Third Quarter 2012 Year-to-Date 2012
Revenue of $9.5 million Revenue of $28.7 million
Net loss of ($0.4) million, or Net loss of ($0.7) million, or
($0.03) per share ($0.05) per share
EBITDAS(1) of $0.2 million, or $0.02 EBITDAS(1) of $0.5 million, or $0.04
per share per share
DDS Wireless International Inc. (TSX:DD), a world leader in providing wireless
data solutions for fleet management for more than 25 years, today reported
financial results for the three and nine months ended September 30, 2012 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.
"I am disappointed that our revenue in the third quarter was lower than that of
the second quarter," stated Vari Ghai, CEO of DDS Wireless. "Slower demand in
Europe, primarily due to the conclusion of the upgrade cycle, continues to
characterize sales in our Taxi business unit in the third quarter of 2012, with
enterprise solutions revenues lower than that of the record third quarter of
2011. We have introduced an extensive product suite this year; enhancements to
the V800(TM), the V5000(TM), our white label mobile booking applications, and
the Connectivity Box with our tablet enabled enterprise solution. It will take
some time for the North American market to absorb these offerings and continue
their upgrade cycle. This, together with the continued strength of the Canadian
dollar in relation to both the US dollar and the Euro in the third quarter, and
deal flow timing, all contributed to more modest revenues of $9.5 million and a
loss of $0.4 million for the quarter."
Mr. Ghai continued, "I am pleased with the continued growth from our Transit
unit which arose not only from the significant contracts signed with MTA New
York City Transit ('NYC Transit') late last year, but also from new contracts
with large para-transit operators in the US and increasing sales of MDTs through
our partners from a rising adoption of our hardware in the transit market."
Third Quarter 2012 Financial Results
Revenue declined 24% or $3.0 million compared to the three months ended
September 30, 2011 and decreased by 10% compared to the immediately preceding
quarter.
The largest driver of the reduction in revenue was in the Taxi unit with lower
revenue of $4.4 million compared to the three months ended September 30, 2011,
resulting from lower enterprise solutions deliveries in Europe, enhanced volume
rebates for a large customer, and lower small hardware orders. Increases in
revenue from both the Transit and New Markets units from enterprise solutions
and MDT sales served to offset decreases seen, in part, in the Taxi unit.
The decrease in total revenue from the immediately preceding quarter arose from
lower revenue in both the Taxi and the Transit units, offset by an increase in
New Markets revenues of $0.1 million from higher adoption of the new financed
MDT purchase offering.
Gross margin decreased by $2.1 million or 34% to $4.1 million from the same
quarter last year due to a combination of both lower revenues and lower average
margins earned on enterprise solutions projects in the Taxi unit and lower
margins earned on transaction based revenues in the Taxi unit. The gross margin
yield in the quarter was 43% compared to 49% in the same quarter last year and
39% in the immediately preceding quarter.
The decrease in the gross margin of $2.1 million, offset by favourable combined
variances of $0.2 million in operating expenses, finance expense (including the
effects of foreign exchange) and tax expense in the period, led to a decrease in
earnings of $1.9 million compared to the same period in the prior year.
The strength of the Canadian dollar has an impact on both our revenue and gross
margin, but also generated a significant foreign exchange loss on translation
for the quarter of $0.5 million and contributed to the net loss experienced in
the quarter. EBITDAS(1) was $0.2 million or 2% of revenue and net loss for the
quarter was $0.4 million or $0.03 per share.
Year-to-Date 2012 Financial Results
Revenue declined 14% or $4.5 million compared to the nine months ended September
30, 2011. Revenue in the Taxi unit decreased by $6.9 million compared to the
nine months ended September 30, 2011 due to lower enterprise solutions
deliveries and lower small hardware orders, offset in part by higher SaaS orders
associated with TaxiBook(TM) sales in North America and higher transaction based
revenues in Finland. The decline in Taxi unit revenue was offset by increases
seen in the Transit unit, largely a result of its NYC Transit projects and other
large para-transit projects generated in the second and third quarters of the
year, and increases in the New Markets unit as a result of additional deliveries
of its eFleet SaaS solution.
Gross margin decreased by $4.1 million or 26% to $11.5 million from the same
period last year 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, hence the
decrease in lower revenues in the year to date is a significant driver on the
lower margin earned. This has translated to a lower yield at 40% compared to 47%
in the prior year.
The decrease in the gross margin of $4.1 million, offset by combined favourable
variances in operating expenses, foreign exchange and taxes in the period, led
to a decrease in earnings of $2.5 million compared to the same period in the
prior year. EBITDAS(1) was $0.5 million or 2% of revenue and net loss was $0.7
million or $0.05 per share.
(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.
Outlook
Revenues for the fiscal year will be significantly below that of last year
despite our typical seasonal strength in the fourth quarter and continued demand
for our product offerings. This arose from a number of factors. The European
upgrade cycle of the past two years has drawn to a close with most of our
marquee client base on the V9000(TM). The continued strength of the Canadian
dollar in relation to both the US dollar and the Euro for the year to date has
had a further dampening effect on worldwide revenue. We have also experienced,
particularly in the third quarter, some impact from the slowing of deal flow and
the postponement of project delivery and therefore revenue into 2013.
Dividend
The cash dividend, in the amount of $0.02 per Share, will be paid on or about
January 15, 2013 to holders of record of the Company's Common Shares as of the
close of business on December 28, 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 12:00 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 November 15, 2012 by dialing 905-694-9451 / 800-408-3053 and entering
access code 5737272.
