3/15/2005 4:12:00 PM
Company reports Q4 up sequentially 22% over Q3; year-end backlog of $7.1 million; expects record first quarter revenue of $4.2 million
BOTHELL, Wash.–(BUSINESS WIRE)–March 15, 2005–Microvision, Inc. (NASDAQ:MVIS), a leader in light scanning
technologies, today reported financial results for the fourth quarter
and full year of 2004.
Consolidated revenue for the twelve months ended December 31, 2004
was $11.4 million compared to $14.7 million for the same period in
2003. Consolidated revenue for the fourth quarter of 2004 was $3.3
million compared to $4.0 million for the same period in 2003 and a
sequential increase of 22% over the $2.7 million reported for the
third quarter of 2004.
Consolidated 2004 revenue was comprised of $2.6 million in product
revenue and $8.8 million in contract revenue compared to $1.1 million
in product revenue and $13.5 million in contract revenue for 2003.
Consolidated revenue includes revenue attributable to Lumera of
$686,000 for 2004 and $1.7 million for 2003. Excluding Lumera,
contract revenue declined by $3.7 million in 2004 due to the
completion of a significant commercial contract in the third quarter
of 2004 and the protracted delay in the award of certain government
contracts. Product revenue for 2004 was comprised of $864,000 in sales
of the Nomad system and $1.7 million in sales of the Flic bar code
scanner.
Consolidated revenue for the fourth quarter of 2004 included
$763,000 in product revenue and $2.6 million in contract revenue
compared to $812,000 in product revenue and $3.2 million in contract
revenue for the same period last year, which included $284,000
attributable to Lumera. Following Lumera’s initial public offering in
July 2004, the company consolidates Lumera’s financial results under
the one line equity method.
The company reported a record year-end backlog of $7.1 million,
its highest quarterly backlog in more than 3 years. As a result of the
record backlog, additional contract bookings in the first quarter of
2005 and sales of the Nomad system and the Flic bar code scanner, the
company announced that it expects first quarter 2005 revenue to exceed
$4.2 million, an increase of more than 27% over the fourth quarter of
2004 and more than 55% over the first quarter of 2004 (excluding
$316,000 from Lumera).
The company also offered preliminary guidance for the second
quarter indicating another sequential increase in revenue of 15 to 20%
for the second quarter of 2005.
For the twelve months ended December 31, 2004, Microvision
reported a net loss available for common shareholders of $33.5 million
or $1.56 per share compared to a net loss available for common
shareholders of $26.2 million or $1.46 per share for the same period
in 2003. For the three months ended December 31, 2004, the company
reported a consolidated net loss available for common shareholders of
$8.2 million or $.38 per share compared to a net loss available for
common shareholders of $5.2 million or $.26 per share for the same
period in 2003. Lumera accounted for $2.0 million of the increased
loss in 2004 from 2003. The remaining portion of the increased loss in
the fourth quarter and fiscal year 2004 was due largely to the
combined effect of lower revenue, reduced margins on product and
contract revenue and inventory write-offs associated with product
design improvements aimed at reducing product cost and improving
reliability for both the Nomad system and the Flic scanner.
Gross margin
Contract margins were 37% in 2004 compared to 56% in the same
period in 2003. The decrease is due primarily to lower contract
activity and an unusually strong margin on a large commercial
development contract in 2003. Product margins in 2004 were negative
due primarily to the move to full absorption of manufacturing overhead
for the Nomad system including inventory write offs of $1.2 million.
Prior to October 2004, the company classified production cost in
excess of revenue on the Nomad system as research and development
expense. In October of 2004, the company determined that Nomad design
and manufacturing processes were sufficiently mature to support full
absorption of manufacturing overhead cost into cost of goods. The
company stated that it expects contract and product margins to improve
significantly and inventory write offs to be significantly lower in
2005.
Operating expenses
For the year 2004, total operating expenses, including Lumera,
were down $5.2 million when compared to 2003. Excluding Lumera, total
operating expenses were $32.1 million in 2004, down $364,000 from
2003. The company expects operating expenses to remain at, or near,
current levels in 2005. During 2004, the company reduced research and
development expense in order to support increased sales and marketing
activity.
