DDS Wireless International Inc.
TSX : DD

DDS Wireless International Inc.

March 17, 2009 08:00 ET

DDS Wireless Reports Record Revenues With 63% Annual Growth

RICHMOND, BRITISH COLUMBIA--(Marketwire - March 17, 2009) - DDS Wireless International Inc. (TSX:DD), a world leader in providing wireless data solutions for fleet management for over 20 years, today released financial results for the fourth quarter and year ended December 31, 2008. All financial information is expressed in Canadian ("CDN") dollars and Canadian generally accepted accounting principles ("GAAP").

"2008 represented a pivotal year for DDS Wireless. We returned the company to profitability in the last quarter of 2008 and delivered revenue growth of 63% for the year, driven in large part by the strategic reorganization of the Company into four market focused business units earlier in the year and the integration of Washington-based StrataGen Systems Inc. and Finland-based Mobisoft Oy acquired in late in 2007," said Vari Ghai, CEO of DDS Wireless. "While the acquisitions completed in 2007 were a significant driver of our growth in 2008, we saw positive growth across all of our businesses. Furthermore, we extended our reach into new markets and verticals and capitalized on the commercial synergies of the acquisitions by leveraging the complementary products and distribution channels of the combined companies. We will continue to exploit these opportunities to drive further growth and expansion into new vertical and geographic markets."

Highlights:

- Delivery and formal acceptance of a major license upgrade for MTA New York City Transit, one of the largest global para-transit operators in the world

- Closing of $3.32 million contract with Access Services Inc. (ASI) of Los Angeles, California for project management services to integrate StrataGen's ADEPT software with voice recognition software

- Sale of over 1,900 iPilot 8000™ mobile computers to Taxi G7 of Paris

- Launch of TaxiBook™ bundled dispatch subscription service for small taxi fleets in North America with deployments of over 300 taxis by the end of the 2008

- Expansion into New Zealand through an iPilot 8000™ order from Steelcom Electronics Ltd., a communications solutions provider for local public safety markets

- Signed contracts for Taxi fleet management systems with City Cabs of Kitchener Ontario, Duffy's Taxi of Winnipeg Manitoba, Kumar Transportation of Memphis Tennessee, and Sydney Australia based Platinum Taxi's

- Delivery of Vector 530™ mobile data terminals to Mumbai, India based ORIX Auto Infrastructure Services Limited (OAIS) to be deployed in its Radio Taxi and Car Rental and Business Transportation Solutions Units

- Launch of the latest generation iMax™ series of mobile computers that set new standards for performance, usability and integration for in-vehicle mobile computing and connectivity

- After year end signed a contract with the City of Helsinki to provide its Mobirouter™ demand response dispatch system

2008 Financial Results

Total revenues for the year ended December 31, 2008 were $33.5 million compared to $20.6 million in the prior year ended December 31, 2007, an increase of $12.9 million or 63%. $9.2 million of the increase in revenues for the year ended December 31, 2008 from the prior year is attributed to the inclusion of a full year of revenues for MobiSoft and StrataGen in the Company's consolidated financial results. The companies were acquired on October 8, 2007, and December 7, 2007 respectively, and therefore the Company's financial results for the fiscal year ended December 31, 2007 only included revenues and operating results for these companies from their respective acquisition dates.

EBITDAS (defined as earnings before interest, tax, depreciation, amortization and stock compensation expense) was $1.3 million for the twelve months of 2008 compared to a loss of $(3.6) million in the same period of last year.

The Company posted a gross margin of 47% for the year ended December 31, 2008 which is lower than the 48% gross margin achieved in the prior year due to the impact of an increase in the amortization of sales related assets associated with bundled subscription services (Taxi Book, TLC, and eFleet initiatives).

Total operating expenses (excluding amortization and stock compensation) increased in the year ended December 31, 2008 to $16.2 million from $11.9 million for the same period ended in the prior year which is primarily attributable to the addition of the operations of Mobisoft and StrataGen acquired in 2007.

Other expenses include items such as amortization of plant and equipment, amortization of intangible assets, foreign exchange gains and losses, and stock compensation expense. Other expense for the year ended December 31, 2008 decreased to $1.8 million, from $2.6 million last year. The decrease is attributed to a $1.1 million foreign exchange gain in the current period, as compared to a foreign exchange loss of $1.7 million in the comparative period. The foreign exchange gain, however, was offset by an increase in amortization expense to $2.9 million from $0.8 million in the prior year. The increase in amortization expense is primarily related to the amortization of intangibles realized on the acquisitions on MobiSoft and StrataGen in late 2007.

