TeleCommunication Systems, Inc. (TCS) (NASDAQ: TSYS), a world
leader in high availability and secure mobile communication
technology, reported record results for the fourth quarter and
fiscal year ended December 31, 2009.
Fourth Quarter 2009 Results
- Revenue was a record $90.8 million, an increase of 15% from
$79.3 million in the fourth quarter of 2008. Fourth quarter 2009
results include partial-period contributions from three businesses
acquired during the quarter. Their total revenue contribution was
approximately $5 million or less than 6% of the company's $90.8
million total revenue for the quarter, so their impact are not
called out separately in the following comments.
- Gross profit was a record $30.4 million, up 22% from $25
million in the fourth quarter of 2008.
- EBITDA (Earnings before Interest, Taxes, Depreciation and
Amortization, including non-cash stock-based compensation) for the
quarter was $25.9 million or $0.44 per diluted share. Excluding a
patent-related gain, net of expenses, EBITDA was $10.2 million or
$0.17 per diluted share, an increase of 36% from $7.5 million or
$0.15 per diluted share in the same year ago quarter (see
discussion about the presentation of EBITDA below).
- Pre-tax income was a record $19.2 million, including the $15.7
million patent-related gain or $0.33 per diluted share, an increase
of 308% from $4.7 million or $0.10 per diluted share in the fourth
quarter of 2008.
- Net income after a 40% tax provision was $11.4 million or $0.20
per diluted share. We reported net income of $38.2 million or $0.78
per diluted share in the fourth quarter of 2008, which included
$33.6 million or $0.68 per diluted share related to a reduction in
the deferred tax asset valuation allowance.
Full Year 2009 Results
- Revenue was a record $300.1 million, an increase of 36% from
the previous record of $220.1 million in 2008. This represents the
company's 12th consecutive year of record revenue.
- Gross profit was a record $113.9 million, up 40% from the
previous record of $81.3 million in 2008.
- EBITDA, excluding the patent-related gain, net of expenses of
$15.7 million or $0.29 per diluted share, was a record $49.1
million or $0.91 per diluted share, an increase of 69% from the
previous record of $29 million or $0.62 per diluted share (which
includes an $8.1 million, or $0.17 per diluted share impact of a
patent gain, net of expenses).
- Pre-tax income was a record $47.1 million, including the $15.7
million patent-related gain or $0.87 per diluted share, an increase
of 93% from the previous record of $24.3 million or $0.52 in
2008.
- Net income after a 40% tax provision was $28.3 million or $0.53
per diluted share. We reported net income of $57.6 million or $1.23
per diluted share in 2008, which included $33.3 million or $0.71
related to a reduction in the deferred tax asset valuation
allowance and $0.17 from a patent sale in the second quarter of
2008.
- Year-end total backlog was $630.8 million, up from $450 million
at the end of last year. The increase includes the effects of
businesses acquired in the fourth quarter.
Summary of Reported Income
Three Twelve
months ended months ended
Dec 31 Dec 31
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
(unaudited) (unaudited)
Revenue: $ 90,841 $ 79,287 $ 300,087 $ 220,142
--------- --------- --------- ---------
EBITDA from operations
including patent-related
gains, net of expenses (see
accompanying reconciliation) 25,931 7,476 64,777 37,050
Less: patent-related gains, net
of expenses (15,700) - (15,700) (8,060)
--------- --------- --------- ---------
EBITDA from operations
excluding patent-related
gains, net of expenses 10,231 7,476 49,077 28,990
Noncash charges (5,343) (2,951) (15,833) (11,859)
--------- --------- --------- ---------
Income from operations
excluding patent-related
gains, net of expenses 4,888 4,525 33,244 17,131
Patent-related gains, net of
expenses 15,700 - 15,700 8,060
--------- --------- --------- ---------
Income from operations 20,588 4,525 48,944 25,191
Other income/(expense) (1,349) 132 (1,880) (880)
--------- --------- --------- ---------
Pre-tax income 19,239 4,657 47,064 24,312
Tax provision (7,854) 33,571 (18,795) 33,257
--------- --------- --------- ---------
Net Income 11,385 38,228 28,269 57,568
