DDS Wireless International Inc. (TSX:DD) -
Fourth Quarter 2011 Full Year 2011
Revenue of $12.5 million Revenue of $45.7 million
Net income of $0.7 million, or $0.05 Net income of $2.5 million, or $0.18
per share per share
EBITDAS(1) of $1.8 million, or $0.13 EBITDAS(1) of $6.7 million, or $0.49
per share 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 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 Results
DDS 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(TM) 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 Results
Revenue 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(TM) 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.
Outlook
Looking 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.
Dividend
The 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 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 March 18,
2012 by dialing 905-694-9451 / 800-408-3053 and entering access code 5784837.
(1)Non-GAAP Measures
The 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 Statements
The 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 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 Year ended December
December 31 31
---------------------------------------------------------------------------
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2010 2010
2011 (1)(2) 2011 (1)(2)
---------------------------------------------------------------------------
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Revenue $ 12,455 $ 13,326 $ 45,691 $ 41,347
Cost of sales 6,450 7,027 24,032 22,790
---------------------------------------------------------------------------
Gross margin 6,005 6,299 21,659 18,557
Operating expenses:
Research and development 1,429 1,688 5,943 6,477
Sales and marketing 1,449 1,120 5,450 3,880
General and administrative 1,415 1,449 5,750 5,659
Other expenses 1 (40) 28 (35)
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4,294 4,217 17,171 15,981
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Income from operating activities 1,711 2,082 4,488 2,576
Net finance expense 571 713 435 1,312
---------------------------------------------------------------------------
Income (loss) before income taxes 1,140 1,369 4,053 1,264
Income tax expense (recovery)
Current tax expense (recovery) 204 709 1,937 1,283
Deferred tax expense (recovery) 241 (782) (354) (1,371)
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445 (73) 1,583 (88)
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Net income (loss) $ 695 $ 1,442 $ 2,470 $ 1,352
---------------------------------------------------------------------------
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Net income per common share - basic
and diluted $ 0.05 $ 0.10 $ 0.18 $ 0.10
Weighted average number of common
shares outstanding 13,792 13,790 13,791 13,790
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(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
December 31, 2010
31, 2011 (1)(2)
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Assets
Current assets:
Cash and cash equivalents $ 6,778 $ 4,178
Trade and other receivables 7,145 6,056
Contract work-in-progress 5,468 5,699
Income taxes receivable 59 31
Inventory 2,718 1,626
Prepaid expenses 494 421
Investments 1,053 -
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23,715 18,011
Plant and equipment 1,022 1,379
Long-term receivables 740 1,094
Investment tax credit receivable 3,276 3,975
Deferred tax assets 2,326 2,564
Intangible assets 3,341 4,835
Goodwill 2,992 3,007
Investment 103 103
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$ 37,515 $ 34,968
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Liabilities and Shareholders' Equity
Current liabilities:
Current portion of debt $ - $ 80
Trade payables and accrued liabilities 6,392 5,684
Income taxes payable 79 -
Deferred revenue 2,103 2,365
Provisions 135 148
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8,709 8,277
Deferred tax liabilities 1,722 2,224
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10,431 10,501
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Shareholders' equity:
Share capital 24,611 24,608
Share-based payments reserve 1,816 1,465
Retained earnings 1,455 (1,015)
Accumulated other comprehensive loss (798) (591)
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27,084 24,467
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$ 37,515 $ 34,968
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(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
ended
(CAD in For the
thousands 2011 2010 year ended
except %) Dec Sep Jun Mar Dec Sep Jun Mar 2011 2010
---------------------------------------------------------------------------
EBITDAS
(1)
EBITDAS 1,759 3,036 1,464 490 2,312 1,034 1,594 (82) 6,749 4,858
As % of
revenue 14% 24% 13% 5% 17% 11% 17% (1%) 15% 12%
Amortiza-
tion of
plant &
equipment (106) (95) (84) (89) (94) (111) (130) (101) (374) (435)
Amortiza-
tion of
intangi-
bles (427) (437) (438) (432) (459) (461) (433) (473)(1,734)(1,825)
Amortiza-
tion of
sales
related
assets (45) (51) (81) (100) (295) (244) (191) (192) (276) (922)
Share-
based
compensa-
tion (87) (59) (111) (97) (82) (113) (72) (102) (354) (369)
Interest 45 (1) - (1) (14) (6) (13) (9) 43 (42)
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Income
(loss)
before
income
taxes 1,139 2,393 750 (229) 1,369 99 755 (959) 4,053 1,264
Adjusted
Gross
Margin
(2)
Revenues 12,455 12,508 11,144 9,584 13,326 9,723 9,383 8,915 45,691 41,347
Adjusted
gross
margin 6,437 6,605 5,716 4,902 7,062 5,321 4,817 4,161 23,660 21,361
Less:
Amortiza-
tion of
plant &
equipment 39 - - - - - - - 39 -
Share-
based
compensa-
tion (66) 22 36 31 28 35 20 32 23 115
Amortiza-
tion of
sales
related
assets 45 51 81 101 295 244 191 192 276 922
Amortiza-
tion of
intangi-
bles 416 417 418 412 439 441 433 453 1,663 1,766
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Gross
margin
per
financial
state-
ments 6,005 6,115 5,181 4,358 6,299 4,601 4,173 3,484 21,659 18,557
(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.
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