EXHIBIT 99.1
[724 SOLUTIONS LOGO]
PRESS CONTACT: COMPANY CONTACT:
Heather Kelly Kelly Lazarus
S&S Public Relations, Inc. 724 Solutions
(719) 634-8274 (805) 884-8306
heather@sspr.com klazarus@724.com
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724 SOLUTIONS ANNOUNCES FIRST QUARTER 2004 RESULTS
SANTA BARBARA, CA (APRIL 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 first quarter ended March 31, 2004 (all figures are in
U.S. dollars).
724 Solutions' total revenue in the first quarter was $3.0 million compared to
$3.2 million in the previous quarter and $3.5 million for the same period last
year. Revenue from the sale of products was $1.8 million and revenue from the
sale of services was $1.2 million.
Pro forma net loss for the first quarter was $2.8 million, or $0.47 per share,
compared to $2.5 million, or $0.41 per share, in the previous quarter and $3.9
million, or $0.65 per share, in the same period last year. The Company's pro
forma net operating expenses were $5.8 million in the first quarter compared to
$5.7 million in the previous quarter and $7.4 million in the same period a year
ago.
The net loss for the first quarter of 2004, computed using generally accepted
accounting principles ("GAAP"), was $5.1 million, or $0.85 per share. The first
quarter loss includes a one time restructuring charge of $2.1 million. The GAAP
loss was $11.3 million or $1.89 per share in the previous quarter and $6.3
million or $1.06 per share in the same period a year ago.
The Company reiterates its second quarter 2004 GAAP cost guidance of
approximately $4 million compared to the $8.1 million ($6.0 million excluding
the one time restructuring charge) reported in the first quarter 2004.
The Company ended the quarter with $11.3 million in cash and cash equivalents,
short-term investments and restricted cash.
Key accomplishments in the first quarter:
o The global product launch of X-treme MMS Accelerator (XMA); a
purpose-built application-to-person Bulk MMS Messaging Gateway that
enables new revenues for mobile operators via large volumes of
perishable MMS messages.
o The deployment by ALLTEL, a top ten North American operator, of its
X-treme Alerts Platform (XAP) to deliver instant, actionable
time-sensitive SMS and voice alerts to subscribers' wireless phone.
"Our performance in the first quarter was in-line with our expectations. We are
encouraged to see that our pipeline of opportunities and trial activity are both
increasing, driven by the growth in mobile data services revenues at leading
mobile network operators," says John Sims, Chief Executive Officer of 724
Solutions. "The strength of our pipeline combined with our new cost structure
means we are on track for quarterly profitability in the second half of 2004,"
says Sims.
CONFERENCE CALL INFORMATION
The Company will host a conference call to discuss the results on April 29, 2004
at 8:30 am ET. The conference call will be available over the Internet through
the company's web site at www.724.com or by telephone at 416-641-6652. A replay
will be available for 48 hours following the conference call and can be accessed
by dialing 800-633-8284, pass code 21180719.
ABOUT 724 SOLUTIONS
724 Solutions (NASDAQ: SVNX; TSX: SVN) delivers reliable, scalable technology
and solutions that allow mobile network operators to rapidly deploy flexible and
open next generation IP-based network and data services. Additionally, in
conjunction with mobile operator partners, the company provides a series of
actionable alerting solutions to enterprises to assist them in lowering
operating costs and improving customer relationship management. 724 Solutions is
a global company with development operations in North America, Switzerland and
Germany with headquarters in Toronto, Canada. For more information, visit
www.724.com.
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This press release contains statements of a forward-looking nature. These
statements are made under the "safe harbor" provisions of the U.S. Private
Securities Litigation Reform Act of 1995. These statements include the
statements herein regarding: the services and products that will be offered by
724 Solutions, the benefits that businesses will obtain from these services and
products, future demand for these services and products, our future operating
cash performance and the sufficiency of our cash resources. The accuracy of
these statements may be impacted by a number of business risks and uncertainties
that could cause actual results to differ materially from those projected or
anticipated, including the risk that 724 Solutions will be unable to deploy the
solutions and products stated herein, the risk that the demand for these
solutions and products, or for 2.5G and 3G networks, will not increase as
presently anticipated, the risk that general economic conditions will not
improve, and other risks described in 724 Solutions' Securities and Exchange
Commission filings, including its annual report on Form 10-K and its quarterly
reports on Form 10-Q. These risks are also described in 724 Solutions' filings
with the Canadian Securities Administrators. 724 Solutions does not undertake
any obligation to update this forward-looking information, except as required
under applicable law.
