States. GSM offers higher messaging volume capabilities and improved power management for clients at low costs, and supports the Company’s aggressive subscriber acquisition plans in the United States and Mexico.
AirIQ reported revenue for the third quarter of $10.3 million, an increase of 32.3% compared to $7.8 million for the period ended September 30, 2004. Revenue for the period was 1.9% higher than the previous three months ended June 30, 2005. For the first nine months of 2005, revenue of $30.1 million was a 136.2% increase from the same period in 2004. The increase in revenues resulted from continuing net additions to the Company’s subscriber base and from the acquisition of the Aircept and Boatracs businesses, which occurred during June and October of 2004.
Gross Profit Improved
Gross profit for the third quarter of 2005 was $4.4 million, an increase of 60.8% compared to gross profit of $2.7 million in the same period in 2004. As a percentage of revenues, gross profit improved to 42.6% from 35.1% for the third quarter of 2004 and management expects further improvements can be achieved as the Company’s integration strategy progresses.
Expenses for the third quarter were $5.3 million, compared to $4.7 million for the same period in 2004.
Expenses as a percentage of revenues were 51.3% in the third quarter, compared to 60.3% in the same quarter in 2004 and 50.4% for the quarter ended June 30, 2005. This decrease reflects improvements in operating efficiencies and execution of the Company’s integration strategies for Aircept and Boatracs.
“Our expenses, excluding accounting-related expenses for stock based compensation and the loss on foreign exchange have continued to improve over the past four quarters, the period since we completed our most recent business acquisition,” states Mark Kohler, Chief Financial Officer of AirIQ.
Expenses, excluding the accounting related expenses for stock-based compensation expenses, and losses or gains on foreign exchange, totalled $4,876,274 for the three months ended September 30, 2005, a further improvement compared to $5,007,224 for the three months ended June 30, 2005, and $5,173,626 for the three months ended March 31, 2005.
Net interest expense for the nine months and three months ended September 30, 2005, was $1,049,785 and $192,399 compared to $1,068,314 and $365,827 for the nine months and three months ended September 30, 2004. The improvement in quarter over quarter interest expense is primarily due to the Company’s repayment of the term loan on May 2, 2005, and the more favourable interest rates charged on the new $10 million credit facility entered into by the Company on April 25, 2005.
Net Loss per Share
The net loss for the three months ended September 30, 2005, was $1.9 million, or $0.02 per share, and an improvement from the $2.9 million net loss in the same quarter last year. The net loss of $7.4 million for first nine-months of 2005 includes provision for income taxes of $471,000 and amortization of intangible assets of $1.7 million resulting from the businesses acquired in 2004.
Liquidity and Capital Resources
As at September 30, 2005, the Company had cash and cash equivalents of $3.4 million and working capital of approximately $2.0 million.
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 these interim consolidated financial statements regardless of their associated amortization period. Deferred service contract costs, as at September 30, 2005, of $7,533,431 (September 30, 2004 - $6,243,873) 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, 2005, to be realized over the same twelve month period amounts to $10,607,735 ($9,775,291 and $832,444, respectively) compared with $12,481,576 ($9,529,389 and $2,952,187, respectively) as at September 30, 2004.
Consolidated Financial Statements
The following unaudited interim consolidated financial statements are presented for the three months and nine months ended September 30, 2005 and September 30, 2004, and include the operating results of AirIQ Inc. and its US subsidiaries.
Interim Consolidated Statements
Conference Call and Webcast
AirIQ will hold its third quarter conference call on Friday, November 11, 2005, at 10 a.m. EST. To access the call please dial 416-644-3415 or 1-800-814-4857. A replay of the conference call will be available at noon the same day until midnight November 18, 2005. To access the replay, dial 416-640-1917 or 1-877- 289-8525 followed by the passcode 21159855#. The call will also be webcast live on the Company’s website at www.airiq.com.
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 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, please visit the Company’s website at www.airiq.com.
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.
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- Mary Catherine Telemaque
- Manager, Corporate Communications
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