The company ended the year with $1.3 million in cash and cash
equivalents. On March 11, the company closed a $10 million private
placement of exchangeable convertible notes and warrants.
“Our primary focus continues to be on ramping revenue,” stated
Rick Rutkowski, Microvision CEO. “While operating results for 2004
were below expectations, we made important progress in the second half
of 2004 to get contract bookings and billings ‘back on track’
following weakness in the first half of the year. Revenue for Q4 of
2004 increased sequentially by 22% versus the prior quarter. This
trend is accelerating in the first quarter of 2005. We expect first
quarter revenue to increase sequentially by more than 27% to exceed
$4.2 million. This would allow us to begin the year with a record
first quarter. Cash flow for the quarter is expected to be especially
strong as well.
“An early look at Q2 suggests that this pattern of sequential
growth could continue.
“During the second half of 2004 we also accomplished a number of
important objectives in product development and production that set
the stage for an aggressive growth plan going forward.
“We have two primary revenue objectives for 2005: To restore and
sustain contract bookings and billings to historic levels and to
aggressively grow product revenue. We are in a very strong position
relative to the first of these goals having booked our largest
contract award in the company’s history at the end of 2004, and ending
the year with a record backlog. It’s also important to note that the
total potential value of this contract including options and license
fees exceeds $12 million giving us some visibility on potential
contract revenue out through the first half of 2006.
“With respect to product revenue, our emphasis continues to be on
developing channels and increasing channel presence for both the Nomad
Expert Technician System (Nomad 2100) and the Flic Barcode Scanner. We
have had good success with early market validation of both products
and recent and pending distribution partnerships and OEM relationships
hold great promise for the short and long term.
“In particular, a key strategic goal during the second quarter
will be to finalize a significant distribution agreement and one or
more co-marketing agreements in the automotive service segment for the
Nomad 2100 system. We believe that such arrangements will allow us to
grow sales in the segment by increasing the number of sales people and
by integrating the product with software and systems to provide a
complete solutions offering. We believe that we are well positioned to
realize this goal.
“We have also made important inroads in the military maintenance
market and in factory automation and plant maintenance applications.
The Nomad is currently in trial and evaluation phase with several of
the world’s leading manufacturing companies as both a solution for
increasing uptime of capital plant and as a process control tool.
“Our outlook for a version of the Nomad, Nomad 2500, for
industrial and military use is improving. We see growing interest and
demand for the product among mechanized units and anticipate a
contract award possibly during the second quarter. We believe that the
product is well positioned strategically with respect to military
requirements, and that a substantial market opportunity exists. We
were recently awarded a $730,000 award from the U.S. Army to begin
work on the development of a full color, fully daylight readable
helmet mounted display. Our continuing development effort on the
Virtual Cockpit is also highly synergistic with future product
requirements.
“Flic sales in the fourth quarter were weaker than expected
principally due to a change in product sales management. The new team
has achieved excellent results in a short time during the first
quarter, primarily focused on restoring sales productivity to existing
channels. We continue to expect that new OEM and reseller channel
partners targeting the broader business market and retail office
supplies channel with software bundles and web-based ASP applications
will become a greater factor and accelerate growth in the second half
of this year, and that we have some exceptional long range
opportunities for which the product is ideally suited.
“Solutions incorporating Flic scanners are targeted at a full
range of asset tracking, inventory management and mobile data capture
applications using manual data entry today — a very large market that
is underserved by suppliers of bar code solutions.
OEM products and product pipeline
“We achieved a major milestone at the end of last year, with our
largest contract award ever, a $6.2 million contract with Ethicon Endo
Surgery, one of the world’s largest developers of advanced surgical
instruments and medical devices. Perhaps more significant, however is
that the contracts three phases (including a $5.5 million option in
planned development) are structured to support development all the way
through to commercial production, and to allow Microvision to be the
exclusive supplier of the product.
