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International Datacasting Corporation Announces Fiscal 2010 Third Quarter Results

^{Published on 2009-12-07 14:36:38 - Market Wire}
 

OTTAWA, ONTARIO--(Marketwire - Dec. 7, 2009) - International Datacasting Corporation (TSX:IDC), a leader in providing advanced solutions for the distribution of broadband content via satellite, announced its financial results for the three- and nine-month periods ended October 31, 2009. All figures are in Canadian dollars unless otherwise stated.

Q3 Fiscal 2010 Financial Summary

- Revenue was $5.8 million, compared to $8.1 million in Q3 fiscal 2009.

- Gross margin was 40%, compared to 47% last year.

- EBITDA1 was $0.3 million, compared to $ 0.7 million in Q3 fiscal 2009.

- Net earnings were $0.1 million, compared to $0.6 million in Q3 fiscal 2009.

Year-to-Date Fiscal 2010 Financial Summary

- Revenue was $16.4 million, compared to $22.6 million for the same period of fiscal 2009.

- Gross margin was 44%, compared to 45% last year.

- EBITDA was $(0.4) million, compared to $ 1.9 million for the same period of fiscal 2009.

- Net income was $(3.7) million, or $(0.08) per share, compared to $1.4 million, or $0.02 per share, last year.

"Our acquisition of the Tiernan product lines in the quarter was a significant step in further growing the Company and enhancing our competitive position in the expanding broadcast video market," said Ron Clifton, President and CEO, International Datacasting Corporation. "We are excited about the accelerated growth opportunity the transaction creates for our broadcast equipment and systems business, as we now offer more complete end-to-end solutions. During the quarter, we successfully integrated our regional sales, customer service and marketing teams, and we also consolidated our manufacturing operations, strengthening our overall organizational infrastructure. We have bid on numerous Tiernan product-related projects, and won several new contracts in the quarter."

Mr. Clifton continued: "While the slower economy continued to impact sales of our core IDC products in Q3, we are optimistic about our results for the coming quarter. Quoting activity has remained high, and we have entered Q4 with a robust sales pipeline and the strongest backlog that we have had all year.

Q3 Fiscal 2010 Operational Highlights

IDC acquired select Tiernan broadcast radio and video product lines, as well as the related intellectual property, trademarks, inventory, customer and vendor lists, OEM partnerships and reseller agreements, for total cash consideration of approximately US$2.0 million. Through the acquisition, IDC has grown its sales force and strengthened its research and development team. In addition, the Company has expanded its broadcast video and radio product portfolios and extended its geographic reach, increasing the size of the Company's total addressable market. In Q3 fiscal 2010, IDC recorded $1.7 million in revenue from the sale of Tiernan products, which included orders from broadcast video and radio customers in the United States and Asia.

In the Broadcast Video market, IDC won a new order from Germany-based MEDIA BROADCAST GmbH, for satellite network equipment to be used in the rollout of its digital cinema service in Europe, and we received follow-on orders for another large digital cinema customer in Europe. In addition, Mexico's Televisa deployed IDC's 3D Live products, which incorporate SENSIO's^® 3D technology, to broadcast a live soccer game from Mexico City's Aztec Stadium to theatres in the country's three largest cities: Mexico City, Guadalajara and Monterrey.

IDC introduced a number of new products in the quarter. For the Broadcast Video market, the Company launched a new compact and highly-scalable blade receiver for the IPTV market and a new video receiver designed for the business television market. The Company also rolled-out its next-generation Pro Cinema 3D Live encoder, which now also facilitates the broadcasting of ultra-high resolution 2D content. For the Broadcast Radio market, IDC extended its PROFLine product line through the introduction of a space-saving eight channel FM modulator and an ultra-low symbol rate satellite audio receiver, designed for smaller regional broadcasts.

IDC's sizable installed customer base drove repeat business in the quarter, as these customers continue to expand or upgrade their broadband satellite distribution networks. In particular exisiting customers NPR, (radio), the US Government, (data) and Hearst-Argyle and EchoStar, (video) placed follow-on orders.

Subsequent to quarter end, IDC acquired Logic Innovations' digital video and data broadcast product lines for total cash consideration of US$600,000. The acquisition strengthens IDC's position in the broadcast equipment and systems business by adding new digital audio, video and data communication applications to its suite of offerings and further enhancing its research and development and global sales teams.

