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CSI Wireless Reports Year-End Results
CSI Wireless Inc. achieved a 32-per-cent revenue increase -- to $54 million -- in 2002 and is budgeting for profits in both the first and second halves of 2003, the company has announced.
CALGARY, Alberta, Canada - March 5, 2003 - (TSX:CSY): CSI Wireless Inc., a provider of advanced wireless and GPS technologies, today reported its financial results for the year ended December 31, 2002.
Key Highlights
In spite of a global economic environment that continues to be challenging, CSI Wireless achieved significant milestones and progress in 2002, including a fifth consecutive year of record revenues and a 57% reduction in net loss over 2001. Other key achievements during the year included:
Motorola branding of CSI's fixed wireless telephone (FX800t) under an exclusive supply agreement with Brightstar Corporation;
$23 million in initial Motorola brandedFX800t purchase orders;
Successful transfer of Motorola branded FX800t manufacturing to Mexico to increase gross margins for 2003;
Significant new customer relationships including Brightstar Corporation, Directed Electronics Inc., and Datacom Wireless Corporation;
Expanded long term relationship with RHS Inc.;
More than a dozen new product releases;
Strong technology investment;
Improvement in Wireless Business Unit gross margins from negative $1M in 2001 to positive $3.4M in 2002.
For the year ended December 31, 2002, CSI Wireless achieved record revenues of $54,136,000, a 32% increase as compared with revenues of $40,961,000 in 2001. The Company also posted increased gross margins in 2002 of $15,898,000, as compared with $13,114,000 in 2001. The increased margin contribution was primarily due to the large revenue contributions from the Wireless Business Unit, including non-recurring engineering fees and royalties. As a percentage of revenues, gross margins in 2002 were 29% as compared with 32% in 2001.
Before investment in research in development costs, the Company had income of $4,192,000 in 2002 as compared with a loss of $860,000 in 2001. After investment in research and development, CSI Wireless reported a much-reduced negative EBITDA of $1,369,000 in 2002, as compared with negative EBITDA of $4,384,000 in 2001. After depreciation and amortization, the Company reported a net loss in 2002 of $3,857,000, or ($0.20) per share, as compared with a net loss (prior to goodwill amortization) of $6,874,000, or ($0.39) per share, in 2001. Improvements in the bottom-line numbers were related to the increased revenue and gross margins for the Wireless Business Unit.
"Strong sales of our new Motorola branded FX800t fixed wireless telephone have increased our revenues to new levels," said Stephen Verhoeff, President and CEO of CSI Wireless. "Though gross margins on our initial shipments of the fixed wireless phone were small, we have been able to increase our profitability on this contract by successfully transferring final assembly to Mexico and will see the impact on the bottom line in the first-quarter results. Cost reduction programs for this product are anticipated to result in further margin improvements during 2003."
For the three months ended December 31, 2002, CSI Wireless reported a 106% increase in revenues to $20,663,000, compared with revenues of $10,027,000 for the same period of 2001. Sales of the Company's new Motorola-branded FX800t fixed wireless telephone account for the increase in revenues. Total expenses (before investment in R&D and special items) for the fourth quarter of 2002 were $2,951,000, as compared with $2,696,000 in the fourth quarter of 2001, calculated prior to goodwill amortization. CSI Wireless reported negative EBITDA of $678,000 for the three months ended December 31, 2002, compared with negative EBITDA of $1,794,000 for the same period in 2001. The Company reported a smaller net loss for the quarter of $1,613,000, or ($0.08) per share compared with a net loss, before amortization of goodwill, of $2,546,000, or ($0.14) per share in the fourth quarter of 2001.
CSI Wireless continued management of its balance sheet during the fourth quarter and closed an offering of 3,287,309 Units at $1.30 each for gross proceeds of approximately $4.3 million in November. Each Unit is comprised of one CSI common share and one-half of one warrant to purchase a CSI common share at a price of $1.80 per share until February 23, 2004. The Company's other long-term debt was reduced by $1,136,000 in agreement with the terms of the borrowing agreement.
Strong Demand for CSI's Fixed Wireless Telephone
Sales of the Company's three-watt, digital, fixed-base wireless telephone were significant in the fourth quarter of 2002 and have remained strong in the first quarter of 2003. The telephone, developed and supplied by CSI Wireless, is being distributed in Latin America by Brightstar Corporation. Brightstar is a Motorola licensee and is branding the phones as the Motorola FX800t.
