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| TSXV:CDN | TSX Venture | Common Stock |
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DDS Wireless International Inc. (TSX:DD) -
Second Quarter 2012 Year-to-Date 2012
Revenue of $10.6 million Revenue of $19.3 million
Net income of $0.2 million, or $0.01 Net loss of ($0.3) million, or
per share ($0.02) per share
EBITDAS(1) of $0.7 million, or $0.05 EBITDAS(1) of $0.3 million, or
per share $0.02 per share
DDS Wireless International Inc., a world leader in providing wireless data
solutions for fleet management for more than 20 years, today reported financial
results for the three and six months ended June 30, 2012 and announced that the
Company's Board of Directors has approved a cash dividend on the Company's
common shares ("Shares"). All financial information is expressed in Canadian
("CDN") dollars and has been prepared in accordance with International Financial
Reporting Standards ("IFRS"), except as otherwise noted.
"The second quarter of fiscal 2012 showed marked improvement from the first
quarter of 2012 in terms of revenue and profitability with revenues of $10.6
million and net income of $0.2 million," stated Vari Ghai, CEO of DDS Wireless.
"Slower demand in Europe continues to characterize sales in the Taxi business
unit, with enterprise solutions revenues lower than that of 2011. However, our
Transit business unit shows growth due to the significant contracts we signed
with MTA New York City Transit ("NYC Transit") late last year and increasing
sales of MDT's through our partners from a rising adoption of our hardware in
the transit market," continued Mr. Ghai.
(1) Non-IFRS measure. Defined as earnings before interest, taxes, amortization
and share-based compensation. Please refer to the reconciliation of reported
financial results to Non-IFRS measures attached to this press release.
"We remain particularly pleased with the continued growth in subscriptions for
our SaaS offerings to the North American small and mid-size taxi, limousine and
work fleets, both currently underserved markets. TaxiBook(TM) subscriptions in
North America continued to increase apace with growth of 54% in the year to
date. eFleet, our SaaS offering to the limousine and work fleet markets, also
met a milestone of 1,000 subscriptions."
Second Quarter 2012 Financial Results
Revenue declined 5% or $0.6 million compared to the three months ended June 30,
2011 and increased by 22% compared to the immediately preceding quarter.
Revenues are lower compared to the same period last year due to lower revenues
from the Taxi business unit (a decrease of $1.8 million), arising from declines
in European enterprise solutions revenue, offset in part by growth through the
unit's TaxiBook(TM) subscriptions. The Transit unit experienced an increase of
$1.0 million in revenue from its continued activities under its NYC Transit
project and through the additional sale of mobile data terminals ("MDT") to our
partners.
The increase in revenue from the immediately preceding quarter of $1.8 million
was the result of $0.8 million from higher TaxiBook(TM) and eFleet subscriptions
(including the related MDT sales), some increases in Taxi and Transit enterprise
solutions delivery and the above noted increase in the sale of MDT units in the
Transit unit ($0.4 million).
Gross margin decreased by $1.1 million or 20% to $4.1 million from the same
quarter last year due to a combination of both lower revenues and lower average
margins earned on enterprise solutions projects in both the Transit and Taxi
business units. The gross margin yield in the quarter was 39% compared to 46% in
the same quarter last year and 38% in the immediately preceding quarter.
The decrease in the gross margin of $1.1 million, offset by combined favourable
variances of $0.8 million in operating expenses and tax recoveries in the
period, led to a decrease in net income of $0.3 million compared to the same
period in the prior year. EBITDAS(1) was $0.7 million or 6% of revenue and net
income was $0.2 million or $0.01 per share.
Year-to-Date 2012 Financial Results
Revenue declined 7% or $1.5 million compared to the six months ended June 30,
2011 arising from lower revenues from the Taxi business unit of $2.6 million; a
result of declines in enterprise solutions, offset by growth in its worldwide
TaxiBook(TM) sales and transaction based revenues. The decline in Taxi revenues
was offset, in part, by increases in Transit revenue (through increases in
enterprise solutions and MDT sales) and New Markets.
Gross margin decreased by $2.1 million or 22% to $7.5 million from the same
period last year due to a combination of both lower revenues and lower average
margins earned on enterprise solutions projects in both the Transit and Taxi
business units, resulting from changing sales mix as well as the NYC Transit
project continuing to be in a lower margin phase of the project.
The decrease in the gross margin of $2.1 million, offset by combined favourable
variances in operating expenses, foreign exchange and tax recoveries in the
period, led to a decrease in net income of $0.6 million compared to the same
period in the prior year. EBITDAS(1) was $0.3 million or 2% of revenue and net
loss was $0.3 million or $0.02 per share.
(1) Non-IFRS measure. Defined as earnings before interest, taxes, amortization
and share-based compensation. Please refer to the reconciliation of reported
financial results to Non-IFRS measures attached to this press release.
