Science & Technology 
Science and Technology
Science and Technology 
Fri, February 6, 2009
Thu, February 5, 2009
TeleCommunication Systems, Inc.: TeleCommunication Systems Reports Record 2008 Fourth Quarter and Full Year Results
ANNAPOLIS, MD--(Marketwire - February 5, 2009) - TeleCommunication Systems, Inc. (TCS) (
Fourth Quarter 2008 Results
- Revenue was a record $79.3 million, an increase of 40% from $56.5 million in the previous quarter and up 114% from $37.1 million in the fourth quarter of 2007. This was the company's fourth consecutive quarter of record revenue. - GAAP net income was $38.2 million or $0.78 per diluted share, which includes $33.6 million or $0.68 per diluted share related to a reduction in the deferred tax asset valuation allowance. This compares to GAAP net income of $2.8 million or $0.06 per diluted share in the previous quarter and $2.4 million or $0.06 per diluted share in the fourth quarter of 2007. - EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization, including non-cash stock-based compensation) for the quarter was $7.5 million or $0.15 per diluted share. This compares to $5.9 million or $0.12 per diluted share in the previous quarter and $5.8 million or $0.13 per diluted share in the same year-ago quarter (see important discussion about the presentation of EBITDA below).
Full Year 2008 Results
- Revenue was a record $220.1 million, an increase of 53% from the previous record of $144.2 million in 2007. This represents the company's 11th consecutive year of record revenue. - Gross profit was $81.3 million, up 50% from $54.1 million in 2007. - GAAP net income was $57.6 million or $1.23 per diluted share, which includes $33.3 million or $0.71 related to a reduction in the deferred tax asset valuation allowance and $0.17 from a patent sale in the second quarter. This compares to a GAAP loss of $1.3 million or $0.03 per share in 2007. - EBITDA, including $8.1 million or $0.17 per diluted share from a second quarter patent sale, was $37.0 million or $0.79 per diluted share for 2008, versus $15.6 million or $0.38 per diluted share in 2007 (see important discussion about the presentation of EBITDA below). - Year end total backlog was nearly $450 million, up from $232 million at the beginning of the year. Summary of Reported Income (amounts in thousands) Three months ended Twelve months ended Dec 31 Dec 31 -------------------- -------------------- 2008 2007 2008 2007 --------- --------- --------- --------- (unaudited) (unaudited) Revenue: $ 79,287 $ 37,078 $ 220,142 $ 144,168 --------- --------- --------- --------- Income: EBITDA before gain on sale of patent $ 7,476 $ 5,842 $ 28,990 $ 15,633 Noncash charges (see accompanying reconciliation) (2,951) (3,137) (11,859) (12,203) --------- --------- --------- --------- Income from operations before gain on sale of patent 4,525 2,705 17,131 3,430 Gain on sale of patent - - 8,060 - --------- --------- --------- --------- Income from operations - continuing 4,525 2,705 25,191 3,430 Loss from operations - discontinued - (61) - (275) Other income/(expense) 132 (207) (880) (4,444) Tax benefit 33,571 - 33,257 - --------- --------- --------- --------- Net Income $ 38,228 $ 2,437 $ 57,568 $ (1,289) ========= ========= ========= ========= Income per diluted share EBITDA before gain on sale of patent $ 0.15 $ 0.13 $ 0.62 $ 0.38 Noncash charges (see accompanying reconciliation) (0.06) (0.07) (0.25) (0.29) --------- --------- --------- --------- Income from operations before gain on sale of patent 0.09 0.06 0.37 0.08 Gain on sale of patent - - 0.17 - --------- --------- --------- --------- Income from operations - continuing 0.09 0.06 0.54 0.08 Loss from operations - discontinued - (0.00) - (0.01) Other income/(expense) 0.00 (0.00) (0.02) (0.11) Tax benefit 0.68 - 0.71 - --------- --------- --------- --------- Net Income $ 0.78 $ 0.06 $ 1.23 $ (0.03) ========= ========= ========= ========= Shares used in calculation - Diluted 49,017 44,305 46,644 41,453 ========= ========= ========= =========
Management Commentary
"Our strong performance throughout 2008 demonstrated TCS has been able to successfully monetize its highly reliable wireless communications technology in three key arenas: cellular text messaging, location-based mobile infrastructure and applications including E9-1-1, and secure satellite-based communications, including deployable kits," said Maurice B. Tosé, chairman, president and CEO of TCS. "All of these contributed to our record results and they appear resistant to the conditions which are affecting much of our economy."
