724 Solutions Announces Second Quarter 2003 Results; Mobile Operator Revenue Grows to 79 Percent of Total Revenue.Business Editors/High-Tech Writers TORONTO--(BUSINESS WIRE)--July 30, 2003 724 Solutions (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : SVNX; TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension : SVN SVN Subversion (version control system) SVN Slovenia (international traffic code) SVN Social Venture Network SVN South Vietnam SVN Secure Virtual Network SVN Supervised Visitation Network ), a leading provider of next-generation IP-based network and data services, today reported results for its second quarter ended June June: see month. 30, 2003 (all figures are in U.S. dollars). 724 Solutions' total revenue in the second fiscal quarter was $3.0 million compared to $3.5 million in the previous quarter and $5.0 million for the same period last year. Revenue from the sale of products accounted for $1.6 million and revenue from the sale of services accounted for $1.4 million. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net loss for the second quarter was $2.9 million, or $0.49 per share, compared to $3.9 million, or $0.65 per share, in the previous quarter and $7.3 million, or $1.22 per share for the same period last year. The company's pro forma net operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were $5.9 million in the second quarter compared to $7.4 million in the previous quarter and $12.3 million in the same period a year ago. The net loss for the second fiscal quarter of 2003, computed using generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), was $6.8 million or $1.14 per share, compared to $13.1 million or $2.19 per share in the second quarter of 2002. The company ended the quarter with $25.3 million in cash, cash equivalents, short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments and restricted cash. The total cash burn in Q2 of $5.7 million comprised an operating cash burn of $3.2 million and cash restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and non-recurring charges of $2.5 million. "We are encouraged by the deployments of our X-treme Mobility Gateway at Radiolinja Radiolinja was a Finnish GSM operator founded on September 19 1988. On March 27, 1991, the world's first GSM phone call was made in Radiolinja's network. The network was opened for commercial use on July 1, 1991. Eesti, Radiolinja Finland Finland, Finnish Suomi (swô`mē), officially Republic of Finland, republic (2005 est. pop. 5,223,000), 130,119 sq mi (337,009 sq km), N Europe. and MTC-Vodafone Kuwait Kuwait (k  wīt`, –wāt) or Kowait (kō`–), officially State of Kuwait, independent sheikhdom (2005 est. pop. ,
and the continued subscriber adoption at Sprint PCS (1) (Personal Communications Services) Refers to wireless services that emerged after the U.S. government auctioned commercial licenses in 1994 and 1995. This radio spectrum in the 1. ," said John
Sims John Sims (1749–1831) was a taxonomist who classified various species of plants. He was the first editor of The Botanical Magazine after the founder, William Curtis.[1] References1. ^ John Sims, 1749–1831. Darwin Project. , chief executive officer, 724 Solutions. "We are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about the growth of the global wireless data market for premium content services and believe our X-treme Mobility Suite will enable mobile operators to better capture a share of these opportunities." "Conversion of our competitive wins to in-service in-service In-service training adjective Referring to any form of on-the-job training noun In-service training of an employee , revenue producing deployments was a major focus for us this quarter," said Sims. Mobile operator wins announced in the second quarter: MTC-Vodafone-Kuwait selects 724 Solutions' X-treme Mobility Gateway - 724 and International Turnkey Systems A complete system of hardware and software delivered to the customer ready-to-run. In other words, just "turn the key" and go.  A Turnkey Video System (ITS) implement WAP (1) (Wireless Access Point) See access point. (2) (Wireless Application Protocol) A standard for providing cellular phones, pagers and other handheld devices with secure access to e-mail and text-based Web pages. 