Outlook
In 2011 Taxi experienced strong growth in Europe arising from the upgrade cycle
of our existing customers. There is now uncertainty in that market given the
general economic conditions. The timing of deal flow and foreign exchange trends
together with the production scheduling issues of the first quarter have given
rise to a slow first half of the year. We are maintaining our guidance of 2012
annual revenues to be at least that of 2011. However, this estimate necessarily
incorporates assumptions around currency rates (particularly in our case the US
dollar & Euro), general economic conditions and the timing and delivery of
certain contracts.
Dividend
The cash dividend, in the amount of $0.02 per Share, will be paid on or about
October 15, 2012 to holders of record of Shares as of the close of business on
September 28, 2012. The Company expects to declare dividends on its Shares
quarterly; however, the declaration of any future dividends, as well as the
distribution date and amount of any future dividends, will be determined by the
Board of Directors of the Company immediately prior to each such declaration.
Unless the Company indicates otherwise, the Company's dividends are designated
as eligible dividends for the purposes of the Income Tax Act (Canada).
Conference Call
The Company will host a conference call at 4:30 pm Eastern Time today to discuss
the financial results. Please call 416-340-2216 / 866-226-1792 to participate in
the call. A replay of this conference call will be available through August 24,
2012 by dialing 905-694-9451 / 800-408-3053 and entering access code 9491576.
Non-IFRS Measures
The following and preceding discussion of financial results includes reference
to EBITDAS and Adjusted Gross Margin. EBITDAS is a non-IFRS financial measure
which the Company defines as Earnings before interest, taxes, amortization and
share-based compensation expenses. The measure is provided as a proxy for the
cash earnings of the business as net income for the Company includes a
significant amount of non-cash amortization expense primarily related to
acquisitions completed in prior years. Adjusted Gross Margin excludes
amortization expense and share-based compensation expenses. The measure is
provided as gross margin includes significant amortization expense related to
acquired intangibles which management believes may affect the comparability of
gross margin. Please refer to the table attached to this press release for a
reconciliation of non-IFRS measures to reported financial results.
Cautionary Note Regarding Forward-Looking Statements
This press release may contain forward-looking statements that involve risks and
uncertainties. These forward-looking statements relate to, among other things,
operations, anticipated financial performance, business prospects and
strategies, statements about future market conditions, supply and demand
conditions, revenues, gross margins, operating expenses, profits, and other
expectations, intentions, and plans contained in this press release that are not
historical facts. Such forward-looking statements are subject to a number of
known and unknown risks, uncertainties and other factors which could cause
actual results or events to differ materially from those expressed or implied by
such forward-looking statements. These risks and uncertainties include, among
other things, business risks, changes in market and competition, technological
and competitive developments and potential downturns in economic conditions
generally. Given these risks and uncertainties DDS Wireless cannot guarantee
that any forward looking statements will be realized.
About DDS Wireless International Inc.
DDS Wireless International Inc. is a global leader in providing application
software for multiple vertical markets within the transportation industry. The
Company specializes in transit routing and scheduling, real-time dispatching,
vehicle location and tracking software applications, communications
infrastructure as well as in-vehicle wireless devices. DDS Wireless operates
four businesses dedicated to transit, taxi, limousines and work truck, and
wireless devices and communication infrastructure. The Company supports its
customers worldwide through its offices in Canada, Finland, India, Singapore,
Sweden, U.K. and U.S.A.
SEE ATTACHED SUMMARY FINANCIAL STATEMENTS AND THE RECONCILIATION OF NON-GAAP
MEASURES
DDS WIRELESS INTERNATIONAL INC.
Consolidated Statements of Operations (Unaudited)
(In thousands of Canadian dollars, except per share amounts)
Three months ended Six months ended
----------------------------------------------------------------------------
----------------------------------------------------------------------------
June 30, June 30,
June 30, 2011 June 30, 2011
2012 (1) 2012 (1)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 10,562 $ 11,144 $ 19,256 $ 20,728
Cost of sales 6,440 5,963 11,789 11,188
----------------------------------------------------------------------------
Gross margin 4,122 5,181 7,467 9,540
Operating expenses:
Research and development 1,597 1,618 3,095 3,175
Sales and marketing 1,175 1,459 2,361 2,746
General and
administrative 1,289 1,430 2,838 2,856
Other expense - - - 21
----------------------------------------------------------------------------
Total operating expenses 4,061 4,507 8,294 8,798
----------------------------------------------------------------------------
Profit (loss) from operating
activities 61 674 (827) 742
Net finance (income) expense (34) (76) 10 221
----------------------------------------------------------------------------
Income (loss) before income
taxes 95 750 (837) 521
Income tax expense
(recovery)
Current tax expense 113 443 35 702
Deferred tax (recovery) (224) (150) (614) (497)
----------------------------------------------------------------------------
(111) 293 (579) 205
----------------------------------------------------------------------------
Net income (loss) $ 206 $ 457 $ (258) $ 316
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss) per common
share - basic and diluted $ 0.01 $ 0.03 $ (0.02) $ 0.02
Weighted average number of
common shares outstanding
(thousands) 13,831 13,791 13,824 13,791
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) The Company has restated its tax expense for comparative periods
relating to the calculation of investment tax credits receivable and certain
deferred tax liabilities relating to intangible assets acquired on
acquisition of its MobiSoft OY and StrataGen Systems Inc. subsidiaries in
2007. Refer to both the 2011 annual financial statements and Q2 2012
condensed consolidated interim financial statements for commentary.
