Exhibit 99.1
Focus Enhancements Reports Second Quarter 2007 Results
- Delivers Gross Margins of 47% Compared to 45% in First Quarter
2007 -
- Q2 Loss per Share Narrows to $0.05 -
CAMPBELL, Calif.--(BUSINESS WIRE)--Aug. 10, 2007--Focus
Enhancements, Inc. (NASDAQ:FCSE), a worldwide leader in Ultra Wideband
(UWB) wireless technology, video conversion and digital media,
announced financial results for its second quarter and the six months
ended June 30, 2007.
"During the second quarter, we posted $8.4 million in revenue, up
18 percent from $7.1 million in the first quarter of 2007," stated
Brett Moyer, president and CEO of Focus Enhancements. "This increase
was driven by a 20 percent sequential increase in the Systems Business
revenue, reflecting strong FireStore and ProxSys(R) sales. In
addition, improved Systems Business pricing and overall a more
favorable product mix drove gross margin as a percent of revenue to 47
percent, compared to 45 percent in the first quarter of 2007. The
improved gross margin combined with cost controls narrowed our net
loss."
"Regarding UWB, we have finished the adjustments to bring our chip
to production and are in the initial stages of the tape out process.
We believe our chip quality and robustness remain best in class in
terms of performance. Publicly, we have demonstrated wireless
(WiMedia) transmissions of over 40 feet and through people and walls.
At Computex 2007 in June, many of our competitors demonstrated
transmission between only three and six feet line of sight. As a
result, our key original equipment manufacturers and design partners
are eager to start design activity with our new chip, which we now
anticipate will occur in October," continued Moyer.
Revenue for the second quarter was $8.4 million, compared to $8.5
million reported for the same quarter of 2006. Semiconductor Business
second quarter revenue was $1.3 million, compared to $1.8 million in
the second quarter of 2006. Systems Business second quarter revenue
was $7.0 million, compared to $6.7 million in the second quarter 2006.
Gross margins were 47 percent, compared to 45 percent in the second
quarter of 2006 reflecting a shift to sales of higher margin products.
Research and development (R&D) expenses increased to $4.0 million from
$2.9 million in the same quarter of last year, reflecting increased
development costs related to our UWB technology. Operating expenses,
including the aforementioned higher R&D, were $7.6 million, compared
with $6.6 million in the prior year period. Net loss for the quarter
was $4.0 million, or $0.05 per share. This compares to a net loss of
$4.9 million, or $0.07 per share, in the same quarter of 2006.
For the six months ended June 30, 2007, revenue was $15.4 million,
compared to $15.6 million reported for the same period of 2006.
Semiconductor Business revenue for the first half of 2007 was $2.6
million, compared to $3.2 million in the first half of 2006. Systems
Business revenue was $12.9 million in the six months ended June 30,
2007, compared to $12.4 million in the same period of 2006. Net loss
for the six month period was $8.4 million, or $0.11 per share. This
compares to a net loss of $12.0 million, or $0.18 per share, in the
same period of 2006. The weighted average number of shares outstanding
in 2007 was 75.7 million versus 68.5 million in 2006 for the six-month
period ended June 30.
2007 Outlook
"Although the Systems Business did grow 20 percent for the second
quarter of 2007, compared to first quarter of 2007, we experienced
some delays of orders in our Digital Signage business from European
customers. We expect continued softness in the signage business, which
we expect to rebound as we migrate toward a new product line in 2008.
We have implemented cost controls to offset the impact. As a result,
we are adjusting 2007 guidance for both revenue and operating
expenses," stated Moyer.
Management now expects 2007 revenue to be in the range of $33
million to $35 million, with initial UWB production revenue
anticipated late in the fourth quarter. The company expects
Semiconductor Business revenue contribution to be approximately 20
percent of total 2007 revenue. Based on these expectations, 2007 gross
margin as a percentage of revenue is anticipated to be in the range of
45 percent to 46 percent. Management has implemented plans to lower
operating expenses by approximately $2 million from its previous
guidance and now expects operating expenses to be in the range of $28
million to $29 million for 2007.
For the third quarter of 2007, the company anticipates revenue in
the range of $8.0 million to $9.0 million. Based on these
expectations, third quarter gross margin as a percentage of revenue is
anticipated to be in the range of 45 percent to 47 percent. Third
quarter 2007 operating expenses are expected to be approximately $7.2
million, including R&D expenses of approximately $4.0 million. Loss
per share for the third quarter of 2007 is expected to be
approximately $0.05, due to continued investment in the UWB project.
Recent Highlights
Semiconductor Business:
- -- Awarded additional design wins featuring the FS455/6 TV-out chip
family.
-- Chosen by Digital Cube for its new i-Station M43, its fourth
generation portable media player (PMP) featuring a touch
screen user interface.
