Fourth Quarter 2012 Fiscal Year 2012
Revenue of $11.9 million Revenue of $40.7 million
Net profit of $2.3 million, or $0.16 Net profit of $1.6 million, or $0.11
per share per share
EBITDAS(1) of $3.2 million, or $0.23 EBITDAS(1) of $3.8 million, or $0.27
per share per share
DDS Wireless International Inc. (TSX:DD) ("DDS" or "the Company"), 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
ended December 31, 2012 and announced that the Company's Board of Directors has
approved both a cash dividend of $0.02 per share on the Company's common shares
("Shares") and a normal course issuer bid to purchase up to 675,000 of its
outstanding 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.
"I am very pleased with our fourth quarter 2012 results. With revenues of $11.9
million, a gross margin yield of 50% and EBITDAS of 27% of revenues, we are
returning to historical performance norms," stated Vari Ghai, CEO of DDS
Wireless. "I am pleased with the resilience the DDS business model has shown in
2012 with the long term growth strategy of diversification into adjacent mobile
data markets paying dividends. The Transit business unit experienced 15% growth
and represented over 30% of total revenues in 2012 and the New Markets business
unit almost doubled in revenue."
Mr Ghai continued, "2012 has been a period of transition and repositioning
coming off a record year for the Taxi business unit. Slower demand in Europe,
primarily due to the conclusion of the upgrade cycle that started in 2010,
characterized sales in that business unit. As the market faces disintermediation
from new entrants, DDS has responded with new products and offerings to support
our customer base in the transition."
Outlook
2012 was a difficult year, but there have been many positive developments and we
have built a strong backlog of revenue for 2013 of $27 million. With our core
base of business, we would expect modest revenue growth in 2013. We have two
significant bids outstanding for multi-year deployment and maintenance revenue.
Given the size and significance of these bids and the difficulty in assessing
their impact, we have not included them in our revenue growth expectations just
noted. We look forward to announcing a successful conclusion to these
opportunities if and when the situation arises.
Dividend
The cash dividend, in the amount of $0.02 per Share, will be paid on or about
April 15, 2013 to holders of record of the Company's Shares as of the close of
business on March 29, 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 at December 31, 2012, the Company held $7.2 million in cash and
short-term investments and, as of today, has a balance of over $10 million in
cash and marketable securities.
Normal Course Issuer Bid
The Board of Directors of DDS has approved a normal course issuer bid to
purchase outstanding Shares of the Company, subject to obtaining the necessary
approval from the Toronto Stock Exchange ("TSX"). Depending on future price
movements and other factors from time to time, the Board of Directors believes
that the purchase of its Shares is a desirable use of a portion of its available
funds and may provide additional liquidity to its shareholders and benefit the
remaining shareholders by increasing the value of their equity interest in the
Company.
The Company may purchase up to 675,000 Shares pursuant to the bid representing
approximately 4.9% of the 13,830,621 Shares outstanding on February 26, 2013.
All purchases of Shares under the bid will be made pursuant to an Automatic
Share Purchase Plan dated March 7, 2013 between DDS and Canaccord Genuity Corp.
The maximum price that will be paid for any Shares pursuant to the bid is $2.75
per Share. Subject to any block purchases made in accordance with the rules of
the TSX, the bid will be subject to a daily repurchase maximum of 1,622 Shares.
Any Shares purchased pursuant to the bid will be cancelled. Shares will be
purchased at the market price of the Shares at the time of purchase and will be
purchased on behalf of DDS by a registered investment dealer through the
facilities of the TSX or alternative Canadian marketplaces. The purchase of
Shares pursuant to the bid will be financed out of working capital of DDS.
Purchases pursuant to the bid will begin on March 8, 2013 and will end on March
7, 2014 or earlier if the number of shares sought in the bid have been obtained.
The Company may terminate the bid earlier if it feels it is appropriate to do
so, subject to the rules of the TSX.
Fiscal 2012 Financial Results
Revenue declined 11% to $40.7 million compared to the prior fiscal year. Revenue
in the Taxi unit decreased by $7.3 million or 22% driven mainly by a 53% or $8.0
million decrease in enterprise solution revenue due to the conclusion of the
upgrade cycle of enterprise solutions deliveries in Europe. The decline in Taxi
unit revenue was offset by increases seen in the Transit unit of 15% or $1.6
million, largely a result of its MTA New York City Transit projects, and
increases in the New Markets unit of $0.9 million, a result of the continued
success of its eFleet(TM) SaaS solution.
Gross margin decreased by $4.1 million or 19% to $17.5 million and yielded 43%
of revenue compared to 47% in the prior year. This was due to a combination of
both lower revenues and lower average margins earned on enterprise solutions
projects in the Taxi business unit. Margin from enterprise solutions is
sensitive to lower revenues with employee costs behaving like fixed costs and
this was a significant driver of the lower margin.
