International Datacasting Corporation

TSX : IDC


International Datacasting Corporation

December 10, 2013 17:00 ET

International Datacasting Corporation Announces Third Quarter Fiscal 2014 Results

OTTAWA, ONTARIO--(Marketwired - Dec. 10, 2013) - International Datacasting Corporation ("IDC") (TSX:IDC), a global leader in digital content distribution solutions for the world's premiere broadcasters, announced its financial results today for the first nine months and third quarter ended October 31, 2013. All amounts in this release are in Canadian dollars unless otherwise stated.

Financial Highlights:
(in thousands, except for gross margin (GM) and loss per share)
Three months ending October 31, Nine months ending October 31,
2013 2012 2013 2012
Revenues (1) GM GM GM GM
Products$ 1,490 24%$6,00543%$9,091 44%$13,78943%
Services 1,043 46% 1,03953% 3,323 48% 3,28545%
Systems Project - 67(11%) 340 40% 6,01221%
Total revenues$ 2,533 $7,111 $12,754 $23,086
Gross profit$ 839 33%$3,10544%$5,752 45%$8,72738%
Operating expenses$ 3,140 $2,552 $8,537 $8,660
Adjusted EBITDA (Loss) (2)$ (2,184) $782 $(2,342) $1,371
Net income (loss)$ (2,259) $543 $(2,770) $31
Net income (loss) per share$(0.04) $0.01 $(0.05) $0.00
(1) The breakdown of revenues is based on revised operating segments.
(2) Adjusted EBITDA is a non-GAAP financial measure. The reconciliation of Adjusted EBITDA to Net Loss is provided at the end of this release.

For the third quarter of Fiscal 2014, total revenues were $2.5 million, a decrease of 64% or $4.6 million from the prior period. The total gross margin for the quarter declined to 33% from 44% for the comparable prior period, primarily due to a lower volume of sales to cover current manufacturing-related overhead costs.

For the first three quarters of Fiscal 2014, total revenues were $12.8 million, compared to $23.1 million for the same period in Fiscal 2013. The decrease of $10.3 million or 45% was driven substantially by lower sales within the Systems Project segment as a result of the completion of the Direct-to-Home Broadcasting project in Kenya and from lower Products revenue across all product lines. Total gross profit declined by $3.0 million in the first three quarters of Fiscal 2014 compared to the same period in Fiscal 2013. Gross margins improved largely due to a change in business mix, as the Products and Services segments generated higher margins than the completed Systems Project.

Commenting on the results, Doug Lowther, IDC's President and CEO stated, "While our run-rate business remained on par for the quarter, our failure to close major deals in the quarter resulted in lower than expected revenues. As a result, we took steps to improve our market coverage, and have completed a top-down review of our product portfolio, market positioning and actions to improve performance. We remain committed to growing our business and to building a world class company."

Operating expenses increased $0.6 million or 23% to $3.1 million in the current quarter primarily due to higher marketing costs and increased research and development expenses. For the nine month period ended October 31, 2013, operating expenses decreased $0.1 million or 1% to $8.5 million largely due to non-recurring general and administration expenses incurred in the second quarter of FY 2013 relating to the dissident shareholder proxy contest and the failed acquisition transaction.

IDC incurred a net loss of $2.2 million for the third quarter and $2.8 million for the first three quarters of Fiscal 2014, compared to net income of $0.5 million and breakeven for the same prior periods, respectively. At October 31, 2013, IDC's working capital ratio was 3.3 to 1, and the Company had liquid assets of $4.1 million.

"As previously announced, IDC has made significant organizational changes in order to strengthen its leadership team," added Lowther. "These changes, along with IDC's strategic review and resulting action plans are intended to improve performance, reduce costs and maximize working capital."

For further information on IDC's third quarter results, refer to the unaudited interim condensed consolidated financial statements and Management's Discussion and Analysis that will be available on SEDAR (www.sedar.com) after the Toronto Stock Exchange closes on December 10, 2013.

