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DDS Wireless Reports Q4 EBITDAS(1) of $3.2 Million, Annual EBITDAS(1) of $3.8 Million, Declares Cash Dividend and Normal Course Issuer Bid to Repurchase Common Shares
RICHMOND, BRITISH COLUMBIA--(Marketwire - March 6, 2013) -
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 per share | Net profit of $1.6 million, or $0.11 per share | |
EBITDAS(1) of $3.2 million, or $0.23 per share | EBITDAS(1) of $3.8 million, or $0.27 per share |
DDS Wireless International Inc. (DD.TO) ("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™ 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, 2012 | December 31, 2011 | December 31, 2012 | December 31, 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) | ||||||||||||||||||||||||||||||
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| For the | |||||||||||||||||||||||||||
(CAD in thousands except %) | Dec | Sep | Jun | Mar | Dec | Sep | Jun | Mar | 2012 | 2011 | ||||||||||||||||||||
EBITDAS (1) | ||||||||||||||||||||||||||||||
EBITDAS | $ | 3,249 | $ | 211 | $ | 672 | $ | (354 | ) | $ | 1,759 | $ | 3,036 | $ | 1,464 | $ | 490 | $ | 3,779 | $ | 6,749 | |||||||||
As % of revenue | 27 | % | 2 | % | 6 | % | -4 | % | 14 | % | 24 | % | 13 | % | 5 | % | 9 | % | 15 | % | ||||||||||
Amortization of plant & equipment, intangibles and sales related assets | (546 | ) | (546 | ) | (586 | ) | (550 | ) | (578 | ) | (583 | ) | (603 | ) | (621 | ) | (2,227 | ) | (2,384 | ) | ||||||||||
Share-based compensation | (25 | ) | (2 | ) | (11 | ) | (46 | ) | (87 | ) | (59 | ) | (111 | ) | (97 | ) | (84 | ) | (354 | ) | ||||||||||
Interest | 4 | 10 | 20 | 20 | 45 | (1 | ) | - | (1 | ) | 52 | 43 | ||||||||||||||||||
Income (loss) before income taxes | $ | 2,682 | $ | (327 | ) | $ | 95 | $ | (930 | ) | $ | 1,139 | $ | 2,393 | $ | 750 | $ | (229 | ) | $ | 1,520 | $ | 4,053 | |||||||
Adjusted Gross Margin (2) | ||||||||||||||||||||||||||||||
Revenues | $ | 11,931 | $ | 9,484 | $ | 10,562 | $ | 8,693 | $ | 12,455 | $ | 12,508 | $ | 11,144 | $ | 9,584 | $ | 40,670 | $ | 45,691 | ||||||||||
Adjusted gross margin | 6,462 | 4,489 | 4,595 | 3,784 | 6,437 | 6,605 | 5,716 | 4,902 | 19,332 | 23,660 | ||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||||
Amortization of plant & equipment | 6 | 7 | 7 | 7 | 39 | - | - | - | 27 | 39 | ||||||||||||||||||||
Share-based compensation | 1 | 1 | 1 | 3 | (66 | ) | 22 | 36 | 31 | 6 | 23 | |||||||||||||||||||
Amortization of sales related assets | 34 | 40 | 46 | 49 | 45 | 51 | 81 | 101 | 169 | 276 | ||||||||||||||||||||
Amortization of intangibles | 397 | 389 | 419 | 382 | 416 | 417 | 418 | 412 | 1,587 | 1,663 | ||||||||||||||||||||
Gross margin per financial statements | $ | 6,024 | $ | 4,052 | $ | 4,122 | $ | 3,343 | $ | 6,005 | $ | 6,115 | $ | 5,181 | $ | 4,358 | $ | 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. |
