Hemisphere GPS Reports 69% Growth in Third Quarter

    Toronto Stock Exchange Symbol: HEM

    Results lifted by increasing cash flow in core customer segment

    CALGARY, Oct. 25 /CNW/ - (TSX:HEM) Hemisphere GPS, a designer and
manufacturer of advanced GPS products, today reported revenue growth of 69%
for the third quarter ended September 30, 2007.
    For the third quarter ended September 30, 2007, Hemisphere GPS reported
revenues of $9.5 million, an increase of 69% as compared to $5.6 million in
the third quarter of 2006. Sales increased in all product areas. Strong growth
in North American and international markets were driven by increased cash flow
within agricultural operations. Reported revenues were tempered by the foreign
exchange impact of a falling US dollar as substantially all revenues are
earned in US dollars. Revenue growth on a US dollar basis was 80% for the
quarter, illustrating the true growth of the business in the quarter
    "We are experiencing very strong momentum in each of our key markets -
air, marine and agriculture," stated Steven Koles, President & CEO of
Hemisphere GPS. "85% of our revenues are derived from sales to the agriculture
market, which is producing record crops in this year's harvest and is
benefiting from high prices for agriculture commodities. Improvements in farm
income and cash flows are widely expected to continue for the next several
years. 2008 budgets for farming operations will support expanded investment in
new farming equipment and technology, including GPS guidance technologies
targeted at increasing farm efficiency and crop yields. With the health of
this year's harvest and continued expectations of high demand and strong
commodity prices, we are excited about the robust years ahead of us in
    International sales increased significantly in the third quarter
including South America and Australia which benefited from higher commodity
prices earlier in 2007 following the southern hemisphere harvest.
International sales delivered healthy growth of 92% (103% in US dollars) in
the third quarter compared to 2006. North American sales also delivered
significant growth of 57% (67% in US dollars) compared to the third quarter of
2006 as a result of the cash flow impact of stronger grain prices.
    While continued strengthening of the Canadian dollar relative to the
United States dollar has negatively impacted gross margins (1.4% estimated
when compared to foreign exchange rates for the third quarter of 2006),
Hemisphere GPS' gross margins strengthened to 46%, as compared to 19% reported
in the third quarter of 2006. Gross margins in the third quarter of 2006
included a one-time inventory adjustment, which results in normalized gross
margins of 37% when adjusted. Gross margins have improved on all product lines
in the third quarter of 2007 arising from cost improvements related to new
products, outsourcing, design cost reductions and manufacturing cost
    Total expenses increased by $346 thousand, or 7%, to $5.3 million,
compared to the third quarter of 2006. Research and development, sales and
marketing, and general and administrative expenses have increased moderately
relative to the revenue growth of 69% realized in the third quarter.
    During the third quarter, Hemisphere GPS was awarded a non-infringement
judgment in a patent infringement lawsuit initiated by Trimble Navigation Ltd.
in 2002. Following this positive decision, a confidential settlement agreement
was concluded between Hemisphere GPS and Trimble, whereby all other
outstanding patent infringement lawsuits between the companies were dismissed,
including the counter claims filed by Hemisphere GPS. During the quarter, the
Company incurred $1.4 million of legal expenses related to this matter,
however, no further legal costs associated with this matter are expected to be
incurred. Commencing this quarter, the legal costs associated with this matter
have been separately disclosed in the Company's Statement of Operations in
order to reflect the impact of these costs on past financial results.
    Hemisphere GPS reported a reduced loss from continuing operations of
$2.6 million, or ($0.06) per share, as compared to a loss $3.8 million, or
($0.08) per share, from continuing operations for the third quarter of 2006.
Legal expenses associated with the Trimble legal action, and foreign exchange
were responsible for approximately $1.8 million of the net loss for the third
    Year-to-date revenue growth has reached 18%. For the first nine months
ended September 30, 2007, Hemisphere GPS reported record revenues of
$44.9 million, 18% higher than $38.0 million for the same period in 2006. The
strength of the Canadian dollar has negatively impacted reported revenues on a
year-to-date basis - when measured in US dollars, revenue growth has been 21%.
    Gross margin for the first nine-months increased to 48%, from 41% for the
same period of 2006. While year-to-date revenues have increased by 18%,
year-to-date expenses have only increased marginally by 5% to $17.6 million
from $16.8 million, demonstrating the scalability and profitability potential
of Hemisphere GPS' business model under increased revenues.
    Hemisphere GPS reported nine-month income from continuing operations of
$363 thousand, $0.01 per share, an improvement from a loss from continuing
operations of $3.0 million, or ($0.06) per share, for the same period in 2006.
After discontinued operations losses, Hemisphere GPS reported 2006 nine-month
net income of $29 thousand, a substantial improvement from the net loss of
$17.1 million, or ($0.37) per share, for the first nine-months of 2006. 2006
included losses of $14.1 million related to the discontinued operations from
the wireless business division divested during 2006.
    At September 30, 2007, Hemisphere GPS held cash of $9.6 million, working
capital of $23.6 million and had no debt.