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 Nine months ended
----------------------------------------------------------------------------
----------------------------------------------------------------------------
September September September September
30, 2012 30, 2011 30, 2012 30, 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Revenue $ 9,484 $ 12,508 $ 28,739 $ 33,236
Cost of sales 5,432 6,393 17,221 17,581
----------------------------------------------------------------------------
Gross margin 4,052 6,115 11,518 15,655
Operating expenses:
Research and
development 1,478 1,339 4,573 4,514
Sales and marketing 1,079 1,255 3,440 4,001
General and
administrative 1,136 1,479 3,974 4,335
Other expense - 6 - 27
----------------------------------------------------------------------------
Total operating expenses 3,693 4,079 11,987 12,877
----------------------------------------------------------------------------
Profit (loss) from
operating activities 359 2,036 (469) 2,778
Net finance (income)
expense 686 (357) 696 (135)
----------------------------------------------------------------------------
Income (loss) before
income taxes (327) 2,393 (1,165) 2,913
Income tax expense
(recovery)
Current tax expense 152 983 187 1,685
Deferred tax
(recovery) (60) (49) (673) (547)
----------------------------------------------------------------------------
92 934 (486) 1,138
----------------------------------------------------------------------------
Net income (loss) $ (419) $ 1,459 $ (679) $ 1,775
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net income (loss) per
common share - basic
and diluted $ (0.03) $ 0.11 $ (0.05) $ 0.13
Weighted average number
of common shares
outstanding (thousands) 13,831 13,792 13,826 13,792
----------------------------------------------------------------------------
----------------------------------------------------------------------------
DDS WIRELESS INTERNATIONAL INC.
Consolidated Balance Sheets (Unaudited)
(In thousands of Canadian dollars)
September December
30, 2012 31, 2011
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 4,770 $ 6,778
Trade and other receivables 5,950 7,145
Contract work-in-progress 6,104 5,468
Income taxes receivable 341 59
Inventory 2,523 2,718
Prepaid expenses 644 494
Investments 1,692 1,053
----------------------------------------------------------------------------
Total current assets 22,024 23,715
Plant and equipment 769 1,022
Long-term receivables 1,399 740
Investment tax credit receivable 5,303 3,276
Deferred tax assets 1,011 2,326
Intangible assets 2,114 3,341
Goodwill 2,873 2,992
Investments 103 103
----------------------------------------------------------------------------
Total assets $ 35,596 $ 37,515
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Trade payables and accrued liabilities $ 6,194 $ 6,392
Income taxes payable 145 79
Deferred revenue 1,987 2,103
Provisions 90 135
----------------------------------------------------------------------------
Total current liabilities 8,416 8,709
Deferred tax liabilities 1,525 1,722
----------------------------------------------------------------------------
Total current and long-term liabilities 9,941 10,431
----------------------------------------------------------------------------
Shareholders' equity:
Share capital 24,686 24,611
Share-based payments reserve 1,865 1,816
Retained earnings (54) 1,455
Accumulated other comprehensive loss (842) (798)
----------------------------------------------------------------------------
Total shareholders' equity 25,655 27,084
----------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 35,596 $ 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 %) Sep Jun Mar
----------------------------------------------------------------------------
EBITDAS (1)
EBITDAS $ 211 $ 672 $ (354)
As % of revenue 2% 6% (4%)
Amortization of plant &
equipment (102) (107) (119)
Amortization of intangibles (404) (433) (382)
Amortization of sales related
assets (40) (46) (49)
Share-based compensation (2) (11) (46)
Interest 10 20 20
----------------------------------------------------------------------------
Income (loss) before income
taxes $ (327) $ 95 $ (930)
Adjusted Gross Margin (2)
Revenues $ 9,484 $ 10,562 $ 8,693
Adjusted gross margin 4,495 4,595 3,784
Less:
Amortization of plant &
equipment 13 7 7
Share-based compensation 1 1 3
Amortization of sales related
assets 40 46 49
Amortization of intangibles 389 419 382
----------------------------------------------------------------------------
Gross margin per financial
statements $ 4,052 $ 4,122 $ 3,343
For the three months ended 2011 2010
(CAD in thousands except %) Dec Sep Jun Mar Dec
----------------------------------------------------------------------------
EBITDAS (1)
EBITDAS $ 1,759 $ 3,036 $ 1,464 $ 490 $ 2,312
As % of revenue 14% 24% 13% 5% 17%
Amortization of plant &
equipment (106) (95) (84) (89) (94)
Amortization of intangibles (427) (437) (438) (433) (459)
Amortization of sales related
assets (45) (51) (81) (100) (295)
Share-based compensation (87) (59) (111) (97) (82)
Interest 45 (1) - (1) (14)
----------------------------------------------------------------------------
Income (loss) before income
taxes $ 1,139 $ 2,393 $ 750 $ (230) $ 1,368
Adjusted Gross Margin (2)
Revenues $12,455 $12,508 $11,144 $ 9,584 $13,326
Adjusted gross margin 6,437 6,605 5,716 4,902 7,062
Less:
Amortization of plant &
equipment 38 - - - -
Share-based compensation (66) 22 36 31 28
Amortization of sales related
assets 45 51 81 101 295
Amortization of intangibles 415 417 418 411 440
----------------------------------------------------------------------------
Gross margin per financial
statements $ 6,005 $ 6,115 $ 5,181 $ 4,359 $ 6,299
(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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