MDSI Mobile Data Solutions Inc.
NASDAQ : MDSI
TSX : MMD

MDSI Mobile Data Solutions Inc.

August 02, 2005 16:00 ET

MDSI Betters Q2 Forecast; Builds Cash for 10th Quarter in a Row, Year-To-Date Net Income Up by $0.15 per Fully Diluted Share

RICHMOND, BRITISH COLUMBIA--(CCNMatthews - Aug. 2, 2005) - In the second quarter of 2005, MDSI Mobile Data Solutions Inc. (TSX:MMD)(NASDAQ:MDSI), the leading provider of mobile workforce management solutions, recorded $12.2 million in revenue, earned $0.02 per fully diluted share and grew year-to-date earnings per fully diluted share by $0.15 over the comparable result for 2004. Since March 31, 2005, the Company has added $1.6 million to its cash balance, which has now grown for ten consecutive quarters.

Erik Dysthe, MDSI's President, Chief Executive Officer and Chairman, stated, "Revenue was roughly a half-million dollars ahead of forecast, and our gross margin was slightly better than expected. So, despite incurring higher than usual general and administrative and sales and marketing expenses in the quarter, as we had expected, we were able to beat our EPS forecast by five to six cents. This accomplishment and a strong first quarter have resulted in significant improvement in MDSI's profitability compared the first half of 2004."

In Q2 2005, MDSI recorded $12.2 million in revenue (Q2 2004: $11.8 million), of which $11.5 million pertained to software and professional services revenue and maintenance and support revenue, combined. MDSI had forecast $11 million for these two revenue sources. The improvement over forecast resulted from some unanticipated contracts from existing customers that resulted in higher than expected software and services revenue. MDSI's third party products and services revenue for Q2 2005 was $726,000 (Q2 2004: $193,000), including $504,000 of zero-margin revenue (Q2 2004: $193,000) required to be recognized on a gross basis under US GAAP. Gross margin for Q2 2005 was 57% (Q2 2004: 59%). The zero-margin revenue decreased Q2 2005 gross margin by 2% (Q2 2004: 1%).

During Q2 2005, MDSI incurred total operating expenses of $6.7 million (Q2 2004: $7.7 million). As expected, MDSI's sales and marketing expenses were higher than usual due to the Company hosting its annual user group, Mindshare, in the quarter, and due to increased efforts internationally to support the Company's strategic plan. MDSI's general and administrative expenses were also higher than usual in Q2 2005, as expected, because of higher professional fees. Operating expenses in Q2 2004 were much higher than typical as the Company incurred $1.8 million in strategic expenses during the period, while MDSI incurred no such expenses in Q2 2005.

In Q2 2005, MDSI's net income was $175,000 (Q2 2004: loss of $1.1 million), or $0.02 per fully diluted share (Q2 2004: loss of $0.13)-better than the Company's forecasted net loss of $0.03 to $0.04 per fully diluted share.

MDSI maintained a strong balance sheet during Q2 2005. The Company's cash balance grew to $22.2 million (December 31, 2004 - $19.8 million, March 31, 2005 - $20.7 million). The increase was attributable primarily to cash flows from operating activities. The company has no long-term debt.

For the six months ended June 30, 2005, MDSI's total revenue was down slightly to $23.9 million (six months ending June 30, 2004: $24.5 million) though net income was up $1.2 million to $519,000 (six months ended June 30, 2004: loss of $720,000), or $0.06 per fully diluted share (six months ending June 30, 2004: loss of $0.09).

All figures in this news release are unaudited, in US dollars and according to US GAAP. Unaudited, condensed consolidated financial statements are presented below. Information as at December 31, 2004 is derived from the 2004 audited consolidated financial statements filed in Form 10-K.

About MDSI

MDSI is the largest, most successful and experienced provider of mobile workforce management software in the world. MDSI's software improves customer service and relationships and reduces operating costs by allowing companies to manage field resources more effectively. Headquartered in Richmond, BC, Canada, MDSI was founded in 1993 and has approximately 325 employees. The company has operations and support offices in the United States, Canada, Europe and Australia. MDSI services approximately 100 customers and has licensed more than 80,000 field service users around the world. MDSI is a public company traded on the Toronto Stock Exchange (MMD) and on NASDAQ (MDSI).

This press release contains statements that constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or developments in our industry, to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from anticipated results include risks and uncertainties detailed in MDSI's most recent Annual Report on Form 10-K and quarterly report on Form 10-Q filed with the Securities and Exchange Commission. MDSI disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



MDSI Mobile Data Solutions Inc.

Condensed Consolidated Balance Sheets
(Expressed in United States Dollars, in accordance with
United States GAAP)
(Unaudited)

As at
June 30, December 31,
--------------------------------------
--------------------------------------
2005 2004
--------------------------------------

Assets
Current assets
Cash and cash equivalents $ 22,247,794 $ 19,842,920
Accounts receivable
Trade (net of allowance
for doubtful accounts of
$147,103; 2004 - $288,246) 8,345,248 10,139,104
Unbilled 1,127,451 822,323
Prepaid expenses and
other assets 721,047 1,118,143
Current deferred income
taxes 93,984 171,451
--------------------------------------

32,535,524 32,093,941

Capital assets, net 6,597,454 6,694,021
--------------------------------------

$ 39,132,978 $ 38,787,962
--------------------------------------
--------------------------------------

Liabilities and
stockholders' equity
Current liabilities
Accounts payable $ 1,144,274 $ 1,929,785
Accrued liabilities 4,914,567 3,686,527
Accrued restructuring
charges 276,341 921,052
Income taxes payable 1,277,697 1,382,017
Deferred revenue 13,052,427 12,653,199
Current obligations under
capital lease 574,030 1,073,883
--------------------------------------

21,239,336 21,646,463

Long term deferred income
taxes 44,264 43,273
--------------------------------------

21,283,600 21,689,736
--------------------------------------

Stockholders' equity
Common stock 45,025,780 44,793,898
Authorized: unlimited
common shares with no par
value
Issued: 8,407,646 shares;
December 31, 2004 -
8,353,179 shares
Additional paid-up capital 2,406,049 2,406,049
Accumulated other
comprehensive loss (690,104) (690,104)
Deficit (28,892,347) (29,411,617)
--------------------------------------

17,849,378 17,098,226
--------------------------------------
--------------------------------------

$ 39,132,978 $ 38,787,962
--------------------------------------
--------------------------------------


MDSI Mobile Data Solutions Inc.

