Cost cutting pays off for Durswitch

Duraswitch has revealed financial results for the quarter and year ended 31st December 2003.

Duraswitch has revealed financial results for the quarter and year ended 31st December 2003.

Duraswitch reported a net loss of $2.6 million, or $0.27 per share, for the year ended 31st December 2003 compared with a net loss of $4.7 million, or $0.49 per share, during fiscal 2002.

Revenue during 2003 included $760,000 in licensing revenue, generating a gross profit of $657,000.

During the comparable period in fiscal 2002, revenue included $747,000 in licensing revenue and $25,000 in product revenue, generating a gross profit of $616,000.

For the fourth quarter of 2003, Duraswitch reported a net loss of $529,000 or $0.06 per share, compared with a net loss of $1.2 million, or $0.12 per share, during the fourth quarter period of fiscal 2002.

Revenue for the fourth quarter of fiscal 2003 included $247,000 in licensing revenue, generating a gross profit of $205,000.

Revenue for the fourth quarter of fiscal 2002 included $175,000 in licensing revenue, generating a gross profit of $85,000.

Gross profit increased to 86% for fiscal 2003 versus 80% in 2002.

Margins vary depending on the mix of different technologies used by licensees.

Duraswitch receives a per-switch royalty as licensees use Duraswitch technologies in their customers' products.

Licensing revenue recognised as a result of deferred revenue received in 2000 from an exclusive agreement with Delphi made up 54% of revenue in 2003.

The majority of nonexclusive revenue was related to royalties from our PushGate pushbutton technology and was generated through 21 different licensees.

Operating expenses for the quarter ended 31st December 2003 were $743,000, a 41% reduction from the same period in 2002.

Operating expenses decreased 41% to $3,217,000 during fiscal 2003 from $5,473,000 in 2002.

The decrease was primarily a result of cost-cutting initiatives that were implemented in 2002 and continued in the first half of 2003.

Operating expenses for the second half of 2003 were $1.4 million, with a net loss of $1.0 million.

The cost-cutting initiatives consisted primarily of reductions in personnel.

Duraswitch's cash position at 31st December 2003 was $4.3 million, and the company has no debt.

Duraswitch CEO, Bob Brilon said: "The full effect of our cost cutting measures was apparent in the latter half of fiscal 2003.

Our licensing model has enabled us to create a lean organisation, focused on commercialisation of our patented technologies".

"At the same time, revenues for 2004 will be significantly increased by Delphi Corp, who has a guaranteed $12 million minimum royalty agreement with our company.

The first payment of $1 million is earned as of 30th June 2004, and is due 1st July 2004.

Payments of $2 million, $3 million and $6 million will be earned as of 30th June in years 2005-2007.

With operating costs significantly reduced, these royalties alone push us rapidly approaching profitability", Brilon added.

"We are relying on this guaranteed royalty as a base.

The tipping point for profitability will be determined by how quickly our other licensees are able to ramp production and win additional designs using our technologies.

The pipeline for designs through our licensees accelerated in 2003, giving us confidence that our licensees are continuing to build their Duraswitch technology business".

Duraswitch licensees continued their record pace of design reviews in 2003, with 96 designs versus 51 in 2002.

Design reviews submitted by licensees are generally the step before a project goes to prototype with potential production following.

Licensees show penetration in new markets, follow-on business with current customers, and have demonstrated design wins with Thincoder and MagnaMouse Duraswitch technologies.

Not all design wins have gone into production as of year end.

PushGate has been designed into a wide range of new applications including medical equipment, commercial appliances, industrial controls and communications equipment.

Use of recently released technologies, including the Thincoder, MagnaMouse and unique constructions in the PushGate line such as the High Impact and Large Key, has been a key driver for new business.

These technologies offer significant benefits over other types of switches.

Brilon continued: "Design reviews in fiscal 2003 came through existing licensees.

We also welcomed eight new licensees during fiscal 2003.

We expanded our reach in Europe through Siemens, Rafi, Danielson and OXI.

We are very excited to open new markets in Asia through Printec and Ishii Hyoki, as well as Russia through Elcom.

In the United States, Advanced Input Devices, a sister company to licensee, Memtron Input Components, and subsidiary of parent Esterline brings further expertise in complete control panel systems.

All of these new partners are growing in their knowledge of Duraswitch's advantages and value proposition, and we believe will be strong advocates for our technologies".

"We continue to show success on the underlying metrics that will make Duraswitch successful.

Going forward, our operating expenses are significantly reduced and we will leverage the sales, manufacturing and engineering strengths of our partners.

We have $12 million in minimum guaranteed royalties from Delphi in the next four years.

Current licensees show continued success in winning business with our technologies.

We continue to build our network of licensees and strategic partners.

These partners also enable us to continue to bring new technology developments to market, such as the recently introduced PushFlex", Brilon concluded.

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