Q3 Fiscal 2010 Financial Review

Revenue was $5.8 million for Q3 fiscal 2010, compared to revenue of $8.1 million in Q3 fiscal 2009. The year-over-year revenue decline was a result of lower satellite equipment sales compared to last year. Due to current economic conditions, IDC continued to experience longer sales cycles in its Satellite Equipment business, as many clients have been delaying or downsizing purchasing decisions.

Gross profit was $2.3 million in Q3 fiscal 2010, representing 40% of revenues, compared to $3.8 million, or 47% of revenues, in Q3 fiscal 2009. The decline was due to one-time costs associated with moving the manufacturing of Tiernan products to IDC's outsourced facilities, as well as a revaluation of existing Tiernan inventory as required by accounting rules. Excluding the impact of the acquisition of the Tiernan product lines, gross profit for Q3 fiscal 2010 was $2.2 million, or 53% of revenue. The Company expects gross margins to continue to be variable on a quarterly basis, but to return to a level that is consistent with past years starting in early fiscal 2011.

Operating expenses for Q3 fiscal 2010 were $3.7 million, up compared to $3.3 million in Q3 fiscal 2009 as a result of increased headcount as well as one-time integration costs related to the Company's acquisition of the Tiernan product lines. Selling, General and Administrative expenses were $2.3 million in Q3 fiscal 2010, up from $2.2 million in Q3 fiscal 2009. Research and Development costs were $1.1 million in Q3 fiscal 2010, up from $0.8 million in Q3 fiscal 2009. Excluding costs related to the Tiernan acquisition, operating expenses for Q3 fiscal 2010 were $3.0 million. The Company believes that it recognized the majority of its one-time expenses related to its acquisition of the Tiernan product lines in Q3 fiscal 2010.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $0.3 million in Q3 fiscal 2010. This is compared to EBITDA of $0.7 million in Q3 fiscal 2009.

In Q3 fiscal 2010, IDC realized net gains of $0.8 million related to the sale of its common share holdings in SENSIO. For the same period in fiscal 2009, the Company did not realize any such gains. IDC also realized $0.6 million in extraordinary income (negative goodwill) in Q3 fiscal 2010, which related to the excess of the fair value assessment of the Tiernan assets acquired over the total cash consideration paid and related transaction costs.

For Q3 fiscal 2010, net earnings were $0.1 million, compared to net earnings of $0.6 million in Q3 fiscal 2009. As per accounting rules, IDC's calculation of net earnings per share excludes the $0.6 million in extraordinary income that the Company realized in the quarter. As such, IDC recorded earnings of $(0.01) per share in Q3 fiscal 2010, compared to $0.01 per share in Q3 fiscal 2009.

IDC had $5.9 million in cash and working capital of $14.3 million at October 31, 2009, compared to $7.2 million in cash and working capital of $13.6 million at July 31, 2009 and $7.6 million in cash and working capital of $14.7 million at January 31, 2009. In Q3 fiscal 2010, IDC used $0.3 million in cash for operations, compared to $1.2 million in cash used for operations in Q3 fiscal 2009. At Q3 fiscal 2010 quarter end, the Company was free of long-term debt and had unused bank credit lines totaling $1.5 million.

A complete set of financial statements and management's discussion and analysis for the three and nine months ended October 31, 2009 will be available at [ www.sedar.com ] or on the Investor Information section of IDC's website at [ www.datacast.com ].

Conference Call

A conference call will be held on Tuesday, December 8, 2009 at 9:00 a.m. ET to discuss this announcement. The call may be accessed by dialing 416-644-3425 or 1-877-974-0445. A taped replay will be available for one week by dialing 416-640-1917 or 877-289-8525, reference number 4187883#. To access the live webcast, please visit the Company's website at [ www.datacast.com ] or [ www.newswire.ca ] for directions.

About International Datacasting Corporation (IDC)

International Datacasting Corporation (TSX:IDC) is a global leader in providing IP-based datacasting solutions for the distribution of broadband multimedia content. IDC has a broad portfolio of advanced technology products marketed under the names SuperFlex, Datacast XD, Tiernan, Logic Innovations and PROFline for implementing a wide range of satellite and other broadband content contribution and distribution networks. IDC's products are in demand for radio and television broadcast networks, distance learning, digital satellite news gathering and sport contribution, digital signage, digital cinema, IPTV distribution and other content distribution applications. IDC is headquartered in Ottawa, Canada, operates in Europe through its wholly owned subsidiary PROFline B.V. in Arnhem, the Netherlands and in the US through its Tiernan and Logic Innovations operations in San Diego, California. The Company is in international in scope with installations in over 100 countries worldwide, has regional sales and service offices in the UK, Australia, Singapore and China as well as an established international network of value-added partners and resellers.