Lower revenue and the ensuing lower gross margin was offset in part by a
decrease in operating expenses of $1.4 million. Profit from operating activities
was 4% of revenue compared to 10% in the prior year. EBITDAS(1) was $3.8 million
or 9% of revenue compared to 15% of revenue last year. Removing the impact of
foreign exchange from EBITDAS(1) leads to $4 million in 2012 or a 10% yield
compared to a 16% yield in 2011.
Fourth Quarter 2012 Financial Results
Revenue declined 4% or $0.5 million compared to the three months ended December
31, 2011 and increased by 26% ($2.4 million) from the immediately preceding
third quarter of 2012. Overall, the fourth quarter of 2011 was a strong
conclusion to a record year and so the fourth quarter of 2012 suffers by
comparison. Revenue in the Taxi business unit decreased by $0.4 million compared
to the three months ended December 31, 2011 due to lower enterprise solutions
deliveries (a reduction of $0.7 million) and small hardware sales (a reduction
of $0.4 million) offset in large part by higher maintenance revenue, SaaS
revenue and transactions based revenue. Revenue for the fourth quarter in
Transit was strong at $3.7 million (an increase from the immediately preceding
quarter of 26%), but was not equal to the record revenue fourth quarter of 2011
and was lower by $0.3 million.
Despite lower revenues, gross margin was consistent with that of the fourth
quarter of 2011 at $6.0 million. The fourth quarter of 2012 shows a marked
improvement in the gross margin yield to 50% (adjusted gross margin - 54%, a
non-IFRS measurement). This margin yield is similar to historical norms and
compared favourably to both the immediately preceding quarter (43%) and the 2011
fourth quarter (48%).
With gross margin consistent with 2011 at $6.0 million, the lower operating
expenses of $0.5 million led directly to an increase in income from operations
of $0.5 million or 30% compared to the same period in the prior year. EBITDAS(1)
was a very strong $3.2 million or 27% of revenues in the fourth quarter of 2012.
Compared to EBITDAS(1) of $1.8 million or 14% of revenues in the fourth quarter
of 2011, this represents an increase of $1.4 million.
Conference Call
The Company will host a conference call at 1:00 pm Eastern Time today to discuss
the financial results. Please call 416-340-2218 / 866-226-1793 to participate in
the call. A replay of this conference call will be available through March 16,
2013 by dialing 905-694-9451 / 800-408-3053 and entering access code 5737272.
(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.
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 Limousines,
Airport Shuttles and Work Fleets. 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 Years ended
----------------------------------------------------------------------------
----------------------------------------------------------------------------
December 31, December 31, December 31, December 31,
2012 2011 2012 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 11,931 $ 12,455 $ 40,670 $ 45,691
Cost of sales 5,907 6,450 23,127 24,032
----------------------------------------------------------------------------
Gross margin 6,024 6,005 17,543 21,659
Operating expenses:
Research and
development 1,450 1,429 6,023 5,943
Sales and marketing 1,117 1,449 4,557 5,450
General and
administrative 1,232 1,415 5,206 5,750
Other expense - 1 - 28
----------------------------------------------------------------------------
Total operating
expenses 3,799 4,294 15,786 17,171
----------------------------------------------------------------------------
Profit from operating
activities 2,225 1,711 1,757 4,488
Net finance (income)
expense (457) 571 237 435
----------------------------------------------------------------------------
Income before income
taxes 2,682 1,140 1,520 4,053
Income tax expense
(recovery)
Current tax expense 855 204 1,040 1,937
Deferred tax
expense (recovery) (425) 241 (1,099) (354)
----------------------------------------------------------------------------
430 445 (59) 1,583
----------------------------------------------------------------------------
Net income $ 2,252 $ 695 $ 1,579 $ 2,470
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income per common
share - basic and
diluted $ 0.16 $ 0.05 $ 0.11 $ 0.18
Weighted average
number of common
shares outstanding
(thousands) 13,831 13,792 13,827 13,791
----------------------------------------------------------------------------
----------------------------------------------------------------------------
DDS WIRELESS INTERNATIONAL INC.
