FOCUS Enhancements 1st Quarter 2005 Results
May 23, 2005
Campbell, CA - FOCUS Enhancements, Inc. announced financial results for its first quarter of 2005 ending March 31.
Revenue for the first quarter was $5.5 million compared to $4.1 million reported for the same quarter of 2004, an increase of 33 percent. Research and development (R&D) expenses increased to $3.9 million for the quarter, compared to $1.1 million in the first quarter a year ago. The Semiconductor Business increased its R&D spending by $2.4 million, to $2.9 million for the first quarter of 2005, compared to $535,000 for the first quarter of 2004, reflecting additional investments in the company's Ultra Wideband (UWB) initiative. The Systems Business increased its R&D spending by $529,000 to $1.1 million for the first quarter of 2005, compared to $571,000 for the first quarter of 2004, reflecting increased investment in its digital signage and digital asset management businesses. Because of these investments in product development, net loss for the quarter was $4.8 million, or $0.08 per share, versus a net loss of $1.6 million, or $0.04 per share, in the same quarter of 2004.
Brett Moyer, president and chief executive officer for FOCUS Enhancements, stated, "We exited the quarter with $1.9 million in sales order backlog, while demonstrating the growing momentum in our Systems Business. Demand is accelerating for our FireStore FS-4 product and in the rapidly growing markets of digital asset management and digital signage. We expect this demand to drive a sequential increase in revenue for the second quarter. The National Association of Broadcasters (NAB) convention was a great success. Both our partners and our representatives received strong interest in our products, and we are confident the product excitement and solid lead generation will contribute to business in the near term."
Moyer continued, "While our Semiconductor Business concentrates the majority of its development resources on our UWB initiative, set-top box demand is now growing, and we are gaining traction in new markets, including the DVD player market. UWB is progressing well, and our plan to migrate our UWB technology to silicon is in-line with the industry. In April, we achieved another UWB milestone, as we demonstrated the transmission of two high-definition TV (HDTV) streams through a wall at our Hillsboro, Oregon facility."
The company ended the quarter with cash and cash equivalents of $3.5 million. Days Sales Outstanding at March 31, 2005 was 49 days, a significant improvement from 57 days at December 31, 2004.
Financial Guidance
Gary Williams, chief financial officer of FOCUS Enhancements, stated, "First quarter gross margins as a percentage of revenue improved slightly to 32.2 percent from 32.1 percent in the first quarter of 2004 and 23.5 percent in the fourth quarter of 2004. The gross margin rate for the first quarter of 2005 was below our high 30s target range as a result of inventory obsolescence charges of approximately $134,000 and lower than expected revenues as a result of new product production constraints. We expect continued improvement in gross margin percentage and contribution in the second quarter of 2005."
Moyer added, "We anticipate revenues to increase in the second quarter to approximately $6.0 million, and we reiterate our previous outlook for full-year 2005 revenue in the range of $25 million to $27 million. We continue to anticipate annual revenue growth in the Systems Business to exceed 40 percent. While we continue to invest heavily in UWB in the first half of 2005, we believe these expenses will have less of an impact in the second half of the year. We are anticipating a loss in the second quarter of approximately $0.08 to $0.09 per share due to our significant investment in UWB."
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Focus Enhancements
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