-- Designed into My Magic Digital Box, the new ET mini-station by
the Beijing Sino-American Boyi Software Development Co.
-- Selected by the Japan-based Mobile Broadcasting Corporation
for use in the MBRO501A for MobaHO!(TM), a satellite digital
multimedia broadcasting service.
-- Featured in the Q5, a new high-end mobile media device from
Korean-based Cowon Systems, Inc.
-- Integrated into three new products - an Internet Protocol
set-top box, a PMP and a car media player - by Shenzhen GEOTIC
Technology Co., Ltd.
- -- Presented samples of the new mobile TV encoder chip, the FS471/2,
which has already captured nine design starts and is optimized for
battery operated, mobile media devices with lower power usage and
small foot print.
- -- Met the following UWB milestones.
-- Completed the tape-out of second generation UWB analog chip
designed especially for wireless USB applications in the
consumer electronics and personal computer markets, in May.
-- Received and started validation on its second generation UWB
chip designed especially for wireless USB applications in the
consumer electronics and personal computer markets, in June.
-- Received first order for UWB system in package (SiP) from a
developer in Asia incorporating high speed wireless technology
in its applications, in May.
- -- Showcased both UWB and mobile TV-out chips at Computex 2007
including the FS471 TV-out daughter card for both the RMI Alchemy
DBAu1250 Development and Freescale i.MX31, in June.
- -- Participated with Microsoft Corp. and other industry leaders at
WinHEC 2007 in Los Angeles, CA to spotlight UWB and TV-out Encoder
products, in May.
Systems Business:
- -- Featured the HX-1 and HX-2 Portable HD Video Switchers at the
National Association of Broadcasters (NAB) Convention in Las Vegas
in April.
- -- Launched the Platinum Partner Program targeted for the company's
Media Asset Management (MAM) solutions to help channel partners
grow their businesses.
- -- At InfoComm'07 in June,
-- Expanded the PX-1 Media Server product offerings with
increased storage options.
-- Demonstrated a feature-rich standard and high definition
Video on Demand (VOD) system that works with the ProxSys
family of media servers.
Corporate:
- -- Included in the Russell Microcap(TM) Index in July. The Russell
index captures the 4,000 largest U.S. stocks as of the end of May,
ranking them by total market capitalization. The Russell Microcap
Index comprises the lower half of the 4,000 stocks.
Investor Conference Call
The company will host a shareholder conference call to discuss its
second quarter 2007 results on August 10, 2007 at 6:00 am PT (9:00 am
ET). Brett Moyer, president and chief executive officer, and Gary
Williams, chief financial officer, will deliver prepared remarks and
conduct a question and answer session. The call will be webcast and
can be accessed at Focus Enhancements' web site at www.focusinfo.com.
The webcast will be available through November 10, 2007. If you do not
have Internet access, the telephone dial-in number is 706-634-0182 for
domestic and international participants, and please dial-in five to
ten minutes prior to the beginning of the call. A telephone replay
will be available through August 14th; dial 706-645-9291, and enter
access code 12420625.
About Focus Enhancements, Inc.
Focus Enhancements, Inc. (NASDAQ CM:FCSE), headquartered in
Campbell, CA, is a leading designer of world-class solutions in
advanced, proprietary video and wireless video technologies. The
company's Semiconductor Group develops integrated circuits (ICs) for
high-performance applications in the video convergence market,
including IPTV set-top boxes and portable media players. Focus
Enhancements is currently developing a wireless IC chip set based on
the WiMedia UWB standard and designed to be compatible with Wireless
USB, and used in personal computer (PC), consumer electronics (CE),
and mobile electronics applications. The company's Systems Group
develops video products for the digital media markets, with customers
in the broadcast, video production, digital signage and digital asset
management markets. More information on Focus Enhancements may be
obtained from the company's SEC filings, or by visiting the Focus
Enhancements home page at http://www.focusinfo.com.
Safe Harbor Statement
Statements in this press release which are not historical,
including statements regarding management's intentions, hopes,
expectations, representations, plans or predictions about the future
are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements include
statements regarding management's expectations of funding requirements
in 2007, demand for Focus Enhancements' products, which impacts
revenue, gross margin percentage and cash from operations,
management's plans to complete its semiconductor chip designs, move
its technology to silicon, and the performance of its technology,
including UWB in silicon. Because these forward-looking statements
involve risks and uncertainties, there are important factors that
could cause our actual results to differ materially from those in the
forward-looking statements. Factors that could cause actual results to
differ materially include customers' acceptance of recently introduced
products, changes in customer order patterns, unforeseen increased
costs and delays in research and development, the company's ability to
maintain adequate funding to develop and implement UWB technology, the
ability of the company to migrate its UWB technology to silicon in a
timely manner, the performance and acceptance of its UWB technology
when successfully moved to silicon, and the risk factors specified in
the company's Form 10-K for the year ended December 31, 2006, 10-Q for
the period ended March 31, 2007, as well as other filings with the
SEC. These statements are based on information as of August 10, 2007
and the company assumes no obligation to update any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
Focus Enhancements, Inc.
