Exhibit 99.1
724 SOLUTIONS ANNOUNCES FOURTH QUARTER AND YEAR END 2003 RESULTS
SANTA BARBARA, CA (JANUARY 28, 2004) - 724 Solutions (NASDAQ: SVNX; TSX: SVN), a
leading provider of next-generation IP-based network and data services, today
reported results for its fourth quarter and year ended December 31, 2003 (all
figures are in U.S. dollars).
724 Solutions' total revenue in the fourth quarter was $3.2 million compared to
$3.1 million in the previous quarter and $5.7 million for the same period last
year. Revenue from the sale of products was $1.6 million and revenue from the
sale of services was $1.6 million.
Pro forma net loss for the fourth quarter was $2.5 million, or $0.41 per share,
compared to $2.6 million, or $0.43 per share, in the previous quarter and $2.4
million, or $0.40 per share, in the same period last year. The Company's pro
forma net operating expenses were $5.7 million in the fourth quarter compared to
$5.7 million in the previous quarter and $8.0 million in the same period a year
ago.
The net loss for the fourth quarter of 2003, computed using generally accepted
accounting principles ("GAAP"), was $11.3 million or $1.89 per share, compared
to $3.9 million or $0.64 per share in the previous quarter and $9.2 million or
$1.54 per share in the same period a year ago.
For the year ended December 31, 2003, revenue was $12.9 million, compared to
$20.7 million for the prior year. Pro forma net loss was $11.8 million or $1.97
per share, compared to $19.7 million, or $3.31 per share, in the previous year.
GAAP net loss was $28.3 million or $4.73 per share, compared to $87.4 million,
or $14.71 per share, for the year ended December 31, 2002.
The Company ended the year with $15.4 million in cash, cash equivalents,
short-term investments and restricted cash.
###
724 SOLUTIONS INC.-SUMMARY OF OPERATIONS (UNAUDITED)
(IN 000'S OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED TWELVE MONTHS ENDED
---------------------------------------------------------- ---------------------------------------
DECEMBER 31, 2003 SEPTEMBER 30, 2003 DECEMBER 31, 2002 DECEMBER 31, 2003 DECEMBER 31, 2002
Revenue:
Product $ 1,643 $ 1,676 $ 2,953 $ 6,964 $ 8,823
Services 1,574 1,437 2,702 5,891 11,905
-------------------------------------------------- ------------------------------------------
Total Revenue 3,217 3,113 5,655 12,855 20,728
Cost of revenue * 1,577 1,458 1,680 6,031 7,277
-------------------------------------------------- ------------------------------------------
Gross Margin 1,640 1,655 3,975 6,824 13,451
Operating expenses:
Research and development * 1,920 2,008 3,017 9,433 16,636
Sales and marketing * 1,241 1,370 2,704 6,968 17,241
General and administrative * 1,004 846 1,319 4,086 6,973
Depreciation 168 178 574 908 5,068
Amortization of intangibles - 1,156 1,243 3,468 4,418
Stock-based compensation
Cost of revenue 6 - 57 14 311
Research and development 16 - 1,996 1,227 10,872
Sales and marketing 14 - 704 296 3,833
General and administrative 26 - 512 141 2,787
Restructuring costs (250) - - 50 20,649
Write down of fixed assets,
goodwill and other
intangible assets 9,097 - 1,285 9,097 7,624
-------------------------------------------------- ------------------------------------------
Total operating expenses 13,242 5,558 13,411 35,688 96,412
-------------------------------------------------- ------------------------------------------
Loss from operations (11,602) (3,903) (9,436) (28,864) (82,961)
Interest income 32 44 166 254 751
Gain on sale (write-down) of
long-term
investments 283 - 83 283 (5,197)
-------------------------------------------------- ------------------------------------------
Net loss for the period $ (11,287) $ (3,859) $(9,187) $(28,327) $(87,407)
-------------------------------------------------- ------------------------------------------
-------------------------------------------------- ------------------------------------------
Basic and diluted net loss per $ (1.89) $ (0.64) $ (1.54) $ (4.73) $(14.71)
share
Weighted-average number of
shares used in
computing basic and diluted net
loss per share
(in thousands) 5,983 5,983 5,978 5,983 5,942
-------------------------------------------------- ------------------------------------------
-------------------------------------------------- ------------------------------------------
724 SOLUTIONS INC.--SUMMARY OF PRO FORMA ADJUSTMENTS (UNAUDITED)