“Our objective is to achieve similar kinds of ‘design wins’
relative to additional OEM products currently in development. These
include proprietary solutions for automotive Head Up Display (HUD),
display solutions for consumer electronics applications including
digital cameras, portable media devices and gaming systems, and our
laser printer engine.
“During 2004, we have made significant progress in each of these
areas and are well positioned to build on this progress toward the
objective of volume commercial production.
“In July, our former subsidiary Lumera (NASDAQ:LMRA) completed its
IPO. We currently own approximately 5.5 million shares of the
company’s stock giving us a significant stake in an emerging
nanotechnology company.
“2004 provided the foundation that has enabled us to get off to
our fastest start ever. We believe that 2005 can be a breakout year
for the company as our products begin to ramp in the market and move
toward design wins and other significant progress on several large
market opportunities.”
Conference Call
Microvision will host a conference call to discuss its 2004
financial results at 4:30 p.m. ET today. Participants may join the
conference call by dialing 800-659-1966 (for U.S. participants) ten
minutes prior to the start of the conference. International
participants can dial 617-614-2711. The conference passcode is
72536565. Additionally, the call will be broadcast over the Internet
and can be accessed from the company’s web site at
www.microvision.com. A telephone replay of the call will be available
through 6:30 p.m. ET March 12, 2005 and can be accessed by dialing
888-286-8010 (for U.S. participants) or 617-801-6888 (for
international participants). The conference passcode for the replay is
15714223. Also, a replay of the conference call will be available on
the company’s web site.
About Microvision: www.microvision.com
Headquartered in Bothell, Wash., Microvision Inc. is the world
leader in the development of high-resolution displays and imaging
systems based on the company’s proprietary silicon micro-mirror
technology. The company’s technology has applications in a broad range
of military, medical, industrial, professional and consumer products.
Forward-Looking Statements Disclaimer
Certain statements contained in this release, including expected
results, projections of future revenues, plans for product development
and production volume, future development contracts and commercial
arrangements, growth in demand, future product benefits, future
operations and the benefits of our equity interest in Lumera, as well
as statements containing words like “believes,””estimate,” “expects,”
“anticipates,” “target,” “plans,” “will”, “could” and other similar
expressions, are forward-looking statements that involve a number of
risks and uncertainties. Factors that could cause actual results to
differ materially from those projected in the company’s
forward-looking statements include the following: our ability to raise
additional capital when needed; market acceptance of our technologies
and products; our financial and technical resources relative to those
of our competitors; our ability to keep up with rapid technological
change; our dependence on the defense industry and a limited number of
government development contracts; government regulation of our
technologies; our ability to enforce our intellectual property rights
and protect our proprietary technologies; the ability to obtain
additional contract awards; the timing of commercial product launches
and delays in product development; the ability to achieve key
technical milestones in key products; dependence on third parties to
develop, manufacture, sell and market our products; potential product
liability claims, risks related to Lumera’s business and the market
for its equity and other risk factors identified from time to time in
the company’s SEC reports and other filings, including the Company’s
Annual Report on Form 10-K filed with the SEC. Except as expressly
required by the federal securities laws, we undertake no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events, changes in circumstances or
any other reason.
Microvision, Inc.
