(TSX: HEM) Hemisphere GPS, a designer and manufacturer of advanced GPS products, reported its financial results for the first quarter ended March 31, 2010. All amounts in this news release are expressed in U.S. dollars.
For the first quarter ended March 31, 2010, Hemisphere GPS reported a 16% decrease in revenues to $15.1 million, versus $18.0 million in the first quarter of 2009. Hemisphere GPS reported a net loss of $1.7 million, or $(0.03) per share (basic and diluted), in the first quarter of 2010 compared to net earnings of $1.6 million, or $0.03 per share (basic and diluted), in the first quarter of 2009.
Agriculture segment revenues decreased by 21% as a result of weakened agricultural equipment spending in North America, Europe and Australia. The Company's North American agriculture sales were 22% lower in the first quarter of 2010 compared to the first quarter of 2009. Similarly, European and Australian sales were 32% and 38% lower respectively. Sales in other regions of the world showed very strong growth being up by 165% driven by sales in South America and China - both up in excess of 200%. Revenues from the Company's Precision Products segment grew by 18% in the first quarter lead by increased sales of Vector heading sensor products, as well as GPS boards, to OEM customers.
"Economies around the world are recovering at different rates and the agriculture sector experienced varied geographical trends globally during the first quarter," stated Steven Koles, President and CEO of Hemisphere GPS. "While agriculture revenue in South America was very strong, North America, Europe and Australia were quite weak as heavy planting activity and weak commodity prices tempered purchasing. Operationally, we entered the second quarter initiating full commercial shipping of several key new products, including the new eDriveX. Based on these new products and associated order backlog, we expect revenue in 2010 to reflect a different seasonal profile than has been typical for our company - with significant relative strength in the back half."
First quarter gross margins of $6.8 million, or 45.2%, were down from $9.4 million, or 52.4%, for the same quarter of 2009. Margins decreased year-over-year primarily as a result of the impact on inventory of the significant weakening of the US dollar over the last year. Much of the US dollar inventory sold by the Company during the first quarter was acquired during the first and second quarter of 2009 - when the US dollar was much stronger. The Company estimates that this had a negative impact on gross margins in the quarter of approximately 4%, in part because the first quarter of 2010 realized an opposite impact from FX rates.
Operating expenses were $8.4 million in the first quarter, an increase of $0.6 million, or 7%, compared to the first quarter of 2009. Research and development expense for the quarter increased year-over-year by $0.3 million to $2.4 million. Sales and marketing expenses were essentially flat over the first quarter of 2009 at $3.2 million. General and administrative expenses increased over the first quarter of 2009 by $150 thousand or 10%. Total headcount at March 31, 2010 was 227 employees, down from 262 at March 31, 2009 with a reduction of 17 employees in the manufacturing department and 18 employees in other functions. However, the impact of these reductions on operating expenses has been substantially offset by the impact of the weakening US dollar on translated expenses.
At March 31, 2010, Hemisphere GPS held cash of $9.1 million, as compared to $8.4 million at December 31, 2009. Working capital at the end of the first quarter was $27.3 million.