DDS WIRELESS INTERNATIONAL INC. 
By RICHMOND, BRITISH COLUMBIA--(Marketwired - May 5, 2014) - DDS Wireless International Inc. (TSX:DD) -
First Quarter 2014
Revenue of $8.6 million
Net profit of $1.4 million or $0.10 per share
EBITDAS(1) of $1.6 million, or $0.12 per share
DDS Wireless International Inc., a world leader in providing wireless data solutions for fleet management for more than 26 years, today reported financial results for the three months and fiscal year to date ended March 31, 2014.
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.
Due to the seasonal nature of our business, the first quarter of each year is typically a slower quarter. Despite the challenges that our first quarter normally brings, revenues were in line with expectations at $8.6 million and recurring revenue was 75% of revenue in the quarter. The adjusted gross margin yield was 51% which is an improvement of five percent from the first quarter of 2013.
As at March 31, 2014, the Company held $11.6 million in cash and short-term investments, consistent with the December 31, 2013 balances.
First Quarter Financial Results
Revenue is consistent with the three months ended March 31, 2013 and experienced a typical seasonal drop from the fourth quarter of 2013. Recurring revenue was 75% of revenue compared to 70% for the first quarter of 2013 and 70% for the full fiscal year of 2013.
Revenue in the Taxi business unit decreased by $0.5 million compared to the three months ended March 31, 2013 due to lower project ($0.6 million) and maintenance ($0.1 million) revenues offset by a slight uptick in SaaS revenue ($0.2 million). Revenue for the first quarter in Transit was $0.5 million higher due to higher project and maintenance revenues.
| (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. |
Gross margin increased by $0.8 million or 24% to $4.3 million from the same quarter last year. The biggest contribution to the increase in overall margin yield arose in the Transit unit, largely as a result of the higher margin earned on the Transit unit projects, hardware orders and other project upgrades. Furthermore, there was no amortization of intangible assets affecting our gross margin in 2014 as intangible assets related to acquisition in prior years were fully amortized in 2013. The intangible amortization expense affecting gross margin in the first quarter of 2013 was $0.4 million.
The gross margin growth of $0.8 million was offset by higher operating expenses of $0.2 million. This led directly to an increase in earnings from operations of $0.6 million compared to the same period in the prior year. This, in combination with net finance income of $1.4 million, resulted in profit before tax of $1.4 million, an increase of $1.0 million from the first quarter of 2013. The favourable net finance income in the first quarter arose largely from a gain on the revaluation of marketable securities held as an investment ($0.9 million) in combination with foreign exchange gains of $0.4 million.
EBITDAS(1) for the quarter was $1.6 million or 19% of revenues. Compared to an EBITDAS(1) of $0.9 million or 11% of revenues in the first quarter of 2013, this represents a variance of $0.7 million. In 2013 we made a strategic investment in a public company, and that investment contributed $0.9 million to EBITDAS and earnings.
Subsequent to March 31, 2014, the Company announced on May 1, 2014 that it entered into a proposed Going-Private Transaction. Please refer to our press release dated May 1, 2014 for further details. As a result of this announcement the Company has suspended payment of dividends.
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.
| (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. |
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, the going-private transaction 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) | |||||||
|
March 31, 2014 |
March 31, 2013 | ||||||
| Revenue | $ | 8,559 | $ | 8,539 | |||
| Cost of sales | 4,262 | 5,068 | |||||
| Gross margin | 4,297 | 3,471 | |||||
| Operating expenses: | |||||||
| Research and development | 1,925 | 1,655 | |||||
| Sales and marketing | 878 | 1,050 | |||||
| General and administrative | 1,363 | 1,282 | |||||
| 4,166 | 3,987 | ||||||
| Earnings from operating activities | 131 | (516 | ) | ||||
| Net finance (income) | (1,350 | ) | (931 | ) | |||
| Income before income taxes | 1,481 | 415 | |||||
| Income tax expense (recovery) | |||||||
