ISCO International Reports Record Revenue, Net Operating Income and Positive Cash Flow in Its Financial Results for the Third Quarter 2006
ELK GROVE VILLAGE, IL -- 10/26/2006 -- The third quarter of 2006 continued
the trend of significant improvement in business results for ISCO
International, Inc. (AMEX: ISO), a leading global supplier of
radio-frequency management and interference-control systems for the
wireless telecommunications industry, Chief Executive Officer John Thode
announced. ISCO posted higher revenue through September 2006 than had been
achieved during all of 2005.
Thode added that 2005 had seen the best four revenue quarters in company
history, now exceeded twice in 2006 and on a cumulative basis with a
quarter remaining in the year. Third quarter performance included a
positive net income from operations and a positive contribution to overall
cash flow of $0.5 million (see non-GAAP measure discussion below). He also
announced progress in several areas that should further strengthen ISCO's
competitive position in 2007.
Third Quarter
ISCO International's revenue for the third quarter of 2006 more than
tripled to $6.4 million from $2.0 million in third quarter of 2005. ISCO
entered the fourth quarter with approximately $1 million in order backlog,
as compared to negligible backlog at the same point last year. Net loss
for the third quarter 2006 improved by approximately 70 percent to $0.2
million from the $0.6 million loss of the third quarter 2005.
Excluding non-cash items, third quarter 2006 showed a profit of $0.5
million. Of the $0.2 million in third quarter net loss, non-cash items
(including certain equity related compensation charges, depreciation and
amortization, and accrued interest) accounted for $0.7 million, or $0.5
million more than the entire net loss (see non-GAAP discussion measure
below).
Product gross margins remained consistent at 40% for the third quarter and
first nine months of 2006. While still far higher than industry standards,
margins were below the 62% achieved during the third quarter 2005 and 50%
for the first nine months of 2005.
For the nine months ended September 30, 2006, revenue was $11.2 million, up
from $7.8 million for the same period of 2005, with a net loss of $3.1
million and $1.9 million, respectively. The combination of non-cash items
including certain equity-related compensation charges, patent-related
expenses, depreciation and amortization and accrued interest was
approximately $1.8 million for each nine month period.
"We have previously shared the expectation that the first half of 2006
would be similar to prior performance, with the second half accelerating to
a higher level," Thode said. "With the Company's strong Q3 revenue growth
we covered all of our operating and development costs, plus a portion of
our financing costs, and generate a positive cash flow -- all during a time
of significant challenge for many in the industry."
Looking beyond the end of 2006, Thode said that the Company is continuing
to execute the strategic plan it put in place 18 months ago. The plan
called for significantly expanding the Company's customer touch points to
identify and target specific growth opportunities in its core 'customized'
RF after-markets products segment while simultaneously developing a highly
differentiated and defensible portfolio of software-controlled, digital
adaptive interference management products.
Thode added, "We have shared our expectations that this strategy would
enable us to significantly grow the Company's top and bottom line over the
next several years and it is exciting to begin to see the results. While
it will continue to be an ongoing balance, through the end of 2007, to
achieve our sequential growth objective while simultaneously investing to
complete the transformation of our business, we believe we have
demonstrated in Q3 that we are up to the challenge."
Investor Call
ISCO will hold its quarterly conference call on Thursday, October 26th at
5:00 pm eastern. To participate in the call domestically, dial
1-800-374-0113. International callers should dial 1-706-758-9607. The
conference name is "ISCO." The call will be replayed for 30 days at
1-800-642-1687 (or 1-706-645-9291 for international callers), with a pass
code of 9399407#.
Following opening comments, a short question and answer session will be
held. Participants are asked to dial in 10 minutes prior to the beginning
of the call. The call will be webcast live and then archived for 30 days.
ISCO will provide a link to the call on its web site (www.iscointl.com) for
both the live and archived versions. A copy of the webcast link will be
provided at www.iscointl.com and is copied below.
Webcast: http://www.b2i.us/external.asp?b=826&id=32477&from=du&L=e
Use of Non-GAAP Financial Information
To supplement our financial results presented in accordance with GAAP, we
use the following non-GAAP financial measure: GAAP net income excluding
non-cash charges for patent amortization, depreciation and other
amortization, equity compensation, and accrued interest expense. We present
this non-GAAP financial measure as a supplement in reporting our financial
results to provide investors with an additional tool to evaluate our
operating results. This non-GAAP financial measure should not be considered
in isolation or as a substitute for comparable GAAP measures, and should be
read only in conjunction with our consolidated financial statements
prepared in accordance with GAAP.
Our management uses the above non-GAAP financial measure internally to
understand, manage and evaluate our business, particularly on a cash flow
basis. Our management believes it is useful for itself and investors to
review, as applicable, both GAAP information, which includes employee
stock-based compensation expense for example, and the non-GAAP measure
which excludes this item, in order to assess the performance of our core
continuing businesses and for planning and forecasting in future periods.