(1)Use of Non-GAAP Financial Information

Non-GAAP measures, such as EBITDA and backlog, are provided to enhance the overall understanding of our current financial performance and our prospects for the future. Specifically, we believe non-GAAP results provide useful information to both management and investors by excluding specific expenses we believe are not indicative of our core operating results. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with generally accepted accounting principles.

EBITDA (earnings before interest, taxes, depreciation and amortization) is not a recognized measure under Canadian generally accepted accounting principles (GAAP), does not have standardized meaning, and is unlikely to be comparable to similar measures used by other companies. Accordingly, investors are cautioned that EBITDA should not be construed as an alternative to revenue, net earnings or loss determined in accordance with GAAP as an indicator of the financial performance of the Company or as a measure of the Company's liquidity and cash flows.

This press release contains forward-looking statements that may involve risks and uncertainties. Actual results may differ materially. Factors that might cause a difference include, but are not limited to, competitive developments, risks associated with IDC's growth, any difficulties with integrating the Tiernan product lines into IDC's business and/or manufacturing procedures, the development of the satellite datacasting market, regulatory risks, intellectual property infringement and other factors. IDC assumes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof. 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.

International Datacasting Corporation
Unaudited Consolidated Balance Sheets as at

 October 31, 2009 January 31, 2009
ASSETS
Current Assets
 Cash $5,850,689 $7,554,296
 Amounts receivable 6,084,367 6,903,984
 Income tax receivable - 171,766
 Inventories 5,586,528 4,250,698
 Prepaid expenses and other assets 752,838 487,073
 Future tax asset 583,537 583,537
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Total Current Assets 18,857,959 19,951,354
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Equipment 2,778,429 3,113,279
Future tax asset long term portion 2,911,463 2,911,463
Intangible assets 620,332 852,957
Goodwill - 2,491,030
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 6,310,224 9,368,729
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 $25,168,183 $29,320,083
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
 Accounts payable and accrued liabilities $3,688,684 $4,376,113
 Customer deposits 150,998 -
 Other liabilities - 7,800
 Obligations under capital leases -
 current portion 84,432 147,827
Deferred revenue 613,865 691,326
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Total Current Liabilities 4,537,979 5,223,066
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Long Term Liabilities
 Obligations under capital leases 112,659 176,473
 Future tax liability 124,067 217,504
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Total Long Term Liabilities 236,726 393,977
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Total Liabilities 4,774,705 5,617,043
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Shareholders' equity
 Capital stock 22,904,113 22,829,784
 Contributed surplus 2,941,272 2,680,871
 Accumulated other comprehensive income 225,924 176,440
 Accumulated deficit (5,677,831) (1,984,055)
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Total Shareholders' Equity 20,393,478 23,703,040
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 $25,168,183 $29,320,083
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International Datacasting Corporation
Unaudited Consolidated Statement of
Operations and Comprehensive Income
 Nine months ended Three months ended
 October 31, October 31, October 31, October 31,
 2009 2008 2009 2008

Revenue $16,441,652 $22,629,311 $5,810,288 $8,074,484

Cost of revenue 9,242,545 12,487,809 3,490,026 4,311,874
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Gross profit 7,199,107 10,141,502 2,320,262 3,762,610
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Operating expenses
Selling, general
 and administrative 5,934,416 5,828,493 2,262,604 2,231,350
Research and
 development, net
 of investment tax
 credits 3,009,812 2,434,330 1,096,994 814,543
Amortization 921,844 875,763 296,313 289,366
Goodwill impairment 2,491,030 - - -
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 12,357,102 9,138,586 3,655,911 3,335,259
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Operating (loss)
 income (5,157,995) 1,002,916 (1,335,649) 427,351
Interest income
 (expense)
 Long-term (15,688) (40,581) (4,474) (8,539)
 Short-term 51,299 123,548 37,588 40,823
Realized gain on
 sale of available-
 for-sale investment 437,384 - 437,384 -
Realized gain on
 sale of held-for-
 trading investment 427,038 - 326,944 -
Foreign exchange
 (loss) gain (116,225) 22,771 29,409 7,293
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(Loss) earnings
 before income
 taxes and
 extraordinary
 income (4,374,187) 1,108,654 (508,798) 466,928
Income tax recovery 88,525 264,766 15,509 124,321
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(Loss) earnings
 before
 extraordinary
 income (4,285,662) 1,373,420 (493,289) 591,249
Extraordinary income 591,886 - 591,886 -
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Net (loss) income $(3,693,776) $1,373,420 $98,597 $591,249
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Other comprehensive
 (loss) income

