International Datacasting Corporation Announces Fiscal 2010 Third Quarter Results

Posted on December 7, 2009

Ottawa, ON – December 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.