IRD Announces Third Quarter 2016 Results and Launch of Innovative New Product

SASKATOON, SASKATCHEWAN--(Marketwired - Oct. 13, 2016) - International Road Dynamics Inc. (TSX:IRD), one of the world's leading providers of systems and solutions for the global Intelligent Transportation Systems (ITS) market, today announced solid financial results for the three and nine months ended August 31, 2016.

NINE MONTHS FISCAL 2016 HIGHLIGHTS:

• Revenues up 16.0% to $48.4 million on growth in key North American markets
• Solid increase in gross margin to 32.5%
• EBITDA rises 18.8% to $3.8 million
• Net earnings increase 27.5% to $2.2 million or $0.15 per common share
• Solid financial position with working capital of $13.3 million
• Innovative new VectorSense® product line launched
• Outlook for continued growth with strong confirmed order backlog and near-term business opportunities

"Our strong operating performance continued in the third quarter, underpinned by a significant increase in gross margin and further growth in our solid base of recurring service and maintenance revenues," commented Terry Bergan, President and CEO. "Looking ahead, we continue to believe fiscal 2016 will be another year of record revenues and net earnings as we continue to leverage our strong presence in the growing global ITS market."

"With our improved profitability and cash flow, we increased our focus on development projects to enhance our current product lines and introduce new solutions to our customers," Mr. Bergan continued. "A key new innovative product is our recently launched VectorSense® Tire Sensor Suite and the related Vehicle Information-In-Motion™ (VI²M™) Traffic Data Collection system. We are confident these advanced, leading-edge ITS solutions will meet the needs of our customers for the enhanced data necessary for improved tolling, increased road safety and more informed decisions on infrastructure spending."

VectorSense® and VI²M™ were developed to meet the needs of highway and roadway authorities to provide previously unavailable traffic and vehicle data. This includes tire width and axle configuration including identification of single, dual and new super-single tires being used on large trucks, enhanced vehicle and truck identification, bicycle lane traffic, vehicle lane position and safety information such as under-inflated tires. This data is collected while vehicles travel at highway speed. More information on VectorSense® and VI²M™ can be found at http://www.irdinc.com/pcategory/axle-sensors--accessories/vectorsense-sensor-suite.html.

SOLID OPERATING PERFORMANCE

For the three and nine months ended August 31, 2016, consolidated revenue increased 0.9% and 16.0%, respectively, compared to the same prior year periods, reflecting the Company's continued ability to complete an increasing number of contracted projects and service contracts and improve year to date product sales. Changes in the value of the U.S. dollar compared to the prior year increased consolidated revenues by approximately $2.6 million for the first nine months of fiscal 2016.

Revenue in the Company's Canada and United States segment for the three and nine months ended August 31, 2016 increased 5.7% and 24.8%, respectively, compared to the same prior year periods primarily due to an increase in contracted project and service revenues. The Company believes revenues in this segment will increase for the full fiscal 2016 year compared to the prior year based on current backlog levels and identified near-term business opportunities.

Latin America and Mexico segment revenue declined for the three and nine months ended August 31, 2016 compared to the same respective prior-year periods due primarily to delays in scheduled delivery requirements on current projects. Gross margin as a percentage of revenue for the three and nine months ended August 31, 2016 increased significantly to 61.9% and 42.6% due primarily to a high margin product sale realized in the third quarter. Management believes revenues for the full fiscal 2016 year in this segment will increase to fiscal 2015 levels due to the completion of existing projects and potential identified near-term contract opportunities.

The decline in India segment revenue reflects the Company's decision to reduce the level of business activity in this region. The Company remains committed to only accepting new business in this market with acceptable profitability and payment terms.

Gross margin for the three and nine months ended August 31, 2016 increased by 30.0% and 24.7%, respectively, compared to the same respective prior-year periods due primarily to the higher sales volumes. As a percentage of revenue, gross margin for the three and nine months ended August 31, 2016 increased to 35.4% and 32.5%, respectively, from 27.5% and 30.2% in the same periods last year, primarily due to an improved product mix and increased margins on specific project activities.

Administrative and marketing expenses for the first nine months of fiscal 2016 are largely consistent with the prior year. R&D costs increased as the Company continues to allocate resources to accelerate near term business opportunities and to advance the development and introduction of new products to its markets such as VectorSense® and VI²M™.

Earnings before interest, income taxes, depreciation and amortization (EBITDA), including gains or losses from foreign exchange and derivatives and earnings or losses from the Company's equity accounted investment were $2.2 million in the third quarter of fiscal 2016, consistent with the prior year's third quarter, For the nine months ended August 31, 2016 EBITDA rose to $3.8 million from $3.2 million in fiscal 2015.

