MARKHAM – Equipment supplier and network services provider Cygnal Technologies reported a tepid second quarter of 2007 today.
"Revenue performance in 2007 has been slower than expected," said Jos Wintermans, president and CEO, in the press release. "We continue to work towards growing revenues for future periods, and we recently added a number of senior salespeople to our network operations business."
Revenues for the three months ended June 30, 2007 increased by $100.000 to $29.7 million, compared to Q2 2006. Revenues in the company’s network operations segment grew by 5% to $15.4 million, with increases in project and Connex revenues offsetting lower revenues in the outside plant, CATV and structured cabling lines of business. Communications services revenues (its White Radio division) decreased by 5% to $14.3 million, due to a lack of product availability and the loss of lines and key people in the company’s audio division.
Cygnal’s gross profit was $6.5 million in the second quarter, compared to $7.1 million in the same period of 2006, says the release. Its gross margin declined by 2.1% to 21.8%. Margins in both segments were negatively impacted by sales mix, and communications services also experienced pricing pressure for certain products.
Selling general and administrative expenses decreased 22% to $5.8 million in the second quarter of 2007. The reduction was comprised of $1 million in foreign exchange gains, lower compensation and office costs, and reduced professional fees.
EBITDA improved by $1.3 million to $500,000, compared to an $800,000 EBITDA loss in the same period of 2006. The improvement was attributable to the decrease in SG&A expense, says the release.
Net loss was $1.1 million, or $0.03 per share, compared to a loss of $2.3 million or $0.08 per share in Q2 2006. The weighted average basic shares outstanding for the quarter ended June 30, 2007 was 32,968,547 versus 27,623,367 for the quarter ended June 30, 2006.
On August 14, 2007, Laurus Master Funds Ltd. ("Laurus") agreed to provide a one-year overadvance facility for up to US$5 million. The overadvance bears interest at 24% per annum. Under the terms of the agreement, the Corporation will only have access to US$2 million of the facility within the first 30 days of the facility term. Thereafter, the facility is available in full.
The company also used today’s release to retract the guidance it has provided on fiscal 2007 revenue growth and EBITDA amounts, where it predicted 5% to 10% revenue growth over 2006 and an EBITDA estimate of $3 million to $6 million.
Cygnal intends to continue to reduce its SG&A expenses "and to increase its operating margin by further improving labour efficiencies," reads the release.
"The company has also placed an increased focus on revenue generation by improving sales management processes and by strengthening its sales force. The company believes that the market size and scope within the industry in which it operates is such that the Company should be able to generate sufficient revenues to return to profitability. The Company is actively pursuing various financing options with existing and potential lenders and investors which, if accepted, will enable the Company to achieve its business plans," reads the release.
During its conference call today, however, executives could provide no potential timeline for a return to profitability,
