Datamirror 6-K Datamirror Corporation

REPORT TO SHAREHOLDERS

Operations Review

Revenue for the quarter ended April 30, 2005, (“Q1 fiscal 2006”) was $10,750,000 compared to $9,845,000 for the quarter ended April 30, 2004 (“Q1 fiscal 2005”), an increase of 9.2%.  The GAAP net income for Q1 fiscal 2006 was $800,000 or $0.08 per basic and fully-diluted share compared to a net loss of ($620,000) or ($0.05) per share for Q1 fiscal 2005. Cash flow from operations for Q1 fiscal 2006 was $4,321,000 or $0.45 per share up significantly from $1,495,000 or $0.13 per share in Q1 fiscal 2005.  Cash, cash equivalents and short-term investments stood at $33,320,000 or $3.89 per common share outstanding at the end of the quarter.

The overall gross margin for Q1 fiscal 2006 was 80.2%, as compared to 73.6% for Q1 fiscal 2005.  Gross margin on maintenance and services was 65.6% in Q1 fiscal 2006, as compared to 58.5% in Q1 fiscal 2005. Total costs, including costs of revenue, were $9,520,000 for Q1 fiscal 2006, down by 12.5% from $10,886,000 in Q1 fiscal 2005.  Total headcount was 217 at April 30, 2005 down significantly from 296 at April 30, 2004 and down slightly from 232 at the end of the previous quarter.

Management’s Comments

“DataMirror delivered a record first quarter, with good license revenue growth, great cash flow and improved earnings, based on the building momentum of our solutions”, Nigel Stokes, DataMirror CEO commented. “Our refocused effort on partnering with clients to deliver innovative business solutions that continuously transform data into information is beginning to show results.   More than 2,000 clients are releasing new business potential and gaining tangible competitive advantage with DataMirror.  In today’s economy the best companies compete and win in real-time.”

“Business visibility for DataMirror is improving,” continued Mr. Stokes.  “We finished the first quarter with increased demand that we expect to continue both in the second quarter and throughout fiscal 2006.  I am proud of the integrity, passion and innovation of the DataMirror team and thank all of them for their focused commitment to the success of DataMirror.”

Outlook

Management offers the following outlook for the full fiscal year, ending January 31^st, 2006 and for the second quarter ending July 31^st, 2005:

·

For the 2006 fiscal year, the Company expects revenue to grow 10-14% and be in the range of $45.0 to $47.0 million with GAAP, diluted, net income in the range of $0.33 to $0.37 per share.

·

In the second quarter of fiscal 2006, the Company expects revenue to grow year over year by 10-16% and be in the range of $10.8 to $11.3 million with GAAP, diluted, net income in the range of $0.09 to U.S. $0.12 per share.

These estimates assume a tax rate of 45 percent and include the expensing of stock options.

/s/ Nigel Stokes

/s/ Peter Cauley

Chairman, President and

Vice President Finance and

Chief Executive Officer

Chief Financial Officer

DataMirror Corporation

Interim Consolidated Financial Statements

Three months ended April 30, 2005 and 2004 - Unaudited

NOTICE TO READER

The attached consolidated financial statements have been prepared by management of DataMirror Corporation. The consolidated financial statements for the three month period ended April 30, 2005 and 2004 have not been reviewed by the auditor of DataMirror Corporation.

DataMirror Corporation
Consolidated Balance Sheets
(Thousands of US$ - unaudited)
				April 30,	January 31,
				2005	2005
Assets
Current assets
	Cash and cash equivalents			$33,320	$7,687
	Short-term investments			0	38,707
	Accounts receivable			4,402	8,055
	Prepaid expenses			1,406	1,328
	Future income taxes			2,248	2,426
				41,376	58,203
Capital assets				2,699	2,754
Future income taxes				84	0
Intangibles				1,911	2,344
Goodwill				4,112	4,180
				$50,182	$67,481
Liabilities
Current liabilities
	Accounts payable and accrued liabilities			$2,901	$2,989
	Deferred revenue			16,746	17,838
	Income taxes payable			958	750
				20,605	21,577
Future income taxes				0	83
				20,605	21,660
Shareholders' Equity
	Share capital
		Common shares  (April 30, 2005 - 8,555,732
			January 31, 2005 - 10,555,966)	32,854	42,250
	Deficit			(9,675)	(2,953)
	Contributed surplus			932	876
	Cumulative translation adjustment			5,466	5,648
				29,577	45,821
				$50,182	$67,481

On behalf of the Board:

Nigel Stokes

Donald Lenz

Director

Director

DataMirror Corporation
Consolidated Statements of Income (Loss)
(Thousands of US$, except per share data - unaudited)
		Three Months Ended
		April 30,
		2005	2004
Revenue
	Licence	$4,683	$3,681
	Maintenance	5,336	5,052
	Services	731	1,112
		10,750	9,845
Cost of revenue
	Licence	45	47
	Maintenance and services	2,088	2,556
		2,133	2,603
Gross margin		8,617	7,242
Operating expenses
	Selling and marketing	3,096	4,087
	Research and development	1,984	2,033
	General and administration	1,847	1,484
	Stock-based compensation	56	84
	Amortization of intangibles	404	595
		7,387	8,283
Operating income (loss)		1,230	(1,041)
Investment income, net		220	140
Income (loss) before income taxes		1,450	(901)
Income tax expense (recovery)		650	(281)
Net income (loss)		$800	($620)
Earnings (loss) per share
	Basic	$0.08	($0.05)
	Fully diluted	$0.08	($0.05)
Weighted average number of
	shares outstanding (000's)
	Basic	9,702	11,372
	Fully diluted	9,756	11,372

