RICHMOND, BRITISH COLUMBIA — (Marketwired) — 11/06/13 —

DDS Wireless International Inc. (TSX: DD), a world leader in providing wireless data solutions for fleet management for more than 26 years, today reported financial results for the three and nine months ended September 30, 2013 and announced that the Company-s Board of Directors has approved a cash dividend on the Company-s common shares. All financial information is expressed in Canadian dollars and has been prepared in accordance with International Financial Reporting Standards (“IFRS”), except as otherwise noted.

“2013 continues to be a year of transition and repositioning for our Transit business unit with a material impact on the results of our Company,” stated Vari Ghai, CEO of DDS Wireless. “Having said that, I-m pleased that we have turned the corner on our deployment issues in that business unit as reflected by an increase in the revenue from the second quarter together with an improvement in the margin.”

Despite the sequential growth in revenue in the third quarter, the impact on revenue in the year to date and the remainder of the year is material and the Company is reporting that revenue will be significantly lower than last year, almost entirely as a result of the Transit business unit.

The Company also reported a bad debt expense of $0.7 million in the quarter due primarily to the rationalization of certain outstanding projects in its Transit business and the renegotiation of contractual arrangements around certain product enhancements. These related to contracts signed some four years ago and which are being closed out this year.

Although the Transit business has been a significant overhang on our results for the year, we are pleased with the progress of our other strategic growth drivers;

Also of note in terms of margin performance, is the fact that in fiscal 2014 approximately $1.4 million of amortization of intangible assets related to prior year acquisitions will no longer affect our gross margin, thereby significantly improving these margins.

We have made some important additions to our operations executive leadership in the past months. Sarah Boden joined us in May as President of the Transit business unit and has led the restructuring of that unit. Sarah comes to us as a seasoned executive with experience leading startup technology companies and large global publicly traded entities. Immediately prior to joining DDS Wireless, she was the CEO of Earth Class Mail, the leading provider of cloud based mail and parcel management systems. Prior to that she was President and COO of Print Inc. a $50m managed print service company.

Gregory Wade joins us this month as President of the Taxi business unit. Greg is a proven global executive with a deep understanding of the wireless industry. Prior to joining DDS Wireless, Greg held several senior leadership roles for over a decade with Research in Motion including most recently as Senior Vice President, East Asia where his team led the region from $50 million to $3 billion in annual revenues. Prior to that he was with AT&T Canada for close to ten years where he held various marketing and operational roles.

Third Quarter 2013 Financial Results

Revenue experienced significant improvement compared to the immediately preceding quarter, an increase of 23%, and experienced a slight decline of 1% or $0.1 million compared to the three months ended September 30, 2012.

The slight reduction in revenue compared to Q3 of 2012 arose from a combination of factors. Contract wins announced earlier in the year generated higher revenue in the quarter, with revenue from the Taxis G7 of Paris and LA Taxi Co-Operative Inc. deals contributing significantly; Taxi business unit revenues increased by 19% or $1.1 million from the third quarter of 2012. Given that these contracts related to the deployment of Vector 9000 product, the increase in revenue is largely within project delivery. In contrast, revenue declined by $0.9 million in the Transit business unit, primarily driven by lower project delivery revenue, and New Markets revenue decreased by $0.3 million due to fewer new customers and installations in the quarter.

Gross margin increased by $0.2 million or 5% to $4.3 million compared to Q3 of 2012. Given the slightly lower revenue in the quarter, this increase is attributable to higher margin yields earned on project revenues in both the Taxi and Transit business units. Good momentum gained on the Transit business unit-s largest projects, in conjunction with the Taxi unit-s increased mix toward higher margin hardware sales, contributed to the higher margin yields.

As noted earlier, 2013 continues to be a year of transition and repositioning for the Transit business unit, impacting not only revenues, but also operating expenses. During the quarter, the Company reported a bad debt expense of $0.7 million due primarily to the rationalization of certain outstanding projects in its Transit business. This served to increase operating expenses, via an increase in general and administrative expense, by $0.7 million.

With the increase in operating expenses of $0.7 million, offset in part by the increase in gross margin, there was a resultant decrease in earnings from operating activities of $0.4 million compared to the same period in the prior year. The operating loss of $0.1 million, in combination with a net finance loss of $0.4 million, resulted in a loss before tax of $0.5 million. The net finance loss in the third quarter arose largely from a loss on the revaluation of marketable securities held as an investment ($0.2 million) in combination with foreign exchange losses.

EBITDAS(1) for the quarter was break-even, compared to $0.2 million or 2% of revenues in the third quarter of 2012.

As at September 30, 2013, the Company held $9.8 million in cash and short-term investments and, as of today, has a balance of approximately $11.0 million in cash and short-term investments.

Year-to-Date 2013 Financial Results

Revenue declined 11% or $3.2 million compared to the nine months ended September 30, 2012. The year to date variance in revenues occurred in the first half of the year and arose primarily within the Transit ($3.3 million) and New Markets ($0.4 million) business units. The significant decline in the Transit business unit revenues was a result of the project deployment and delivery issues experienced in Q2 2013, in combination with the phasing of a key project in Q1 2013. Offsetting these decreases, revenue in the Taxi business unit increased by $0.5 million. The increase in the Taxi business unit was driven by an increase in project deployment activities in the third quarter of 2013 ($0.7 million) and an increase in maintenance revenues ($0.4 million), offset by lower small hardware sales ($0.6 million).