Consolidated Balance Sheets (Unaudited)
(In thousands of Canadian dollars)
December 31, 2012 December 31, 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 5,252 $ 6,778
Trade and other receivables 5,932 7,145
Contract work-in-progress 7,597 5,468
Income taxes receivable 357 59
Inventory 2,404 2,718
Prepaid expenses 426 494
Investments 1,974 1,053
----------------------------------------------------------------------------
Total current assets 23,942 23,715
Plant and equipment 677 1,022
Long-term receivables 1,417 740
Investment tax credit receivable 4,792 3,276
Deferred tax assets 855 2,326
Intangible assets 1,715 3,341
Goodwill 2,970 2,992
Investments 103 103
----------------------------------------------------------------------------
Total assets $ 36,471 $ 37,515
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Trade payables and accrued
liabilities $ 5,576 $ 6,392
Income taxes payable 27 79
Deferred revenue 1,806 2,103
Provisions 52 135
----------------------------------------------------------------------------
Total current liabilities 7,461 8,709
Deferred tax liabilities 1,232 1,722
----------------------------------------------------------------------------
Total current and long-term
liabilities 8,693 10,431
----------------------------------------------------------------------------
Shareholders' equity:
Share capital 24,686 24,611
Share-based payments reserve 1,890 1,816
Retained earnings 1,928 1,455
Accumulated other comprehensive
loss (726) (798)
----------------------------------------------------------------------------
Total shareholders' equity 27,778 27,084
----------------------------------------------------------------------------
Total liabilities and shareholders'
equity $ 36,471 $ 37,515
----------------------------------------------------------------------------
----------------------------------------------------------------------------
DDS WIRELESS INTERNATIONAL INC.
Reconciliation of Non-IFRS Measures
(In thousands of Canadian dollars)
For the three months ended 2012
(CAD in thousands except %) Dec Sep Jun Mar
----------------------------------------------------------------------------
EBITDAS (1)
EBITDAS $ 3,249 $ 211 $ 672 $ (354)
As % of revenue 27% 2% 6% -4%
Amortization of plant & equipment,
intangibles and sales related assets (546) (546) (586) (550)
Share-based compensation (25) (2) (11) (46)
Interest 4 10 20 20
----------------------------------------------------------------------------
Income (loss) before income taxes $ 2,682 $ (327) $ 95 $ (930)
Adjusted Gross Margin (2)
Revenues $11,931 $ 9,484 $10,562 $ 8,693
Adjusted gross margin 6,462 4,489 4,595 3,784
Less:
Amortization of plant & equipment 6 7 7 7
Share-based compensation 1 1 1 3
Amortization of sales related assets 34 40 46 49
Amortization of intangibles 397 389 419 382
----------------------------------------------------------------------------
Gross margin per financial statements $ 6,024 $ 4,052 $ 4,122 $ 3,343
DDS WIRELESS INTERNATIONAL INC.
Reconciliation of Non-IFRS Measures
(In thousands of Canadian dollars)
For the three months ended 2011
(CAD in thousands except %) Dec Sep Jun Mar
----------------------------------------------------------------------------
EBITDAS (1)
EBITDAS $ 1,759 $ 3,036 $ 1,464 $ 490
As % of revenue 14% 24% 13% 5%
Amortization of plant & equipment,
intangibles and sales related assets (578) (583) (603) (621)
Share-based compensation (87) (59) (111) (97)
Interest 45 (1) - (1)
----------------------------------------------------------------------------
Income (loss) before income taxes $ 1,139 $ 2,393 $ 750 $ (229)
Adjusted Gross Margin (2)
Revenues $12,455 $12,508 $11,144 $9,584
Adjusted gross margin 6,437 6,605 5,716 4,902
Less:
Amortization of plant & equipment 39 - - -
Share-based compensation (66) 22 36 31
Amortization of sales related assets 45 51 81 101
Amortization of intangibles 416 417 418 412
----------------------------------------------------------------------------
Gross margin per financial statements $ 6,005 $ 6,115 $ 5,181 $4,358
DDS WIRELESS INTERNATIONAL INC.
Reconciliation of Non-IFRS Measures
(In thousands of Canadian dollars)
For the
For the three months ended year ended
(CAD in thousands except %) 2012 2011
----------------------------------------------------------
EBITDAS (1)
EBITDAS $ 3,779 $ 6,749
As % of revenue 9% 15%
Amortization of plant & equipment,
intangibles and sales related assets (2,227) (2,384)
Share-based compensation (84) (354)
Interest 52 43
----------------------------------------------------------
Income (loss) before income taxes $ 1,520 $ 4,053
Adjusted Gross Margin (2)
Revenues $40,670 $45,691
Adjusted gross margin 19,332 23,660
Less:
Amortization of plant & equipment 27 39
Share-based compensation 6 23
Amortization of sales related assets 169 276
Amortization of intangibles 1,587 1,663
----------------------------------------------------------
Gross margin per financial statements $17,543 $21,659
(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:
DDS Wireless International Inc.
Investor Relations
(604) 241-1441
Investors@ddswireless.com
DDS Wireless International Inc
Caroline J. Dunn
Chief Financial Officer
(604) 214-7206
www.ddswireless.com
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