In January of 2003, CSI Wireless announced it had received a second FX800t purchase order from Brightstar valued at more than $12.5 million. The additional order was placed to meet ongoing demand, as an initial $20-million order from Brightstar from September 2002 was being completed in the first quarter of 2003. Brightstar has been meeting the purchase order amounts of $12.5M per quarter that are required in its agreement with CSI Wireless in order to maintain exclusive rights to the FX800t. CSI Wireless reports that demand has remained strong for the FX800t and is expected to contribute significantly to revenues throughout 2003.
By the end of November 2002, CSI Wireless transferred all final assembly of the Motorola FX800t from Thailand to a facility in Mexico. The transfer to Mexico was important in meeting the end customer's high volume requirements and in removing international shipping tariffs that were reducing profit margins.
"We are now shipping out of the Mexican facility on a consistent basis at a high volume level that meets our customer's needs on a much more cost effective basis," said Mr. Verhoeff.
New Product Development
CSI maintained an important focus on new product engineering throughout the year, investing $8,049,124 in research and development in 2002, compared to $8,142,396 in 2001. These significant investments resulted in the introduction of more than a dozen leading edge technologies and products during the year. In addition to the exciting new Motorola FX800t, which was primarily designed for Central and South American markets, some of CSI Wireless' other product releases in 2002 included:
Asset-Link 100 and Asset-Link 200
The first two members of CSI's growing family of innovative and cost-effective fleet-tracking, safety and security Telematics products were released in 2002. Asset-Link(tm) 100 and Asset-Link(tm) 200 are rugged, compact Telematics products for use with the cellular AMPS control channel networks throughout North America and parts of Central and South America. The Asset-Link 200, in addition to offering Microburst capability, offers a Circuit Switched Advanced Mobile Phone Services (AMPS) capability. In the fourth quarter, the Company's release of Driver-Link(tm) added voice capability. Future additions to the Asset-Link family will add other wireless protocols, including GSM (the Global System for Mobile Communications).
Vector
CSI's new Vector line of GPS heading sensors maintain highly accurate headings for marine navigation at substantially lower cost than traditional gyro compasses or competing GPS systems.
Seres "Smart Antenna"
A high-performance GPS/SBAS combined receiver and antenna system for Precision Agriculture, GIS & Mapping, and other markets.
Outback Hitch for RHS Inc.
The Outback Hitch uses GPS signals to keep agricultural implements precisely on track. The patent-pending Outback Hitch is an accessory to the Outback S® - CSI Wireless' popular, low-cost guidance system that features a highly accurate Differential GPS and Wide Area Augmentation System (WAAS) receiver, guidance system and Steering Guide(tm). CSI Wireless manufactures the Outback Hitch, Outback S and Outback 360 exclusively for RHS Inc., which has global distribution rights for the entire Outback product line. In October, RHS placed more orders for the Outback S that will contribute approximately $6 million to CSI Wireless in 2003.
"These new products expand our market opportunities and bode well for our growth and competitive position now and in the future," stated Mr. Verhoeff. "Combined, we expect these new products to generate significant new revenues in 2003."
Growing Demand and Customer Opportunities
CSI Wireless closed 2002 with the signing of a Supply Agreement with Datacom Wireless Corporation to supply Asset-Link 100 Telematics hardware for Datacom's MOBILUS stolen vehicle recovery system, a sophisticated and cost-effective system designed to detect theft, recover stolen vehicles, and provide popular telematics services via the phone or Internet in real time throughout North America. In January of 2003, one of the first MOBILUS-equipped vehicles, a Jeep Grand Cherokee, was stolen during a Rolling Stones concert in Montreal. Police found the vehicle only 20 minutes after the launch of the recovery efforts, enabling it to be recovered without any damages. Many insurance companies now offer car and truck owners discounts if they install the MOBILUS system.
In early 2003, CSI Wireless announced that it has become the exclusive Telematics hardware supplier to Directed Electronics, Inc., the world's largest after-market vehicle security and remote-start supplier, with sales in more than 46 countries. CSI is providing a unique Telematics product that serves as the enabling technology for Directed's new Directrack(tm) stolen vehicle tracking system. Directrack will be sold under four of Directed's biggest-selling brands - Viper, Python, Clifford and Automate - through the company's network of more than 5,000 dealers. By mid-2003, CSI Wireless expects initial product to be on the shelves of Directed's largest retail dealers, including chains such as Best Buy and Circuit City in the U.S., and Future Shop and Best Buy in Canada.
"With the momentum that we are seeing from customers such as Datacom and Directed Electronics, we believe that 2003 is shaping up to be another record year for CSI Wireless", Mr. Verhoeff said."