Condensed Consolidated Statement of Operations
(In thousands, except per share amounts)
Unaudited
Three Months Ended Six Months Ended
------------------ ------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
--------- -------- -------- ---------
Net revenue $ 8,354 $ 8,457 $15,441 $ 15,590
Cost of revenue 4,444 4,670 8,365 9,138
--------- -------- -------- ---------
Gross margin 3,910 3,787 7,076 6,452
--------- -------- -------- ---------
Operating expenses:
Sales, marketing and support 2,479 2,548 4,604 4,622
General and administrative 1,048 1,065 2,145 1,980
Research and development 3,979 2,866 7,917 5,847
Amortization of intangible
assets 51 127 156 254
--------- -------- -------- ---------
7,557 6,606 14,822 12,703
--------- -------- -------- ---------
Loss from operations (3,647) (2,819) (7,746) (6,251)
Interest expense, net (299) (292) (589) (491)
Value of derivative security - - - (4,000)
Change in value of derivative
security - (1,761) - (1,361)
Other income (expense), net (2) (2) 1 68
--------- -------- -------- ---------
Loss before income tax
expense (3,948) (4,874) (8,334) (12,035)
Income tax expense 19 - 23 9
--------- -------- -------- ---------
Net loss $(3,967) $(4,874) $(8,357) $(12,044)
--------- -------- -------- ---------
Net loss per share
Basic and diluted $ (0.05) $ (0.07) $ (0.11) $ (0.18)
Weighted average number of
shares used in per share
calculations:
Basic and diluted 77,277 68,755 75,738 68,455
Focus Enhancements, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
Unaudited
June 30, December 31,
2007 2006
---------- ------------
Assets
Current assets:
Cash and cash equivalents $ 3,986 $ 5,969
Accounts receivable, net of allowances of
$274 and $304, respectively 4,840 4,188
Inventories 4,296 4,072
Prepaid expenses and other current assets 1,389 1,207
---------- ------------
Total current assets 14,511 15,436
Property and equipment, net 1,311 980
Other assets 173 187
Intangible assets, net - 186
Goodwill 13,191 13,191
---------- ------------
$ 29,186 $ 29,980
========== ============
Liabilities and Stockholders' Equity
Accounts payable $ 3,538 $ 3,424
Accrued liabilities 3,532 3,702
Current portion of capital lease obligations 116 10
Borrowings under line of credit 3,450 3,390
Term loan 2,500 2,500
---------- ------------
Total current liabilities 13,136 13,026
Convertible notes 11,493 10,946
Capital lease obligations, net of current
portion 63 -
---------- ------------
Total liabilities 24,692 23,972
---------- ------------
Stockholders' equity:
Preferred stock, $0.01 par value; authorized
3,000,000 shares; 3,161 shares issued and
outstanding at June 30, 2007 and December
31, 2006, respectively (aggregate
liquidation preference $3,917) - -
Common stock, $0.01 par value; 150,000,000
shares authorized, 78,970,845 and
73,210,870 shares issued and outstanding at
June 30, 2007 and December 31, 2006,
respectively 780 722
Treasury stock at cost, 516,667 and 497,055
shares at June 30, 2007 and December 31,
2006, respectively (775) (750)
Additional paid-in capital 118,052 111,203
Accumulated other comprehensive income 91 130
Accumulated deficit (113,654) (105,297)
---------- ------------
Total stockholders' equity 4,494 6,008
---------- ------------
$ 29,186 $ 29,980
========== ============
Focus Enhancements, Inc.
Selected Business Segment Data
(In thousands)
(Unaudited)
Revenue: Three Months Ended Six Months Ended
- ------------------------ ---------------------- ----------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
-------- ------------- -------- -------------
Systems Business $7,020 $ 6,663 $12,873 $ 12,415
Semiconductor Business 1,334 1,794 2,568 3,175
-------- ------------- -------- -------------
Net Revenue $8,354 $ 8,457 $15,441 $ 15,590
======== ============= ======== =============
Research and
Development: Three Months Ended Six Months Ended
- ------------------------ ---------------------- ----------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
-------- ------------- -------- -------------
Systems Business $1,037 $ 678 $ 2,137 $ 1,334
Semiconductor Business 2,942 2,188 5,780 4,513
-------- ------------- -------- -------------
Total Research and
Development $3,979 $ 2,866 $ 7,917 $ 5,847
======== ============= ======== =============
CONTACT: Focus Enhancements Investors:
Lippert/Heilshorn & Assoc.
Mary Magnani, 415-433-3777
mmagnani@lhai.com