Add back tax-effected
convertible debt interest
expense to net income for
diluted earnings per share 380 - 380 -
--------- --------- --------- ---------
Net Income, diluted $ 11,765 $ 38,228 $ 28,649 $ 57,568
========= ========= ========= =========
Per diluted share
EBITDA from operations
including patent-related
gains, net of expenses (see
accompanying reconciliation) $ 0.44 $ 0.15 $ 1.20 $ 0.79
Less: patent-related gains, net
of expenses (0.26) - (0.29) (0.17)
--------- --------- --------- ---------
EBITDA from operations
excluding patent-related
gains, net of expenses 0.17 0.15 0.91 0.62
Noncash charges (0.09) (0.06) (0.29) (0.25)
--------- --------- --------- ---------
Income from operations
excluding patent-related
gains, net of expenses 0.08 0.09 0.62 0.37
Patent-related gains, net of
expenses 0.26 - 0.29 0.17
--------- --------- --------- ---------
Income from operations 0.35 0.09 0.91 0.54
Other income/(expense) (0.02) 0.01 (0.03) (0.02)
--------- --------- --------- ---------
Pre-tax income 0.33 0.10 0.87 0.52
Tax provision (0.13) 0.68 (0.34) 0.71
--------- --------- --------- ---------
Net Income 0.20 0.78 0.53 1.23
Add back tax-effected
convertible debt interest
expense to net income for
diluted earnings per share 0.00 - 0.00 -
--------- --------- --------- ---------
Net Income, diluted $ 0.20 $ 0.78 $ 0.53 $ 1.23
========= ========= ========= =========
Shares used in calculation -
Diluted 59,564 49,017 53,946 46,644
========= ========= ========= =========
Management Commentary
"The 2009 year was transformative for TeleCommunication Systems,
Inc., concluding with three strategic fourth quarter acquisitions,
positioning us to continue to generate double-digit growth for
years to come," said Maurice B. Tosé, chairman and CEO. "All of our
actions reinforce our identity as a well-capitalized specialist in
highly reliable, secure mobile communications technology.
"In our commercial segment, we have realized several years of
healthy, profits as a leader in text messaging, that we expect to
continue in 2010. For the longer term, we foresee steadily growing
revenues from wireless applications beyond E9-1-1 call routing that
are based on the user's location information. This led to our
acquisitions of the former Autodesk LocationLogic and Networks in
Motion application businesses during 2009, giving us proven,
high-volume versions of the three leading LBS apps in the world --
navigation, people finder, and asset tracker. For our government
segment, we built on our strength as a secure satellite
communications solution provider by acquiring high-growth business
units with satcom field service and cyber security expertise and
new customers. And our intellectual property portfolio netted us
almost $16 million (pretax) in the fourth quarter as we resolved a
patent infringement issue, continuing our resourceful initiatives
to monetize our engineers' inventions.
We funded our 2009 acquisitions with internally generated cash,
bank term debt, and a convertible debt placement designed to be the
lowest cost and least dilutive. So we enter 2010 having
significantly shifted our revenue mix towards more recurring
services, while scaling up our core businesses to remain among the
top three in their respective high-growth markets. We believe all
the acquired businesses are assimilating smoothly into the culture
and control processes of our 23-year-old company, with confidence
that we have the leadership and depth of talent to take advantage
of our opportunities."
"Millions of consumers around the world use TCS wireless apps or
our underlying technology as a fundamental part of their daily
lives," said Tosé. "The record operating results of 2009 continue
to illustrate our ability to monetize highly reliable wireless
communications technology in three key areas: cellular text
messaging, mobile location-based applications and infrastructure,
and secure satellite-based communications, including deployable
kits. We foresee strong growth in both of our business segments in
2010 and beyond."
Fourth Quarter and Full Year Financial
Highlights
Revenue and Gross Profit
(unaudited):
Three months ended December 31
-------------------------------------------------------------
2009 2008 Incr. (Decr.)