"The fourth quarter of 2008 showed particularly strong systems sales to government customers, as well as solid sales of licenses for wireless carrier text messaging software," continued Tosé. "In addition, because the company's cumulative profit achievements and forecasted future profitability met the accounting criteria for reversal of the reserve against our deferred tax asset (mainly representing the value of tax loss carryforwards), the quarter includes a nonrecurring $33.6 million or $0.68 per share tax accounting benefit. This contributed to 2008's net book value (shareholders' equity) improvement from $44 million in 2007 to $114 million at year end 2008.
"We believe our financial strength and portfolio of proprietary intellectual property, coupled with the judicious continuing R&D investment and the positive fundamental drivers for each of our wireless market niches, makes TCS a compelling choice for our customers. Our 2008 backlog growth, along with other indicators for our markets, gives us confidence we will realize year-over-year growth in 2009 and beyond."
Fourth Quarter and Full Year Financial Highlights Revenue and Gross Profit (unaudited): Three months ended December 31 --------------------------------------------------------------- 2008 2007 Incr. (Decr.) ---------------------- -------------------- ----------------- Coml. Govt. Total Coml. Govt. Total Coml. Govt. Total ------ ------ ------ ----- ----- ------ ----- ----- ----- Revenue ($millions) Services $ 16.6 $ 12.7 $ 29.3 $15.5 $ 7.0 $ 22.5 $ 1.1 $ 5.7 $ 6.8 Systems 10.7 39.3 50.0 4.0 10.6 14.6 6.7 28.7 35.4 ------ ------ ------ ----- ----- ------ ----- ----- ----- Total revenue $ 27.3 $ 52.0 $ 79.3 $19.5 $17.6 $ 37.1 $ 7.8 $34.4 $42.2 ====== ====== ====== ===== ===== ====== ===== ===== ===== Gross profit ($millions) Gross profit - services $ 8.3 $ 2.8 $ 11.1 $ 8.4 $ 1.4 $ 9.8 $(0.1) $ 1.4 $ 1.3 As % of rev 50% 22% 38% 54% 20% 43% Gross profit - systems 9.0 4.9 13.9 2.8 2.4 5.2 6.2 2.5 8.7 As % of rev 84% 12% 28% 70% 23% 36% ------ ------ ------ ----- ----- ------ ----- ----- ----- Total Gross Profit $ 17.3 $ 7.7 $ 25.0 $11.2 $ 3.8 $ 15.0 $ 6.1 $ 3.9 $10.0 ====== ====== ====== ===== ===== ====== ===== ===== ===== As % of rev 63% 15% 32% 57% 22% 40% Twelve months ended December 31 --------------------------------------------------------------- 2008 2007 Incr. (Decr.) ---------------------- -------------------- ----------------- Coml. Govt. Total Coml. Govt. Total Coml. Govt. Total ------ ------ ------ ----- ----- ------ ----- ----- ----- Revenue ($millions) Services $ 64.4 $ 36.9 $101.3 $58.8 $29.3 $ 88.1 $ 5.6 $ 7.6 $13.2 Systems 37.4 81.4 118.8 16.5 39.6 56.1 20.9 41.8 62.7 ------ ------ ------ ----- ----- ------ ----- ----- ----- Total revenue $101.8 $118.3 $220.1 $75.3 $68.9 $144.2 $26.5 $49.4 $75.9 ====== ====== ====== ===== ===== ====== ===== ===== ===== Gross profit ($millions) Gross profit - services $ 32.0 $ 7.7 $ 39.7 $29.4 $ 6.5 $ 35.9 $ 2.6 $ 1.2 $ 3.8 As % of rev 50% 21% 39% 50% 22% 41% Gross profit - systems 28.5 13.1 41.6 11.5 6.7 18.2 17.0 6.4 23.4 As % of rev 76% 16% 35% 70% 17% 32% ------ ------ ------ ----- ----- ------ ----- ----- ----- Total Gross Profit $ 60.5 $ 20.8 $ 81.3 $40.9 $13.2 $ 54.1 $19.6 $ 7.6 $27.2 ====== ====== ====== ===== ===== ====== ===== ===== ===== As % of rev 59% 18% 37% 54% 19% 38%
Commercial Segment Revenue and Gross Profit:
Commercial segment gross profit for the fourth quarter of 2008 was $17.3 million, an increase of 54% from $11.2 million of gross profit in Q4 2007 on a 40% increase in revenue. The commercial segment gross profit was 63% of revenue in the fourth quarter of 2008, an increase from 57% in the same year-ago period.
