TeleCommunication Systems Reports 2010 Fourth Quarter and Record Full Year ResultsRecord Annual Revenue of $389 Million Drives EBITDA of $66 Million and Net Income of $0.28 per Diluted Share
ANNAPOLIS, MD -- (Marketwire - February 03, 2011) - TeleCommunication Systems, Inc. (TCS) (NASDAQ: TSYS), a world leader in highly reliable and secure mobile communication technology, reported results for the fourth quarter and fiscal year ended December 31, 2010.
Fourth Quarter 2010 Results
- Revenue was $102.3 million, up 13% from $90.8 million in the fourth quarter of 2009.
- Gross profit was $34.5 million, up 14% from $30.4 million in the fourth quarter of 2009.
- EBITDA (Earnings before Interest, Taxes, Depreciation, Amortization and non-cash stock-based compensation) was $17.4 million, up 70% from $10.2 million in the fourth quarter of 2009 (excluding a patent-related net gain), (see discussion about the presentation of EBITDA below).
- Net income was $3.5 million or $0.06 per diluted share, compared to $11.4 million or $0.20 per diluted share in the fourth quarter of 2009, which included a patent-related gain representing about $0.17 per share, net of related income tax expense.
Full Year 2010 Results
- Revenue for the year was a record $388.8 million, up 30% from the previous record of $300.1 million in 2009. This represents the company's 13th consecutive year of record revenue.
- Gross profit was a record $138 million, up 21% from the previous record of $113.9 million in 2009.
- EBITDA for 2010 was a record $66.3 million, an increase of 35% from the previous record of $49.1 million in 2009, excluding the patent gain.
- Net income was $15.9 million or $0.28 per diluted share. This compares to net income of $28.3 million or $0.53 per diluted share (including the patent-related net gain representing about $0.17 per share, net of related income tax expense) in 2009.
- Funded backlog was $322.3 million at year-end 2010, versus $338.5 million at the end of 2009. Total backlog, including unfunded orders, grew from $630.8 million at the end of 2009 to a record $1.1 billion at the end of 2010 (see further discussion about backlog, below).
Management Commentary
"TCS exceeded profitability expectations for the fourth quarter through expense controls and an improving services mix despite lower revenue that was affected by federal budget pressure on procurement funding," said Maurice B. Tosé, TCS chairman and CEO. "During 2010, TCS assimilated the 2009 acquisitions, deepening company proficiency and credentials in wireless location-based and secure communication platforms. The acquired businesses contributed to record revenue growth and EBITDA, with record contributions from both our Commercial and Government segments."
Tom Brandt, SVP & CFO, commented: "In our Commercial segment, wireless location-based services and systems, including navigation, E9-1-1 and other application businesses grew significantly. While in our Government segment, we are encouraged by user reception of TCS' broadened secure wireless communication solutions portfolio, plus success with our new cyber security business."
"About 70 percent of 2010 revenue came from services, rather than systems, versus 50 percent in 2009, with most of this based upon recurring revenue streams," continued Brandt. "We enter 2011 with more than $300 million of funded backlog, so a growing proportion of our business is forward-visible. This should contribute towards smoother quarter to quarter revenues and profits.
"Beginning this period, we decided to join our high tech peers and report results as an Adjusted Net Income number, which we define as GAAP net income adjusted for amortization of acquired intangibles, non-cash stock-based compensation expense, non-cash tax and financing charges, patent gains and discontinued operations. TCS management believes this measure is a preferable metric for cash flows available to equity holders of our ongoing operations, and its reconciliation to net income is presented in the table below. Our historical trend using this measure is now also included in the model that is available for download from our website."
Continued Tosé: "As we begin 2011, TCS remains committed to the creation of shareholder value through investment in quality-of-service, with a focus on growth markets, which we are confident will yield long-term growth in revenue and profits for our investors. We will continue to invest in R&D, capital assets, and strategic acquisitions to strengthen our position as the leader in highly reliable and secure mobile communication technology."