Financial Summary and Conference Call

This announcement will be followed by a Management conference call at 8:30 a.m. ET on Wednesday, December 11, 2013, to discuss the results, and to respond to questions from investors.

Mr. Doug Lowther, President and CEO of IDC, cordially invites all interested parties to participate in the conference call.

CONFERENCE CALL DETAILS:

CONFERENCE DATE: Wednesday, December 11, 2013

CONFERENCE TIME: 8:30 a.m. ET

DIAL-IN NUMBERS: 613-233-1979 / 888-789-9572

PARTICIPANT CODE: 6142941

WEBCAST: A live audio webcast of the conference call will be available at the following link: http://www.gowebcasting.com/5135. This webcast will be archived here for 365 days. Please connect to the website at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be needed to access the webcast.

About International Datacasting Corporation:

International Datacasting Corporation (TSX:IDC) is a global leader in digital content distribution for the world's premiere broadcasters in radio, television, data and digital cinema. IDC offers a broad portfolio of advanced solutions including the STAR Pro Audio™ Solution, LASER™ Targeted Ad Insertion Platform, and the Digital Tattoo™ DTH Over IP Gateway. IDC's products and solutions are in demand for radio and television networks, targeted ad insertion, digital cinema, 3D live events, satellite news gathering, sports contribution, VOD, and IPTV. IDC is headquartered in Ottawa, Canada, with regional offices in Arnhem, the Netherlands and in San Diego, California. The company has installations in over 100 countries and service offices in Thailand and Singapore, and an international network of value-added partners and resellers.

For more information visit: www.datacast.com.

Forward-Looking Statements:

This press release contains certain information that may constitute "forward-looking information" and/or "forward-looking statements" within the meaning of applicable Canadian securities laws. All forward-looking information and forward-looking statements are necessarily based on a number of estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies. All statements other than statements which are reporting results as well as statements of historical fact are forward-looking statements that may involve a number of known and unknown risks, uncertainties and other factors; many of which are beyond the ability of IDC to control or predict.

Forward-looking statements are generally identifiable by use of the words "may", "will", "should", "continue", "expect", "anticipate", "estimate", "believe", "intend", "plan or "project" or the negative of these words or other variations on these words or comparable terminology. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Risks and uncertainties that might cause actual results to differ materially include, but are not limited to: competitive developments; risks associated with IDC's growth; expectations regarding new product initiatives and timing, including the STAR Pro Audio™ Solution, LASER™ Targeted Ad Insertion Platform and Digital Tattoo™ DTH Over IP Gateway; any difficulties with integrating acquired product lines into IDC's business and/or manufacturing procedures; any difficulties or disputes with IDC's subcontractors, contract manufacturers and suppliers; IDC's dependence on the development and growth of the satellite services market; a lengthy and variable sales cycle for IDC's products and services; IDC's reliance on a small number of customers for a large percentage of its revenue; expectations with respect to the sufficiency of its financial resources and liquidity; regulatory risks and intellectual property infringement.

More detailed information about potential factors that could affect IDC's financial and business results is included in the public documents IDC files from time to time with Canadian securities regulatory authorities and which are available on SEDAR at www.sedar.com, including, without limitation, IDC's MD& A for the year ended January 31, 2013, dated April 29, 2013.

Except as expressly required by applicable law, we undertake no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements are provided to assist external stakeholders in understanding IDC's expectations as at the date of this release and may not be appropriate for other purposes. Readers are cautioned not to place undue reliance on such statements.

