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Press release from Marketwire

DDS Wireless Reports Revenue of $8.5 million and EBITDAS(1) of $0.9 million for the First Quarter of 2013 First Quarter 2013

-- Revenue of $8.5 million -- Net profit of $0.4 million, or $0.03 per share -- EBITDAS(1) of $0.9 million, or $0.06 per share

Wednesday, May 08, 2013

DDS Wireless Reports Revenue of $8.5 million and EBITDAS(1) of $0.9 million for the First Quarter of 2013 First Quarter 2013

07:30 EDT Wednesday, May 08, 2013

RICHMOND, BRITISH COLUMBIA--(Marketwired - May 8, 2013) - DDS Wireless International Inc. (TSX:DD), a world leader in providing wireless data solutions for fleet management for more than 25 years, today reported financial results for the three months and fiscal year to date ended March 31, 2013.

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 first quarter is typically a slow quarter so I am pleased to report strong EBITDAS(1) of $0.9 million or 10% of revenue," stated Vari Ghai, CEO of DDS Wireless. "Revenues were as expected at $8.5 million and recurring revenue was 70% of total revenue in the quarter. The adjusted gross margin(2) was an improvement at 46% from the first quarter of 2012. We built momentum in the fourth quarter of 2012 and are maintaining that momentum in some of our critical performance indicators."

Mr. Ghai continued, "We also made strong progress in building backlog to support our 2013 forecast. We have signed $3 million of new contract deals in support of the 2013 forecast since the beginning of the year bringing our backlog to $30 million."

In addition to the previously announced $2.5 million in customer contracts since the reporting of its fiscal 2012 results, the Company further announces an additional $1.0 million in customer contracts. These contracts are distributed in both the Transit and Taxi divisions and continue to build on the theme of the Company's strategic growth drivers; 9 customers with white label mobile booking applications, 5 new TaxiBook customers and 1 new backseat customer of 360 vehicles.

As at March 31, 2013, the Company held $9.7 million in cash and short-term investments and, as of today, has a balance of approximately $9.8 million in cash and short-term investments.

First Quarter Financial Results

Revenue showed a modest decrease of 2% from the three months ended March 31, 2012 and experienced a typical seasonal drop from the fourth quarter of 2012. This decline of 28% is slightly exaggerated this year by the very strong fourth quarter of 2012. Recurring revenue was 70% of revenue compared to 65% for the first quarter of 2012 and 62% for the full fiscal year of 2012.

Revenue in the Taxi business unit increased by $0.3 million compared to the three months ended March 31, 2012 due to higher maintenance revenues ($0.3 million) and SaaS ($0.2 million) and a slight uptick in project revenue ($0.1 million), offset in part by lower small hardware sales (a reduction of $0.3 million). Revenue for the first quarter in Transit was $0.5 million lower due to the phasing of activity on New York City transit projects.

The improvement in the gross margin yield to 41% offset the lower revenues, giving rise to an increase in gross margin of 4% to $3.5 million. Though not the level of the margins earned in the latter half of 2012, this is reflective of our normal cyclical experience in the first quarter and arises from the typical lower revenues.

With gross margin slightly higher at $3.5 million and lower operating expenses of $0.2 million, this led directly to an increase in earnings from operations of $0.4 million or 43% compared to the same period in the prior year. This, in combination with net finance income of $0.9 million, resulted in profit before tax of $0.4 million, an increase of $1.3 million from the first quarter of 2012. The favourable net finance income in the first quarter arose largely from a gain on the revaluation of marketable securities held as an investment ($0.6 million) in combination with foreign exchange gains of $0.3 million.

EBITDAS(1) for the quarter was $0.9 million or 10% of revenues, compared to an EBITDAS(1) loss of $0.4 million or (4)% of revenues in the first quarter of 2012.

Outlook

We continue to build a strong backlog of revenue for 2013, now at $30 million and with our core base of business, we expect modest revenue growth in 2013.

Dividend

The Company is pleased to announce its 6th consecutive quarterly dividend. The cash dividend, in the amount of $0.02 per Share, will be paid on or about July 15, 2013 to holders of record of the Company's Common Shares as of the close of business on June 28, 2013. 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). As of May 6, 2013, the Company has 13,777,464 Common Shares issued and outstanding.

Conference Call

The Company will host a conference call at 1:00 pm Eastern Time today to discuss the financial results. Please call 416-340-8527 / 877-440-9795 to participate in the call. A replay of this conference call will be available through May 18, 2013 by dialing 905-694-9451 / 800-408-3053 and entering access code 4947461.

(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.
(2) Adjusted Gross Margin is a non-IFRS measure. Please refer to the reconciliation of reported financial results to Non-IFRS measures attached to this press release.