------------------- ------------------- -------------------
Coml. Govt. Total Coml. Govt. Total Coml. Govt. Total
----- ----- ----- ----- ----- ----- ------ ----- -----
Revenue
($millions)
Services $27.6 $19.8 $47.4 $16.6 $12.7 $29.3 $11.0 $7.1 $18.1
Systems 7.8 35.6 43.4 10.7 39.3 50.0 (2.9) (3.7) (6.6)
----- ----- ----- ----- ----- ----- ------ ----- -----
Total
revenue $35.4 $55.4 $90.8 $27.3 $52.0 $79.3 $8.1 $3.4 $11.5
===== ===== ===== ===== ===== ===== ==== ==== =====
Gross profit
($millions)
Gross
profit-
services $17.7 $4.1 $21.8 $8.3 $2.8 $11.1 $9.4 $1.3 $10.7
As % of
rev 64% 21% 46% 50% 22% 38%
Gross
profit-
systems 4.1 4.5 8.6 9.0 4.9 13.9 (4.9) (0.4) (5.3)
As % of
rev 53% 13% 20% 84% 12% 28%
----- ----- ----- ----- ----- ----- ------ ----- -----
Total Gross
Profit $21.8 $8.6 $30.4 $17.3 $7.7 $25.0 $4.5 $0.9 $5.4
===== ===== ===== ===== ===== ===== ==== ==== =====
As % of
rev 62% 16% 33% 63% 15% 32%
Twelve months ended December 31
----------------------------------------------------------------
2009 2008 Incr. (Decr.)
------------------- ------------------- ----------------------
Coml. Govt. Total Coml. Govt. Total Coml. Govt. Total
------ ----- ------ ------ ------ ------ ------ ----- -----
Revenue
($millions)
Services $89.7 $62.2 $151.9 $64.4 $36.9 $101.3 $25.3 $25.3 $50.6
Systems 37.6 110.6 148.2 37.4 81.4 118.8 0.2 29.2 29.4
------ ----- ------ ----- ----- ------ ------ ----- -----
Total
reve-
nue $127.3 $172.8 $300.1 $101.8 $118.3 $220.1 $25.5 $54.5 $80.0
====== ====== ====== ====== ====== ====== ====== ===== =====
Gross profit
($millions)
Gross
profit-
services $54.4 $13.4 $67.8 $32.0 $7.7 $39.7 $22.4 $5.7 $28.1
As % of
rev 61% 22% 45% 50% 21% 39%
Gross
profit-
systems 27.0 19.1 46.1 28.5 13.1 41.6 (1.5) 6.0 4.5
As % of
rev 72% 17% 31% 76% 16% 35%
------ ----- ------ ------ ------ ------ ------ ----- -----
Total
Gross
Profit $81.4 $32.5 $113.9 $60.5 $20.8 $81.3 $20.9 $11.7 $32.6
====== ====== ====== ====== ====== ====== ====== ===== =====
As % of
rev 64% 19% 38% 59% 18% 37%
(Gross Profit = revenue minus direct cost of revenue, including
amortization of software development costs and related non-cash
stock-based compensation.)
Commercial Segment Revenue and Gross
Profit:
Commercial segment revenue for the fourth quarter of 2009 was a
record $35.4 million, up 30% from the same year-ago quarter, and
gross profit was up 26% to a record $21.8 million. Services revenue
growth includes higher revenue from maintenance on the cumulative
installed base of software in carrier systems, from hosted E9-1-1
services, and from location-based applications downloadable by
wireless subscribers. Systems sales were down $2.9 million, mainly
reflecting the timing of customer purchases of licenses for
incremental capacity for text messaging volume.
For the full year, commercial segment revenue was a record
$127.3 million, up 25% from $101.8 million in 2008, and gross
profit was a record $81.4 million, up 34% from $60.5 million in
2008. The commercial segment gross profit was 64% of commercial
revenue in 2009, an increase from 59% last year.
Government Segment Revenue and Gross
Profit:
Revenue from government customers for the fourth quarter was
$55.4 million, up 7% from the same year-ago quarter. Services
revenue of $19.8 million was up $7.1 million or 56% over the fourth
quarter of 2008, while systems sales decreased $3.7 million or 9%
over the year-ago quarter, due mainly to the timing of funding for
incremental shipments of deployable satellite communication
kits.
