Norsat’s Revenues up 9% in 1st Q 2014

Vancouver, British Columbia – May 7, 2014 — Norsat International Inc., a provider of innovative communication solutions that enable the transmission of data, audio and video for remote and challenging applications, today reported financial results for the first quarter ended March 31, 2014.   Total sales were US$ 9.1 million, compared to US$ 8.4 million in Q1 2013.

 “We continued to maintain a strict cost discipline across our operations.  To drive ongoing efficiencies we balance cost reductions with strategic investment throughout our operations.  In the longer term we expect these investments will lead to even better operating profitability.  We also benefited from the strengthening of the US dollar against the Canadian dollar.  In all year-over-year employee related costs savings and a favorable US to Canadian exchange rate, have help reduce total expenses, net of government funding, to US$ 1.7 million in the first quarter of 2014 compared to US$ 3.0 million in the first quarter of 2013”, said Norsat CEO Aimee Chan.

Chan continued “from a product development perspective,  we launched a number of new products this quarter, including the ATOM series of Ku-band BUCs and SSPAs, and the 700 – 800 MhZ TXC Series of Ceramic Combiners.  The ATOM series of BUCs and SSPAs are the most compact, lightweight, and energy efficient transmitters available in the market.”

Sales from the Sinclair Technologies segment remained consistent at US$ 5.6 million for the first quarter of 2014, compared to US$ 5.6 million during the same period in 2013.

First quarter Satellite Solutions segment sales were US$ 0.6 million, compared to US$ 1.4 million in Q1 2013, reflecting the continuing decrease in US military demand and budget constraints among other non-military customers. Other service revenues were also US$ 0.2 million lower year-over-year due to the non-renewal of a significant airtime contract.

First quarter Microwave Products segment sales were US$ 2.8 million, compared to US$ 1.4 million in Q1 2013. The US$ 1.4 million increase was mainly driven by the product deliveries on the Atom contract.

On a consolidated basis, first quarter gross margin percentages were 41% which is comparable to Q1 2013 margins of 40%. Gross margins in our Microwave Products segment were 46%, compared to 39% in Q1 2013, which reflects a greater portion of higher-margin revenues in the mix and the reduced warranty costs due to the expiry of a significant warranty obligation acquired as part of the acquisition of certain assets and liabilities of CVG.  Our Sinclair and Satellite Solutions margins were 40% and 30%, respectively for the first quarter in 2014 which are comparable to the gross margins for the same period in 2013.

For the three months ended March 31, 2014, total expenses decreased to US$ 1.7 million, from US$ 3.0 million in Q1 2013.

First quarter selling and distributing expenses decreased to US$ 1.3 million, from US$ 1.6 million in 2013, and first quarter general administration expenses decreased to $0.9 million, from $1.0 million in 2013.  The decrease reflects the strengthening of the US dollar against the Canadian dollar, as a significant portion of the company’s expenses are in Canadian Dollars, and employee-related costs savings.

First quarter 2014 net product development expenses was $0.3 million which is comparable to first quarter 2013 net product development expenses of $0.3 million. The decrease of direct expenses to $0.6 million, from $0.8 million in 2013, reflects the strengthening of the US dollar against the Canadian dollar as a significant portion of the company’s product development costs are in Canadian Dollars, and employee-related costs savings.  This was offset by the decrease of government contributions of $0.4 million in the first quarter of 2014 compared to $0.6 million for the same period in 2013.  In 2013 the timing of the award of the Strategic Aerospace & Defense Initiative (“SADI”) program meant over two quarters worth of government contributions were recorded in Q1 2013, compared to just one in the first quarter of 2014.

 First quarter earnings before income taxes were US$ 2.1 million, compared to $0.4 million during the same period last year, reflecting higher gross profits and lower operating expenses. First quarter net earnings were US$ 2.2 million, or $0.04 per share, basic and diluted, compared to $0.4 million, or $0.01 per share, basic and diluted in 2013.

Adjusted EBITDA for the three months ended March 31, 2014 improved by 100% to US$ 1.6 million, compared to the same period last year, reflecting a $0.4 million increase in gross profit contributions from higher sales volume, and lower total expenses of approximately $0.4 million in the first quarter of 2014 compared to the same period in 2013.  The decrease in operating expenses mainly reflects the strengthening of the US dollar against the Canadian dollar, as a significant portion of the company’s expenses are in Canadian Dollars, and lower expenses from employee-related cost savings in the first quarter of 2014 compared to the same period in 2013. This was partially offset by approximately $0.2 million less government contributions for the first quarter of 2014 compared to the same period in 2013.