For the full year, commercial segment gross profit was $60.5 million, up 48% from $40.9 million of gross profit in 2007 on a 35% increase in revenue. The commercial segment gross profit was 59% of revenue in 2008, an increase from 54% last year.
The increases in fourth quarter and full year commercial revenue and gross profit were driven by continuing growth in the use of Short Message Services (SMS) by wireless carrier subscribers, which has led to increased TCS sales of licenses for higher SMS traffic capacity and growth in maintenance service revenue.
Government Segment Revenue and Gross Profit:
Revenue from government customers for the quarter was $52.0 million, up $34.4 million from $17.6 million or nearly triple the same year-ago quarter. Services revenue was up $5.7 million or 81% over the fourth quarter 2007, and systems sales were up $28.7 million or 3.7 times system sales in the year-ago quarter.
Gross profit from government customers was $7.7 million in the fourth quarter of 2008, more than double the fourth quarter of 2007. The gross margin on government segment revenue for the quarter was 15%, compared to 22% in the fourth quarter of 2007. The decrease in gross margin reflects the inclusion of more high-volume system sales that carry a lower average margin and some very low margin "pass-through" business that enhances the company's volume purchase history with vendors.
For the full year, revenue from the government segment increased 72% to $118.3 million. Services revenue was up $7.6 million or 26%, and systems revenue for the year was more than double 2007. Services growth was realized from professional services, teleport usage, and maintenance on the installed base of systems. Systems growth reflects volume under the Worldwide Satellite Systems (WWSS) contract vehicle as well as Swiftlink® sales outside of WWSS.
Government segment gross profit increased 58% over the previous year, from $13.2 million in 2007 to $20.8 million in 2008. The average gross margin on government segment revenue in 2008 was 18% of revenue versus 19% in 2007.
Operating Costs and Expenses:
R&D: Fourth quarter 2008 R&D expense was $4.3 million (5% of revenue), increasing $0.5 million or 13% from the previous quarter and up $0.9 million or 26% from $3.4 million (9% of revenue) in the fourth quarter of 2007. For the full year, R&D expense was up 24% to $16.2 million, with an emphasis on wireless location-based-service platform and applications technology, voice over IP public safety technology, and continuing improvement of the company's messaging and secure satcom deliverables.
SG&A: Fourth quarter 2008 selling, general and administrative expense was $14.7 million (18.6% of revenue), up from $7.4 million (19.9% of revenue) in the fourth quarter of 2007, and includes additional variable compensation related to financial measures including revenue, operating profit and net income. Variable compensation was approximately $6.0 million greater in the fourth quarter 2008 versus the same quarter in 2007 due to record results in 2008.
For the full year, selling, general and administrative expense was $42.0 million (19.1% of revenue), up $10.8 million or 35% from $31.2 million (21.7% of revenue) in 2007. The increase includes additional variable compensation earned by the company's employees as a result of improved performance by the company in accordance with formulas established for key employees at the beginning of the respective years. Variable compensation was approximately $10.0 million greater in 2008 than in 2007 due to record results in 2008.