Fourth quarter 2009 gross profit from government customers was
$8.6 million, up 12% from Q4-08. Gross profit as a percentage of
government segment revenue was 16%, up 1% from the same year-ago
quarter.
For the full year, revenue from government customers totaled
$172.8 million, up 46% from $118.3 in 2008. Services revenue of
$62.2 million was up $25.3 million or 69% over 2008, while systems
sales increased $29.2 million or 36% over 2008.
For the full year, gross profit from government customers was
$32.5 million, up 56% from $20.8 million in 2008. Gross profit as a
percentage of government segment revenue was 19%, up 1% versus
2008.
Operating Costs and Expenses:
R&D: Fourth quarter 2009 R&D expense was $6.7 million
(7% of revenue), up $2.4 million from $4.3 million (5% of revenue)
in the fourth quarter of 2008. For the full year, R&D expense
was $22.4 million (7% of revenue), up $6.2 million from $16.2
million (7% of revenue) in 2008. Investments included continued
work on wireless location-based applications and infrastructure
software, telematics applications, VoIP and wireless E9-1-1, text
messaging and deployable satcom technology.
SG&A: Fourth quarter 2009 selling, general and
administrative expense was $16.7 million (18% of revenue), up from
$14.7 million (19% of revenue) in the fourth quarter of 2008. For
the full year, selling, general and administrative expense was
$51.4 million (17% of revenue), up from $41.9 million (19% of
revenue) in 2008. Direct and variable sales and marketing programs
have been increased for both the commercial and government business
segments. Higher G&A expenditures in the fourth quarter of 2009
include about $3 million of fees and expenses associated with the
acquisition of Networks in Motion. Other G&A spending increases
reflect investments for process control, legal and professional
costs associated with protection and monetization of intellectual
property, and accruals for variable compensation based mainly on
profit and growth performance metrics.
Noncash charges: Total non-cash charges to operating profit were
$5.3 million in the fourth quarter of 2009 versus $3 million in the
same year-ago quarter, due mainly to higher non-cash stock-based
compensation. For the full year, total non-cash charges to
operating profit were $15.8 million versus $12 million in 2008, due
mainly to higher non-cash stock compensation and amortization of
purchased non-goodwill intangible assets and capitalized
software.
Patent-Related Gain:
During the fourth quarter, the company reached a settlement of
patent litigation under which Sybase paid TCS $23 million in
January 2010 to license its patents related to cell phone carrier
messaging technology. TCS incurred $7.3 million in legal and other
expenses related to the settlement, so that the net pretax proceeds
to TCS were $15.7 million.
Income from Operations Excluding
Patent-Related Gain:
Income from operations excluding the patent-related gain was
$4.9 million for the fourth quarter of 2009, up 8% from $4.5
million in the same year-ago quarter. For the full year, income
from operations, excluding the patent-related gain was $33.2
million, up 94% from $17.1 million, excluding the patent-related
gain, in the same year-ago quarter.
Income Taxes:
The company recorded a $7.9 million provision for income taxes
against pre-tax income for the fourth quarter of 2009, representing
an effective tax rate of approximately 40%, and recorded an $18.8
million provision for income taxes (40% effective rate) for the
full year against pre-tax income. In the fourth quarter of 2008,
the company reversed most of the reserve against its deferred tax
asset that had accumulated in past years as a result of loss and
R&D credit carryforwards, resulting in a credit to net income
of $33.3 million.
Net Income:
Net income for the fourth quarter was $11.4 million or $0.20 per
diluted share, compared to net income of $38.2 million or $0.78 per
diluted share in the fourth quarter of 2008, which included a $0.68
favorable effect from income tax reserve reversal accounting.
Full year 2009 net income was $28.3 million or $0.53 per diluted
share, compared to net income of $57.6 million or $1.23 per diluted
share in 2008, which included a $0.71 favorable effect from income
tax reserve reversal accounting.