Net loss for the twelve months ended December 31, 2008 was $1.5 million compared to a net loss of $3.4 million for the twelve months ended December 31, 2007. The decrease in net loss reflects an increase in gross margin of $5.8 million in the current year that was partially offset by an increase in operating costs of $4.3 million. The net loss for the twelve months ended December 31, 2008 includes amortization and stock compensation expenses of $3.7 million compared to $1.1 million for the same period in the prior year.

The Company has line of credit facilities totaling $4.5 million. At December 31, 2008, the Company had $1.5 million drawn on its banking facilities. This compares to $1.3 million drawn on its line of credit and a cash balance of $1.1 million at December 31, 2007. The increase in the Company's line of credit drawing and decline in cash and cash equivalents as at December 31, 2008 is mainly due to the repayment of $1.3 million of deferred acquisition costs for Mobisoft and StrataGen during the year, and $2.4 million capital expenditure investment primarily related to the Company's bundled subscription services. As at the date of this release, the Company is not drawn on its line of credit.

As at December 31, 2008, the Company had 13,789,746 shares outstanding compared to 13,143,191 as at December 31, 2007, the difference being the shares issued for payment of deferred acquisition costs.

Fourth Quarter

Revenues for the 3 months ended December 31, 2008 were $10.6 million, an increase of $3.4 million, or 46.3% over the same period in the prior year. The increase over the same period in the prior year is due to a $1.5 million increase in revenues attributable to the inclusion of a full quarter of StrataGen's financial results. The balance of the increase in revenue of $1.9 million is attributable to an increase in the Company's enterprise Taxi business in Europe. Revenue increased by $3.0 million or 39.4% from the previous quarter ending September 30, 2008, due to an increase in the delivery and implementation of systems in the Taxi division and an increase in the revenues in the Transit division as the divisions closed and delivered a number of significant sales in the quarter.

Gross margin for the quarter ended December 31, 2008 was $5.1 million representing an increase of 60.7% from $3.2 million for the fourth quarter of 2007 and a 45.7% increase from the $3.5 million reported for the three months ended September 30, 2008. The change in gross margin from prior periods is directly related to increase in revenues for the three months ended December 31, 2008, as the taxi and transit divisions closed and delivered significant business in the current quarter.

Operating expenses for the three months ended December 31, 2008 totaled $4.6 million compared to $4.0 million for the same period in 2007, and $4.0 million for the three months ended September 30, 2008. The increase over the three months ended December 31, 2007 of $0.5 million is attributed to the addition of the operations of MobiSoft and StrataGen (increase of $1.0 million), offset by a decrease in operating expenses from the Company's other operations achieved through an increase in staff utilization on revenue producing projects, and the rationalization of operating functions in the process of integrating the acquired entities. The increase in operating expenses from Q3 of 2008 is attributable to an increase in bad debts expense of approximately $561,000 in the current quarter as a result of higher provisions for uncollectable accounts.

Other expense for the three months ended December 31, 2008 decreased to $35,000 from $0.5 million in the same period in the prior year, and from $0.1 million in the three months ended September 30, 2008. The decrease is primarily related to a $0.9 million foreign exchange gain recognized in the three months ended December 31, 2008 which largely offset the amortization and stock compensation expense in other income. By comparison the same quarter in the prior year and the prior quarter both reflected a foreign exchange gain of $0.1 million.

Net income after tax for the three months ended December 31, 2008 was $0.5 million or $0.04 earnings per share ("EPS") compared with $(1.0) million net loss after tax or $(0.08) loss per share ("LPS") for the same period in the prior year.

EBITDAS (was $1.5 million for the three months ended December 31, 2008 compared to a loss of $(0.6) million for the same period ended in the prior year and a loss of $(0.2) million for the previous quarter.

Outlook

Based on the Company's current outstanding customer orders and anticipated future sales opportunities, the Company projects total revenues for the year ending December 31, 2009 to be in the $35 million to $36 million range and to have positive earnings before interest, stock compensation, taxes, foreign exchange, and amortization for the year ending December 31, 2009. Actual revenues may vary significantly from guidance given current economic conditions, foreign exchange and other factors. We also expect a softer first quarter based on historical trends.

Conference Call

The Company will host a conference call at 5:00 PM EDT (2:00 PM PDT) on March 17, 2009, to discuss the financial results. Please call 416-340-2216 or 866-226-1792 to participate in the call. A replay of this conference call will be available until March 26, 2009, by dialing 416-695-5800 or 800-408-3053 and entering access code 3754607.