Unrealized gain on
 revaluation of
 available-for-
 sale investment
 arising during
 the period $446,897 $- $128,333 $-
Reclassification
 adjustment for
 gains included in
 net income (446,897) - (446,897) -
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Change in unrealized
 gain on available-
 for-sale investment - - (318,564) -
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Unrealized gain
 (loss) on
 translation of
 self sustaining
 foreign operations 49,484 9,988 104,827 (98,417)
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Other comprehensive
 income (loss) 49,484 9,988 (213,737) (98,417)
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Comprehensive (loss)
 income $(3,644,292) $1,383,408 $(115,140) $492,832
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Net (loss) earnings
 per share
Basic $(0.08) $0.02 $(0.01) $0.01
Diluted $(0.08) $0.02 $(0.01) $0.01

Weighted average
 number of shares
 outstanding
 Basic 56,755,340 56,378,431 56,762,413 56,392,413
 Diluted 57,272,770 59,162,382 58,072,492 57,436,921



International Datacasting Corporation
Consolidated Statement of Cash Flows
 Nine months ended Three months ended
 October 31, October 31, October 31, October 31,
 2009 2008 2009 2008

Operating Activities
 Net (loss) income $(3,693,776) $1,373,420 $98,597 $591,249
 Add items not
 requiring an
 outlay of cash:
 Goodwill
 impairment 2,491,030 - - -
 Amortization 921,844 875,763 296,313 289,366
 Bad debt expense
 (recovery) 38,357 (6,894)
 Gain on sale of
 available-for-
 sale investment (437,384) (437,384) -
 Gain on sale of
 held-for-trading
 investment (427,038) - (326,944) -
 Future income
 taxes (93,437) (175,009) (15,509) (107,174)
 Stock-based
 compensation 278,319 122,387 88,651 36,632
 Extraordinary
 income (591,886) - (591,886) -
Net change in
 operating components
 of working capital
 net of effects of
 business acquisition
 of Tiernan 1,257,951 (1,029,728) 486,370 (1,858,079)
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Cash (applied to)
 provided by operating
 activities (256,020) 1,166,833 (408,686) (1,048,006)
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Investing activities
Additions to equipment (350,378) (717,487) (149,253) (249,061)
Proceeds on
 disposition of
 available-for-sale
 investment 635,487 - 635,487 -
Proceeds on
 disposition of
 held-for-trading
 investment 624,778 - 624,778 -
Business acquisition
 of Tiernan (1,870,135) - (1,870,135) -
Purchase of
 available-for-sale
 investment (198,103) - - -
Purchase of held-for
 -trading investment (197,740) - (145,843) -
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Cash applied to
 investing
 activities (1,356,091) (717,487) (904,966) (249,061)
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Financing activities
Bank loan repayments - (971,978) - -
Repayments of
 obligations under
 capital leases (127,209) (160,038) (36,117) (54,471)
Issue of common
 shares, net of
 issue costs 56,411 3,363 - -
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Cash applied to
 financing activities (70,798) (1,128,653) (36,117) (54,471)
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Effect of foreign
 exchange rate
 changes on cash (20,698) 44,010 8,846 (32,336)
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Decrease in cash
 during the period (1,703,607) (635,297) (1,340,923) (1,383,874)

Cash - Beginning of
 period 7,554,296 7,842,443 7,191,612 8,591,020
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Cash - End of period $5,850,689 $7,207,146 $5,850,689 $7,207,146
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Interest paid 15,688 61,163 4,474 10,966
Equipment purchased
 under capital lease - 24,841 - -
Capital lease
 obligations assumed - (24,841) - -
Income taxes paid 4,913 8,612 - 913