    Operational Highlights

    -   Hemisphere GPS introduced a new finance program for its Outback
        Guidance brand in North America. Qualifying customers can have access
        to the company's latest Outback Guidance products, without having to
        make a payment for up to six months. With agricultural costs
        continuing to rise, The Outback Guidance Financing Program allows
        Hemisphere GPS precision ground agriculture customers to reap
        immediate benefits.

    -   Hemisphere GPS offers affordable centimeter accuracy with the launch
        of its new Eclipse(TM) dual-frequency GPS receiver technology, based
        on Hemisphere's successful Crescent(R) L1 GPS technology. Eclipse
        advances the Company's existing product line and opens opportunities
        in new vertical markets. Exceptional value, superior performance and
        versatility of Eclipse enables OEM customers to integrate into a wide
        variety of precise applications including navigation and GPS machine
        control. Eclipse users can record and post-process GPS data or choose
        from several differential solutions including Real-Time
        Kinematics(RTK), OmniSTAR(R) (HP/XP) and SBAS (WAAS, EGNOS, etc.).

    -   Hemisphere GPS introduced Outback S-Lite(TM), an entry-level version
        of its popular Outback brand. S-Lite is a low-cost, portable, GPS
        guidance solution for non-precision spraying, spreading, and broad-
        acre tillage and seeding. Hemisphere GPS will begin shipping Outback
        S-Lite in November 2007.

    -   Hemisphere GPS announced Outback AutoMate(TM), an automatic boom
        shutoff product that works directly with Outback Guidance products,
        such as Outback S2(TM) and the new Outback S-Lite(TM). Outback
        AutoMate monitors and controls individual sprayer sections to
        minimize overlaps and skips. Automated boom section control is a new
        innovation which complements Hemisphere GPS' Outback Guidance product
        line and reduces usage and expense of herbicides and fertilizers.

    The strength of the agriculture market has helped propel the Company's
GPS sales revenues to record levels in 2007. Recent increases in agricultural
commodity prices and other macro-economic factors, such as low inventory
levels and demand for bio-fuels, are leading to broad expectations for several
years of profit growth within the agriculture sector and rural populations.
Higher profits from farming operations are anticipated to result in increased
investment in farm equipment and technologies such as GPS that improve farming
efficiencies, crop yields and cash flow.
    2007 will be Hemisphere GPS' first full year as a pure-play GPS company.
The Company is the market share leader in the growing market for precision
agriculture guidance technology and products, as well as in other markets such
as marine. "Our new products create a very exciting platform for growth into
new verticals as well as in our core markets. GPS guidance is now one of the
hottest sectors in agriculture," stated Mr. Koles. "Yet this is still a
relatively young market with lots of room for growth. With farmers adopting
GPS for guidance and autosteer to improve yields and lower input costs, we
anticipate several years of healthy growth ahead of us. In the US, autosteer
penetration is now beginning to rapidly increase and complement guidance-only
systems. We see autosteer as a tremendous growth opportunity and we are very
well positioned to capture that opportunity International markets are still
years behind North America, but quickly working to catch up."