Forward-Looking Statements

This press release contains statements which, to the extent that they are not recitations of historical fact, may constitute forward-looking information. Factors that could cause actual events or results to differ materially from those suggested by these forward-looking statements include, but are not limited to: the ability to successfully integrate Mobisoft Oy and StrataGen Systems Inc. the need to develop, integrate and deploy applications to meet our customer's requirements; the possibility of development or deployment difficulties or delays; the dependence on our customer's satisfaction with DDS Wireless' products; the timing of entering into significant contracts; our customers' continued commitment to the deployment of our solutions; the risks involved in developing integrated software and hardware solutions and integrating them with third-party communication and other services; the performance of the global economy and growth in software industry sales; market acceptance of the Company's products and services; customer and industry analyst perception of the Company and its technology vision and future prospects; the success of certain business combinations engaged in by the Company or by its competitors; political unrest or acts of war; possible disruptive effects of organizational or personnel changes; technological change, new products and standards; risks related to acquisitions and international expansion; reliance on large customers; concentration of sales; international operations and sales; management of growth and expansion; dependence upon key personnel and hiring; reliance on a limited number of suppliers; industry growth; competition; intellectual property; product defects and product liability; currency exchange rate risk; concentration of ownership; and including but not limited to other factors described in DDS Wireless' reports filed on Sedar, including its Annual Information Form and financial report for the year ended December 31, 2008.
In drawing a conclusion or making a forecast or projection set out in the forward-looking information, the Company takes into account the following material factors and assumptions in addition to the above factors: the Company's ability to execute on its business plan; the acceptance of the Company's products and services by its customers; the timing of execution of outstanding or potential customer contracts by the Company; the sales opportunities available to the Company; the Company's subjective assessment of the likelihood of success of a sales lead or opportunity; the Company's historic ability to generate sales leads or opportunities; and that sales will be completed at or above the Company's estimated margins. This list is not exhaustive of the factors that may affect our forward-looking information. These and other factors should be considered carefully and readers should not place undue reliance on such forward-looking information. All forward-looking statements made in this press release are qualified by this cautionary statement and there can be no assurance that actual results or developments anticipated by the Company will be realized. The Company disclaims any intention or obligation to update or revise forward-looking information, whether as a result of new information, future events or otherwise.

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 four businesses dedicated for Transit, Taxi, Limousines and Work Truck, and Wireless Devices and Communication Infrastructure. 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



DDS WIRELESS INTERNATIONAL INC.
Consolidated Balance Sheets
December 31, 2008 and 2007
(unaudited)
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2008 2007
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Assets
Current assets:
Cash $ - $ 1,075,203
Accounts receivable, net 6,943,023 7,473,503
Unbilled receivables 3,241,843 3,326,299
Income taxes receivable 86,491 147,601
Future income taxes 19,253 76,100
Inventories 2,165,696 2,917,686
Prepaid expenses 831,404 620,444
Current portion of leases receivable 501,484 475,377
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13,789,194 16,112,213

Plant and equipment 3,938,256 2,660,921
Investment 102,565 -
Long-term leases receivable 1,926,872 1,784,818
Future income taxes 4,970,208 3,933,562
Acquired intangibles 9,407,286 11,011,000
Goodwill 3,533,201 3,329,000
--------------------------------------------------------------------------
37,667,582 38,831,514
--------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Bank overdraft 62,748 -
Lines of credit 1,401,431 1,255,954
Acquisition purchase price payable 763,243 4,097,802
Accounts payable and accrued liabilities 5,093,321 4,527,892
Future income taxes 695,336 820,761
Deferred revenue 1,883,984 1,459,894
Deferred gain - 143,308
Current portion of long-term debt 313,666 144,193
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10,213,729 12,449,804

Long-term debt 287,187 506,053
Future income taxes 762,667 1,139,849
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11,263,583 14,095,706
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Shareholders' equity:
Share capital 24,608,226 22,836,687
Contributed surplus 814,459 660,231
Retained earnings 628,936 2,106,161
Accumulated other comprehensive income (loss) 352,378 (867,271)
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26,403,999 24,735,808
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$ 37,667,582 $ 38,831,514
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DDS WIRELESS INTERNATIONAL INC.
Consolidated Statements of Operations
(unaudited)
-------------------------------------------------------------------------
Three months ended Year Ended
December 31, December 31,
2008 2007 2008 2007
-------------------------------------------------------------------------

Revenue $ 10,647,671 $ 7,278,156 $ 33,500,429 $ 20,558,808
Cost of sales 5,551,808 4,108,846 17,755,960 10,632,456
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5,095,863 3,169,310 15,744,469 9,926,352

