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Press release from Marketwire

DDS Wireless Reports Revenues of $8.7 Million and Declares Cash Dividend of $0.02 Per Share

First Quarter 2012 Revenue of $8.7 million Net loss of $0.5 million, or $0.03 per share EBITDAS(1) loss of $0.4 million, or $0.03 per share

Thursday, May 10, 2012

DDS Wireless Reports Revenues of $8.7 Million and Declares Cash Dividend of $0.02 Per Share08:00 EDT Thursday, May 10, 2012RICHMOND, BRITISH COLUMBIA--(Marketwire - May 10, 2012) - DDS Wireless International Inc. (TSX:DD) a world leader in providing wireless data solutions for fleet management for more than 20 years, today reported financial results for the quarter ended March 31, 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."Clearly revenues in the quarter were lower and we did not see the growth of recent quarters. Having said that, I am pleased with the developments in a couple of key areas; that of TaxiBook™ and the completion of two key enhancements to our product lines and I see an improvement in our 2012 outlook," stated Vari Ghai, CEO of DDS Wireless. Mr. Ghai further stated that, "The first quarter's performance was affected by the completion of two key enhancements to our product lines; the Vector 800 and the Vector 9000. The development of certain software for the Vector 800 had been delayed and this led to delays in the shipment of product in the quarter. The completion of the software has permitted the commencement of shipment of units in the second quarter. We also refined the design of our very popular Vector 9000 product to improve the customer's experience with the user interface. To ensure proper testing and product roll-out, production was suspended for one month in February and also in April. As this has been one of our most successful products, this had an impact on revenue in the first quarter. These were important developments to maintain our extremely high standard for the customer experience." "I am particularly pleased with the continued growth of the TaxiBook™ subscriptions in North America. This area is a key growth strategy for us, and subscriptions grew from 1,142 at the beginning of the year to 1,729 to date. To put this in context, the growth in the year to date has now outpaced the increase in subscriptions in all of fiscal 2011. It is this type of accelerated growth that will deliver a sustained SaaS revenue base in future years. Obviously the in year 2012 revenue of these 4-5 year contracts is moderated. The penetration of a SaaS model into the mid-market taxi companies is a cornerstone of our growth strategy."First Quarter 2012 Financial Results Revenue for the first quarter of 2012 was $8.7 million, a decline of 9% or $0.9 million compared to the first quarter of 2011 and declined by 30% compared to the immediately preceding fourth quarter. The decline from the immediately preceding quarter is not unexpected as the first quarter of the year is seasonally the slowest with revenues typically increasing in magnitude as the year progresses and also due to the production suspension. Revenues have declined compared to the first quarter of 2011 largely as a result of lower enterprise solutions revenues and a pause in maintenance revenues for 2011 deliveries still under warranty in the Taxi business unit (a combined decrease of $1.0 million). This decline was offset in part by higher small hardware orders associated with TaxiBook™ sales in Finland (an increase of $0.2 million). Revenues in the Transit and New Markets business units were stable. Gross margin decreased by $1.0 million or 23% to $3.3 million from the first quarter of 2011 due in part to the lower revenues and lower margins earned on enterprise solutions revenues in both the Taxi and Transit business units, including a lower margin phase of deliveries on our MTA New York City Transit project. The combination of the above has led to a lower yield of 38% compared to 45% in the first quarter of 2011. The decrease in the gross margin of $1.0 million, offset by combined favourable variances of $0.7 million in net finance expense and tax recoveries in the period, led to an increase