(IN 000'S OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED TWELVE MONTHS ENDED
---------------------------------------------------------- ---------------------------------------
DECEMBER 31, 2003 SEPTEMBER 30, 2003 DECEMBER 31, 2002 DECEMBER 31, 2003 DECEMBER 31, 2002
GAAP net loss for the period $(11,287) $(3,859) $(9,187) $(28,327) $ (87,407)
Depreciation 168 178 574 908 5,068
Amortization of intangibles - 1,156 1,243 3,468 4,418
Stock-based compensation 62 - 3,269 1,678 17,803
Interest Income (32) (44) (166) (254) (751)
Restructuring costs (250) - - 50 20,649
Write down of fixed assets,
goodwill and other
intangible assets 9,097 - 1,285 9,097 7,624
Write-down (gain on sale) of
long-term
investments (283) - (83) (283) 5,197
Non-recurring and acquisition 48 - 694 1,849 7,733
charges **
-------------------------------------------------- ------------------------------------------
Pro forma net loss for the $ (2,477) $(2,569) $(2,371) $(11,814) $(19,666)
period
-------------------------------------------------- ------------------------------------------
-------------------------------------------------- ------------------------------------------
Pro forma net loss per share $ (0.41) $ (0.43) $ (0.40) $ (1.97) $ (3.31)
*The proforma numbers are as
follows
Cost of revenue 1,577 1,419 1,615 5,961 6,745
Research and development 1,920 1,961 2,796 8,597 13,375
Sales and Marketing 1,241 1,335 2,355 6,195 14,407
General and administrative 956 967 1,260 3,916 5,867
-------------------------------------------------- ------------------------------------------
Total pro forma costs 5,694 5,682 8,026 24,669 40,394
Certain comparative figures for 2002 have been reclassified to conform to the
financial statement presentation adopted in the current year
**Non-recurring and acquisition charges include direct costs related to
terminated employees and direct costs related to historic acquisitions
724 SOLUTIONS INC.--CASH RECONCILIATION (UNAUDITED)
(In millions of U.S. dollars)
Cash and cash equivalents, short-term investments and restricted cash:
At September 30, 2003 $ 18.9
At December 31, 2003 15.4
---------------------------
TOTAL CASH USED IN QUARTER ENDED DECEMBER 31, 2003 3.5
Add: Cash source related to sale of long-term investment 0.3
Less: Non-recurring payments
Hosting exit, rent restructuring and severance $ (0.5)
Acquisition related--deferred consideration (0.5)
---------------------------
Total non-recurring payments (1.0)
---------------------------
OPERATING CASH USED IN QUARTER ENDED DECEMBER 31, 2003 $ 2.8
724 SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of US dollars)
DECEMBER 31 December 31,
2003 2002
Assets
Current assets:
Cash and cash equivalents $ 13,436 $ 19,129
Short-term investments 1,748 18,562
Restricted cash 198 962
Accounts receivable--trade net of allowance
(December 31, 2002--$150) 2,297 2,211
Prepaid expenses and other receivables 648 819
-----------------------------------------------------------
18,327 41,683
Fixed assets 612 1,418
Goodwill - 9,097
Other intangible assets - 3,468
-----------------------------------------------------------
Total assets $ 18,939$ 55,666
-----------------------------------------------------------
-----------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 411 $ 1,253
Accrued liabilities 3,402 9,892
Note payable - 600
Deferred revenue 410 1,217
Deferred consideration - 1,415
-----------------------------------------------------------
4,223 14,377
Shareholders' equity:
Share capital:
Authorized:
Unlimited common shares
Unlimited preferred shares
Issued and outstanding:
5,983,349 common shares
(December 31, 2002--5,983,349) 764,508 764,508
Contributed Surplus 62 -
Deferred stock-based compensation - (1,616)
Accumulated deficit (749,887) (721,560)
Cumulative translation adjustment 33 (43)
-----------------------------------------------------------
14,716 41,289
-----------------------------------------------------------
Contingent liabilities *
-----------------------------------------------------------
Total liabilities and shareholders' equity $ 18,939 $ 55,666
-----------------------------------------------------------
-----------------------------------------------------------
* See note 8 to our consolidated financial statements set forth in our third
quarter report 2003
The historic common share numbers have been adjusted to reflect the 10 for 1
share consolidation completed in the second quarter of 2003