Liquidity and Capital Resources:
At December 31, 2009, TCS had $61.4 million of cash and
equivalents, compared to $79.3 million at the beginning of the
quarter. Funds were generated in the fourth quarter from $10.2
million in EBITDA (excluding $15.7 million from the patent-related
transaction), $92.7 million in net proceeds from convertible debt
financing, $11.9 million in proceeds from commercial bank
borrowings net of principal prepayments, $1.4 million in proceeds
from exercise of employee stock options, and $2.1 million from new
lease financing for fixed asset purchases and a $3.9 million
decrease in working capital (excluding the $15.7 million
patent-related settlement collected in January 2010). Uses of cash
during the quarter were $133.2 million for the acquisitions of
Networks in Motion, Solvern Innovations and Sidereal Solutions, net
of cash acquired, $3.8 for capital expenditures including software
development, $1.8 million of scheduled debt principal and lease
payments, and $1.3 million of cash taxes paid. The company had
approximately $33 million of unused borrowing availability under
its bank line of credit at quarter end. The $15.7 million net
proceeds from the December 2009 settlement of the patent-related
dispute were received in January 2010 and are reported in Other
Current Assets in the accompanying Consolidated Condensed Balance
Sheet for the period ended December 31, 2009.
Intellectual Property:
TCS was issued five patents during the fourth quarter, and
acquired 13 patents and 40 patent applications as part of fourth
quarter acquisitions. As of December 31, 2009, the company's patent
portfolio included 108 patents issued in the U.S. and abroad, and
over 300 patent applications pending. The company continued efforts
to monetize its patents through licensing and other arrangements,
as well as use them to position the company for competitive
advantages. During the fourth quarter, the company agreed to settle
two patent infringement lawsuits with Sybase, Inc., which included
a one-time payment of $23 million, before $7.3 million of related
expenses, to TCS in exchange for a license in the TCS inter-carrier
messaging family of patents.
Backlog:
Operations
Acquired
9/30/2009 New Orders in Q4-09 Revenue 12/31/2009
---------- --------- ---------- --------- --------
Funded Contract Backlog
($mil)
Commercial $ 90.5 $ 41.6 $ 143.9 $ (35.4) $ 240.5
Government $ 109.1 $ 29.0 $ 15.2 $ (55.4) $ 98.0
---------- --------- ---------- --------- -------
Total Funded Contract
Backlog $ 199.6 $ 70.6 $ 159.1 $ (90.8) $ 338.5
Customer Options $ 239.4 $ (13.7) $ 66.6 $ - $ 292.3
---------- --------- ---------- --------- -------
Total Backlog $ 439.0 $ 56.9 $ 225.7 $ (90.8) $ 630.8
========== ========= ========== ========= =======
Funded contract backlog on December 31, 2009 was approximately
$338.5 million of which the company expects to recognize
approximately $216.1 million in the next twelve months. Total
backlog was approximately $630.8 million at the end of the fourth
quarter of 2009. Funded contract backlog represents contracts for
which fiscal year funding has been appropriated by the company's
customers (mainly federal agencies), and for hosted services
(mainly for wireless carriers), backlog for which is computed by
multiplying the most recent month's contract or subscription
revenue times the remaining months under existing long-term
agreements, which is the best available information for
anticipating revenue under those agreements. Total backlog, as is
typically measured by government contractors, includes orders
covering optional periods of service and/or deliverables, but for
which budgetary funding may not yet have been approved. Company
backlog at any given time may be affected by a number of factors,
including the availability of funding, contracts being renewed or
new contracts being signed before existing contracts are completed.
Some of the company's backlog could be canceled for causes such as
late delivery, poor performance and other factors. Accordingly, a
comparison of backlog from period to period is not necessarily
meaningful and may not be indicative of eventual actual revenue
About the Presentation of EBITDA EBITDA
(from continuing operations) is not a financial measure calculated
and presented in accordance with U.S. generally accepted accounting
principles (GAAP) and should not be considered as an alternative to
net income, operating income or any other financial measures so
calculated and presented, nor as an alternative to cash flow from
operating activities as a measure of liquidity. The company defines
EBITDA as net income/(loss) before depreciation; amortization of
non-cash stock-based compensation; amortization of software
development costs, property and equipment and other intangibles;
taxes; and interest expense and other non-cash financing costs.
Other companies (including competitors) may define EBITDA
differently. The company presents EBITDA because management
believes it to be an important supplemental measure of performance
that is commonly used by securities analysts, investors and other
interested parties in the evaluation of companies in the industry.