Noncash charges: Total non-cash charges to operating profit were $3.0 million in the fourth quarter and $11.9 million for the year. Noncash stock compensation expense decreased from $4.3 million in 2007 to $3.8 million in 2008. Depreciation and amortization of property and equipment was down slightly from $6.2 million in 2007 to $5.9 million in 2008.
Income from Operations:
Income from operations was $4.5 million for the fourth quarter of 2008 versus $2.7 million in 2007, and $25.2 million for the full year, including an $8.1 million second quarter gain on the sale of a patent. Income from operations for full year 2007 was $3.4 million.
Income Taxes (reversal of deferred tax asset reserve):
Prior to 2008, the company's deferred tax asset (benefit) from past taxable losses and credits had been fully reserved due to uncertainty as to prospects for realization of the benefits. As a result of "positive evidence" from updated assessments as to the prospects for future taxable income, in the fourth quarter of 2008 the company reduced the valuation allowance (reserve) against the deferred tax asset so that a net $33.6 million tax credit, or benefit, was recorded in the quarter. (For the year, $33.3 million was recorded.) Beginning with the first quarter of 2009, the company expects to record a normal tax provision against pre-tax income at about 37%. However, the company does not expect to make significant non-AMT cash tax payments in 2009 and until the deferred tax asset has been fully used to offset future taxable income.
Net Income:
Net income for the fourth quarter was $38.2 million or $0.78 per diluted share, which includes the positive effect of $0.68 tax accounting benefit, compared to net income of $2.4 million or $0.06 per diluted share in the fourth quarter of 2007. The increase in net income was primarily driven by the increase in revenues and related improvement in operating leverage the company is currently experiencing.
For the full year, net income was $57.6 million or $1.23 per diluted share, which includes the positive effect of $0.71 tax accounting benefit, compared to a net loss of $1.3 million or $0.03 per diluted share in 2007. In addition to the positive effect of the reduction in the deferred tax asset valuation allowance, the increase in net income was driven primarily by overall revenue growth of 53%, with increases from both services and systems in both commercial and government segments, as well as the second quarter patent sale which netted $8.1 million to the company.
Liquidity and Capital Resources:
At December 31, 2008 TCS had $39.0 million of cash and equivalents, compared to $38.7 million at the beginning of the fourth quarter and $16.0 million at the beginning of the year. Funds were generated in the fourth quarter from $7.5 million in EBITDA, $2.5 million from warrant exercises, $2.2 million from stock option exercises, $1.0 million from collection of a note receivable which was partial consideration from a 2007 divestiture, and $0.6 million from new lease financing of fixed asset purchases. Funds were used during the quarter for $2.3 million of capital expenditures, including software development, $0.9 million for debt repayment, and a $10.3 million increase in working capital, due to mainly higher receivables from government and carrier customers on the higher volume of business. Unused availability under credit facilities was $21.0 million at quarter end, which is based on billed receivables.
Intellectual Property:
Since our last quarterly report, TCS was issued three patents which brought the total patent portfolio to 68 patents and 212 patent applications in the U.S. and abroad. The company continued efforts to monetize its patents as well as use them to position the company for competitive advantages. No announcements have been made regarding post-trial activity involving a 2007 jury verdict awarding more than $10 million for infringement by Sybase Inc. of a TCS intercarrier messaging patent. While significant legal expenses have been paid in connection with ongoing patent litigation, no related revenue has been recorded pending the outcome of appeals.
