Digital Dispatch Systems Inc.
TSX : DD

Digital Dispatch Systems Inc.

August 04, 2005 08:00 ET

Digital Dispatch Q2 Revenue up 19 Percent Over Q1

RICHMOND, BRITISH COLUMBIA--(CCNMatthews - Aug. 4, 2005) - Digital Dispatch Systems Inc. (TSX:DD) has continued its trend of revenue recovery in the second quarter of 2005 with revenues of $6.7 million, compared to $5.6 million in Q1 of 2005 and $4.8 million in Q4 of 2004. The Company's gross margin for the quarter is 51.4 percent, compared to 48.2 percent in Q1 of 2005 and 42.9 percent in Q4 of 2004. Earnings per share rose to $0.04 cents, compared to $0.01 cent in Q1 of 2005 and a loss of $(0.03) in Q4 of 2004.

"We are very encouraged by the continuing recovery of our revenue and gross margins, particularly since the indications are that we are returning to our traditional pattern of seeing proportionately higher revenue as the year progresses," said Bruce Watson, Chief Financial Officer for Digital Dispatch. "This is a positive indicator going forward, since the predictability of our operating costs means that an increasing proportion of revenue flows to the bottom line as our revenue rises."

The Company finished the quarter with $20.0 million of cash and short-term investments, compared to $21.1 million at December 31, 2004. The change is primarily attributable to the Company's normal course issuer bid, under which 311,800 shares of the company were repurchased and cancelled during the period for aggregate proceeds of $1.0 million. The Company now has 12.8 million shares outstanding.

For a more detailed analysis, please refer to Management's Discussion and Analysis of Financial Conditions and Results of Operations, which is available on the Company website (www.digital-dispatch.com) and which will be filed on SEDAR.

Outlook

Based on current foreign exchange rates, the Company is reaffirming its 2005 revenue guidance in the range of $28 to $30 million, with the larger portion in the second half of the year.

Forward-Looking Statement

This press release contains "forward-looking statements". All statements and other information contained in this press release relative to markets for the Company's services and products and trends in revenue, gross margin, backlog and anticipated expense levels, as well as other statements about anticipated future events or results constitute forward-looking statements. Forward-looking statements are subject to business and economic risks and uncertainties and other factors, including without limitation the risk factors described in the Company's Annual Information Form, that could cause actual results of operations to differ materially from those contained in the forward-looking statements. Forward-looking statements are based on estimates and opinions of management at the date the statements are made. Consequently, 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 Corporation will be realized. Digital Dispatch disclaims any obligation or intention to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

About Digital Dispatch

Digital Dispatch Systems Inc. is a worldwide provider of mobile data solutions for fleet and mobile workforce management. Founded in 1987, we have an installed base of more than 61,000 wireless mobile data devices and 174 wireless data systems in 31 countries. We offer products and services to manage vehicle fleets and mobile workforces, including dispatch software, wireless communication infrastructure and a range of in-vehicle mobile devices.

Visit www.digital-dispatch.com for more information.



DIGITAL DISPATCH SYSTEMS INC.
Consolidated Balance Sheets

--------------------------------------------------------------------
June 30, December 31,
2005 2004
(Unaudited) (Audited)
--------------------------------------------------------------------

Assets

Current assets:
Cash and cash equivalents $ 8,886,049 $ 9,526,377
Short-term investments 11,153,357 11,585,367
Accounts receivable 4,505,774 4,837,227
Unbilled receivables 3,505,844 2,113,027
Investment tax credits recoverable 1,178,349 1,040,599
Future income taxes recoverable 629,469 780,260
Inventories 3,099,109 3,958,482
Prepaid expenses 580,714 512,615
Current portion of leases receivable 543,986 1,074,218
--------------------------------------------------------------------
34,082,651 35,428,172

Capital assets 531,454 580,003

Investment tax credits recoverable 1,100,600 1,040,600

Future income taxes recoverable 304,083 304,083

Long term leases receivable 1,335,965 1,183,286
--------------------------------------------------------------------

$ 37,354,753 $ 38,536,144
--------------------------------------------------------------------
--------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued
liabilities $ 2,322,161 $ 1,953,140
Deferred revenue 1,046,884 2,031,203
Deferred gain 191,076 191,076
Current income tax payable 864,853 848,100
Current portion future income
taxes payable 47,893 47,893
--------------------------------------------------------------------
4,472,867 5,071,412

Long-term portion of deferred gain 429,922 525,460

Future income taxes payable 776,089 776,089

Shareholders' equity:
Share capital 21,380,404 21,899,862
Contributed surplus 141,079 50,013
Retained earnings 10,553,578 10,496,581
Cumulative translation adjustments (399,186) (283,273)
--------------------------------------------------------------------
31,675,875 32,163,183
--------------------------------------------------------------------