Management also uses this information internally for forecasting
and budgeting. It may not be indicative of the historical operating
results of TCS nor is it intended to be predictive of potential
future results. Investors should not consider EBITDA in isolation
or as a substitute for analysis of the company's results as
reported under GAAP. See "GAAP to non-GAAP Reconciliation" below
for further information on this non-GAAP measure. Shares used in
the calculation of GAAP diluted earnings per share are the same as
the shares used in the calculation of diluted adjusted operating
income/(loss) per share except when the company reports a GAAP
loss.
Three months ended
GAAP to non-GAAP Reconciliation December 31
------------------------
(amounts in thousands) 2009 2008
----------- -----------
Consolidated Statement of Operations (unaudited)
Reconciliation
Net income on a GAAP basis $ 11,385 $ 38,228
Depreciation and amortization of property and
equipment 1,576 1,395
Amortization of stock-based compensation 2,312 960
Interest, financing, and other costs 1,349 (132)
Amortization of software development costs 966 560
Amortization of acquired intangible assets 489 36
Provision for income taxes 7,854 (33,571)
----------- -----------
EBITDA from operations including patent-related
gains, net of expenses 25,931 7,476
Less patent-related gains, net of expenses (15,700) -
----------- -----------
EBITDA from operations before patent-related
gains, net of expenses $ 10,231 $ 7,476
=========== ===========
Consolidated Statement of Operations
Reconciliation per Share-Diluted
Net Income per share on a GAAP basis $ 0.19 $ 0.78
Depreciation and amortization of property and
equipment 0.03 0.03
Amortization of stock-based compensation 0.04 0.02
Interest, financing, and other costs 0.02 (0.00)
Amortization of software development costs 0.02 0.01
Amortization of acquired intangible assets 0.01 0.00
Provision for income taxes 0.13 (0.68)
----------- -----------
EBITDA from operations including patent-related
gains, net of expenses 0.44 0.15
Less patent-related gains, net of expenses (0.26) -
----------- -----------
EBITDA from operations before patent-related
gains, net of expenses $ 0.17 $ 0.15
=========== ===========
Shares used in calculation - Diluted 59,564 49,017
=========== ===========
GAAP to non-GAAP Reconciliation Twelve months ended
December 31
(amounts in thousands) 2009 2008
----------- -----------
Consolidated Statement of Operations (unaudited)
Reconciliation
Net income on a GAAP basis $ 28,269 $ 57,568
Depreciation and amortization of property and
equipment 6,035 5,865
Non-cash stock compensation expense 5,859 3,758
Interest, financing, and other costs 1,880 880
Amortization of software development costs 3,069 2,089
Amortization of acquired intangible assets 870 147
Provision for income taxes 18,795 (33,257)
----------- -----------
EBITDA from operations including patent-related
gains, net of expenses 64,777 37,050
Less patent-related gains, net of expenses (15,700) (8,060)
----------- -----------
EBITDA from operations before patent-related
gains, net of expenses $ 49,077 $ 28,990
=========== ===========
Consolidated Statement of Operations
Reconciliation per Share
Net Income per share on a GAAP basis $ 0.53 $ 1.23
Depreciation and amortization of property and
equipment 0.11 0.13
Non-cash stock compensation expense 0.10 0.08
Interest, financing, and other costs 0.03 0.02
Amortization of software development costs 0.06 0.04
Amortization of acquired intangible assets 0.02 0.00
Provision for income taxes 0.35 (0.71)
----------- -----------
EBITDA from operations including patent-related
gains, net of expenses 1.20 0.79
Less patent-related gains, net of expenses (0.29) (0.17)
----------- -----------
EBITDA from operations before patent-related
gains, net of expenses $ 0.91 $ 0.62
=========== ===========
Shares used in calculation - Diluted 53,946 46,644
=========== ===========
Conference Call TCS will hold a conference
call later today, Thursday, February 4, 2010 to discuss these
quarter and year end 2009 financial results. The company's
chairman, president and CEO, Maurice B. Tosé, and senior vice
president and CFO, Tom Brandt, will host the call starting at 5:00
p.m. Eastern time. A question and answer session will follow
management's presentation.
