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Press release from Marketwire

DDS Wireless Reports 11% Revenue Growth & $6.7 Million EBITDAS(1) and Declares Cash Dividend

Thursday, March 08, 2012

DDS Wireless Reports 11% Revenue Growth & $6.7 Million EBITDAS(1) and Declares Cash Dividend08:00 EST Thursday, March 08, 2012RICHMOND, BRITISH COLUMBIA--(Marketwire - March 8, 2012) - DDS Wireless International Inc. (TSX:DD) - Fourth Quarter 2011Full Year 2011Revenue of $12.5 millionRevenue of $45.7 millionNet income of $0.7 million, or $0.05 per shareNet income of $2.5 million, or $0.18 per shareEBITDAS(1) of $1.8 million, or $0.13 per shareEBITDAS(1) of $6.7 million, or $0.49 per shareDDS 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 fourth quarter and fiscal year ended December 31, 2011 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."2011 was a record year for DDS Wireless in terms of annual revenue, EBITDAS and EBITDAS margin % and I am very pleased with what we have accomplished as a company," stated Vari Ghai, CEO of DDS Wireless. "As we enter our 25th year in business with strong growth, profitability and stability, I am very pleased to introduce an initial dividend for our shareholders. I view this dividend as representing confidence in our ability to continue to deliver profitable long term growth and provide a regular return to our shareholders. We have set the dividend at a more modest level to ensure we are still in a position to execute incremental acquisitions as they become available."Full Year 2011 Financial ResultsDDS Wireless reported another successful year with a revenue increase of 11% to $45.7 million compared to $41.3 million for the year ended December 31, 2010. The latest wave of upgrades by our largest European taxi customers has been driven by one of our most successful products, the Vector 9000™ mobile data terminal, resulting in the increase in revenue and support of the increase in the gross margin percentage to 47% in 2011 from 45% in 2010.Revenue in the Taxi business unit increased by 16% or $4.6 million and the Transit business unit showed a revenue increase of 5% or $0.5 million. These increases were offset by declines from DWI and eFleet (now collectively the New Markets unit) of $0.8 million.Operating expenses were $17.2 million, an increase of $1.2 million over 2010, driven mainly by the increase in average annual headcount of 77% as significant investment in Sales and Marketing headcount, particularly in the Taxi business unit, were made at the beginning of the 2011 year.The Company posted a strong earnings performance with EBITDAS(1) of $6.7 million or 15% of revenue and net income of $2.5 million or $0.18 per share. This represents a $1.1 million increase in net income over 2010 as the higher revenues and an improved gross margin percentage offset the increase in operating expenses and taxes.Fourth Quarter 2011 Financial ResultsRevenue for the fourth quarter of 2011 was $12.5 million, a decline of 7% or $0.9 million compared to the fourth quarter of 2010 and flat with the immediately preceding third quarter of 2011. This is not unexpected as the Company experienced record quarters in the third quarter of 2011 and fourth quarter of 2010. The year-over-year decline in revenue is attributable to the decrease in Taxi revenue by $1.5 million to $8.0 million, as delivery of enterprise solutions decreased by $1.9 million. This was offset in part by higher small hardware orders associated with TaxiBook™ sales in Finland (an increase of $0.5 million). The revenue in the Transit business unit increased significantly by $1.3 million compared to the fourth quarter of 2010 as it commenced delivery on the MTA New York City Transit project signed in the quarter.Gross margin decreased modestly by $0.3 million or 5% to $6.0 million from the fourth quarter of 2010 due to lower revenue. The yield was slightly higher at 48% of revenue compared to 47% in the prior year due to higher gross margins in the Transit business unit.The decrease in the gross margin of $0.3 million and the slight increase in operating expenses of $0.1 million led to a decrease in income from operations of $0.4 million or 18% compared to same period in the prior year. EBITDAS(1) were $1.8 million or 14% of revenue and net income was $0.7 million or $0.05 per share.OutlookLooking forward, we are executing well to our strategy in our target markets. We are a global leader in Taxi and a North American leader in Transit with opportunities to extend to the world stage. We continue to incubate new market segments in fleet management, leveraging off our core technology. Our customers rely on us to provide industry-leading products, technology, quality and service. In addition we expect to increasingly benefit from leverage between our Taxi and Transit lines of business in global operators.We had a very strong year in 2011 and in our Transit market we built a strong backlog for 2012 revenue. Taxi experienced extraordinary growth in Europe, but there is now a degree of opaqueness in that market given the general economic conditions. North America tends to lag behind Europe in terms of adoption and we foresee limited growth in the first half of the year due to the vagaries of deal flow and foreign exchange trends. Given these circumstances we are issuing an outlook for 2012 revenue roughly in line with 2011. We expect to further refine this outlook in our first quarter report in May 2012.We remain excited about the growth prospects for DDS Wireless and believe the Company has the foundation necessary to continue to drive profitable, sustainable growth over the long term.DividendThe cash dividend, in the amount of $0.02 per Share, will be paid on or about April 16, 2012 to holders of record of Shares as of the close of business on March 30, 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 CallThe 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 March 18, 2012 by dialing 905-694-9451 / 800-408-3053 and entering access code 5784837.