    Conference Call - Thursday October 25 at 11:00AM ET (9:00am MT)

    A conference call and Web cast for shareholders, analysts and other
members of the investment community has been scheduled for Thursday
October 25, 2007 at 11:00 a.m. Eastern Time (9:00 a.m. Mountain Time) to
discuss the financial results and provide updates on operations.
    To participate, please dial 1-800-731-6941 approximately 10 minutes
before the conference call. Please note that a live Web cast of the call will
be available on the Hemisphere GPS Web site at http://www.hemispheregps.com.
The Web cast will be archived there for later review. A recording of the call
will be available through November 1. Please dial 1-877-289-8525 and enter the
reservation number 21250936 followed by the number sign to listen to the

    About Hemisphere GPS

    Hemisphere GPS, designs and manufactures innovative, cost-effective GPS
products for positioning, guidance, and machine control applications in
agriculture, marine and other markets. The Company holds numerous patents and
other intellectual property and owns leading brand names, including Outback
Guidance(R), one of the leading brands in precision GPS for ground
agriculture. The Company is headquartered in Calgary, Alberta, with major
product development, sales, and marketing facilities in Arizona, Kansas, and
Texas. For more information about Hemisphere GPS go to www.hemispheregps.com.

    The above disclosure contains certain forward-looking statements that
involve substantial known and unknown risks and uncertainties. These
forward-looking statements are subject to numerous risks and uncertainties,
certain of which are beyond Hemisphere GPS' control, including: the impact of
general economic conditions, industry conditions, increased competition, the
lack of availability of qualified personnel or management, fluctuations in
foreign exchange or interest rates, stock market volatility and market
valuations of companies with respect to the announced transactions and the
final valuations thereof, and obtaining required approvals of regulatory
authorities. Hemisphere GPS' actual results, performance or achievement could
differ materially from those expressed in, or implied by these forward-looking
statements and, accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or occur, or if
any of them do so, what benefits, including the amount of proceed, that
Hemisphere GPS will derive there from.

    Consolidated Statements of Operations and Deficit

                          Three months ended           Nine months ended
                             September 30,               September 30,
                      --------------------------  ---------------------------
                              2007          2006          2007          2006

    Sales             $  9,474,224  $  5,617,430  $ 44,871,875  $ 38,037,987

    Cost of sales        5,088,368     4,562,414    23,409,037    22,401,843
                         4,385,856     1,055,016    21,462,838    15,636,144
      Research and
       development       1,294,862     1,134,299     3,857,759     3,531,915
      Sales and
       marketing         1,937,392     1,772,476     7,232,476     6,933,442
      General and
       administrative    1,348,660     1,190,929     4,261,162     3,978,800
       compensation        131,493       215,168       536,060       544,285
      Amortization         583,529       637,533     1,748,334     1,843,437
                         5,295,936     4,950,405    17,635,791    16,831,879

    Earnings (loss)
     before undernoted
     items                (910,080)   (3,895,389)    3,827,047    (1,195,735)

    Foreign exchange
     (gain) loss           421,757      (132,998)      648,236       695,376
    Loss on sale of
     securities                  -             -        38,809
    Interest and
     other income         (104,433)      (84,005)     (324,700)     (193,781)
     costs                       -             -             -     1,043,000
    Legal fees on
     of lawsuit          1,406,785       155,580     3,101,504       229,262
    Earnings (loss)
     from continuing
     operations         (2,634,189)   (3,833,966)      363,198    (2,969,592)

    Loss from
     operations           (106,920)   (1,978,404)     (333,965)  (14,164,667)
    Net earnings
     (loss) and
     income (loss)      (2,741,109)   (5,812,370)       29,233   (17,134,259)

     beginning of
     period            (48,096,367)  (42,302,035)  (50,866,709)  (30,980,146)

    Deficit, end
     of period        $(50,837,476) $(48,114,405) $(50,837,476) $(48,114,405)

    Earnings (loss)
     per common share
     from continuing
      Basic and
       diluted        $      (0.06) $      (0.08) $       0.01  $      (0.06)

    Loss per common
      Basic and
       diluted        $      (0.06) $      (0.13) $          -  $      (0.37)

    Weighted average
      Basic             46,345,867    46,086,642    46,225,372    45,992,887
      Diluted           46,566,090    49,340,921    46,317,060    49,340,921

    Consolidated Balance Sheets

                                                  September 30,  December 31,
                                                          2007          2006


