Miranda reports results for the fourth quarter 2006

2007-02-20

TSX - Toronto Stock Exchange · Gold · Canada

MONTREAL, Feb. 19 /CNW Telbec/ - Miranda Technologies Inc. (TSX: MT), a global developer, manufacturer and marketer of high-performance hardware and software for the television broadcast industry, today reported results for the fourth quarter and full fiscal year ended December 31, 2006.

Highlights

Sales of $28.8 million for the quarter, up 5% compared with the fourth quarter of 2005 Net income of $7.1 million for the quarter, up 45% compared with the fourth quarter of 2005 Fully diluted EPS for the quarter at $0.28, compared with $0.23 for the fourth quarter of 2005 Good results for the Vertigo range of products for the fourth quarter and delivery of the first Kaleido-X For fiscal 2006, sales of $106.7 million, up 11% compared with 2005 For fiscal 2006, net income of $19 million, up 16% compared with 2005

"We are satisfied with the Miranda results for the fourth quarter and for fiscal 2006," said Strath Goodship, the President and CEO of Miranda. "The company has experienced good overall organic growth and we are continuing to innovate by introducing key products to the market. The acquisition of VertigoXmedia has strengthened our offering, as was demonstrated by the results obtained during the last quarter of 2006." During the fourth quarter of 2006, sales totalled $28.8 million, for an increase of 5% when compared with the same period in 2005 and 13% when compared with the preceding quarter. Revenue for the year reached $106.7 million, an increase of $10.2 million or 11% relative to 2005. The strength of the Canadian dollar in 2006, when compared with American, European and Japanese currencies, had the effect of reducing our annual sales by $6.7 million, corresponding to 7% of 2005 revenue. When we compare sales for the fourth quarters of 2005 and 2006 by geographic segment, we see growth of $3.1 million or 21% for the Americas, an increase of $0.5 million or 6% on sales in Europe, but a decline of $2.2 million or 49% in Asia. It should be noted that the fourth quarter 2005 was exceptionally high for Asia due to several large contracts delivered during that period. "We are disappointed by our results in Asia. This market has been sporadic with severe pricing pressure. In response, we are continuing to restructure our Asian organization and are adding two additional senior sales executives in the belief that long-term prospects warrant the investment", said Mr. Goodship. The allotment of quarterly sales by the Corporation is 64% for the Americas, 28% for EMEA and 8% for Asia. For the year, these proportions are 61%, 29% and 10% respectively. During the quarter, Miranda received orders from major clients such as ABC Washington (US), Comcast (US), Daystar (US), DirecTV (US), Discovery Channel (UK), Disney Channel-Europe, NHK (Japan), Telus Communications (Canada), Tribune (US), Turner (Argentina) and VTR (Chile). Revenue from the Vertigo range of products (products added to our offer following the acquisition of VertigoXmedia in May 2006), $2.5 million for the fourth quarter, are at forecast. For the year, the sale of these products reached $3.8 million. In the fourth quarter, we show a high gross margin of 64% resulting from a favourable product mix having a higher ratio of software and services than usual. Even excluding the reversal of a one-time reserve of approximately $0.4 million, resulting from a successful transition to RoHS compliant production processes, the gross margin is nevertheless 63%. For the year, the gross margin is 61%, at the same level as in 2005. Sales, general and administrative expenses were $6.6 million for the fourth quarter, the same level when compared with the corresponding period a year earlier. Investment in Research and Development (R&D) moved from $3.5 million for the fourth quarter of 2005 to $4.0 million for the same quarter in 2006. "During the last quarter, we have increased R&D investment by 13% compared with the same quarter in 2005. Miranda is making every effort to better understand the needs of its clients and to quickly respond. We are undertaking sizeable projects to develop integrated solutions. This level of investment allows us to continue to innovate and accelerate the introduction of new products. For instance, the positive reaction to the launch of the Kaleido-X, our new top-of-the-line, multi-image platform, is very encouraging", said Mr. Goodship. We note a currency gain of $1.3 million in the fourth quarter. For the same quarter in 2005, we recorded a loss of $0.7 million. A significant portion of this currency gain comes from the favourable effect of the conversion of assets held in the United Kingdom following the appreciation of the British pound. The EBITDA (earnings before interest, taxes, depreciation and amortization) shows a substantial increase, rising to $10.4 million for the quarter, compared to $7.7 million at the fourth quarter in 2005. This increase is largely attributable to the increase in sales, the higher gross margin and the currency exchange gain. The tax expense for the fourth quarter is $3.1 million, or 30% of earnings before income taxes - compared to a rate 27% in the corresponding quarter in 2005. For the year, the taxation rate is also 30%, compared with 31% for the preceding year. Net earnings for the fourth quarter of 2006 were $7.1 million, an increase of 45% when compared with the same period in 2005. On a fully diluted basis, net earnings per share moved from $0.23 in the fourth quarter of 2005 to $0.28 in 2006. For the year, fully diluted earnings per share were at $0.76 compared with $0.83 in 2005; the decrease being explained by the dilution following the Corporation's IPO in December 2005. At the end of the fiscal period, the cash balance and short-term investments reached $62.6 million; an increase of $3.9 million when compared with the preceding year. Cash flow from operations was at $15.2 million, taking into account the increased needs for working capital. "The broadcast television market is continuing its transformation to digital and high definition television as well as seeking cost effective solutions to operate more efficiently", said Mr. Goodship. "These changes are all bearers of significant business opportunities. Our cash on hand and our product development capabilities position us well to take advantage and profit from such opportunities in the future."