(1)Non-GAAP MeasuresThe following and preceding discussion of financial results includes reference to EBITDAS and Adjusted Gross Margin. EBITDAS is a non-GAAP financial measure which the Company defines as Earnings before interest, taxes, depreciation, 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-GAAP measures to reported financial results.(1)Non-GAAP measure. Defined as earnings before interest, taxes, depreciation, amortization and share-based compensation.Please refer to the reconciliation of reported financial results to Non-GAAP measures attached to this press release.Restatement of Prior Year Financial StatementsThe Company has commenced reporting under International Financial Reporting Standards ("IFRS") with application beginning January 1, 2010. The comparative figures for the year ended December 31, 2010 and the IFRS opening balance sheet as at January 1, 2010 have been restated to comply with the adoption of these standards. In addition the Company has restated certain comparative figures for an error in its previously reported Canadian GAAP figures related to taxation which were updated upon the application of IFRS. The opening IFRS balance sheet was adjusted to record $1.3 million of deferred tax liabilities and $0.4 million of deferred tax assets. Further information is available in the consolidated financial statements and in the Management Discussion and Analysis.Cautionary Note Regarding Forward-Looking StatementsThis 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 MEASURESDDS WIRELESS INTERNATIONAL INC.Consolidated Statements of Operations (Unaudited) (In thousands of Canadian dollars, except per share amounts)Three months ended December 31Year ended December 3120112010(1)(2)20112010(1)(2)Revenue$ 12,455$ 13,326$ 45,691$ 41,347Cost of sales6,4507,02724,03222,790Gross margin6,0056,29921,65918,557Operating expenses: Research and development1,4291,6885,9436,477 Sales and marketing1,4491,1205,4503,880 General and administrative1,4151,4495,7505,659 Other expenses1(40)28(35)4,2944,21717,17115,981Income from operating activities1,7112,0824,4882,576Net finance expense5717134351,312Income (loss) before income taxes1,1401,3694,0531,264Income tax expense (recovery)Current tax expense (recovery)2047091,9371,283Deferred tax expense (recovery)241(782)(354)(1,371)445(73)1,583(88)Net income (loss)$ 695$ 1,442$ 2,470$ 1,352Net income per common share - basic and diluted$ 0.05$ 0.10$ 0.18$ 0.10Weighted average number of common shares outstanding13,79213,79013,79113,790(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. Further information is available in the consolidated financial statements and in the Management Discussion and Analysis.(2) Restated to reflect the adoption of International Financial Reporting Standards as required for all Canadian publicly held companies.DDS WIRELESS INTERNATIONAL INC.Consolidated Balance Sheets (Unaudited) (In thousands of Canadian dollars)December 31, 2011December 31, 2010(1)(2)AssetsCurrent assets:Cash and cash equivalents$ 6,778$ 4,178Trade and other receivables7,1456,056Contract work-in-progress5,4685,699Income taxes receivable5931Inventory2,7181,626Prepaid expenses494421Investments1,053-23,71518,011Plant and equipment1,0221,379Long-term receivables7401,094Investment tax credit receivable3,2763,975Deferred tax assets2,3262,564Intangible assets3,3414,835Goodwill2,9923,007Investment103103$ 37,515$ 34,968Liabilities and Shareholders' EquityCurrent liabilities:Current portion of debt$ -$ 80Trade payables and accrued liabilities6,3925,684Income taxes payable79-Deferred revenue2,1032,365Provisions1351488,7098,277Deferred tax liabilities1,7222,22410,43110,501Shareholders' equity:Share capital24,61124,608Share-based payments reserve1,8161,465Retained earnings1,455(1,015)Accumulated other comprehensive loss(798)(591)27,08424,467$ 37,515$ 34,968(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. Further information is available in the consolidated financial statements and in the Management Discussion and Analysis.(2) Restated to reflect the adoption of International Financial Reporting Standards as required for all Canadian publicly held companies.DDS WIRELESS INTERNATIONAL INC.Reconciliation of Non-GAAP Measures (In thousands of Canadian dollars)For the three months ended20112010For the year ended(CAD in thousands except %)DecSepJunMarDecSepJunMar20112010EBITDAS (1)EBITDAS1,7593,0361,4644902,3121,0341,594(82)6,7494,858As % of revenue14%24%13%5%17%11%17%(1%)15%12%Amortization of plant & equipment(106)(95)(84)(89)(94)(111)(130)(101)(374)(435)Amortization of intangibles(427)(437)(438)(432)(459)(461)(433)(473)(1,734)(1,825)Amortization of sales related assets(45)(51)(81)(100)(295)(244)(191)(192)(276)(922)Share-based compensation(87)(59)(111)(97)(82)(113)(72)(102)(354)(369)Interest45(1)-(1)(14)(6)(13)(9)43(42)Income (loss) before income taxes1,1392,393750(229)1,36999755(959)4,0531,264Adjusted Gross Margin (2)Revenues12,45512,50811,1449,58413,3269,7239,3838,91545,69141,347Adjusted gross margin6,4376,6055,7164,9027,0625,3214,8174,16123,66021,361Less:Amortization of plant & equipment39-------39-Share-based compensation(66)2236312835203223115Amortization of sales related assets455181101295244191192276922Amortization of intangibles4164174184124394414334531,6631,766Gross margin per financial statements6,0056,1155,1814,3586,2994,6014,1733,48421,65918,557(1)Non-GAAP measure. Defined as earnings before interest, taxes, depreciation, amortization and share-based compensation.(2)Non-GAAP measure. Defined as gross margin before amortization and share-based compensation.FOR FURTHER INFORMATION PLEASE CONTACT: Investor RelationsDDS Wireless International Inc.604-241-1441Investors@ddswireless.comORCaroline J. DunnDDS Wireless International Inc.Chief Financial Officer604-214-7206www.ddswireless.com