$ 37,354,753 $ 38,536,144
--------------------------------------------------------------------
--------------------------------------------------------------------

Approved on behalf of the Board

"Vari Ghai" "Erik Dysthe"
----------- -------------
Director Director


DIGITAL DISPATCH SYSTEMS INC.
Consolidated Statements of Operations and Retained Earnings

---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2005 2004 2005 2004
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------------------------------------------------------------------

Revenue $ 6,701,002 $ 7,323,856 $ 12,328,089 $ 13,576,718
Cost of sales 3,255,546 3,655,315 6,173,073 6,773,943
---------------------------------------------------------------------
3,445,456 3,668,541 6,155,016 6,802,775

Operations
expenses:
Research and
development 1,019,756 965,283 2,096,419 2,056,985
Sales and
marketing 898,766 738,662 1,653,588 1,429,664
General and
administrative 720,513 720,746 1,444,809 1,438,438
Other operations
expenses 23,995 34,248 23,995 34,248
---------------------------------------------------------------------
2,663,030 2,458,939 5,218,811 4,959,335
---------------------------------------------------------------------

Earnings before
undernoted 782,426 1,209,602 936,205 1,843,440

Other (income)
expense:
Amortization of
capital assets 68,332 86,699 143,900 177,028
Foreign exchange 60,908 (162,127) 9,781 (448,501)
Other (47,222) (85,183) (89,930) (236,410)
Stock
compensation 46,066 50,229 91,066 50,229
---------------------------------------------------------------------
128,084 (110,382) 154,817 (457,654)
---------------------------------------------------------------------

Earnings before
income taxes 654,342 1,319,984 781,388 2,301,094

Income taxes
Current 24,907 320,926 106,157 466,320
Future 167,755 155,471 130,097 369,501
---------------------------------------------------------------------
192,662 476,397 236,254 835,821
---------------------------------------------------------------------

Net earnings 461,680 843,587 545,134 1,465,273

Retained earnings,
beginning of
period 10,580,035 11,029,767 10,496,581 10,408,081
Stock repurchase (488,137) - (488,137) -
---------------------------------------------------------------------

Retained earnings,
end of period $ 10,553,578 $11,873,354 $10,553,578 $ 11,873,354
---------------------------------------------------------------------
---------------------------------------------------------------------

Earnings per
common share
Basic $ 0.04 $ 0.06 $ 0.04 $ 0.11
Diluted $ 0.04 $ 0.06 $ 0.04 $ 0.11
---------------------------------------------------------------------


DIGITAL DISPATCH SYSTEMS INC.
Consolidated Statements of Cash Flows

---------------------------------------------------------------------
---------------------------------------------------------------------
Three months ended Six months ended
June 30, June 30,
2005 2004 2005 2004
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------------------------------------------------------------------

Cash provided by
(used in):

Operations:
Net earnings $ 461,680 $ 843,587 $ 545,134 $ 1,465,273
Items not
involving cash:
Amortization 78,253 86,700 153,821 177,028
Sales lease - 267,536 - 267,536
Future income
taxes 159,568 19,053 164,338 201,424
Amortization of
gain on
disposition
of land
and building (47,769) (47,769) (95,538) (95,538)
Stock
compensation 46,066 50,229 91,066 50,229
---------------------------------------------------------------------
697,798 1,219,336 858,821 2,065,952

Change in non-
cash operating
working capital (790,217) (1,503,313) (1,261,304) 1,896,204
---------------------------------------------------------------------
(92,419) (283,977) (402,483) 3,962,156

Investments:
Increase in
short-term
investments (6,994,197) (2,099,322) 404,162 (2,489,340)
Purchase of
capital assets (76,547) (48,351) (110,208) (85,419)
Repayments on
leases receivable (6,495) 304,845 386,074 653,247
---------------------------------------------------------------------
(7,077,239) (1,842,828) 680,028 (1,921,512)
Financing:
Common shares
reacquired and
cancelled (1,007,596) - (1,007,596) -
Deferred
financing costs - - - 422,629
Issue of common
shares for cash - - - 14,000
Warrants issued
for cash - - - 15,164,453
---------------------------------------------------------------------
(1,007,596) - (1,007,596) 15,601,082
Effect of foreign
currency exchange
rates on cash and
cash equivalents 113,797 87,218 89,723 67,996
---------------------------------------------------------------------

Increase (decrease)
in cash and cash
equivalents (8,063,457) (2,039,587) (640,328) 17,709,722

Cash and cash
equivalents,
beginning of
period 16,949,506 21,416,668 9,526,377 1,667,359
---------------------------------------------------------------------

Cash and cash
equivalents,
end of period $ 8,886,049 $ 19,377,081 $ 8,886,049 $ 19,377,081
---------------------------------------------------------------------
---------------------------------------------------------------------


The Toronto Stock Exchange has neither approved nor disapproved the contents of this press release.

Contact Information