INTERNATIONAL DATACASTING CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT OCTOBER 31, 2013 and JANUARY 31, 2013
(Canadian dollars)
October 31, 2013 January 31, 2013
ASSETS
Current Assets
Cash $ 3,928,507 $ 4,943,025
Short-term investments 162,000 75,000
Available-for-sale investments - 1,986,510
Accounts receivable 3,676,961 6,145,251
Inventories 4,560,702 2,449,121
Other assets 582,304 443,519
Total Current Assets 12,910,474 16,042,426
Non-Current Assets
Other assets 17,826 28,215
Capital assets 1,024,293 1,312,544
Deferred taxes 2,800,000 2,800,000
Total Non-Current Assets 3,842,119 4,140,759
TOTAL ASSETS $ 16,752,593 $ 20,183,185
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 1,747,001 $ 1,842,762
Accrued liabilities 1,242,182 1,842,544
Customer deposits 17,444 363,936
Deferred revenue - current portion 440,256 433,480
Provisions 495,574 440,167
Current tax liability 668 19,326
Total Current Liabilities 3,943,125 4,942,215
Non-Current Liabilities
Deferred tax liability 12,237 23,063
Deferred revenue 88,719 55,277
Total Non-Current Liabilities 100,956 78,340
TOTAL LIABILITIES 4,044,081 5,020,555
Shareholders' Equity
Capital stock 23,637,259 23,406,259
Contributed surplus 3,334,876 3,263,245
Accumulated other comprehensive loss (229,729 ) (243,209 )
Accumulated deficit (14,033,894 ) (11,263,665 )
TOTAL SHAREHOLDERS' EQUITY 12,708,512 15,162,630
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 16,752,593 $ 20,183,185
INTERNATIONAL DATACASTING CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
FOR THE PERIODS ENDED OCTOBER 31, 2013 and 2012
(Canadian dollars, except for share data)
Three months ended Nine months ended
October 31, 2013 October 31, 2012 October 31, 2013 October 31, 2012
REVENUE $ 2,533,510 $ 7,111,096 $ 12,753,721 $ 23,086,247
COST OF REVENUE 1,694,467 4,006,235 7,001,286 14,359,724
GROSS PROFIT 839,043 3,104,861 5,752,435 8,726,523
OPERATING EXPENSES
Selling, general and administrative 1,946,453 1,628,968 5,243,671 5,595,347
Research and development, net of investment tax credits 1,202,367 914,360 3,323,644 3,062,304
Foreign exchange loss (gain) (9,197 ) 8,967 (30,727 ) 2,273
Total operating expenses 3,139,623 2,552,295 8,536,588 8,659,924
OPERATING INCOME (LOSS) BEFORE OTHER ITEMS (2,300,580 ) 552,566 (2,784,153 ) 66,599
Realized loss on sale of investments - - (25,344 ) (27,220 )
Investment income 11,836 2,614 46,049 47,589
Interest expense - (1,827 ) (1,182 ) (11,149 )
INCOME (LOSS) BEFORE INCOME TAXES (2,288,744 ) 553,353 (2,764,630 ) 75,819
Income tax recovery (expense):
Current 26,255 (10,782 ) (16,425 ) (18,735 )
Deferred 3,321 - 10,826 (26,283 )
NET INCOME (LOSS) $ (2,259,168 ) $ 542,571 $ (2,770,229 ) $ 30,801
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES
Change in fair value of available-for-sale investments - (3,820 ) - (3,820 )
Other comprehensive loss - (3,820 ) - (3,820 )
COMPREHENSIVE INCOME (LOSS) $ (2,259,168 ) $ 538,751 $ (2,770,229 ) $ 26,981
NET EARNINGS (LOSS) PER SHARE
Basic $ (0.04 ) $ 0.01 $ (0.05 ) $ 0.00
Diluted $ (0.04 ) $ 0.01 $ (0.05 ) $ 0.00
Weighted average number of shares outstanding - basic 58,484,642 57,502,268 58,230,796 58,082,876
Weighted average number of shares outstanding - diluted 58,484,642 57,506,101 58,230,796 58,089,327
INTERNATIONAL DATACASTING CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED OCTOBER 31, 2013 and 2012
(Canadian dollars)
Three months ended Nine months ended
October 31, 2013 October 31, 2012 October 31, 2013 October 31, 2012
OPERATING ACTIVITIES
Net loss $ (2,259,168 ) $ 542,571 $ (2,770,229 ) 30,801
Add items not requiring an outlay of cash:
