MARKHAM – Cygnal Technologies said today that second quarter revenues were down 7% to $29.6 million, compared to the same period in 2005.
Gross margin was 23.9% in the quarter ended June 30th, up from 21.8% in Q2 ’05 and selling, general and administrative expenses were $7.4 million, down from $8.6 million in Q2 2005. EBITDA was a loss of $800,000, compared to an EBITDA loss of $1.7 million in the second quarter last year.
The company’s net loss was $2.3 million, compared to a loss of $1.7 million in the second quarter of 2005.
Cygnal provides network solutions to businesses and contracting services to telecom and cable companies. It also is a leading supplier of equipment under the White Radio umbrella.
"Our cost structure continued to improve in the second quarter, with both SG&A and cost of sales declining in absolute terms and as a percentage of revenue," said Jos Wintermans, president and CEO, in the press release. "Even more importantly, in the key central region of our network operations division, sales bookings have risen significantly in recent months following an overhaul of the sales organization and the implementation of more disciplined processes for identifying and converting prospects. I believe the revenue impact will be seen in upcoming quarters. We are expecting Cygnal to generate positive EBITDA in the second half of the year.
"Our communications services division, known as White Radio, continues to be the strongest performer in the company. Segment revenues are up 16% from the same quarter last year as a result of the management’s focus and the growing demand for wireless, telecom and VOIP technology."
Revenue in Cygnal’s network operations segment decreased by $4.2 million to $15.2 million, due to the absence this year of certain larger projects which generated revenue in Q2 2005, and to poor bookings and a weak sales funnel at the beginning of the second quarter, says the company.
"At the beginning of the second quarter CEO Jos Wintermans assumed a leadership role in the sales function, made significant personnel changes and revamped internal processes. These actions resulted in significant strengthening of the sales funnel and greatly increased bookings in June and July which should result in increased revenues for the remainder of this year," reads the release.
Revenue at White Radio grew by $2 million in the quarter to $14.4 million, due to improvements in all categories of the business prompted by new product lines. The Q2 2006 revenue split between network operations and communications services was 51%/49%, respectively, compared to 61%/39% a year earlier, said the company.
The company also announced a restatement of its past balance sheet.
"Cygnal has two primary lenders, LaSalle Business Credit for its communications services segment and Laurus for the network operations segment," explains the release.
"Historically, the amounts outstanding under the Laurus arrangement were classified as long-term liabilities. On August 14, 2006, the board of directors approved a determination that the Laurus convertible secured note and revolving loan, both covered under the same security agreement, should be classified as a current liability," says the release.
"As a result, the borrowings outstanding under the Laurus agreement are classified as a current liability even though the term of the convertible secured note extends to September 30, 2008 (except with respect to the January 30, 2006 revolving note which is not due until January 30, 2008), and the company is not in breach of any clauses that would cause acceleration of repayment of the borrowings."
