Wireless Matrix Announces Second Quarter Fiscal 2011 Results

HERNDON, Va.--(BUSINESS WIRE)-- Wireless Matrix Corporation (TSX: WRX), the leading provider of service chain performance management solutions targeting field service organizations, today announced financial and operating results for the three and six months ended October 31, 2010.

All currency is expressed in U.S. dollars.

Second Quarter 2011 Highlights

• Ended the quarter with 83,883 total subscribers, up 6% from Q2 2010, with almost 3,000 additional subscribers in backlog anticipated to be activated in fiscal year 2011.
• Application related subscribers increased 60% to 59,713, now representing 71% of total subscribers.
• Total revenues were $8.7 million, compared to $10.3 million in Q2 2010.
• Application-related revenue increased 27% to $3.5 million.
• Improved service gross margin from 71% to 79% in Q2 2011.
• Overall gross margin was 62% compared to 55% a year earlier.
• Adjusted EBITDA* of $0.9 million, compared to $1.0 million in Q2 2010.
• Net loss of $1.3 million or $0.02 per share, compared to a net loss of $280,000 or $0.00 per share in Q2 2010.
• Closed San Francisco facility and successfully migrated functions to Herndon headquarters in September.
• Commenced a deployment with a leader in the residential services space that has led to an initial roll-out of 1,600 subscribers with the potential to expand to 40,000 subscribers next year.

“We have overcome some challenges in the first half of the fiscal year towards making significant progress in refocusing on our SaaS offerings for improved long-term growth and profitability,” said J. Richard Carlson, president and chief executive officer of Wireless Matrix. “Our strategy of outsourcing devices is on track and will lead to sizable savings in the second half of the year. We have been pleased with the early results of our expansion into the small-to-medium business market. More importantly, we continue to have success in winning major customers in the enterprise space, as evidenced by the recent contract win that could lead to a substantial increase in our subscriber base.”

Financial and Operating Review

Application-related services revenue was $3.4 million in the second quarter of fiscal 2011, an increase of $0.7 million or 27% from $2.7 million in Q2 2010. This growth was offset by a $0.4 million decrease in hardware and license revenues, and by a $1.9 million decrease in satellite-related services revenues which totaled $2.7 million in Q2 2011. Satellite services revenues have been declining as the Company transitions its legacy subscriber base to application subscriptions enabled by lower cost wireless communication services. Satellite communication subscribers represented 29% of total subscribers and 31% of total revenues in Q2 2011, compared to 53% of subscribers and 44% of revenues one year earlier. Wireless Matrix’s total revenues in the second quarter of fiscal 2011 were $8.7 million, a decrease of $1.6 million or 15% compared to Q2 2010 revenues.

Wireless Matrix ended the quarter with 83,883 subscribers, a 6% increase over the 79,277 subscribers at October 31, 2009. The Company added 1,254 gross subscribers in the second quarter of fiscal 2011, including 845 application-related subscribers. Total subscribers decreased by 1,234 units during the quarter, however, due to churn or disconnects of 2,488 subscribers resulting primarily from reduction-in-forces leading to fleet reductions by a major customer. Subsequent to quarter end, the Company has shipped units to generate over 1,900 application and wireless network subscribers during the third quarter fiscal 2011.

Gross margin percentage grew to 62% in the second quarter of fiscal 2011 from 55% in Q2 2010, despite the decrease in revenue. Margin improvement resulted from the layering of additional subscribers onto a relatively fixed infrastructure while at the same time reducing the costs of that infrastructure over the past year. Gross margins on service revenues were 79% in the Q2 2011, up from 71% a year earlier.

Adjusted EBITDA of $0.9 million in Q2 2011 was down 13% from $1.0 million in the previous year’s second quarter, due to the decline in revenues. While operating expenses declined 3% from Q2 2010, they included $568,000 of expenses related to operations scheduled to be discontinued by Q3 2011. In the absence of those expenses, proforma adjusted EBITDA for this quarter would have been $1.4 million. Management anticipates EBITDA improvements in the second half of the fiscal year as more subscribers are added and cost savings are realized from the ongoing restructuring of the business.

In addition to amounts charged to operating expenses, the Company incurred $1.0 million of corporate restructuring costs in the second quarter of 2011 as a result of the closing and relocation of certain facilities, compared to $0.3 million in Q2 2010. These costs contributed to a net loss of $1.3 million in Q2 2011, compared to a net loss of $0.3 million a year earlier.