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724 SOLUTIONS INC. - SUMMARY OF OPERATIONS
(IN 000'S OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
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MARCH 31, 2004 DECEMBER 31, 2003 MARCH 31, 2003
Revenue:
Product $ 1,761 $ 1,643 $ 2,010
Services 1,240 1,574 1,505
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Total Revenue 3,001 3,217 3,515
Cost of revenue* 1,528 1,577 1,574
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Gross Margin 1,473 1,640 1,941
Operating expenses:
Research and development* 2,089 1,920 2,950
Sales and marketing* 1,379 1,241 2,192
General and administrative* 833 1,004 945
Depreciation 185 168 359
Amortization of intangibles - - 1,156
Stock-based compensation
Cost of revenue 2 6 8
Research and development 4 16 529
Sales and marketing 4 14 112
General and administrative 7 26 115
Restructuring costs 2,100 (250) -
Write down of fixed assets, goodwill
and other intangible assets - 9,097 -
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Total operating 6,603 13,242 8,366
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Loss from operations (5,130) (11,602) (6,425)
Interest income 16 32 93
Gain on sale (write-down) of long-term
investments - 283 -
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Net loss for the period $ (5,114) $ (11,287) $ (6,332)
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Basic and diluted net loss per share $ (0.85) $ (1.89) $ (1.06)
Weighted-average number of shares used
in computing basic and diluted net loss
per share (in thousands) 5,983 5,983 5,983
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724 SOLUTIONS INC. - SUMMARY OF PRO FORMA ADJUSTMENTS (UNAUDITED)
(IN 000'S OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
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MARCH 31, 2004 DECEMBER 31, 2003 MARCH 31, 2003
GAAP NET LOSS FOR THE PERIOD $ (5,114) $ (11,287) $ (6,332)
Depreciation 185 168 359
Amortization of intangibles - - 1,156
Stock-based compensation 17 62 764
Interest Income (16) (32) (93)
Restructuring costs 2,100 (250) -
Write down of fixed assets, goodwill
and other intangible assets - 9,097 -
Write-down (gain on sale) of long-term
investments - (283) -
Non-recurring and acquisition charges** 30 48 280
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PRO FORMA NET LOSS FOR THE PERIOD $ (2,798) $ (2,477) $ (3,866)
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Pro forma net loss per share $ (0.47) $ (0.41) $ (0.65)
*The pro forma numbers are as follows
Cost of revenue 1,528 1,577 1,554
Research and development 2,089 1,920 2,749
Sales and Marketing 1,379 1,241 2,148
General and administrative 803 956 930
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Total pro forma costs 5,799 5,694 7,381
** Non-recurring and acquisition charges include direct costs related to
terminated employees and direct costs related to historic acquisitions. The
three months ended March, 2003 per share number has been adjusted to reflect
the 10 for 1 share consolidation completed in the quarter of 2003
724 SOLUTIONS INC. - CASH RECONCILIATION (UNAUDITED)
(In millions of U.S. dollars)
Cash and cash equivalents, short-term investments and
restricted cash:
At December 31, 2003 $ 15.4
At March 31, 2004 11.3
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TOTAL CASH USED IN QUARTER ENDED MARCH 31, 2004 4.1
Less: Non-recurring payments
Hosting exit, rent restructuring and severance (0.3)
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OPERATING CASH USED IN QUARTER ENDED MARCH 31, 2004 $ 3.8
724 SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of US dollars)
MARCH 31, December 31,
2004 2003
Assets
Current assets:
Cash and cash equivalents $ 11,100 $ 13,436
Short-term investments - 1,748
Restricted cash 190 198
Accounts receivable - trade, net of allowance of $60
(December 31, 2003 - $60) 2,624 2,297
Prepaid expenses and other receivables 868 648
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14,782 18,327
Fixed assets 429 612
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Total assets $ 15,211 $ 18,939
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 277 $ 411
Accrued liabilities 4,961 3,402
Deferred revenue 326 410
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5,564 4,223
Shareholders' equity:
Share capital:
Authorized:
Unlimited common shares
Unlimited preferred shares
Issued and outstanding:
5,983,349 common shares
(December 31, 2003 - 5,983,349) 764,508 764,508
Contributed Surplus 79 62
Accumulated deficit (755,001) (749,887)
Cumulative translation adjustment 61 33
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9,647 14,716
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Contingent liabilities*
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Total liabilities and shareholders' equity $ 15,211 $ 18,939
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* See note 17 to our consolidated financial statements set forth in our 2003
annual report