To participate in the call, dial the appropriate number 5-10
minutes prior to the start time, ask for the TeleCommunication
Systems conference call and provide the conference ID: Dial-In
Number: 1-800-862-9098 International: 1-785-424-1051 Conference
ID#: 7TELECOM
The conference call will be broadcasted simultaneously on the
company's Web site at www.telecomsys.com. For the webcast, please
go to the Web site at least 15 minutes early to register, download,
and install any necessary audio software. If you have any
difficulty connecting with the conference call or webcast, please
contact the Liolios Group at 949-574-3860.
A replay of the call will be available after 8:00 p.m. Eastern
time on the same day and until March 4, 2010: Toll-free replay
number: 1-800-283-8486 International replay number: 1-402-220-0869
(No passcode required)
About TeleCommunication Systems, Inc.
TeleCommunication Systems, Inc. (TCS) (NASDAQ: TSYS) is a world
leader in high availability and secure mobile communication
technology. TCS infrastructure forms the foundation for market
leading solutions in E9-1-1, text messaging, commercial location
and deployable wireless communications. TCS is at the forefront of
new mobile cloud computing services providing wireless applications
for navigation, hyper-local search, asset tracking, social
applications and telematics. Millions of consumers around the world
use TCS wireless apps as a fundamental part of their daily lives.
Federal government agencies depend on TCS' cyber security
expertise, professional services, and highly secure deployable
satellite solutions for mission-critical communications.
Headquartered in Annapolis, MD, TCS maintains technical, service
and sales offices around the world. To learn more about emerging
and innovative wireless technologies, visit www.telecomsys.com.
This announcement contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities and Exchange Act of 1934, as
amended. These statements are based upon TCS' current expectations
and assumptions that are subject to a number of risks and
uncertainties that would cause actual results to differ materially
from those anticipated. The words, "believe," "expect,'' "intend,"
"anticipate,'' and variations of such words, and similar
expressions identify forward-looking statements, but their absence
does not mean that the statement is not forward-looking. Statements
in this announcement that are forward-looking include, but are not
limited to statements that (a) are made by Mr. Tosé generally,
including that 2009 was transformative and the fourth quarter
acquisitions position the company to continue to generate
double-digit growth for years to come, the company will continue to
be a well capitalized specialist, the company anticipates growing
its text messaging profits in 2010, and that the company
anticipates revenue growth from wireless applications beyond E9-1-1
call routing, the company's government segment acquisitions are in
high growth areas, the company's initiatives are expected to result
in monetization of its patented technologies, the company's
recurring services are likely to remain among the top three in
their respective high-growth markets, and that the company's
acquisitions are assimilating smoothly and that the company will be
able to take advantage of its opportunities (b) the company
foresees strong growth in both of its business segments in 2010 and
beyond, (c) the company will be able to continue its efforts to
monetize its patents, (d) the company will recognize any of the
reported backlog.
Additional risks and uncertainties are described in the
company's filings with the Securities and Exchange Commission
(SEC). These include without limitation risks and uncertainties
relating to the company's financial results and the ability of the
company to (i) reach and sustain profitability, (ii) continue to
rely on its customers and other third parties to provide additional
products and services that create a demand for its products and
services, (iii) conduct its business in foreign countries, (iv)
adapt and integrate new technologies into its products, (v) expand
its sales and business offerings in the wireless communications
industry, (vi) develop software and provide services without any
errors or defects, (vii) protect its intellectual property rights,
(viii) have sufficient capital resources to fund its operations,
(ix) not incur substantial costs from product liability claims
relating to its software, (x) implement its sales and marketing
strategy and (xi) successfully integrate the assets and personnel
obtained in its acquisitions and investments. Existing and
prospective investors are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to update or revise
the information in this press release, whether as a result of new
information, future events or circumstances, or otherwise.