The Company recorded foreign exchange losses in the third quarter and first nine months of fiscal 2016 reflecting the year to date decline in the value of the U.S. dollar relative to the Canadian dollar and Chilean peso, which resulted in a reduction in the carrying value of U.S. dollar net assets. In addition, the Company recorded a loss on outstanding U.S. dollar forward sales contracts and a decrease in accrued embedded derivative gains related to the realization of U.S. revenues on open contracts within its Chilean and Mexican subsidiaries. The Company partially reduces its exposure to U.S. currency volatility by maintaining a portion of its bank indebtedness in U.S. funds and by hedging a portion of its future U.S. dollar cash flows.

The Company owns a 50% joint venture interest in Xuzhou-PAT Control Technologies Limited (XPCT), an ITS products and manufacturing service provider in China, and reported equity earnings of $189,858 for the first nine months of fiscal 2016 compared to $473,198 in the prior year-to-date. Fiscal 2015 year-to-date earnings at XPCT included a $167,577 after-tax gain on the sale of land and a building.

Net earnings in the third quarter of fiscal 2016 were $1.4 million or $0.10 per common share compared to $1.5 million or $0.10 per common share in the prior year. For the first nine months of fiscal 2016 net earnings increased 27.5% to $2.2 million or $0.15 per common share compared to $1.8 million or $0.12 per common share in the prior year.

The Company generated cash from operations of $2.4 million through the nine months ended August 31, 2016 compared to a use of funds of $1.3 million in the prior year. Working capital increased to $13.3 million compared to $11.3 million at November 30, 2015.

Financial Highlights (financial statements are available on the Company's web site at www.irdinc.com)

		Three Months Ended								Nine Months Ended
		August 31,				August 31,				August 31,				August 31,
		2016				2015				2016				2015
(in $000's except per share amounts)		$				$				$
Revenue		18,256				18,086				48,439				41,746
Gross margin		6,462				4,970				15,752				12,628
Gross margin percentage of revenue (%)		35.4	%			27.5	%			32.5	%			30.2	%
Net earnings		1,410				1,458				2,235				1,752
Earnings per common share, basic		0.10				0.10				0.15				0.12
Earnings per common share, diluted		0.09				0.10				0.15				0.12
EBITDA		2,176				2,188				3,808				3,206
Working capital										13,278				10,548
Common shares outstanding										14,765				14,276
Shareholders' equity per share										1.68				1.53

This news release contains forward-looking statements about the Company, including its business operations, strategy and expected financial performance and conditions. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or contain words such as "expects", "anticipates", "plans", "believes", "estimates", "intends", "forecasts", or negative versions thereof and other similar expressions, or future or conditional future financial performance, on-going business strategies or prospects, and possible future action by the Company. Forward looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company, the general economic environment and ITS industry, business conditions in all geographic areas where the Company carries on business, interest and foreign exchange rates, changes in accounting policies and methods used to report financial condition, including uncertainties associated with critical accounting assumptions and estimates, the effect of applying future accounting changes, business competition, technological changes, changes in government regulation and legislation, changes in tax laws, unexpected judicial or regulatory proceedings, catastrophic events, and the Company's success in managing the foregoing risks. Readers are cautioned, to consider these and other factors carefully and not place undue reliance on forward-looking statements. Forward-looking information contained in this news release is based on management's current estimates, expectations and projections, which management believes are reasonable as of October 12, 2016. However, actual future operating results and economic performance could differ materially from what is currently expected. While the Company may elect to, it is under no obligation and does not undertake to update any forward-looking statements at any particular time, unless required by applicable securities law. Additional information on the Company, including our most recently filed Annual Information Form can be found on SEDAR at www.sedar.com.

As used herein, "EBITDA" means earnings before interest, income taxes, depreciation and amortization, and includes gains or losses from foreign exchange and derivatives and earnings or losses from the Company's equity investments. EBITDA is not a recognized measure under International Financial Reporting Standards ("IFRS"). Management believes that EBITDA is a useful supplemental measure to net earnings, as it provides investors with an indication of operating performance prior to debt service, capital expenditures and income taxes. Investors should be cautioned, however, that EBITDA should not be construed as an alternative to net earnings determined in accordance with IFRS as an indicator of the Company's performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. The Company's method of calculating EBITDA may differ from the methods by which other companies calculate EBITDA and, accordingly, EBITDA may not be comparable to measures used by other companies.

Additionally, as used herein, 'Shareholders' equity per share' means total shareholders' equity divided by the number of shares outstanding as at the reporting date. Shareholders' equity per share is not a recognized measure under IFRS however, management believes it is an important metric that shareholders use as an indicator of the Company's value relative to its stock price. The Company's method of calculating Shareholders' equity per share may differ from methods used by other companies and, accordingly, it may not be comparable to measures used by other companies.

IRD is a highway traffic management technology company specializing in supplying products and systems to the global Intelligent Transportation Systems (ITS) industry. IRD is a North American company based in Saskatoon, Saskatchewan Canada with sales and service offices throughout the United States and overseas. Private corporations, transportation agencies and highway authorities around the world use IRD's products and advanced systems to manage and protect their highway infrastructures.

The Company's shares trade on the Toronto Stock Exchange under the symbol IRD.