in net loss of $0.3 million compared to same period in the prior year. EBITDAS(1) loss was $0.4 million or 4% of revenue and net loss was $0.5 million or $0.03 per share.OutlookIn 2011 Taxi experienced strong growth in Europe but 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 give rise to a slow first half of the year. We do see an improvement in our outlook for the second half of the year with 2012 annual revenues at least that of 2011.Dividend The cash dividend, in the amount of $0.02 per Share, will be paid on or about July 16, 2012 to holders of record of Shares as of the close of business on June 29, 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 May 20, 2012 by dialing 905-694-9451 / 800-408-3053 and entering access code 3225491.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-IFRS MEASURESDDS WIRELESS INTERNATIONAL INC. Consolidated Statements of Operations (Unaudited) (In thousands of Canadian dollars, except per share amounts)Three months ended March 3120122011(1)Revenue$8,693$9,584Cost of sales5,3505,225Gross margin3,3434,359Operating expenses:Research and development1,4981,558Sales and marketing1,1861,287General and administrative1,5481,426Other expense-214,2324,292Profit (loss) operating activities(889)67Net finance expense41297Loss before income taxes(930)(230)Income tax expense (recovery)Current tax expense (recovery)(77)258Deferred tax expense (recovery)(390)(347)(467)(89)Net loss$(463)$(141)Net loss per common share - basic and diluted$(0.03)$(0.01)Weighted average number of common shares outstanding13,81813,790(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.Refer to both the 2011 annual financial statements and Q1 2012 condensed consolidated interim financial statements for commentary.DDS WIRELESS INTERNATIONAL INC. Consolidated Balance Sheets (Unaudited) (In thousands of Canadian dollars)March 31, 2012December 31, 2011AssetsCurrent assets:Cash and cash equivalents$6,209$6,778Trade and other receivables4,4457,145Contract work-in-progress6,4405,468Income taxes receivable16759Inventory3,3232,718Prepaid expenses575494Investments1,1311,05322,29023,715Plant and equipment9491,022Long-term receivables650740Investment tax credit receivable5,4903,276Deferred tax assets8242,326Intangible assets2,9783,341Goodwill3,0082,992Investments103103$36,292$37,515Liabilities and Shareholders' EquityCurrent liabilities:Trade payables and accrued liabilities$5,914$6,392Income taxes payable11379Deferred revenue1,7432,103Provisions1291357,8998,709Deferred tax liabilities1,8381,7229,73710,431Shareholders' equity:Share capital24,68624,611Share-based payments reserve1,8521,816Retained earnings7161,455Accumulated other comprehensive loss(699)(798)26,55527,084$36,292$37,515DDS WIRELESS INTERNATIONAL INC. Reconciliation of Non-IFRS Measures (In thousands of Canadian dollars)For the three months ended201220112010(CAD in thousands except %)MarDecSepJunMarDecSepJunMarEBITDAS (1)EBITDAS$(354)$1,759$3,036$1,464$490$2,312$1,034$1,594$(82)As % of revenue(4%)14%24%13%5%17%11%17%(1%)Amortization of plant & equipment(119)(106)(95)(84)(89)(94)(111)(130)(101)Amortization of intangibles(382)(427)(437)(438)(433)(459)(461)(433)(473)Amortization of sales related assets(49)(45)(51)(81)(100)(295)(244)(191)(192)Share-based compensation(46)(87)(59)(111)(97)(82)(113)(72)(102)Interest2045(1)-(1)(14)(6)(13)(9)Income (loss) before income taxes$(930)$1,139$2,393$750$(230)$1,368$99$755$(959)Adjusted Gross Margin (2)Revenues$8,693$12,455$12,508$11,144$9,584$13,326$9,723$9,383$8,915Adjusted gross margin3,7846,4376,6055,7164,9027,0625,3214,8174,161Less:Amortization of plant & equipment738-------Share-based compensation3(66)22363128352032Amortization of sales related assets49455181101295244191192Amortization of intangibles382415417418412440441433453Gross margin per financial statements$3,343$6,005$6,115$5,181$4,358$6,299$4,601$4,173$3,484(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 compensationFOR FURTHER INFORMATION PLEASE CONTACT: Investor RelationsDDS Wireless International Inc.(604) 241-1441Investors@ddswireless.comORCaroline J. DunnDDS Wireless International Inc.Chief Financial Officer(604) 214-7206www.ddswireless.com