Depreciation and amortization 116,675 122,739 442,007 401,229
Deferred taxes (3,321 ) 17,537 (10,826 ) 43,820
Realized loss on sale of available-for-sale investments - 111,727 25,344 27,220
Unrealized losses on derivatives 57,200 - 25,176 125,296
Stock-based compensation 48,870 21,452 71,631 42,744
(2,039,744 ) 816,026 (2,216,897 ) 671,110
Net change in non-cash working capital:
Accounts receivable 1,541,968 (250,873 ) 2,468,290 (1,449,374 )
Inventories (1,183,867 ) 547,296 (2,111,581 ) 1,313,598
Other assets 297,413 31,894 (128,396 ) 116,428
Accounts payable and accrued liabilities 28,231 3,790 (718,300 ) 355,257
Customer deposits (18,101 ) (782,773 ) (346,492 ) (508,989 )
Deferred revenue (116,742 ) 252,902 40,218 (78,104 )
Provisions 16,787 (50,937 ) 55,407 (236,619 )
Current tax liability (27,196 ) - (18,658 ) 26,283
Net cash provided by (applied to) operating activities (1,501,251 ) 567,325 (2,976,409 ) 209,590
INVESTING ACTIVITIES
Purchase of capital assets (12,055 ) (13,291 ) (153,756 ) (125,443 )
Proceeds from sale of available-for-sale investments - 2,309,580 1,974,646 2,309,580
Purchase of short-term investment (87,000 ) - (87,000 ) (75,000 )
Purchase of available-for-sale investments - (1,999,990 ) (1,999,990 )
Net cash provided by (applied to) investing activities (99,055 ) 296,299 1,733,890 109,147
FINANCING ACTIVITIES
Repayments of obligations under capital leases - (9,036 ) (2,999 ) (27,829 )
Issue of common shares, net of issue costs - - 231,000 4,481
Repurchase of common shares, net of costs - - - (16,124 )
Net cash provided by (applied to) financing activities - (9,036 ) 228,001 (39,472 )
Net increase (decrease) in cash during the period (1,600,306 ) 854,588 (1,014,518 ) 279,265
CASH - Beginning of period 5,528,813 4,313,160 4,943,025 4,914,766
CASH - End of period $ 3,928,507 $ 5,167,748 $ 3,928,507 $ 5,194,031
International Datacasting Corporation
Non-GAAP Financial Measure Reconciliation
Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
For the periods ended October 31, 2013 and 2012
(Canadian dollars)
Three months ended Nine months ended
October 31, 2013 October 31, 2012 October 31, 2013 October 31, 2012
Net income (loss) reported under IFRS $ (2,259,168 ) $ 542,571 $ (2,770,229 ) $ 30,801
Add (subtract):
Depreciation expense 116,675 122,739 442,007 401,229
Income tax expense (recovery) (29,576 ) 10,782 5,599 45,018
Interest expense - 1,827 1,182 11,149
Net investment income (11,836 ) (2,614 ) (20,705 ) (20,369 )
Dissident shareholder expense - 10,000 - 401,229
Restructuring expense - 96,377 - 287,665
Incremental external business acquisition expense - - - 213,940
Adjusted EBITDA (Loss) $ (2,183,905 ) $ 781,682 $ (2,342,146 ) $ 1,370,662

In this release, IDC has presented Adjusted EBITDA (Loss), which is a "non-GAAP financial measure" and accordingly it is not an earnings measure recognized by IFRS and does not carry standard prescribed significance.

Moreover, IDC's method for calculating Adjusted EBITDA (Loss) may differ from that used by other companies using the same designation. Accordingly, we caution readers that Adjusted EBITDA (Loss) should not be substituted for determining net income (loss) as an indicator of operating results or as a substitution for cash flows from operating and investing activities.

We believe Adjusted EBITDA (Loss) is a meaningful and useful financial metric to investors and analysts for measuring and predicting its operating performance by excluding interest expense and income, income taxes, depreciation and amortization as well as unusual and/or non-recurring charges as noted in the above table.

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