2.0 technology for advanced data services. Radiolinja Finland selects 724 Solutions' X-treme Mobility Gateway - XMG XMG Xavier Media Group XMG Crossmaglen (British army base in County Armagh, near Ireland) XMG Cross-Media Gaming enables new content-rich data services in one of the world's most advanced wireless markets. Radiolinja Eesti Launches MMS (Multimedia Messaging Service) An enhanced transmission service that enables graphics, video clips and sound files to be transmitted via cellphones. Developed as part of the 3GPP project, MMS phones are generally backward compatible with SMS and EMS. Applications with 724 Solutions' WAP 2.0 Gateway - X-treme Mobility Gateway enables MMS games, photos and music. In the second quarter, the company also announced the launch of its X-treme Mobile Data Applications, initially centered on collections management, fraud protection, banking and credit card management. These actionable Giving sufficient legal grounds for a lawsuit; giving rise to a Cause of Action. An act, event, or occurrence is said to be actionable when there are legal grounds for basing a lawsuit on it. alerts-based applications will provide mobile network operators an immediate opportunity for revenue through the expansion of their relationship with their enterprise clients. 724 Solutions and our mobile operator partners were selected for several pilots of these applications, which are currently underway. Conference Call Information The company will host a conference call to discuss the results on July 31, 2003 at 8:30a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . The conference call will be available over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the through the company's Web site at www.724.com or by telephone at 416-641-6444. A replay will be available for 48 hours following the conference call and can be accessed by dialing 800-558-5253, pass code 21152972. About 724 Solutions 724 Solutions (NASDAQ: SVNX; TSX: SVN) delivers reliable, scalable technology and solutions that allow mobile network operators to rapidly deploy flexible and open next generation IP-based network and data services. Additionally, in conjunction with mobile operator partners, the company provides a series of actionable alerting solutions to enterprises to assist them in lowering operating costs operating costs npl → gastos mpl operacionales and improving customer relationship management. 724 Solutions is a global company with development operations in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , Switzerland and Germany with headquarters in Toronto, Canada. For more information, visit www.724.com This press release contains statements of a forward-looking nature. These statements are made under the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the U.S. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements include the statements herein regarding: the services and products that will be offered by 724 Solutions, the benefits that businesses will obtain from these services and products, future demand for these services and products, our future operating cash performance and the sufficiency of our cash resources. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including the risk that 724 Solutions will be unable to deploy the solutions and products stated herein, the risk that the demand for these solutions and products, or for 2.5G and 3G networks, will not increase as presently anticipated, the risk that general economic conditions will not improve, and other risks described in 724 Solutions' Securities and Exchange Commission filings, including its annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and its quarterly reports on Form 10-Q Form 10-Q See 10-Q. . These risks are also described in 724 Solutions' filings with the Canadian Securities Administrators Canadian Securities Administrators(CSA) is a forum for the 13 securities regulators of Canada's provinces and territories to coordinate and harmonize regulation of the Canadian capital markets. . 724 Solutions does not undertake any obligation to update this forward-looking information, except as required under applicable law.
724 Solutions Inc. - Summary of Operations (unaudited)
(In 000's of U.S. dollars, except per share amounts)
Three months ended Six months ended
--------------------------- -------------------
June 30, March 31, June 30, June 30, June 30,
2003 2003 2002 2003 2002
Revenue:
Product $1,635 $2,010 $1,572 $3,645 $4,127
Services 1,375 1,505 3,436 2,880 5,394
--------------------------- -------------------
Total Revenue 3,010 3,515 5,008 6,525 9,521
Cost of revenue (a) 1,422 1,574 2,669 2,996 4,372
