StockerYale reports improved quarterly and annual results

FEBRUARY 16--StockerYale (Salem, NH, USA; www.stockeryale.com) has announced its financial results for the fourth quarter and year ended December 31, 2006.

Feb 16th, 2007

FEBRUARY 16--StockerYale (Salem, NH, USA; www.stockeryale.com), a designer and manufacturer of structured-light lasers, LED modules, and specialty optical fibers for industrial OEMs, has announced its financial results for the fourth quarter and year ended December 31, 2006. All 2005 and 2006 numbers have been adjusted for discontinued operations, and the 2006 numbers include financial results from the date of acquisition of Photonic Products Ltd. on October 31, 2006. The reported results are subject to the completion of the annual audit by our independent registered public accountants.
* Revenues from continuing operations for the year ended December 31, 2006, increased 20% from $16.2 million to $19.4 million, including $1.7 million of revenues from photonic products. For the year, gross margin improved to 35% from 30% in the prior year due to improved product mix from divestitures and acquisition.
* Operating expenses increased 2% to $10.4 million from $10.2 million in 2005, net of noncash asset impairment charges of $1.4 million in 2005, mainly from accretive operating expenses of Photonic Products ($0.5 million) and a $0.3 million increase relating to the adoption of FAS 123R. Research-and-development expenditures represented 14% of revenues.
* Operating loss declined 33% to $3.6 million from $5.3 million in 2005, net of asset impairment charges.
* EBITDA loss declined 70% to $0.9 million for 2006 compared to $2.9 million in 2005.
* 2006 net loss decreased significantly to $5.1 million or $0.17 per share from $11.9 million or $0.46 per share for 2005.
* Completed the acquisition of privately held Photonic Products Ltd. a provider of laser diode modules and laser diodes for industrial, medical, and scientific markets for $9.4 million in cash, stock, and bonds on October 31, 2006. This strategic acquisition significantly broadened StockerYale's product portfolio of laser modules.
* Introduced the Flat-Top2 Generator, a laser-beam-shaping module that converts a standard Gaussian beam into a focused, collimated, or diverging flat-top profile that will satisfy diverse application requirements in areas such as biodetection, night vision, and optical character recognition. The Flat-Top2 Generator is compatible with lasers that emit at UV, visible, and near-IR wavelengths and allows for seamless integration with the company's Lasiris lasers.
* Signed a two-year, sole-source supply agreement with NxtPhase T&D to supply a series of specialty optical fibers and fiber-based components optimized for use with the NxtPhase line of optical current and voltage sensors.
* Announced availability of ultrasmall-form-factor fibers with specialty coating. These products are facilitating new applications within the industry, with initial emphasis on products for cardiology, angioplasty, and medical sensing devices.
* Introduced the SpecBright family of LED modules, targeting the expanding machine-vision, security, UV curing, and biomedical markets.

Net revenues from continuing operations increased 45% to a record $5.9 million for the fourth quarter 2006, compared to the $4.1 million reported in the fourth quarter of 2005. Laser and associated diode revenues increased 67% to $4.1 million from $2.5 million in the fourth quarter of 2005, primarily due to $1.7 million of revenues from Photonic Products. LED revenues increased 60% and optical component revenues, mainly specialty optical fiber, grew 13%. Gross profit increased 118% from $0.8 million reported in the fourth quarter of 2005 to a record $1.8 million, including $0.7 million from the Photonic Products acquisition, while gross margin increased from 21% to 31%. Operating expenses increased by 4%, or $0.1 million to $2.7 million excluding noncash charges relating to asset impairment and amortization of intangible assets. Operating loss declined 49% from $1.9 million to $0.9 million, excluding non-cash asset impairment and amortization expense. EBITDA loss declined 70% to $0.3 million in the fourth quarter 2006 compared to $1.1 million in the same period of 2005. Net loss for fourth quarter 2006 decreased significantly to $1.6 million or $0.05 per share compared with $5.6 million or $0.20 per share for the fourth quarter of 2005.

Revenues from continuing operations for the year ended December 31, 2006, increased 20% from $16.2 million to $19.4 million, including $1.7 million of revenues from Photonic Products. Sales growth was led by specialty optical fiber (34%) and LEDs (29%). Gross profit increased 39% to $6.8 million during 2006 from $4.9 million in 2005. Gross margin improved to 35% from 30%. Operating expenses increased 2% to $10.4 million from $10.2 million in 2005, net of non-cash asset impairment charges of $0.8 million in 2005, mainly from accretive operating expenses of Photonic Products ($0.5 million) and a $0.3 million increase relating to the adoption of FAS 123R. Operating expenses included approximately $115,000 nonrecurring expenses associated with the acquisition of Photonic Products. Operating loss declined 33% to $3.6 million from $5.3 million in 2005, net of the asset impairment charges. EBITDA loss declined 69% to $0.9 million for 2006 compared to $2.9 million in 2005. Net loss for 2006 decreased significantly to $5.1 million or $0.17 per share from $11.9 million or $0.40 per share for 2005.

For 2007, StockerYale expects annual revenue in the range of $30 million to $34 million, gross margin in the range of 37% to 42%, and positive EBITDA for the year. Mark W. Blodgett, chairman and chief executive officer, stated, "Strategically, 2006 was a transition year for StockerYale, which included the divestiture of three noncore product lines, the opportunistic acquisition of a highly complementary laser business, and the acceleration of our product development efforts. All of these actions set the stage for accelerating revenues in 2007 and improved bottom line performance based on strengthened operating efficiencies. Our financial expectations for 2007 reflect the market acceptance of recent new product offerings, significant new OEM opportunities, and projections based on current backlog, which stands at a record $10.4 million as of February 8, 2007.

"Overall, we expect faster growth in our three core businesses this year--lasers, LEDs, and specialty optical fiber," Blodgett continued. "Meanwhile, we will continue to seek additional strategic acquisitions consistent with our complementary product line criteria. Our 2007 outlook does not include the effect of any potential strategic investments that may be completed in 2007."

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