Backlog:
New 9/30/2008 Orders Revenue 12/31/2008 ---------- ------- ------- ---------- Funded Contract Backlog ($mil) Commercial $ 68.5 $ 38.9 $ (27.3) $ 80.1 Government $ 87.0 $ 44.7 $ (52.0) $ 79.7 ---------- ------- ------- ---------- Total Funded Contract Backlog $ 155.5 $ 83.6 $ (79.3) $ 159.8 Customer Options $ 294.3 $ (8.9) $ - $ 285.4 ---------- ------- ------- ---------- Total Backlog $ 449.7 $ 74.7 $ (79.3) $ 445.1 ---------- ------- ------- ----------
Funded contract backlog represents contracts from TCS customers (mainly federal agencies) which have been appropriated fiscal year funding. It is computed by multiplying the most recent month's recurring revenue times the remaining months under existing long-term agreements, which the company believes is the best method for anticipating revenue under those agreements. Total backlog, as is typically measured by government contractors, includes orders covering optional periods of service and/or deliverables, but for which budgetary funding may not yet have been approved.
About the Presentation of EBITDA
EBITDA (from continuing operations) is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. The company defines EBITDA as net income/(loss) before depreciation; amortization of non-cash stock-based compensation; amortization of software development costs, property and equipment and other intangibles; and interest expense and other non-cash financing costs. Other companies (including competitors) may define EBITDA differently. The company presents EBITDA because management believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in the industry. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of TCS nor is it intended to be predictive of potential future results. Investors should not consider EBITDA in isolation or as a substitute for analysis of the company's results as reported under GAAP. See "GAAP to non-GAAP Reconciliation" below for further information on this non-GAAP measure. Shares used in the calculation of GAAP diluted earnings per share are the same as the shares used in the calculation of diluted adjusted operating income/(loss) per share except when the company reports a GAAP loss.
Three months ended GAAP to non-GAAP Reconciliation December 31 ------------------ (amounts in thousands) 2008 2007 -------- -------- Consolidated Statement of Operations Reconciliation (unaudited) Net income (loss) on a GAAP basis $ 38,228 $ 2,437 Depreciation and amortization of property and equipment 1,395 1,479 Amortization of stock based compensation 960 1,212 Interest, financing, and other costs (132) 207 Amortization of software development costs 560 409 Amortization of acquired intangible assets 36 37 Benefit for income taxes (33,571) - Income (loss) from discontinued operations - (61) -------- -------- EBITDA from continuing operations $ 7,476 $ 5,842 ======== ======== Consolidated Statement of Operations Reconciliation per Share Net Income (loss) per share on a GAAP basis $ 0.78 $ 0.06 Depreciation and amortization of property and equipment 0.03 0.03 Amortization of stock based compensation 0.02 0.03 Interest, financing, and other costs (0.00) 0.00 Amortization of software development costs 0.01 0.01 Amortization of acquired intangible assets 0.00 0.00 Benefit for income taxes (0.68) - Loss from discontinued operations - 0.00 -------- -------- EBITDA from continuing operations per share - Diluted $ 0.15 $ 0.13 ======== ======== EBITDA from continuing operations per share - Basic $ 0.17 $ 0.14 ======== ======== Shares used in calculation - Basic 44,165 42,173 Shares used in calculation - Diluted 49,017 44,305 ======== ======== Twelve months ended GAAP to non-GAAP Reconciliation December 31 ------------------ (amounts in thousands) 2008 2007 -------- -------- Consolidated Statement of Operations Reconciliation (unaudited) Net income (loss) on a GAAP basis $ 57,568 $ (1,289) Depreciation and amortization of property and equipment 5,865 6,200 Amortization of stock based compensation 3,758 4,333 Interest, financing, and other costs 880 4,444 Amortization of software development costs 2,089 1,522 Amortization of acquired intangible assets 147 148 Benefit for income taxes (33,257) - Income (loss) from discontinued operations - (275) -------- -------- EBITDA from continuing operations including gain on sale of patent 37,050 15,633 Less gain from sale of patent in second quarter (8,060) - -------- -------- EBITDA from continuing operations before gain on sale of patent $ 28,990 $ 15,633 ======== ======== Consolidated Statement of Operations Reconciliation per Share Net Income (loss) per share on a GAAP basis $ 1.23 $ (0.03) Depreciation and amortization of property and equipment 0.13 0.15 Amortization of stock based compensation 0.08 0.10 Interest, financing, and other costs 0.02 0.11 Amortization of software development costs 0.04 0.04 Amortization of acquired intangible assets 0.00 0.00 Benefit for income taxes (0.71) - Loss from discontinued operations - 0.01 -------- -------- EBITDA from cont. ops per share incl gain on sale of patent - Diluted 0.79 0.38 Less gain from sale of patent in second quarter (0.17) - -------- -------- EBITDA from cont. ops per share before gain on sale of patent - Diluted $ 0.62 $ 0.38 ======== ======== EBITDA from continuing operations per share - Basic $ 0.86 $ 0.38 ======== ======== Shares used in calculation - Basic 43,063 41,453 Shares used in calculation - Diluted 46,644 41,453 ======== ========Conference Call
TCS will hold a conference call later today (Thursday, February 5, 2009) to discuss these fourth quarter and year end 2008 financial results. The company's chairman, president and CEO, Maurice B. Tosé, and senior vice president and CFO, Tom Brandt, will host the call starting at 5:00 p.m. Eastern time. A question and answer session will follow management's presentation.
