PR – Hemisphere GPS, a designer and manufacturer of advanced GPS products, today reported financial results for the fourth quarter and year ended December 31, 2008. All amounts in this news release are expressed in US dollars. For the year ended December 31, 2008, Hemisphere GPS reported a 35% increase in revenues to a record of $72.7 million, versus $53.7 million in 2007. 2008 growth was driven by strong market fundamentals in agriculture during the year including high farm incomes. Revenues in the Ground Agriculture business grew 34% for the year, while the Air Agriculture business grew 31%.
Strong grain commodity prices lead to record net farm income in the United States in 2007, and similarly in other countries, which in turn drove stronger sales of agricultural products. International sales growth for the year was 44%, contributing 30% of total revenues for the year, as compared to a contribution of 28% in 2007.
The most significant revenue growth from the Hemisphere GPS Ground Agriculture products was from the Outback S3(TM), introduced in February 2008 and the Outback S-Lite(TM) introduced late in 2007 – both of which have been very favourably received by the markets. Auto-steering products continued their strong momentum with the eDriveTC(TM) product once again representing the largest single revenue-generating product. Software revenues associated with the acquisition of Beeline in December 2007 also contributed to the increase in Ground Agriculture product sales.
Even stronger growth of 45% was seen in sales to non-agriculture markets through the Precision Products segment – including sales to marine, GIS and original equipment manufacture (“OEM”) customers. Revenues for these products are benefiting from a focused global sales channel initiative which has resulted in increased demand for GPS receivers and board level GPS equipment from OEMs and custom integrators, as well as for the marine line of Vector(TM) heading sensor products. “2008 was the most successful in the history of Hemisphere GPS, despite the global economic conditions and a late North American harvest which emerged late in the year” stated Steven Koles, President & CEO of Hemisphere GPS.
“We are very proud of what we have accomplished last year and are even more excited about the great opportunities we are pursuing for future growth and scalability.” Gross margin in 2008 increased to 51% of revenues from 47% in 2007. Gross margin has improved as a result of the outsourcing of higher volume components and finished goods to third-party manufacturing overseas, product mix, and from the inclusion of software revenues from the Beeline(R) integration which naturally generate very high gross margins. Investment in research and development was $8.1 million in 2008, compared to $5.0 in 2007. The primary increase resulted from the acquisition of Beeline Technologies in December 2007 which added approximately 20 engineering employees, greatly strengthening software engineering capabilities.
The investment in research and development activities is critical to maintain and build Hemisphere GPS’ position in current and targeted markets. For 2008, research and development was 11% of revenue. Following the acquisition of Beeline, Hemisphere GPS expects its investment in research and development to be 11% to 12% of revenue. Total operating expenses in 2008, which include operating expenses from the acquired Beeline business, were $31.4 million, an increase of 39% compared to 2007. Although fully integrated into the Ground Agriculture segment, operating expenses related to the Beeline acquisition were estimated to be approximately $4.2 million for the year, with the remainder of the increase in operating expenses relating to activity associated with the significant growth in revenues over the last year.