For information contact:
Rick Wadsworth, MDSI Mobile Data Solutions Inc., 519-729-7998 or ir@mdsi.ca
NEWS RELEASE
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, B.C. (August 2, 2005) – In the second quarter of 2005, MDSI Mobile Data Solutions Inc. (NASDAQ: MDSI) (TSX: MMD), 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).
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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).www.mdsi.ca
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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 |