Operations
expenses:
Research and
development 1,402,396 1,581,036 5,954,392 4,427,919
Sales and
marketing 1,062,384 972,908 4,140,100 3,842,412
General and
administrative 2,105,388 1,417,994 6,066,780 3,594,839
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4,570,168 3,971,938 16,161,272 11,865,170
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Earnings (loss)
before under
noted 525,695 (802,628) (416,803) (1,938,818)

Other (income)
expense:
Amortization of
plant and equipment 125,181 92,235 476,481 313,583
Amortization of
acquired
intangibles 673,623 448,000 2,408,375 448,000
Foreign exchange
(gain) loss (873,825) (85,612) (1,120,966) 1,740,009
Stock compensation 96,704 57,162 154,228 282,162
Other 13,206 (37,485) (70,843) (169,280)
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34,889 474,300 1,847,275 2,614,474
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Earnings (loss)
before income
taxes 490,806 (1,276,928) (2,264,078) (4,553,292)

Income taxes
provision
(recovery)
Current (546,217) 674,703 67,542 265,120
Future 501,385 (952,705) (854,395) (1,457,143)
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(44,832) (278,002) (786,853) (1,192,023)
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Net earnings (loss) 535,638 (998,926) (1,477,225) (3,361,269)
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Earnings (loss) per
common share:
Basic and
diluted $ 0.04 $ (0.08) $ (0.11) $ (0.28)
Weighted average
number of shares
outstanding 13,789,746 13,143,191 13,635,212 12,185,829
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DDS WIRELESS INTERNATIONAL INC.
Consolidated Statements of Comprehensive loss
Years ended December 31, 2008 and 2007
(unaudited)
--------------------------------------------------------------------------
2008 2007
--------------------------------------------------------------------------

Net loss $ (1,477,225) $ (3,361,269)

Other Comprehensive Income
Unrealized gain on translation of self-
sustaining foreign operations, net of
income taxes of $144,488 1,219,649 29,343

--------------------------------------------------------------------------
Comprehensive loss $ (257,576) $ (3,331,926)
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Consolidated Statements of Changes in
Retained Earnings and Accumulated Other
Comprehensive Income (loss)
Years ended December 31, 2008 and 2007
--------------------------------------------------------------------------
2008 2007
--------------------------------------------------------------------------

Retained Earnings
Beginning of year $ 2,106,161 $ 5,467,430

Net loss (1,477,225) (3,361,269)
--------------------------------------------------------------------------
628,936 2,106,161
--------------------------------------------------------------------------

Accumulated Other Comprehensive Income
(Loss) on translation of Self-sustaining
Foreign Operations

Beginning of year (867,271) (896,614)

Net unrealized gain on translation of
self-sustaining foreign operations in the
year net of income taxes of $144,488 1,219,649 29,343
--------------------------------------------------------------------------
352,378 (867,271)
--------------------------------------------------------------------------

Total Retained Earnings and Accumulated
Other Comprehensive Loss $ 981,314 $ 1,238,890
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DDS WIRELESS INTERNATIONAL INC.
Consolidated Statements of Cash Flows
Years ended December 31, 2008 and 2007
(unaudited)
--------------------------------------------------------------------------
2008 2007
--------------------------------------------------------------------------

Cash (used in) provided by:

Operations:
Net (loss) earnings $ (1,477,225) $ (3,361,269)
Items not involving cash:
Amortization of plant and equipment 1,102,821 391,802
Amortization of acquired intangibles 2,408,375 448,000
Future income taxes (854,395) (1,020,197)
Investment tax credits included in
research and development (772,499) (436,946)
Unrealized foreign exchange gain 99,987 -
Amortization of gain on disposition property (143,308) (191,076)
Stock compensation 154,228 282,162
Accretion of interest - 3,000
--------------------------------------------------------------------------
517,984 (3,884,524)

Change in non-cash operating working capital 1,641,215 608,194
--------------------------------------------------------------------------
2,159,199 (3,276,330)

Investing:
Maturity of short-term investments - 4,381,016
Purchase of plant and equipment (2,285,037) (2,393,543)
Purchase of investment (25,275) -
Acquisitions, net of cash acquired (1,304,439) (6,662,080)
Repayments of lease receivables 347,735 1,054,154
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(3,267,016) (3,620,453)

Financing:
(Payments) Drawings on long-term debt (175,611) 3,246
Drawings on bank overdraft 62,748 -
Drawings on line of credit 145,477 1,255,954
--------------------------------------------------------------------------
32,614 1,259,200

Decrease in cash and cash equivalents (1,075,203) (5,637,583)

Cash and cash equivalents, beginning of year 1,075,203 6,712,786
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Cash and cash equivalents, end of year $ - $ 1,075,203
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