Forward-Looking Statement

This press release contains forward-looking statements reflecting Miranda's objectives, estimates and expectations. Such statements may be marked by the use of verbs such as 'believe', 'anticipate', 'estimate' and 'looking ahead', as well as the use of the conditional and future tenses. By their very nature, such statements involve risks and uncertainty. Consequently, results could differ materially from the Company's expectations. Our Annual Information Form under "Risk Factors" -available on SEDAR at the address www.sedar.com- deals with the risks that could cause significant spreads between presented results and Miranda forecasts. The forward-looking statements contained in this press release represent our current expectations and, accordingly, are subject to change. However, we disclaim any intention and assume no obligation for updating or revising any forward-looking statements, whether as a result of new information, events or otherwise, unless required by applicable securities legislation.

Conference Call

Miranda Technologies Inc. will hold a conference call tomorrow (February 20th) at 9 a.m. EST with financial analysts to present the results of the fourth quarter 2006. People wishing to join the call are invited to call 514-807-8791 (in Montreal and overseas) or 1-800-733-7571 (elsewhere in North America). The call will also be accessible via the Web at the following addresses: www.miranda.com, www.cnw.ca or www.q1234.com. The conference call will be rebroadcast on the Web, at the same addresses, for a period of 60 days. A recording of the teleconference will also be accessible on Tuesday Feb. 20th 2007 from 12 o'clock to 11:59 p.m. on Tuesday Feb. 27th 2007, by calling 1-877-289-8525 and by entering the code 21218898(number sign) on the telephone keypad.

About Miranda

Miranda Technologies Inc. (TSX: MT) develops, manufactures and markets high-performance material and software for the television broadcast industry. Its products are purchased by content creators, broadcasters, specialty channels and television service providers to enable and enhance the transition to a complex, multi-channel digital and HDTV broadcast environment. This equipment allows clients to generate additional revenue while reducing costs through the more efficient distribution and more effective management of content, as well as by automation of previously manual processes. The Corporation has approximately 400 employees at its Head Office in Montreal, and in its offices in Wallingford (United Kingdom), Springfield (United States), Paris (France), Tokyo (Japan), Beijing (China) and Hong Kong. Miranda became a public company in December of 2005 and is listed on the Toronto Stock Exchange. For more information, please consult www.miranda.com.

The consolidated financial information set out below for the fourth quarter and the fiscal year ending December 31, 2006 is unaudited, presented in Canadian dollars and prepared in accordance with generally accepted Canadian accounting principles. The following information should be considered in relation with the Corporation's audited financial statements and attached Notes, which will be filed on SEDAR in the coming weeks.

Unaudited Consolidated Financial Statements of

MIRANDA TECHNOLOGIES INC.

Three-month and twelve-month periods ended December 31, 2006 and 2005

Consolidated Balance Sheets (In thousands of Canadian dollars)

December 31, 2006 and 2005 2006 2005 (Unaudited) (Audited)

Assets

Current assets: Cash and cash equivalents $ 40,378 $ 58,664 Short-term investments 22,179 - Accounts receivable 17,710 17,201 Inventories 15,292 9,281 Income taxes receivable 5,279 3,287 Prepaid expenses 886 805 Future income taxes 625 1,519 102,349 90,757

Capital assets 13,498 12,139 Intangible assets 7,937 612 Goodwill 3,933 - Future income taxes - 4,643 $ 127,717 $ 108,151

Liabilities and Shareholders' Equity

Current liabilities: Accounts payable and accrued charges $ 14,649 $ 16,006 Deferred revenues 298 2,182 Income taxes payable 1,015 1,845 Future income taxes - 814 15,962 20,847

