StockerYale, Inc. (StockerYale), a US-based manufacturer of illumination products, specialty optical fiber and diffractive optics, has reported net sales of $32.1 million for the year-end 2008, up 7.5%, compared with the net sales of $29.9 million in the previous year-end. It has also reported a net loss of $10.3 million, or $0.27 loss per share, for the year-end 2008, compared with the net loss of $8.5 million, or $0.24 loss per share, in the previous year-end.

Full-Year 2008:

Record gross profit of $11.3 million vs. $9.0 million, a 26% increase;

Gross margin 35.3% vs. 30.2%;

EBITDA $0.2 million (excluding one-time acquisition expenses) vs. $2.5 million loss;

Record Order bookings $33 million.

Fourth-Quarter 2008:

Revenue of $7.0 million vs. $7.5 million in fourth quarter 2007, a 6.8% decrease, but flat on a currency adjusted basis;

Gross profit of $2.4 million vs. $1.5 million, a 61% increase;

Gross margin 34.7% vs. 20.1%;

Operating loss $0.5 million vs. $3.2 million, an 83% improvement;

EBITDA breakeven vs. $2.1 million loss;

Order bookings $7.5 million, ending backlog $9.6 million.

2008 Business Highlights:

Defense contract win with BAE Systems valued at $2.1 million;

Multi-million dollar 3 year Supply Agreement with Boston Scientific, Inc. for fiber-based assemblies;

New product introductions including: Cold Ray Laser for bio-medical market, Cobra Slim LED System for solar panel/flat panel inspection and Thulium-Doped Fiber Laser for military applications;

Granted US patent on Flat-Top optics beam shaping technology and filed patent on pulsed Thulium Fiber Laser technology;

Growth of 32% year over year in LED Systems business; relocated to new R&D/manufacturing facility;

Several major medical/bio-medical product customers wins; medical sales grew 28% vs.2007;

New management team recruited at Photonic Products, Ltd.; new medical supply contract signed with Fortune 50 company;

Industrial sales of 78% of revenues, 12% medical and 8% defense;

Geographic sales – 54% North America, 36% Europe and 10% ROW;

Reduced costs and improved efficiencies throughout the business;

Headcount declined 15% from 219 to 190.

Fourth Quarter 2008 Financial Results:

Total revenues for the fourth quarter of 2008 of $7.0 million decreased 7 percent (unchanged, adjusting for currency) from the fourth quarter of 2007. The year-over-year decrease was due to the appreciation of the US dollar versus the Euro and British pound in the second half of 2008.

Bookings for the fourth quarter of 2008 were $7.5 million and backlog was $9.6 million at December 31, 2008. The backlog at quarter end is net of a $(1.0) million negative adjustment for foreign currency fluctuations.

Gross profit was $2.4 million for the fourth quarter of 2008, a 61% increase compared to the $1.5 million in the fourth quarter of 2007. Fourth quarter 2008 gross margin was 35% compared with 20% in the comparable year-ago quarter due to higher margin product mix, increased productivity, lower restructuring charges and the effect of foreign currency fluctuations in 2008 versus 2007.

Operating expenses totaled $3.0 million for the fourth quarter of 2008, a decrease of 36% over the $4.7 million in the fourth quarter of 2007. The decreased operating expenses over 2007 were primarily due to non-cash share-based compensation expense under FAS 123(R), as the performance based stock option plan expenses were reversed, a reduction in compensation and benefits, some of which is due to the impact of foreign currency exchange, as well as the $0.4 million of non recurring charges in the fourth quarter of 2007. The operating loss for the fourth quarter was $0.5 million compared to an operating loss of $3.2 million for the fourth quarter 2007, an 83% improvement. EBITDA for the quarter was $(13,000) compared to $(2,138,000) for the fourth quarter of 2007.

“While pleased with both our quarterly and year over year performance, the recent downturn in the industrial market, the financial crisis and fluctuations in exchange rates impacted our fourth quarter results,” stated Mark W. Blodgett, chairman and chief executive officer of StockerYale. “Our EBITDA loss dropped from $2.1 million to break even despite lower sales on a currency adjusted basis, and reflected management’s focus on continuous operational improvement. Both gross margin and gross profit improved significantly in the fourth quarter due to higher margin new product traction in both the medical/bio-medical instrumentation and defense markets, as well as increased productivity resulting from lean initiatives. As a result of the challenging economic environment we took steps late in the fourth quarter to reduce our annual cost structure by approximately $2.5 million without sacrificing either our R&D initiatives or customer applications capabilities.”

Full-Year 2008 Financial Results:

Sales growth was led by our LED systems (32% increase), optical components (12%) and the lasers and associated diode revenues (4%). Gross profit was a record $11.3 million, an increase of 26% compared to $9.0 million in 2007. Gross profit margin also increased to 35% from 30% in 2007 due to higher margin product mix, improvements in supply-chain management, and cost containment. Foreign currency changes positively impacted gross margin by 0.6 points.

Operating expenses in 2008, net of non-cash asset amortization expenses and asset impairment charges, increased 5% to $14.7 million from $14.1 million in 2007. The increase was driven by one-time expenses associated with the tender offer for Virtek Vision Systems ($0.8 million). Operating loss was $4.5 million compared to $6.3 million in 2007. EBITDA loss was $0.6 million and included $0.2 million of favorable foreign exchange impact. This compares with an EBITDA loss of $2.5 million in 2007. Excluding the one-time expenses, EBITDA was $221,000 versus $2.5 million loss, a $2.7 million improvement over the prior year. The increase primarily related to a $2.8 million foreign exchange loss related to the revaluation of liabilities and receivables at the Company’s foreign subsidiaries denominated in currencies other than the functional currencies of those subsidiaries.


“We expect the environment will remain difficult and volatile – at least for the near-term. We are very focused on increasing market share, new customer development and customer retention, particularly in the medical and bio-medical instrumentation fields. With our new line of fiber coupled laser modules and patented beam shaping optics we successfully penetrated several of the world’s leading flow cytometry and cell sorting companies in 2008 and we expect medical/bio-medical sales to increase significantly in 2009. On the defense front we received an initial award of a $2.1 million for reference lasers from BAE Systems and are working closely with one of the world’s leading defense companies to develop our gain-switched pulsed Thulium fiber laser technology. We expect defense sales as a percentage of total revenues to increase meaningfully in 2009,” added Blodgett. “While the business outlook remains challenging, our priorities remain clear and achievable. We remain focused on selling new, higher margin products, and aggressively seeking opportunities to further reduce the company’s cost structure, while improving the Company’s balance sheet through effective working capital management and financing activities. We have clearly seen the positive impact of our efforts on our financial results over the last year and the economy notwithstanding, we expect the Company to continue to strengthen its product portfolio and brand identity in the photonics industry,” concluded Blodgett.