Gross margin decreased by $1.0 million or 9% to $10.5 million from the same period last year due lower revenues and a slight improvement in margins earned in the Taxi unit. Both the margin yield and the Adjusted Gross Margin(2) yield improved by one percentage point from the first nine months of 2012, ending at 41% and 46% respectively.

The lower gross margin, in combination with an increase in operating expenses compared to the first nine months of 2012 of $0.4 million, led to a decrease in earnings from operations of $1.4 million. This decrease was offset by a favourable variance in net finance income and taxes of approximately $1.9 million, resulting in earnings after tax being $0.5 million higher. The favourable net finance income in the year to date arose largely from a gain on the revaluation of marketable securities held as an investment ($1.0 million) in combination with foreign exchange gains of $0.4 million.

EBITDAS(1) for the nine months ended September 30, 2013 was $1.1 million or 4% of revenues, compared to EBITDAS(1) of $0.5 million or 2% of revenues in the comparable period of 2012.

Outlook

A combination of dampening of pipeline development in our Transit business unit together with the deployment delays noted above has created a slowing of the buildup of the backlog which is now at $34.6 million. The Taxi business unit revenue is developing consistent to last year, but with timing issues and the reduced visibility in the Transit unit the overall Company revenue for 2013 fiscal year will be significantly lower than last year.

The recent wins in both the Taxi backseat and new TaxiBook customers will generate meaningful revenue only in 2014 onwards. With new leadership in both Taxi and Transit business units and the expectation that we will be able to close on the acquisitions mentioned above, we anticipate that we will show positive growth next year and beyond.

Dividend

The Company is pleased to announce its 8th consecutive quarterly dividend. The cash dividend, in the amount of $0.02 per Share, will be paid on or about January 15, 2014 to holders of record of the Company-s Common Shares as of the close of business on December 31, 2013. The Company expects to declare dividends on its Shares quarterly; however, the declaration of any future dividends, as well as the distribution date and amount of any future dividends, will be determined by the Board of Directors of the Company immediately prior to each such declaration. Unless the Company indicates otherwise, the Company-s dividends are designated as eligible dividends for the purposes of the Income Tax Act (Canada). As of November 4th, 2013, the Company has 13,674,440 Common Shares issued and outstanding.

Conference Call

The Company will host a conference call at 1:00 pm Eastern Time today to discuss the financial results. Please call 416-340-8527 / 877-440-9795 to participate in the call. A replay of this conference call will be available through November 18, 2013 by dialing 905-694-9451 / 800-408-3053 and entering access code 4947461.

Non-IFRS Measures

The following and preceding discussion of financial results includes reference to EBITDAS and Adjusted Gross Margin. EBITDAS is a non-IFRS financial measure which the Company defines as Earnings before interest, taxes, amortization, and share-based compensation. The measure is provided as a proxy for the cash earnings of the business as net income for the Company includes a significant amount of non-cash amortization expense primarily related to acquisitions completed in prior years.

Adjusted Gross Margin excludes amortization expense and share-based compensation expenses. The measure is provided as gross margin includes significant amortization expense related to acquired intangibles which management believes may affect the comparability of gross margin. Please refer to the table attached to this press release for a reconciliation of non-IFRS measures to reported financial results.

Cautionary Note Regarding Forward-Looking Statements

This press release may contain forward-looking statements that involve risks and uncertainties. These forward-looking statements relate to, among other things, operations, anticipated financial performance, business prospects and strategies, statements about future market conditions, supply and demand conditions, revenues, gross margins, operating expenses, profits, and other expectations, intentions, and plans contained in this press release that are not historical facts. Such forward-looking statements are subject to a number of known and unknown risks, uncertainties and other factors which could cause actual results or events to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, business risks, changes in market and competition, technological and competitive developments and potential downturns in economic conditions generally. Given these risks and uncertainties DDS Wireless cannot guarantee that any forward looking statements will be realized.

About DDS Wireless International Inc.

DDS Wireless International Inc. is a global leader in providing application software for multiple vertical markets within the transportation industry. The Company specializes in transit routing and scheduling, real-time dispatching, vehicle location and tracking software applications, communications infrastructure as well as in-vehicle wireless devices. DDS Wireless operates three businesses dedicated for Taxi, Transit and New Markets such as OEM partners, Limousines, Airport Shuttles and Buses. The Company supports its customers worldwide through its offices in Canada, Finland, Singapore, Sweden, U.K. and U.S.A.

SEE ATTACHED SUMMARY FINANCIAL STATEMENTS AND THE RECONCILIATION OF NON-GAAP MEASURES

Contacts:
DDS Wireless International Inc.
Investor Relations
(604) 241-1441

DDS Wireless International Inc.
Caroline J. Dunn
Chief Financial Officer
(604) 214-7206

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