    Current assets:
      Cash                                        $  9,624,505  $ 11,160,405
      Accounts receivable                            7,168,035     4,995,204
      Inventories                                   14,530,512    11,479,139
      Deferred commissions                             224,757       111,619
      Prepaid expenses and deposits                    477,236       550,530
      Current assets of discontinued operations        387,877     1,360,735
                                                    32,412,922    29,657,632

    Deferred commissions                               290,181       246,414
    Property and equipment                           8,196,428     8,507,990
    Intangible assets                                3,834,929     4,332,591
    Goodwill                                        22,961,432    22,961,432
    Assets of discontinued operations                        -       116,380
                                                  $ 67,695,892  $ 65,822,439

    Liabilities and Shareholders' Equity

    Current liabilities:
      Accounts payable and accrued liabilities    $  7,166,743  $  5,785,501
      Deferred revenue                               1,344,958       773,527
      Current portion of long-term debt                      -       300,517
      Current portion of capital leases                195,856       291,057
      Current liabilities of discontinued
       operations                                      139,274       974,505
                                                     8,846,831     8,125,107

    Deferred revenue                                 1,941,911     1,672,116
    Capital lease obligations                                -       101,714

    Shareholders' equity:
      Share capital                                104,616,683   104,013,743
      Contributed surplus                            3,127,943     2,776,468
      Deficit                                      (50,837,476)  (50,866,709)
                                                    56,907,150    55,923,502

                                                  $ 67,695,892  $ 65,822,439

    Consolidated Statements of Cash Flows

                          Three months ended           Nine months ended
                             September 30,               September 30,
                      --------------------------  ---------------------------
                              2007          2006          2007          2006

    Cash flows from
     (used in)
      Earnings (loss)
       operations     $ (2,634,189) $ (3,833,966) $    363,198  $ (2,969,592)
      Items not
        Amortization       583,529       637,533     1,748,334     1,843,437
         compensation      131,493       215,168       536,060       544,285
        Loss on sale
         of marketable
         securities              -             -        38,809             -
         gain                    -         8,855             -         4,748
                        (1,919,167)   (2,972,410)    2,686,401      (577,122)

      Change in
         receivable      1,919,895      (118,395)   (2,812,038)     (467,047)
        Inventories     (1,719,634)     (179,430)   (3,051,373)      304,107
         expenses and
         deposits          (54,042)     (270,458)       73,294       (47,790)
         commissions        (8,140)      (17,952)     (156,905)     (277,391)
        Accounts payable
         and accrued
         liabilities      (685,880)      380,024     1,381,242       822,322
        Deferred revenue    46,128       119,699       841,226     1,846,676
                        (2,420,840)   (3,058,922)   (1,038,153)    1,603,755
      Cash used in
       operations          (58,374)   (1,875,884)      (79,958)   (7,888,870)
                        (2,479,214)   (4,934,806)   (1,118,111)   (6,285,115)

    Cash flows from
     (used in)
      Long-term debt             -      (125,884)     (300,517)     (381,772)
      Capital lease
       obligations         (66,313)      (45,734)     (196,915)     (212,121)
      Issue of share
       capital, net
       of share issue
       costs               107,204        66,560       418,355       397,259
      Cash from
       operations                -             -             -     2,977,665
                            40,891      (105,058)      (79,077)    2,781,031

    Cash flows from
     (used in)
      Purchase of
       property and
       equipment          (367,869)     (745,821)     (939,110)   (1,445,911)
       net                       -             -             -      (959,303)
      Proceeds on
       sale of
       securities                -             -       600,398             -
      Cash from
       (used in)
       operations                -             -             -      (117,035)
                          (367,869)     (745,821)     (338,712)   (2,522,249)

    Decrease in
     cash position      (2,806,192)   (5,785,685)   (1,535,900)   (6,026,333)

    Cash, beginning
     of period          12,430,697    12,354,706    11,160,405    12,595,354
    Cash, end of
     period           $  9,624,505  $  6,569,021  $  9,624,505  $  6,569,021

For further information:

For further information: Cameron Olson, Chief Financial Officer,
Hemisphere GPS, (403) 259-3311, COlson@HemisphereGPS.com; Cory Pala, Investor
Relations, E.vestor Communications Inc., (416) 657-2400, CPala@evestor.com

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