| Current tax expense | 107 | 155 | |||||
| Deferred tax (recovery) | 10 | (128 | ) | ||||
| 117 | 27 | ||||||
| Net income | $ | 1,364 | $ | 388 | |||
| Net income per common share - basic and diluted | $ | 0.10 | $ | 0.03 | |||
| Weighted average number of common shares outstanding (thousands) | 13,597 | 13,831 | |||||
| DDS WIRELESS INTERNATIONAL INC. | |||||||
| Consolidated Balance Sheets (Unaudited) | |||||||
| (In thousands of Canadian dollars) | |||||||
|
March 31, 2014 |
December 31, 2013 | ||||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 7,656 | $ | 7,290 | |||
| Trade and other receivables | 6,464 | 5,343 | |||||
| Contract work-in-progress | 3,719 | 5,618 | |||||
| Income taxes receivable | 158 | 153 | |||||
| Inventory | 1,948 | 2,053 | |||||
| Prepaid expenses | 629 | 608 | |||||
| Investments | 3,708 | 2,821 | |||||
| Total current assets | 24,282 | 23,886 | |||||
| Plant and equipment | 820 | 849 | |||||
| Long-term receivables | 1,025 | 1,148 | |||||
| Investment tax credit receivable | 5,663 | 5,584 | |||||
| Deferred tax assets | 1,550 | 1,404 | |||||
| Intangible assets | 301 | 321 | |||||
| Goodwill | 3,426 | 3,298 | |||||
| Investments | 103 | 103 | |||||
| Total assets | $ | 37,170 | $ | 36,593 | |||
| Liabilities and Shareholders' Equity | |||||||
| Current liabilities: | |||||||
| Trade payables and accrued liabilities | $ | 5,115 | $ | 5,661 | |||
| Income taxes payable | 95 | 74 | |||||
| Deferred revenue | 2,924 | 3,024 | |||||
| Provisions | 47 | 56 | |||||
| Total current liabilities | 8,181 | 8,815 | |||||
| Deferred tax liabilities | 1,244 | 1,115 | |||||
| Total current and long-term liabilities | 9,425 | 9,930 | |||||
| Shareholders' equity: | |||||||
| Share capital | 24,231 | 24,321 | |||||
| Share-based payments reserve | 1,862 | 1,859 | |||||
| Retained earnings | 1,989 | 909 | |||||
| Accumulated other comprehensive loss | (337 | ) | (426 | ) | |||
| Total shareholders' equity | 27,745 | 26,663 | |||||
| Total liabilities and shareholders' equity | $ | 37,170 | $ | 36,593 | |||
| DDS WIRELESS INTERNATIONAL INC. | |||||||||||||||||||||||||||
| Reconciliation of Non-IFRS Measures | |||||||||||||||||||||||||||
| (In thousands of Canadian dollars) | |||||||||||||||||||||||||||
For the three months ended | 2014 | 2013 | 2012 | ||||||||||||||||||||||||
| (CAD in thousands except %) | Mar | Dec | Sep | Jun | Mar | Dec | Sep | Jun | Mar | ||||||||||||||||||
| EBITDAS (1) | |||||||||||||||||||||||||||
| EBITDAS | $ | 1,597 | $ | 677 | $ | 22 | $ | 158 | $ | 890 | $ | 3,249 | $ | 211 | $ | 672 | $ | (354 | ) | ||||||||
| As % of revenue | 19 | % | 7 | % | 0 | % | 2 | % | 10 | % | 27 | % | 2 | % | 6 | % | (4 | %) | |||||||||
| Less | |||||||||||||||||||||||||||
| Amortization of plant & equipment, intangibles and sales related assets | 139 | 346 | 545 | 524 | 528 | 546 | 546 | 586 | 550 | ||||||||||||||||||
| Share-based compensation | 3 | 3 | 8 | 3 | (28 | ) | 25 | 2 | 11 | 46 | |||||||||||||||||
| Interest | (26 | ) | (27 | ) | (27 | ) | (14 | ) | (25 | ) | (4 | ) | (10 | ) | (20 | ) | (20 | ) | |||||||||
| Income (loss) before income taxes | $ | 1,481 | $ | 355 | $ | (504 | ) | $ | (355 | ) | $ | 415 | $ | 2,682 | $ | (327 | ) | $ | 95 | $ | (930 | ) | |||||
| Adjusted Gross Margin(2) | |||||||||||||||||||||||||||
| Revenues | $ | 8,559 | $ | 9,329 | $ | 9,385 | $ | 7,648 | $ | 8,539 | $ | 11,931 | $ | 9,484 | $ | 10,562 | $ | 8,693 | |||||||||
| Adjusted gross margin | 4,355 | 4,619 | 4,724 | 3,199 | 3,897 | 6,462 | 4,491 | 4,595 | 3,784 | ||||||||||||||||||
| As % of revenue | 51 | % | 49 | % | 50 | % | 42 | % | 46 | % | 54 | % | 47 | % | 44 | % | 44 | % | |||||||||
| Less: | |||||||||||||||||||||||||||
| Amortization of plant & equipment | 15 | 21 | 9 | 7 | 8 | 6 | 7 | 7 | 7 | ||||||||||||||||||
| Share-based compensation | - | - | 1 | - | (2 | ) | 1 | 1 | 1 | 3 | |||||||||||||||||
| Amortization of sales related assets | 43 | 47 | 43 | 32 | 33 | 34 | 40 | 46 | 49 | ||||||||||||||||||
| Amortization of intangibles | - | 196 | 400 | 393 | 387 | 397 | 389 | 419 | 382 | ||||||||||||||||||
| Gross margin per financial statements | $ | 4,297 | $ | 4,355 | $ | 4,271 | $ | 2,767 | $ | 3,471 | $ | 6,024 | $ | 4,054 | $ | 4,122 | $ | 3,343 | |||||||||
| As % of revenue | 50 | % | 47 | % | 45 | % | 36 | % | 41 | % | 50 | % | 43 | % | 39 | % | 38 | % | |||||||||
(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.