TeleCommunication Systems, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands)
December 31, December 31,
2009 2008
------------ ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 61,426 $ 38,977
Accounts receivable, net 65,476 61,827
Unbilled receivables 23,783 21,797
Inventory 9,331 2,715
Investment in marketable securities - 78
Deferred income tax benefit 9,507 9,736
Deferred costs and other current assets 30,083 3,791
------------ ------------
Total current assets 199,606 138,921
Property and equipment, net 20,734 12,391
Software development costs, net 45,384 2,773
Acquired intangible assets, net 33,975 562
Goodwill 164,350 1,813
Deferred income tax benefit - 24,309
Other assets 8,176 1,190
------------ ------------
Total assets $ 472,225 $ 181,959
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 72,264 $ 51,588
Deferred revenue 9,938 4,349
Current portion of capital leases and notes
payable 39,731 3,837
------------ ------------
Total current liabilities 121,933 59,774
Capital leases and notes payable, less current 143,316 7,913
Deferred income taxes 15,435 -
Other long-term liability 5,755 -
Total stockholders' equity 185,786 114,272
------------ ------------
Total liabilities and stockholders'
equity $ 472,225 $ 181,959
============ ============
TeleCommunication Systems, Inc.
Consolidated Statements of Operations
(amounts in thousands, except per share data)
Three months ended Twelve months
December 31, ended December 31,
------------------ ------------------
2009 2008 2009 2008
-------- -------- -------- --------
(unaudited) (unaudited)
Revenue
Services $ 47,426 $ 29,357 $151,944 $101,359
Systems 43,415 49,930 148,143 118,783
-------- -------- -------- --------
Total revenue 90,841 79,287 300,087 220,142
Direct costs of revenue
Direct cost of services revenue 25,688 18,271 84,122 61,594
Direct cost of systems 34,804 35,992 102,111 77,291
-------- -------- -------- --------
Total direct cost of revenue 60,492 54,263 186,233 138,885
Services gross profit 21,738 11,086 67,822 39,765
As a % of revenue 46% 38% 45% 39%
Systems gross profit 8,611 13,938 46,032 41,492
As a % of revenue 20% 28% 31% 35%
-------- -------- -------- --------
Total gross profit 30,349 25,024 113,854 81,257
Total gross profit as a %
of revenue 33% 32% 38% 37%
Operating costs and expenses
Research and development expense 6,739 4,323 22,351 16,161
Sales and marketing expense 4,225 3,893 15,967 13,715
General and administrative
expense 12,432 10,852 35,387 28,238
Depreciation and amortization of
property and equipment 1,576 1,395 6,035 5,865
Amortization of acquired
intangible assets 489 36 870 147
-------- -------- -------- --------
Total operating costs and
expenses 25,461 20,499 80,610 64,126
-------- -------- -------- --------
Patent-related gains, net of
expenses 15,700 - 15,700 8,060
-------- -------- -------- --------
Income from operations 20,588 4,525 48,944 25,191
Cash interest expense (1,010) (188) (1,794) (922)
Amortization debt issuance expenses (327) (7) (401) (180)
Other income/(expense), net (12) 327 315 222
-------- -------- -------- --------
Income before income taxes 19,239 4,657 47,064 24,311
Benefit/(provision) for income
taxes (7,854) 33,571 (18,795) 33,257
-------- -------- -------- --------
Net income $ 11,385 $ 38,228 $ 28,269 $ 57,568
======== ======== ======== ========
Net income per share-basic $ 0.23 $ 0.87 $ 0.59 $ 1.34
======== ======== ======== ========
Add back tax-effected convertible
debt interest expense to net
income for diluted earnings per
share $ 380 $ - $ 380 $ -
-------- -------- -------- --------
Net income per share-diluted $ 0.20 $ 0.78 $ 0.53 $ 1.23
======== ======== ======== ========
Weighted average shares
outstanding-basic 49,872 44,165 47,623 43,063
======== ======== ======== ========
Weighted average shares
outstanding-diluted 59,564 49,017 53,946 46,644
======== ======== ======== ========
Company Contacts: Tom Brandt Senior Vice President and CFO
TeleCommunication Systems, Inc. Tel 410-280-1001
tbrandt@telecomsys.com Evan Weisel Media Contact Welz & Weisel
Communications Tel 703-218-3555 evan@w2comm.com Scott Liolios
Investor Relations Liolios Group, Inc. Tel 949-574-3860
info@liolios.com
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