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. 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 three businesses dedicated for Taxi, Transit and New Markets such as OEM partners, Limousines, Airport Shuttles and Buses. The Company supports its customers worldwide through its offices in Canada, Finland, 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 March 31
2013 2012
Revenue $ 8,539 $ 8,693
Cost of sales 5,068 5,350
Gross margin 3,471 3,343
Operating expenses:
Research and development 1,655 1,498
Sales and marketing 1,050 1,186
General and administrative 1,282 1,548
Total operating expenses 3,987 4,232
Loss from operating activities (516 ) (889 )
Net finance (income) expense (931 ) 41
Income (loss) before income taxes 415 (930 )
Income tax expense (recovery)
Current tax expense (recovery) 155 (77 )
Deferred tax (recovery) (128 ) (390 )
27 (467 )
Net income (loss) $ 388 $ (463 )
Net income (loss) per common share - basic and diluted $ 0.03 $ (0.03 )
Weighted average number of common shares outstanding (thousands) 13,831 13,818
DDS WIRELESS INTERNATIONAL INC.
Consolidated Balance Sheets (Unaudited)
(In thousands of Canadian dollars)
March 31, 2013 December 31, 2012
Assets
Current assets:
Cash and cash equivalents $ 7,196 $ 5,252
Trade and other receivables 3,941 5,932
Contract work-in-progress 7,452 7,597
Income taxes receivable 355 357
Inventory 2,522 2,404
Prepaid expenses 384 426
Investments 2,539 1,974
Total current assets 24,389 23,942
Plant and equipment 688 677
Long-term receivables 1,131 1,417
Investment tax credit receivable 4,987 4,792
Deferred tax assets 918 855
Intangible assets 1,288 1,715
Goodwill 2,963 2,970
Investments 103 103
Total assets $ 36,467 $ 36,471
Liabilities and shareholders' equity
Current liabilities:
Trade payables and accrued liabilities $ 5,468 $ 5,576
Income taxes payable 123 27
Deferred revenue 1,978 1,806
Provisions 63 52
Total current liabilities 7,632 7,461
Deferred tax liabilities 1,132 1,232
Total current and long-term liabilities 8,764 8,693
Shareholders' equity:
Share capital 24,646 24,686
Share-based payments reserve 1,862 1,890
Retained earnings 2,030 1,928
Accumulated other comprehensive loss (835 ) (726 )
Total shareholders' equity 27,703 27,778
Total liabilities and shareholders' equity $ 36,467 $ 36,471
DDS WIRELESS INTERNATIONAL INC.
Reconciliation of Non-IFRS Measures
(In thousands of Canadian dollars)

For the three months ended
2013
2012

2011
(CAD in thousands except %) Mar Dec Sep Jun Mar Dec Sep Jun Mar
EBITDAS (1)
EBITDAS $ 890 $ 3,249 $ 211 $ 672 $ (354 ) $ 1,759 $ 3,036 $ 1,464 $ 490
As % of revenue 10% 27% 2% 6% (4% ) 14% 24% 13% 5%
Amortization of plant & equipment, intangibles and sales related assets (528 ) (546 ) (546 ) (586 ) (550 ) (578 ) (583 ) (603 ) (621 )
Share-based compensation 28 (25 ) (2 ) (11 ) (46 ) (87 ) (59 ) (111 ) (97 )
Interest 25 4 10 20 20 45 (1 ) - (1 )
Income (loss) before income taxes $ 415 $ 2,682 $ (327 ) $ 95 $ (930 ) $ 1,139 $ 2,393 $ 750 $ (229 )
Adjusted Gross Margin (2)
Revenues $ 8,539 $ 11,931 $ 9,484 $ 10,562 $ 8,693 $ 12,455 $ 12,508 $ 11,144 $ 9,584
Adjusted gross margin 3,897 6,462 4,489 4,595 3,784 6,437 6,605 5,716 4,902
As % of revenue 46% 54% 47% 44% 44% 52% 53% 51% 51%
Less:
Amortization of plant & equipment 8 6 7 7 7 39 - - -
Share-based compensation (2 ) 1 1 1 3 (66 ) 22 36 31
Amortization of sales related assets 33 34 40 46 49 45 51 81 101
Amortization of intangibles 387 397 389 419 382 416 417 418 412
Gross margin per financial statements $ 3,471 $ 6,024 $ 4,052 $ 4,122 $ 3,343 $ 6,005 $ 6,115 $ 5,181 $ 4,358
As % of revenue 41% 50% 43% 39% 38% 48% 49% 46% 45%
(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.

FOR FURTHER INFORMATION PLEASE CONTACT:

Contact Information:
DDS Wireless International Inc.
Caroline J. Dunn
Chief Financial Officer
(604) 214-7206


DDS Wireless International Inc.
Investor Relations
(604) 241-1441
Investors@ddswireless.com
www.ddswireless.com

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