This non-GAAP measure is intended to provide investors with an
understanding of our operational results and trends that more readily
enables them to analyze our base financial and operating performance and
facilitate period-to-period comparisons and analysis of operation trends.
Our management believes this non-GAAP financial measure is useful to
investors in allowing for greater transparency with respect to supplemental
information used by management in its financial and operational decision
making. Management sets operating plans and is evaluated on both net
result as well as cash flow and EBITDA (earnings before interest, taxes,
depreciation and amortization), and thus uses this non-GAAP measure
internally on a regular basis.
Safe Harbor Statement
Because the Company wants to provide investors with meaningful and useful
information, this news release contains, and incorporates by reference,
certain "forward-looking statements" that reflect the Company's current
expectations regarding the future results of operations, performance and
achievements of the Company. The Company has tried, wherever possible, to
identify these forward-looking statements by using words such as
"anticipates," "believes," "estimates," "looks," "expects," "plans,"
"intends" and similar expressions. These statements reflect the Company's
current beliefs and are based on information currently available to it.
Accordingly, these statements are subject to certain risks, uncertainties
and contingencies, which could cause the Company's actual results,
performance or achievements to differ materially from those expressed in,
or implied by, such statements. These factors include, among others, the
following: market acceptance of the Company's technology; the spending
patterns of wireless network operators in connection with the build out of
2.5G and 3G wireless systems; the Company's ability to obtain additional
financing in the future; the Company's history of net losses and the lack
of assurance that the Company's earnings will be sufficient to cover fixed
charges in the future; uncertainty about the Company's ability to compete
effectively against better capitalized competitors and to withstand
downturns in its business or the economy generally; continued downward
pressure on the prices charged for the Company's products due to the
competition of rival manufacturers of front-end systems for the wireless
telecommunications market; the timing and receipt of customer orders; the
Company's ability to attract and retain key personnel; the Company's
ability to protect its intellectual property; the risks of foreign
operations and the risks of legal proceedings. A more complete description
of these risks, uncertainties and assumptions is included in the Company's
filings with the Securities and Exchange Commission, including those
described under the heading "Risk Factors" in the Company's Annual Report
on Form 10-K and in the Registration Statement on Form S-3 filed by the
Company with the Securities and Exchange Commission on August 14, 2006.
You should not place undue reliance on any forward-looking statements. The
Company undertakes no obligation to release publicly the results of any
revisions to any such forward-looking statements that may be made to
reflect events or circumstances after the date of this Report or to reflect
the occurrence of unanticipated events.
Three Months Ending
September 30, September 30,
2006 2005
------------- -------------
UNAUDITED
Net sales $ 6,433,000 $ 2,037,000
Costs and expenses:
Cost of sales 3,850,000 772,000
Research and development 452,000 420,000
Selling and marketing 989,000 450,000
General and administrative 1,094,000 824,000
------------- -------------
Total costs and expenses 6,385,000 2,467,000
Operating income/(loss) $ 48,000 $ (430,000)
Other income (expense):
Interest income 46,000 29,000
Interest expense (261,000) (196,000)
------------- -------------
Total other income (expense) $ (215,000) $ (167,000)
Net loss $ (167,000) $ (596,000)
Basic and diluted loss per common
share $ (0.00) $ (0.00)
Weighted average number of common
shares outstanding 186,105,000 176,030,000
Nine Months Ending
September 30, September 30,
2006 2005
------------- -------------
UNAUDITED
Net sales $ 11,205,000 $ 7,815,000
Costs and expenses:
Cost of sales 6,739,000 3,888,000
Research and development 1,390,000 1,321,000
Selling and marketing 2,472,000 1,262,000
General and administrative 3,154,000 2,588,000
------------- -------------
Total costs and expenses 13,755,000 9,059,000
Operating loss $ (2,550,000) $ (1,244,000)
Other income (expense):
Interest income 98,000 37,000
Interest expense (646,000) (682,000)
------------- -------------
Total other income (expense) $ (548,000) $ (645,000)
Net loss $ (3,098,000) $ (1,889,000)
Basic and diluted loss per common
share $ (0.02) $ (0.01)
Weighted average number of common
shares outstanding 184,705,000 167,159,000
Selected Balance Sheet Information: (unaudited)
September 30, December 31,
2006 2005
------------- -------------
Cash and equivalents $ 4,173,000 $ 3,486,000
Working Capital excl. Debt $ 10,253,000 $ 6,397,000
Total Assets $ 27,468,000 $ 22,906,000
Debt, short term and long term,
including related accrued interest $ 16,167,000 $ 10,520,000
Stockholders' Equity $ 8,720,000 $ 10,531,000