--------------------------- -------------------
Gross Margin 1,588 1,941 2,339 3,529 5,149
Operating expenses:
Research and
development (a) 2,555 2,950 4,106 5,505 9,858
Sales and
marketing (a) 2,165 2,192 4,342 4,357 10,718
General and
administrative (a) 1,291 945 1,546 2,236 3,946
Depreciation 203 359 1,478 562 3,160
Amortization of
intangibles 1,156 1,156 1,011 2,312 2,164
Stock-based
compensation
Cost of revenue - 8 54 8 200
Research and
development 682 529 1,879 1,211 6,997
Sales and marketing 170 112 662 282 2,467
General and
administrative - 115 482 115 1,793
Restructuring costs 300 - - 300 16,987
Write down of fixed
assets, goodwill and
other intangible
assets - - - - 4,134
--------------------------- -------------------
Total operating
expenses 8,522 8,366 15,560 16,888 62,424
--------------------------- -------------------
Loss from operations (6,934) (6,425) (13,221) (13,359) (57,275)
Interest income 85 93 139 178 525
--------------------------- -------------------
Net loss for the
period $(6,849) $(6,332) $(13,082) $(13,181) $(56,750)
--------------------------- -------------------
Basic and diluted net
loss per share $(1.14) $(1.06) $(2.19) $(2.20) $(9.60)
Weighted-average number
of shares used in
computing basic and
diluted net loss per
share (in thousands) 5,983 5,983 5,964 5,983 5,911
--------------------------- -------------------
724 Solutions Inc. - Summary of Pro Forma Adjustments (unaudited)
(In 000's of U.S. dollars, except per share amounts)
Three months ended Six months ended
--------------------------- -------------------
June 30, March 31, June 30, 30-Jun-03 30-Jun-02
2003 2003 2002
GAAP net loss for the
period $(6,849) $(6,332) $(13,082) $(13,181) $(56,750)
Depreciation 203 359 1,478 562 3,160
Amortization of
intangibles 1,156 1,156 1,011 2,312 2,164
Stock- based
compensation 852 764 3,077 1,616 11,457
Interest Income (85) (93) (139) (178) (525)
Restructuring costs 300 - - 300 16,987
Write down of fixed
assets, goodwill and
other intangible
assets - - - - 4,134
Non-recurring and
acquisition
charges (b) 1,521 280 361 1,801 4,643
--------------------------- -------------------
Pro forma net loss for
the period $(2,902) $(3,866) $(7,294) $(6,768) $(14,730)
--------------------------- -------------------
Pro forma net loss per
share $(0.49) $(0.65) $(1.22) $(1.13) $(2.49)
(a) The proforma numbers
are as follows
Cost of revenue 1,411 1,554 2,565 2,965 3,905
Research and
development 1,967 2,749 4,080 4,716 7,924
Sales and Marketing 1,471 2,148 4,162 3,619 9,199
General and
administrative 1,063 930 1,495 1,993 3,223
(b) Non-recurring and acquisition charges include Q1 direct costs
related to terminated employees and direct costs related to
historic acquisitions
Proforma Cash Reconciliation
(millions)
Cash and cash equivalents,
short-term investments
and restricted cash:
At March 31, 2003 $31.0
At June 30, 2003 25.3
---------
Cash used in quarter ended
June 30, 2003 $5.7
Non Proforma Cash amounts
Severance and
transition payments $1.5
Hosting exit payments 0.5
Deferred consideration
payments 0.5
--------
Non proforma cash payments 2.5
---------
Proforma cash burn in quarter
ended June 30, 2003 $3.2
724 Solutions Inc.
Consolidated Balance Sheets
(in thousands of US dollars)
June 30, December 31,
2003 2002
(unaudited)
Assets
Current assets:
Cash and cash equivalents $20,896 $19,129
Short-term investments 2,758 18,562
Restricted cash 1,630 962
Accounts receivable - trade net of
allowance of $25 (December 31,
2002 - $150) 2,518 2,211
Prepaid expenses and other receivables 1,091 819
--------------------------
28,893 41,683
Fixed assets 938 1,418
Goodwill 9,097 9,097
Other intangible assets 1,156 3,468
--------------------------
Total assets $40,084 $55,666
--------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $940 $1,254
Accrued liabilities 7,691 9,892
Note payable - 600
Deferred revenue 652 1,217
Deferred consideration 983 1,414
--------------------------
10,266 14,377
Shareholders' equity:
Share capital:
Authorized:
Unlimited common shares
Unlimited preferred shares
Issued and outstanding:
5,983,349 common shares
(December 31, 2002 -
5,983,349) 764,508 764,508
Deferred stock-based compensation - (1,616)
Accumulated deficit (734,741) (721,560)
Cumulative translation adjustment 51 (43)
--------------------------
29,818 41,289
--------------------------
Contingent liabilities
--------------------------
Total liabilities and shareholders' equity $40,084 $55,666
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