Wireless Matrix had a cash balance of $12.1 million at October 31, 2010, compared to $13.6 million at July 31, 2010. Cash was primarily used to fund infrastructure projects that are intended to lead to improved margins. The Corporation has no debt, and its $4 million line of credit remains unused.

Outlook

Wireless Matrix provided an updated outlook for fiscal 2011 in a recent news release. Current expectations for the year are as follows:

• Total revenue of approximately $33.5 to $36.0 million, comprised of:
  • Recurring Services revenue of approximately $25 to $26.5 million
  • Hardware revenues of approximately $8.5 to $9.5 million
• Adjusted EBITDA of $4.7 to $5.5 million
• Total subscribers greater than 90,000.

“We are on track with our restructuring initiatives, which have already led to savings in both our cost of goods and operating expenses,” said Maria C. Izurieta, chief financial officer of Wireless Matrix. “In the second half of fiscal 2011 we expect to continue to deliver significant year-over-year improvement in gross margins. We also anticipate generating EBITDA at levels above that of the first half, resulting in double-digit EBITDA growth for the year. We are optimistic that the current opportunities in our sales pipeline will enable us to return to our pattern of subscriber growth.”

Conference Call

Wireless Matrix has scheduled a conference call to begin at 10:00 a.m. EST on Tuesday, December 14, 2010, to discuss these results. The conference call dial-in number is 800.926.4425. A replay of the conference call will be available on the Company’s website at www.wirelessmatrix.com or by dialing 800.558.5253 (code#21491921), shortly after the completion of the conference call until 11:59 p.m. EDT on December 16, 2010.

About Wireless Matrix

Wireless Matrix Corporation (TSX: WRX) is a leader in mobile resource management providing service chain execution solutions to enterprises with service fleets. Our solutions provide location intelligence for managing, measuring and monitoring service execution, while at the same time increasing productivity and reducing operating expenses within service fleet operations. The Wireless Matrix solution suite includes FleetOutlook®, a web-based platform that provides management and fleet operators complete visibility into their operations, enabled by real-time wireless data communication services and hardware devices. Wireless Matrix is headquartered in Herndon, Va.

Non-GAAP measures

In addition to providing measures in accordance with Canadian GAAP, Wireless Matrix presents certain supplemental measures that are used by Management to manage and measure operations. These are gross margin, operating expenses, adjusted EBITDA, current liabilities before deferred product revenue, ARPU, and churn rates. These measures do not have any standardized meaning prescribed by Canadian GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. Investors are urged to refer to the “Supplemental Non-GAAP measures” section in our Management Discussion and Analysis for more details.

Forward Looking Statements

General information regarding the Corporation set forth in this document, including management’s assessment of the Corporation’s future plans and operations, contains forward-looking statements that involve substantial known and unknown risks and uncertainties. These forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Corporation’s and management’s control, including but not limited to, the impact of general economic conditions, industry conditions, market demand, dependence on key customers, financial conditions and wherewithal of customers, non-infringement on third-party technology, ability to grow through acquisition, technological aptitude of products and intellectual property rights, inventory management, fluctuation of commodity prices, fluctuation of foreign exchange rates, imperfection of estimates, effective integration of acquisitions, industry competition, availability of qualified personnel and management, stock market volatility, timely and cost-effective access to sufficient capital from internal and external sources, ability to integrate and realize anticipated benefits from acquisitions, ability to procure and resell third party network communications at favorable rates, ability to realize cost savings and margin improvements from restructuring initiatives and outsourcing activities, and to effectively manage growth. The Corporation’s actual results, performance or achievement could differ materially from those expressed in or implied by, these forward-looking statements and accordingly, no assurance can be given that any of the events anticipated to occur or transpire from the forward-looking statements will provide what, if any, benefits to the Corporation. All data presented herein should be read in conjunction with the Corporation’s regulatory filings, with the appropriate Securities Commission and SEDAR. These filings, including the Corporation’s AIF, are located at www.sedar.com.

CONTACT:

Investor Relations
Wireless Matrix
Maria C. Izurieta, 703-262-4020
maria.izurieta@wirelessmatrix.com
or
The Equicom Group
Jeff Codispodi or Craig Armitage
416-815-0700 ext 261 or 278
jcodispodi@equicomgroup.com or carmitage@equicomgroup.com

KEYWORDS:   United States  North America  Canada  Virginia

INDUSTRY KEYWORDS:   Technology  Data Management  Software  Transport  Mobile/Wireless  Logistics/Supply Chain Management

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