Corporate Governance
As part of the Company's commitment to good corporate governance practices, including the need for the boards of publicly traded companies to maintain a significant degree of independence from the management teams they oversee, CSI Wireless announced that its board of directors has appointed Michael Lang as Chairman of the Board of Directors on non-executive basis. The chairman position was previously held by Stephen Verhoeff, the Company's founder, President and CEO. Mr. Lang has been an independent (non-employee) member of the board for several years and has been chairing the Audit and Compensation Committees of CSI Wireless. Stephen Verhoeff remains an active director of the seven-member board.
Mr. Verhoeff stated, "I initiated this decision so that no single individual holds all three of CSI's primary titles - chairman, president and CEO - and so that the chairman is an independent non-employee. Investors recognize the value of a board's independence from management as an important component of a public company today and we fully support this. Michael has provided years of valuable contribution as a CSI director and I am very pleased to have him appointed as our chairman."
Management Change
CSI Wireless also reported today that Director and Chief Technology Officer, Hamid Najafi, will transition to a consulting role with the Company from his current full-time staff position. Mr. Najafi will retain his Director position and will remain an officer with CSI Wireless to maintain close working and personal relationships with the management team.
"As a valuable Director and technical consultant, we will continue to benefit from Hamid's knowledge and experience," said Verhoeff. "Hamid has done a fantastic job of assembling a top-notch engineering team in our California office that has made our company an innovation leader."
In conjunction with Mr. Najafi's new role, on March 4, 2003 Hamid Najafi, the Company and the Company's wholly owned subsidiary, CSI Wireless LLC (the "Lender") entered into a share purchase sale and loan repayment agreement at the purchase price prescribed by the exempt issuer bid rules under the Securities Act (Alberta). In accordance with this agreement, Mr. Najafi utilized the proceeds from the share sale to repay the U.S.$750,000 loans received from the Lender in 2001 and 2002. Following the application of the proceeds to the Loans plus accrued interest, approximately U.S.$99,000 remained outstanding which the Lender subsidiary has agreed to forgive. 700,000 common shares purchased by the Company will be returned to treasury for cancellation. Advance notice of the transaction was not disseminated as the effect of the transaction on the Corporation's business is anticipated to be minimal.
CSI Amends Price on CIBC Warrants
CSI Wireless has amended the exercise price of 250,000 warrants previously issued to Canadian Imperial Bank of Commerce ("CIBC") in connection with fees associated with debt facilities provided through CIBC. The exercise price of the warrants will be reduced from $3.10 per share to $2.50 per share effective March 12, 2003. The expiry date for the exercise of the warrants remains September 29, 2005.
Conference Call - Wednesday, March 5, 2003 at 11:00 AM (Eastern Standard Time)
A Web cast conference call for shareholders, analysts and other members of the investment community has been scheduled for Wednesday, March 5, 2003, at 11:00 AM (Eastern Standard Time) to discuss the financial results and provide updates on operations. To participate, dial 1-800-814-4861 approximately 10 minutes prior to the call, or go to the CSI Wireless Web site's Investor Relations section at http://www.csi-wireless.com/investors/conference_calls.shtml.
The Web cast will also be archived there for later reviewing, and will be available from 1:00 pm EST, Wednesday, March 5, until 11:59 pm EST Wednesday, March 12, at 1-877-289-8525. Enter the reservation number 240567# to listen to the recording.
About CSI Wireless
With offices in Calgary, Silicon Valley, and Phoenix, CSI Wireless (TSX:CSY) designs and manufactures innovative, cost-effective, wireless and GPS products for mobile and fixed applications in the agriculture, marine, automotive and other markets. Through the integration of GPS and wireless, CSI has begun serving several emerging high-growth markets including Fleet Management, Asset Tracking, Stolen Vehicle Recovery and Telematics applications. The Company owns several patents and intellectual property relating to wireless and GPS technologies. CSI Wireless has licensed its cellular technology to GPS, cellular handset, and chipset manufacturers. The Company's common shares trade on The Toronto Stock Exchange under the trading symbol "CSY", with approximately 22 million outstanding. For online information about CSI Wireless, go to www.csi-wireless.com
For more information, please contact:
Stephen Verhoeff
President & CEO
CSI Wireless Inc.
403-259-3311
sverhoeff@csi-wireless.com
Jeff Adams
Public Relations Manager
CSI Wireless Inc.
403-259-3311 / 403-615-8747 (cell)
jadams@csi-wireless.com
Cory Pala
Investor Relations
E-vestor Communications Inc.
416-657-2400
cpala@e-vestorcom.com
The above disclosure contains certain forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond CSI Wireless's control, including: the impact of general economic conditions, industry conditions, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to the announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. CSI Wireless's actual results, performance or achievement could differ materially from those expressed in, or implied by these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceed, that CSI Wireless will derive therefrom.
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