DDS WIRELESS INTERNATIONAL INC.
Consolidated Balance Sheets (Unaudited)
(In thousands of Canadian dollars)
June 30, December 31,
2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 6,375 $ 6,778
Trade and other receivables 4,730 7,145
Contract work-in-progress 6,487 5,468
Income taxes receivable 338 59
Inventory 2,472 2,718
Prepaid expenses 735 494
Investments 1,651 1,053
----------------------------------------------------------------------------
Total current assets 22,788 23,715
Plant and equipment 940 1,022
Long-term receivables 1,173 740
Investment tax credit receivable 5,246 3,276
Deferred tax assets 876 2,326
Intangible assets 2,544 3,341
Goodwill 2,939 2,992
Investments 103 103
----------------------------------------------------------------------------
Total assets $ 36,609 $ 37,515
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Trade payables and accrued liabilities $ 6,909 $ 6,392
Income taxes payable 98 79
Deferred revenue 1,794 2,103
Provisions 92 135
----------------------------------------------------------------------------
Total current liabilities 8,893 8,709
Deferred tax liabilities 1,401 1,722
----------------------------------------------------------------------------
Total current and long-term liabilities 10,294 10,431
----------------------------------------------------------------------------
Shareholders' equity:
Share capital 24,686 24,611
Share-based payments reserve 1,864 1,816
Retained earnings 644 1,455
Accumulated other comprehensive loss (879) (798)
----------------------------------------------------------------------------
Total shareholders' equity 26,315 27,084
----------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 36,609 $ 37,515
----------------------------------------------------------------------------
----------------------------------------------------------------------------
DDS WIRELESS INTERNATIONAL INC.
Reconciliation of Non-IFRS Measures
(In thousands of Canadian dollars)
For the three months
ended
(CAD in thousands 2012 2011
except %) Jun Mar Dec Sep Jun Mar
----------------------------------------------------------------------------
EBITDAS (1)
EBITDAS $ 672 $(354) $1,759 $3,036 $1,464 $ 490
As % of revenue 6% (4%) 14% 24% 13% 5%
Amortization of plant
& equipment (107) (119) (106) (95) (84) (89)
Amortization of
intangibles (433) (382) (427) (437) (438) (433)
Amortization of sales
related assets (46) (49) (45) (51) (81) (100)
Share-based
compensation (11) (46) (87) (59) (111) (97)
Interest 20 20 45 (1) - (1)
----------------------------------------------------------------------------
Income (loss) before
income taxes $ 95 $(930) $1,139 $2,393 $750 $(230)
Adjusted Gross Margin
(2)
Revenues $10,562 $8,693 $12,455 $12,508 $11,144 $9,584
Adjusted gross margin 4,595 3,784 6,437 6,605 5,716 4,902
Less:
Amortization of plant
& equipment 7 7 38 - - -
Share-based
compensation 1 3 (66) 22 36 31
Amortization of sales
related assets 46 49 45 51 81 101
Amortization of
intangibles 419 382 415 417 418 411
----------------------------------------------------------------------------
Gross margin per
financial statements $4,122 $3,343 $6,005 $6,115 $5,181 $4,359
DDS WIRELESS INTERNATIONAL INC.
Reconciliation of Non-IFRS Measures
(In thousands of Canadian dollars)
For the three months
ended
(CAD in thousands 2010
except %) Dec Sep Jun
-------------------------------------------------
EBITDAS (1)
EBITDAS $2,312 $1,034 $1,594
As % of revenue 17% 11% 17%
Amortization of plant
& equipment (94) (111) (130)
Amortization of
intangibles (459) (461) (433)
Amortization of sales
related assets (295) (244) (191)
Share-based
compensation (82) (113) (72)
Interest (14) (6) (13)
-------------------------------------------------
Income (loss) before
income taxes $1,368 $99 $755
Adjusted Gross Margin
(2)
Revenues $13,326 $9,723 $9,383
Adjusted gross margin 7,062 5,321 4,817
Less:
Amortization of plant
& equipment - - -
Share-based
compensation 28 35 20
Amortization of sales
related assets 295 244 191
Amortization of
intangibles 440 441 433
-------------------------------------------------
Gross margin per
financial statements $6,299 $4,601 $4,173
(1) Non-IFRS measure. Defined as earnings before interest, taxes,
amortization and share-based compensation.
(2) Non-IFRS measure. Defined as gross margin before amortization, and
share-based compensation.
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