Deferred revenues 1,040 590 Future income taxes 2,313 2,148

Shareholders' equity: Share capital (note 2) 111,784 107,611 Contributed surplus (note 2) 1,216 531 Deficit (4,598) (23,576) 108,402 84,566 $ 127,717 $ 108,151

Consolidated Statements of Income (Unaudited)

Three-month and twelve-month periods ended December 31, 2006 and 2005 (In thousands of Canadian dollars, except per share amounts) Three-month periods ended Twelve-month periods ended December 31, December 31, 2006 2005 2006 2005 Sales $ 28,783 $ 27,328 $ 106,675 $ 96,503

Cost of sales 10,317 10,127 41,505 37,439 18,466 17,201 65,170 59,064

Operating expenses: Selling, general and administrative 6,568 6,566 28,789 23,792 Research and development 3,950 3,501 15,300 12,883 Research and development tax credits (915) (875) (3,915) (6,000) Interest (830) 59 (2,268) 508 Foreign exchange (gain) loss (1,274) 654 (2,302) 1,747 Stock-based compensation 308 117 744 457 Amortization of intangible assets 449 460 1,809 1,837 Income before income taxes 10,210 6,719 27,013 23,840

Income taxes: Current 1,940 390 5,210 4,610 Future 1,143 1,413 2,825 2,873 3,083 1,803 8,035 7,483 Net income $ 7,127 $ 4,916 $ 18,978 $ 16,357

Net earnings per share (note 2 (c)): Basic $ 0.29 $ 0.25 $ 0.78 $ 0.90 Diluted 0.28 0.23 0.76 0.83

Basic weighted average number of common shares outstanding 24,690,529 19,393,672 24,384,951 18,245,236 Diluted weighted average number of common shares outstanding 25,106,554 21,386,050 25,097,351 19,772,766

Consolidated Statements of Deficit (Unaudited)

Net income 7,127 4,916 18,978 16,357

Redemption of warrants - (1,071) - (1,071) Deficit, end of year $ (4,598) $ (23,576) $ (4,598) $ (23,576)

Consolidated Statements of Cash Flows (Unaudited)

Three-month and twelve-month periods ended December 31, 2006 and 2005 (In thousands of Canadian dollars) Three-month periods ended Twelve-month periods ended December 31, December 31, 2006 2005 2006 2005 Cash flows from operating activities: Net income $ 7,127 $ 4,916 $ 18,978 $ 16,357 Adjustments for: Depreciation of capital assets 575 458 1,960 1,594 Amortization of intangible assets 449 460 1,809 1,837 Stock-based compensation 308 117 744 457 Future income taxes 1,143 1,413 2,825 2,873 Other - (2) (100) 57 Effect of exchange rates on cash and cash equivalents (980) 586 (1,217) 1,180 8,622 7,948 24,999 24,355 Net change in operating working capital items (3,553) (173) (9,806) (7,838) 5,069 7,775 15,193 16,517

Cash flows from financing activities: Repayment of long-term debt - (7,822) (502) (12,291) Reimbursement of loan granted to management - - 2,366 - Issuance of common shares 62 50,000 1,483 50,000 Tax benefits related to the exercise of stock options 265 - 265 - Share issuance costs - (4,905) - (4,905) Redemption of warrants - (1,071) - (1,071) 327 36,202 3,612 31,733

Cash flows from investing activities: Additions to capital assets (632) (1,213) (3,105) (2,221) Proceeds from sale of investment - - 100 200 Additions to short-term investments (22,179) - (22,179) - Additions to intellectual property - - (192) - Business acquisition including bank indebtedness - - (12,932) - (22,811) (1,213) (38,308) (2,021)

Effect of exchange rates on cash and cash equivalents 980 (586) 1,217 (1,180) Net (decrease) increase in cash and cash equivalents (16,435) 42,178 (18,286) 45,049

Cash and cash equivalents, beginning of period 56,813 16,486 58,664 13,615 Cash and cash equivalents, end of period $ 40,378 $ 58,664 $ 40,378 $ 58,664

Cash and cash equivalents are comprised of: Cash $ 15,988 $ 13,737 $ 15,988 $ 13,737 Cash equivalents 24,390 44,927 24,390 44,927

$ 40,378 $ 58,664 $ 40,378 $ 58,664

Notes to Consolidated Financial Statements (Unaudited)

Three-month and twelve-month periods ended December 31, 2006 and 2005 (In thousands of Canadian dollars, except per share amounts)

Miranda Technologies Inc. (the "Company") is incorporated under Part 1A of the Companies Act (Quebec). The Company develops, manufactures and markets high performance solutions for the television broadcast industry.

