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DALSA Reports First Quarter 2006 Financial Results

Waterloo, Ontario, April 27, 2006 - DALSA Corporation (TSX:DSA), an international high performance semiconductor and electronics company, today reported revenue of $46.6 million in the first quarter of 2006 and net income of $2.6 million or $0.14 per share, diluted. The following table summarizes the key results for the first quarter of 2006 and compares them to the first quarter of 2005.


(In millions of dollars, except per share amounts)

Q1, 2006 Q1, 2005 Increase/
Total Revenues $46.6 $36.9 26.4%
Total Net Income $2.6 $2.7 (4.2%)
Earnings Per Share (diluted) $0.14 $0.16 (12.5%)
Gross Margin % 40.4% 39.5% 0.9 p.p.*
Order Backlog at March 31 st $65.8 $55.0 19.6%
Cash Flow From Operations $3.7 $4.8 (21.3%)

* percentage points

"I am pleased with the Company's performance in the quarter and my outlook for 2006 is positive," commented Savvas Chamberlain, CEO of DALSA Corporation. "In our Digital Imaging Business, we are starting to see improving market conditions in key sectors such as semiconductor inspection, flat panel, electronics inspection and life sciences imaging, which should fuel growth in the future. In the Semiconductor division, our MEMS business is gaining momentum. In the quarter, MEMS revenues, which are largely derived from existing customers, were almost equal to that of CMOS revenues. I am also happy to report that in the first quarter we received production orders from a number of new MEMS customers. The Semiconductor Business is progressively moving from its traditional revenue base to more proprietary products and processes including MEMS and high voltage."

"On the Digital Cinema front, our 4K Origin camera is getting into the hands of customers at the same time that high resolution 4K workflows are gaining broad market acceptance. The feedback from the 2006 National Association of Broadcasters show, where our Origin footage was featured prominently in numerous workflow vendors' booths, indicates that we maintain a good two year lead over the competition. There are currently no prototype or production cameras that offer the same imaging performance as the Origin. In 2006, our focus will be on landing new productions and making sure that we have the equipment and support services in place as the Origin camera replaces film based cameras in motion picture production and DALSA Digital Cinema develops into a profitable business."

In the first quarter, Digital Imaging revenues, not including Digital Cinema, were $33.6 million, up 41% from the first quarter of 2005. A significant portion of the increase in revenue relates to the acquisition of Coreco; however, sales also increased in the quarter due to the delivery of a number of large orders in flat panel display inspection and due to general strength in orders and deliveries. Application Specific Contracts ("ASC") revenue was up slightly from the same period last year, and the Company sees good opportunities for both custom development work and for follow-on product orders. Net income for the Digital Imaging Business was $2.7 million, approximately even with the same quarter last year. In the quarter, the positive impact of the addition of DALSA Coreco on earnings was offset by lower shipments in the professional digital photography market.

Semiconductor Business standard product sales were $11.9 million in the quarter, down slightly from the same period last year, but up from the fourth quarter of 2005 due to increases in shipments of MEMS and high voltage products, which the Company sees as key growth drivers. Semiconductor ASC revenue, which is being shown separately for the first time, was $0.7 million in the quarter, up from $0.4 million in the first quarter of 2005. These revenues are used to partially fund internal R&D costs, mainly for MEMS and high voltage. Net income in the Semiconductor Business increased slightly over the first quarter of 2005 to $1.0 million mainly due to higher gross margins.

Digital Cinema revenue, which included the billing for the first commercial shoot using the Origin camera, increased 46.3% to $0.4 million in the quarter compared to the same quarter last year. The increase is mainly due to higher rental of standard and high definition equipment. The loss for the quarter was $1.1 million, an increase of 26.7% from the first quarter of 2005.

The Company's order backlog increased by $5.8 million dollars to $65.8 million through the first quarter of 2006, largely due to an increase in custom contracts in the Digital Imaging Business for semiconductor inspection and life sciences applications.

Overall gross margins in the quarter were 40.4%, up slightly from the first quarter of last year. Gross margins in the Semiconductor Business increased 5.4 percentage points to 28% due to favourable product mix, selected price increases and the positive impact of headcount reductions implemented in 2005. In the Digital Imaging Business, gross margins were 45.1%, down four percentage points from the same period last year and below the Company's target range of 50 to 55%. This is due mainly to the impact of Digital Cinema and costs associated with the launch of new professional imaging products. The Company expects that it can adjust the cost structure and improve manufacturing processes to maintain gross margin targets even if the Canadian dollar reaches parity with the US dollar.

Cash provided from operating activities was $3.7 million in the quarter compared to $4.8 million in the same period of 2005. During the quarter, the net cash position decreased as the Company paid down $1.5 million of the long term debt associated with the acquisition of Coreco in 2005. This was accomplished despite the fact that it exercised an expiring option and spent $2.4 million for the strategic purchase of land in Waterloo during the quarter. Management's goal is to continue to be cash flow positive from operations throughout 2006 and believes that cash on hand, existing bank facilities, and cash flow from operating activities will be sufficient to fund currently anticipated working capital, planned capital spending and debt service requirements in 2006.

For further detail, please refer to the first quarter 2006 Financial Statements, accompanying notes, and Management's Discussion and Analysis at the DALSA website. The address is www.dalsa.com/public/corp/investor/2006/DSA_2006Q1_release.pdf.

Investor Conference Call
A conference call to discuss the Company's First Quarter financial results will be held this afternoon at 5:00pm ET. The conference call, followed by a question and answer period, will be broadcast live and open to anyone interested in listening at http://events.onlinebroadcasting.com/dalsa/042706/index.php. The phone numbers for those who wish to participate in the question and answer period are as follows:

Live Conference Access Information:
Local / International: 416-850-9150
North American Toll-Free: 1-866-809-4939

Instant Replay Access information:
Local Dial-In Number: 402-220-0608
Toll-Free Dial-In Number: 1-800-695-9456
Passcode: 7476388
Expiry: May 10, 2006

About DALSA Corporation
DALSA is an international high performance semiconductor and electronics company that designs, develops, manufactures, and markets digital imaging products and solutions, in addition to providing semiconductor products and services. DALSA's core competencies are in specialized integrated circuit and electronics technology, software, and highly engineered semiconductor wafer processing. Products and services include image sensor components; electronic digital cameras; vision processors; image processing software; and semiconductor wafer foundry services for use in MEMS, high-voltage semiconductors, image sensors and mixed-signal CMOS chips. DALSA is listed on the Toronto Stock Exchange under the symbol "DSA". The Company has its corporate offices in Waterloo, ON and approximately 1000 employees world-wide.

For more information, please contact:

Patrick Myles
Director, Corporate Communications
DALSA Corporation
Tel: (519) 886-6001 Ext. 2177
Fax: (519) 886-3972
E-mail: [email protected]
Internet: www.dalsa.com

Some of the statements in this press release, including those relating to the Company's strategies and other statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", or similar expressions, are forward-looking statements within the meaning of securities law. Actual results may differ materially from those currently anticipated. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements are detailed from time to time in DALSA's periodic reports filed with the Ontario Securities Commission and other regulatory authorities. Investors should read review the Business Risks and Prospects sections of the DALSA 2005 annual Management's Discussion and Analysis ("MD&A") to understand the assumptions, risks and uncertainties inherent in forward looking information or statements. DALSA has no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Published 2006-04-27

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