To participate in the call, dial the appropriate number 5-10 minutes prior to the start time, ask for the TeleCommunication Systems conference call and provide the conference ID:
Dial-In Number: 1-800-862-9098 International: 1-785-424-1051 Conference ID#: 7TELECOM
The conference call will be broadcasted simultaneously on the company's Web site at [ www.telecomsys.com ]. For the webcast, please go to the web site at least 15 minutes early to register, download, and install any necessary audio software. If you have any difficulty connecting with the conference call or webcast, please contact the Liolios Group at 949-574-3860.
A replay of the call will be available after 8:00 p.m. Eastern time on the same day and until March 5, 2009:
Toll-free replay number: 1-800-688-7945 International replay number: 1-402-220-1370 (No passcode required)
About TeleCommunication Systems
TeleCommunication Systems, Inc. (TCS) (
This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. These statements are based upon TCS' current expectations and assumptions that are subject to a number of risks and uncertainties that would cause actual results to differ materially from those anticipated. The words, "believe," "expect,'' "intend," "anticipate,'' and variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. Statements in this announcement that are forward-looking include, but are not limited to statements that (a) are made by Mr. Tose generally, including those about our three areas of focus and their performance in 2009, reasons why we are a compelling choice for our customers, and ability to realize year-over-year growth in 2009 and beyond; (b) our wireless communications technologies appear resistant to current economic conditions, (c) our financial strength and IP portfolio give us confidence we will realize additional growth in 2009 and beyond, (d) some of our contracts have potential values significantly greater than currently funded amounts, (e) we have positioned our IP for monetization and competitive advantage, (f) our tax planning includes evidence of prospective future taxable income, and no expectation for non-AMT cash tax payments in 2009, and (g) our current orders and backlog calculations give confidence of future revenues.
Additional risks and uncertainties are described in the Company's filings with the Securities and Exchange Commission (SEC). These include without limitation risks and uncertainties relating to the Company's financial results and the ability of the Company to (i) sustain profitability, (ii) continue to rely on its customers and other third parties to provide additional products and services that create a demand for its products and services, (iii) conduct its business in foreign countries, (iv) develop software and provide services without any errors or defects, (vii) protect its intellectual property rights, and (viii) implement its sales and marketing strategy. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update or revise the information in this press release, whether as a result of new information, future events or circumstances, or otherwise.