1. Basis of presentation:

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with Canadian generally accepted accounting principles on a basis consistent with those followed in the most recent audited annual consolidated financial statements. These unaudited interim consolidated financial statements do not include all information and note disclosures required by Canadian generally accepted accounting principles for annual financial statements, and, therefore, should be read in conjunction with the December 31, 2005 audited consolidated financial statements and the notes thereto. The sales are subject to seasonal fluctuations. Normally, the first quarter of each year is the weakest and business is more evenly spread over the remaining quarters.

2. Share capital:

(a) Issued and paid share capital: Common share Contributed Number amount surplus Issued and outstanding as at December 31, 2005 23,951,855 $ 107,611 $ 531

Shares issued pursuant to the exercise of stock options 754,958 1,807 (324)

Stock-based compensation - - 744

Tax benefits related to the exercise of stock options - - 265

Reimbursement of loan granted to management - 2,366 - Issued and outstanding as at December 31, 2006 24,706,813 $ 111,784 $ 1,216

(b) Stock option plan:

The Company established a stock option plan to attract, retain and provide an incentive to the employees, directors, officers and consultants, by providing these persons with the opportunity, through stock options, to acquire an ownership interest in the Company. The current stock option plan was adopted in June 2003 to replace prior plans and has been amended and restated in November 2005 to conform to applicable securities rules and practices for public companies. The stock option plan is administered by the Board of Directors. The Board of Directors may determine, in accordance with the terms of the stock option plan, the terms relating to each option, including the number of shares subject to each option, exercise price and expiration date of each option and the extent to which each option is exercisable during the term of the option. The term of an option granted after November 2005 cannot exceed 5 years (10 years under the previous plan) and will usually be vested over three years. All of the options granted pursuant to the stock option plan before the November 2005 amendment have vested upon closing of the initial public offering of the Company. A total of 2,395,185 common shares is reserved for issuance upon exercise of options issued under the stock option plan. After taking into account issued and cancelled options, 708,777 common shares are available for issuance under this stock option plan.

The following table summarizes information on stock options outstanding at December 31, 2006:

Weighted average Number exercise of options price

Balance, beginning of period 1,286,444 $ 2.37

Granted 399,750 16.67

Exercised (754,958) 1.96 Balance, end of period 931,236 $ 8.84

The outstanding options at December 31, 2006 are presented in the table below:

Number of Number of Residual outstanding vested life Exercise price options options (years) $1.71 241,486 241,486 6.6 $3.96 115,000 115,000 8.2 $3.96 175,000 175,000 8.5 $16.46 324,000 - 4.2 $17.08 50,000 - 4.2 $18.82 20,000 - 4.4 $17.24 5,750 - 4.6 931,236 531,486

Compensation cost charged against income was $308 (2005 - $117) and $744 (2005 - $457) for the three and twelve-month periods ended December 31, 2006, respectively. The offsetting credit has been recorded as contributed surplus. The fair value of the stock options was estimated using the Black-Scholes option pricing model using the following assumptions:

2006 Risk-free interest rate 3.25% to 3.30% Dividend yield 0% Expected life 3.5 years Expected volatility 50% Weighted average fair value of each option at grant date $6.66 to $7.37

The following table provides the reconciliation between basic and diluted earnings per share:

Three-month periods ended Twelve-month periods ended December 31, December 31, 2006 2005 2006 2005

Net income $ 7,127 $ 4,916 $ 18,978 $ 16,357

Basic weighted average number of common shares outstanding 24,690,529 19,393,672 24,384,951 18,245,236 Dilutive effect: Outstanding stock options 416,025 1,992,378 712,400 1,527,530

Diluted weighted average number of common shares outstanding 25,106,554 21,386,050 25,097,351 19,772,766

Basic earnings per share $ 0.29 $ 0.25 $ 0.78 $ 0.90

Diluted earnings per share $ 0.28 $ 0.23 $ 0.76 $ 0.83

3. Financial instruments:

Foreign exchange contracts:

As at December 31, 2006, the Company entered into the following foreign exchange contracts expiring before June 30, 2007:

Currencies National Average Average Advantage Average (sold/bought) amount rate floor rate ceiling US$/CDN$ $ 9,000 $ 1.1347 $ - $ - $ -

Euro/CDN$ 6,000 - 1.4750 1.4850 1.5600

US$/CDN$ 5,500 - 1.1312 - 1.1779

4. Segmented information:

The Company determined that it operates in a single reportable segment, the broadcast equipment segment, and it derives its revenues from the sale of hardware and software solutions including related services, training and commissioning.

Three-month periods ended Twelve-month periods ended December 31, December 31, Sales 2006 2005 2006 2005

Miranda reports results for the fourth quarter 2006

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