DataMirror Corporation
Consolidated Statements of Cash Flows
(Thousands of US$ - unaudited)
			Three Months Ended
			April 30,
			2005	2004
Cash provided by (used in)
Operating activities
	Net income (loss)		$800	($620)
	Add (deduct) items not affecting cash:
		Amortization of capital assets	223	217
		Amortization of intangibles	404	595
		Stock-based compensation	56	84
		Future income taxes	(28)	(134)
		Investment tax credits	0	(46)
			1,455	96
	Changes in non-cash working capital balances		2,866	1,399
			4,321	1,495
Investing activities
	Capital asset additions		(213)	(219)
	Sale of short-term investments		38,749	24,447
	Investment in Idion		0	(72)
			38,536	24,156
Financing activities
	Capital lease payments		0	(14)
	Issuance of share capital		10	489
	Repurchase of share capital		(16,928)	(305)
			(16,918)	170
Effect of exchange rate changes
	on cash and cash equivalents		(306)	(848)
Increase in cash and cash equivalents			25,633	24,973
Cash and cash equivalents
	Beginning of period		7,687	7,009
	End of period		$33,320	$31,982

DataMirror Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands of U.S. dollars)

As at and for the three months ended April 30, 2005(unaudited)

1. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared by the Company in U.S. dollars [note 2] in accordance with Canadian generally accepted accounting principles, consistent with those used and described in the Company’s audited consolidated financial statements and notes as at and for the year ended January 31, 2005, except for the change in the Company’s reporting currency from Canadian to U.S. dollars effective February 1, 2005 described as discussed in note 2.  These unaudited condensed notes to the consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report for the year ended January 31, 2005.

2. CHANGE IN REPORTING CURRENCY

Effective February 1, 2005, the Company adopted the U.S. dollar as its reporting currency, but has retained the Canadian dollar as its functional currency.  Management believes that reporting in U.S. dollars will improve the comparability of the Company’s financial position and results of operations with others in its industry.

In accordance with Canadian generally accepted accounting principles, the Company uses the current rate method to translate all amounts presented to U.S. dollars. Under the current rate method, all assets and liabilities of the Company’s operations having a functional currency other than U.S. dollars are translated to U.S. dollars using exchange rates in effect at the end of the reporting period, revenues, expenses and cash flows are translated at the average rates during the reporting period and any associated translation gains or losses are recorded as a separate component of shareholders’ equity.  All comparative figures presented have been translated using the same method.

For the period ended April 30, 2005, revenues, expenses and cash flows have been translated to U.S. dollars at the average rate of .8126 [2004 – .7500] and the assets and liabilities were translated at the period-end rate of .7946 [January 31, 2005 – .8078].   

3. SEGMENTED INFORMATION

The Company operates in only one industry, that being the business of developing and marketing computer software products.  The Company has two reportable segments, North America, which includes the Company's recently incorporated Asia Pacific operations, and Europe, based on the geographic location of its operations.  The accounting policies followed by these segments are the same as those described in the summary of significant accounting policies in the Company’s audited consolidated financial statements for and as at the year ended January 31, 2005.  The Company accounts for intersegment sales at fair value.

DataMirror Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands of U.S. dollars)

As at and for the three months ended April 30, 2005(unaudited)

The Company's reportable segments are strategic business units.  They are managed separately because each reportable segment operates in different economic marketplaces and therefore, requires different investing and marketing strategies.  The Company evaluates segment performance based on profit or loss from operations before investment income and income taxes.

The following table presents certain information with respect to the reportable segments described above:

Three months ended April 30,

2005

2004

$

$

Revenue

North American customers

7,591

6,260

Intersegment

943

833

8,534

7,093

European customers

3,159

3,585

Elimination of intersegment revenue

(943)

(833)

10,750

9,845

Operating income (loss)

North America

1,236

(1,080)

Europe

(6)

39

1,230

(1,041)

Amortization

North America

593

768

Europe

34

44

627

812

Capital asset additions

North America

192

202

Europe

21

17

213

219

DataMirror Corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands of U.S. dollars)

As at and for the three months ended April 30, 2005(unaudited)

As at April 30,

2005

2004

$

$

Identifiable assets

North America

35,577

45,587

Europe

8,582

6,767

44,159

52,354

Intangibles

1,911

3,692

Goodwill

4,112

3,775

50,182

59,821

Summaries of revenue, segmented according to the customers' country of residence, and of capital and intangible assets, segmented according to the country in which the assets are located, are as follows:

Three months ended April 30,

2005

2004

$

$

Revenue

Canada

569

625

United States

6,478

5,143

United Kingdom

1,428

1,561

Germany

818

907

Other

1,457

1,609

10,750

9,845

As at April 30,

2005

2004

$

$

Capital assets, intangibles and goodwill

Canada

6,230

7,895

Germany

2,162

1,980

Other

330

400

8,722

10,275