Condensed Consolidated Statements of Operations
(Expressed in United States Dollars, in accordance with
United States GAAP)
(Unaudited)

----------------------------------------------------
----------------------------------------------------
Three months ended June 30, Six months ended June 30,
----------------------------------------------------
----------------------------------------------------
2005 2004 2005 2004
----------------------------------------------------
----------------------------------------------------

Revenue
Software and
professional
services $ 6,606,215 $ 7,250,212 $ 13,010,485 $ 14,731,926
Maintenance and
support 4,887,061 4,357,923 9,627,290 8,660,650
Third party
products and
services 725,984 192,727 1,308,705 1,058,984
----------------------------------------------------

12,219,260 11,800,862 23,946,480 24,451,560

Direct costs 5,239,280 4,822,554 10,581,884 11,412,543
----------------------------------------------------

Gross profit 6,979,980 6,978,308 13,364,596 13,039,017

Operating
Expenses
Research and
development 2,089,724 1,597,346 4,075,144 3,132,690
Sales and
marketing 2,638,426 2,317,201 4,649,151 4,452,252
General and
administrative 2,015,880 1,971,260 3,893,734 3,724,321
Bad debts
expense - 73,586 - 73,586
Strategic
expenses - 1,770,299 - 2,120,299
----------------------------------------------------

6,744,030 7,729,692 12,618,029 13,503,148
----------------------------------------------------
----------------------------------------------------

Operating income
(loss) 235,950 (751,384) 746,567 (464,131)

Other income
(expense) 23,638 (11,220) (26,928) 214,898
----------------------------------------------------

Income (loss)
from operations
before tax
provision 259,588 (762,604) 719,639 (249,233)

Provision for
income taxes 84,820 300,946 200,369 470,734
----------------------------------------------------

Net income (loss)
for the period 174,768 (1,063,550) 519,270 (719,967)

Deficit,
beginning of
the period (29,067,115) (29,575,512) (29,411,617) (29,919,095)
----------------------------------------------------

Deficit, end of
period $(28,892,347)$(30,639,062)$(28,892,347)$(30,639,062)
----------------------------------------------------
----------------------------------------------------

Earnings (loss)
per common
share
Basic $ 0.02 $ (0.13)$ 0.06 $ (0.09)
----------------------------------------------------
----------------------------------------------------
Diluted $ 0.02 $ (0.13)$ 0.06 $ (0.09)
----------------------------------------------------
----------------------------------------------------

Weighted average
shares
outstanding
Basic 8,403,577 8,280,528 8,394,689 8,251,554
Diluted 8,514,854 8,280,528 8,559,637 8,251,554


MDSI Mobile Data Solutions Inc.

Condensed Consolidated Statements of Cash Flows
(Expressed in United States Dollars, in accordance with
United States GAAP)
(Unaudited)

----------------------------------------------------
----------------------------------------------------
Three months ended June 30, Six months ended June 30,
----------------------------------------------------
----------------------------------------------------
2005 2004 2005 2004
----------------------------------------------------

Cash flows from
operating
activities
Net income (loss)
for the period $ 174,768 $ (1,063,550)$ 519,270 $ (719,967)
Items not
affecting cash:
Depreciation 495,101 695,915 1,038,623 1,274,976
Deferred
income taxes 54,124 - 78,458 (1,012)
Stock-based
compensation
charge - - - 135,000
Changes in
non-cash
operating
working capital
items:
Accounts
receivable 3,215,823 3,454,168 1,488,728 3,128,340
Prepaid
expenses and
other assets 54,579 205,518 397,096 748,232
Income taxes
payable (99,847) 222,576 (104,320) 221,304
Accounts
payable,
accrued
liabilities,
and accrued
restructuring
charges 549,754 569,534 (202,182) 1,208,623
Deferred
revenue (1,934,658) (2,092,067) 399,228 (2,295,636)
----------------------------------------------------

Net cash
provided by
operating
activities 2,509,644 1,992,094 3,614,901 3,699,860
----------------------------------------------------

Cash flows from
investing
activity

Acquisition of
capital assets (694,115) (187,437) (942,056) (512,198)
----------------------------------------------------

Net cash used
in investing
activity (694,115) (187,437) (942,056) (512,198)
----------------------------------------------------

Cash flows from
financing
activities

Issuance of
common stock 22,591 354,739 231,882 382,696
Repayment of
capital leases (264,756) (282,211) (499,853) (646,411)
----------------------------------------------------

Net cash used
in financing
activities (242,165) 72,528 (267,971) (263,715)
----------------------------------------------------

Net cash inflow 1,573,364 1,877,185 2,404,874 2,923,947

Cash and cash
equivalents,
beginning of
period 20,674,430 16,873,805 19,842,920 15,827,043
----------------------------------------------------

Cash and cash
equivalents,
end of the
period $ 22,247,794 $ 18,750,990 $ 22,247,794 $ 18,750,990
----------------------------------------------------
----------------------------------------------------



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