TeleCommunication Systems, Inc. Consolidated Statements of Operations (amounts in thousands, except per share data) Three months ended Twelve months ended December 31, December 31, -------------------- -------------------- 2008 2007 2008 2007 --------- --------- --------- --------- (unaudited) (unaudited) Revenue Services $ 29,357 $ 22,510 $ 101,359 $ 88,062 Systems 49,930 14,568 118,783 56,106 --------- --------- --------- --------- Total revenue 79,287 37,078 220,142 144,168 Direct costs of revenue Direct cost of services revenue 18,271 12,674 61,594 52,161 Direct cost of systems 35,992 9,417 77,291 37,906 --------- --------- --------- --------- Total direct cost of revenue 54,263 22,091 138,885 90,067 Services gross profit 11,086 9,836 39,765 35,901 As a % of revenue 38% 44% 39% 41% Systems gross profit 13,938 5,151 41,492 18,200 As a % of revenue 28% 35% 35% 32% --------- --------- --------- --------- Total gross profit 25,024 14,987 81,257 54,101 Total gross profit as a % of revenue 32% 40% 37% 38% Operating costs and expenses Research and development expense 4,323 3,372 16,161 13,072 Sales and marketing expense 3,893 2,868 13,715 11,917 General and administrative expense 10,852 4,526 28,238 19,334 Depreciation and amortization of property and equipment 1,395 1,479 5,865 6,200 Amortization of acquired intangible assets 36 37 147 148 --------- --------- --------- --------- Total operating costs and expenses 20,499 12,282 64,126 50,671 --------- --------- --------- --------- Income from operations before gain on sale of patent 4,525 2,705 17,131 3,430 Gain(loss) on sale of patent - - 8,060 - --------- --------- --------- --------- Income from operations 4,525 2,705 25,191 3,430 Cash interest income/(expense), net 5 (188) (222) (1,315) Amortization of debt discount and debt issuance expenses (7) (42) (180) (3,176) Other income/(expense), net 134 23 (478) 47 --------- --------- --------- --------- Income from continuing operations before income taxes 4,657 2,498 24,311 (1,014) Reversal of deferred tax asset reserve 33,571 - 33,257 - --------- --------- --------- --------- Income from continuing operations 38,228 2,498 57,568 (1,014) Loss from discontinued operations - (61) - (275) --------- --------- --------- --------- Net income (loss) $ 38,228 $ 2,437 $ 57,568 $ (1,289) ========= ========= ========= ========= Income/(loss) per share - basic Income per share from continuing operations $ 0.87 $ 0.06 $ 1.34 $ (0.02) Loss from discontinued operations - (0.00) - (0.01) --------- --------- --------- --------- Net income/(loss) per share - basic $ 0.87 $ 0.06 $ 1.34 $ (0.03) ========= ========= ========= ========= Income/(loss) per share - diluted Income per share from continuing operations $ 0.78 $ 0.06 $ 1.23 $ (0.02) Loss from discontinued operations - (0.00) - (0.01) --------- --------- --------- --------- Net income/(loss) per share - diluted $ 0.78 $ 0.06 $ 1.23 $ (0.03) ========= ========= ========= ========= Weighted average shares outstanding - basic 44,165 42,173 43,063 41,453 Weighted average shares outstanding - diluted 49,017 44,305 46,644 41,453 ========= ========= ========= ========= TeleCommunication Systems, Inc. Condensed Consolidated Balance Sheets (amounts in thousands) December 31, December 31, 2008 2007 ------------- ------------- (Unaudited) Assets Current assets: Cash and cash equivalents $ 38,977 $ 15,955 Accounts receivable, net 61,827 20,424 Unbilled receivables 21,797 15,229 Inventory 2,715 5,373 Investment in marketable securities 78 873 Deferred income tax benefit 9,736 - Deferred costs and other current assets 3,791 3,688 Note receivable from sale of discontinued operations - 1,000 ------------- ------------- Total current assets 138,921 62,542 Property and equipment, net 12,391 11,209 Software development costs, net 2,773 4,406 Acquired intangible assets, net 562 709 Goodwill 1,813 1,813 Deferred income tax benefit 24,309 - Other assets 1,190 1,445 ------------- ------------- Total assets $ 181,959 $ 82,124 ============= ============= Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued expenses $ 51,588 $ 17,374 Deferred revenue 4,349 4,685 Current portion of capital leases and notes payable 3,837 5,444 ------------- ------------- Total current liabilities 59,774 27,503 Capital leases and notes payable, less current portion and net of debt discount 7,913 10,657 Total stockholders' equity 114,272 43,964 ------------- ------------- Total liabilities and stockholders' equity $ 181,959 $ 82,124 ============= =============