Consolidated Balance Sheet
(In thousands)
(Unaudited)
December 31, December 31,
2004 2003
------------ ------------
Assets
Current Assets
Cash and cash equivalents $ 1,268 $ 10,700
Investment securities, available-for-
sale - 11,078
Accounts receivable, net of allowances 5,227 1,896
Costs and estimated earnings in excess
of billings on uncompleted contracts 597 664
Inventory 3,167 331
Other current assets 1,293 1,684
------------ ------------
Total current assets 11,552 26,353
Investment in Lumera 10,201 -
Property and equipment, net 2,318 5,958
Restricted investments 1,238 1,269
Other assets 229 338
------------ ------------
Total assets $ 25,538 $ 33,918
============ ============
Liabilities, Mandatorily Redeemable
Convertible Preferred Stock and
Shareholders' Equity
Current Liabilities
Accounts payable $ 2,624 $ 1,223
Accrued liabilities 4,538 5,164
Allowance for estimated contract losses 53 -
Billings in excess of costs and
estimated earnings on uncompleted
contracts 3,318 53
Current portion of capital lease
obligations 39 62
Current portion of long-term debt 77 70
------------ ------------
Total current liabilities 10,649 6,572
Research liability, net of current portion - 1,948
Capital lease obligations, net of current
portion 9 34
Long-term debt, net of current portion 22 99
Deferred rent, net of current portion 21 107
Other long-term liabilities - 16
------------ ------------
Total liabilities 10,701 8,776
------------ ------------
Commitments and contingencies - -
Minority interest - 1,847
Mandatorily redeemable convertible
preferred stock 7,647 -
------------ ------------
Shareholders' Equity
Common stock at par value 22 21
Additional paid-in capital 197,037 180,354
Deferred compensation (305) (846)
Subscriptions receivable from related
parties (166) (166)
Receivables from related parties, net (1,823) (1,823)
Accumulated other comprehensive income - 25
Accumulated deficit (187,575) (154,270)
------------ ------------
Total shareholders' equity 7,190 23,295
------------ ------------
Total liabilities, mandatorily
redeemable convertible preferred
stock and shareholders' equity $ 25,538 $ 33,918
============ ============
Microvision, Inc.
Consolidated Statement of Operations
(In thousands, except earnings per share data)
(Unaudited)
Three months ended Twelve months ended
December 31, December 31,
------------------ -------------------
2004 2003 2004 2003
------- ------- -------- --------
Contract revenue $ 2,554 $ 3,227 $ 8,821 $ 13,517
Product revenue 763 812 2,597 1,135
------- ------- -------- --------
Total revenue 3,317 4,039 11,418 14,652
------- ------- -------- --------
Cost of contract revenue 1,562 1,181 5,539 5,988
Cost of product revenue 1,679 756 3,868 1,058
------- ------- -------- --------
Total cost of revenue 3,241 1,937 9,407 7,046
------- ------- -------- --------
Gross margin 76 2,102 2,011 7,606
------- ------- -------- --------
Research and development
expense 2,081 4,913 14,709 23,316
Sales, marketing, general and
administrative expense 4,742 3,541 19,228 15,827
Non-cash compensation expense 290 695 2,118 2,156
------- ------- -------- --------
Total operating
expenses 7,113 9,149 36,055 41,299
------- ------- -------- --------
Loss from operations (7,037) (7,047) (34,044) (33,693)
Interest income 48 91 272 381
Interest expense (14) (16) (151) (51)
Gain (loss) on disposal of
fixed assets - 3 (1) 36
Realized gain on sale of
investment securities - - - 39
------- ------- -------- --------
Loss before minority interests
and equity in losses of
Lumera $(7,003) $(6,969) $(33,924) $(33,288)
Minority interests in loss of
consolidated subsidiary - 1,759 2,438 7,125
Equity in losses of Lumera (961) - (1,711) -
------- ------- -------- --------
Net loss $(7,964) $(5,210) $(33,197) $(26,163)
Less: Stated dividend on
mandatorily redeemable
convertible preferred stock (88) - (108) -
Non-cash accretion on
preferred stock (195) - (238) -
------- ------- -------- --------
Net loss available for common
shareholders $(8,247) $(5,210) $(33,543) $(26,163)
======= ======= ======== ========
Net loss per share before non-
cash compensation expense $ (0.37) $ (0.23) $ (1.46) $ (1.34)
Non-cash compensation expense (0.01) (0.03) (0.10) (0.12)
------- ------- -------- --------
Net loss per share - basic and
diluted $ (0.38) $ (0.26) $ (1.56) $ (1.46)
======= ======= ======== ========
Weighted-average shares
outstanding -
basic and diluted 21,508 20,194 21,493 17,946
======= ======= ======== ========
CONTACT: Microvision, Inc.
Brian Heagler, 425-415-6794 (Investors)
Matt Nichols, 425-415-6657 (Media)
SOURCE: Microvision, Inc.