Summary of EBITDA and Adjusted Net Income and Reconciliation to Net Income
Quarter ended Dec 31 Year ended Dec 31
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
(unaudited) (unaudited)
Revenue $ 102,275 $ 90,841 $ 388,803 $ 300,087
========= ========= ========= =========
EBITDA excl. patent-related
gains $ 17,351 $ 10,231 $ 66,309 $ 49,077
Non-cash charges (1) (9,236) (5,343) (33,897) (15,833)
--------- --------- --------- ---------
Income from operations excl.
patent-related gains 8,115 4,888 32,412 33,244
Patent-related gain, net of
expenses - 15,700 - 15,700
Interest and other
income/(expense) (2,916) (1,349) (8,386) (1,880)
Tax provision (1,747) (7,854) (8,147) (18,795)
--------- --------- --------- ---------
Net Income 3,452 11,385 15,879 28,269
Add back tax-effected
convertible debt interest
expense (2) - 380 - 380
--------- --------- --------- ---------
Net Income for Diluted EPS
calculation $ 3,452 $ 11,765 $ 15,879 $ 28,649
========= ========= ========= =========
Diluted shares for Net Income
per Share (2) 55,955 59,564 56,032 53,946
Net Income per Share - Diluted $ 0.06 $ 0.20 $ 0.28 $ 0.53
========= ========= ========= =========
Net Income $ 3,452 $ 11,385 $ 15,879 $ 28,269
Non-cash stock based
compensation expense 2,754 2,312 10,172 5,859
Amortization of acquired
intangible assets 1,160 489 4,664 870
Non-cash tax expense 1,588 7,588 5,010 17,429
Amortization of deferred
finance fees 187 327 750 401
Patent-related gain, net of
expenses - (15,700) - (15,700)
--------- --------- --------- ---------
Adjusted Net Income 9,141 6,401 36,475 37,128
Add back tax-effected
convertible debt interest
expense (2) 770 380 3,044 380
--------- --------- --------- ---------
Adjusted Net Income for Diluted
EPS calculation $ 9,911 $ 6,781 $ 39,519 $ 37,508
========= ========= ========= =========
Diluted shares for Adjusted Net
Income per Share (2) 65,957 59,564 66,034 53,946
Adjusted Net Income per Share -
Diluted $ 0.15 $ 0.11 $ 0.60 $ 0.70
========= ========= ========= =========
(1) Non-cash charges are depreciation/amortization of fixed assets,
acquired intangible assets, software development costs and stock-based
compensation expense.
(2) Shares issuable via the convertible debt are included if dilutive, in
which case tax-effected interest expense on the debt is excluded from
the determination of Net Income per Share and Adjusted Net Income per
Share.
The company will hold a conference call later today, Thursday, February 3, 2011 to discuss these financial results. Please see the Conference Call section below for further instructions.
Fourth Quarter and Full Year Financial Highlights
Revenue and Gross Profit (unaudited):
Three months ended December 31
-------------------------------------------------------------
2010 2009 Incr. (Decr.)
------------------- ------------------- -------------------
Coml. Govt. Total Coml. Govt. Total Coml. Govt. Total
----- ----- ----- ----- ----- ----- ----- ----- -----
Revenue
($ millions)
Services $45.4 $27.4 $72.8 $27.6 $19.8 $47.4 $17.8 $ 7.6 $25.4
Systems 5.8 23.7 29.5 7.8 35.6 43.4 (2.0) (11.9) (13.9)
----- ----- ------ ----- ----- ----- ----- ----- -----
Total
revenue $51.2 $51.1 $102.3 $35.4 $55.4 $90.8 $15.8 $(4.3) $11.5
===== ===== ====== ===== ===== ===== ===== ===== =====
Gross profit
($ millions)
Gross
profit-
services $22.3 $ 7.5 $29.8 $17.7 $ 4.1 $21.8 $ 4.6 $ 3.4 $ 8.0
As %
of rev 49% 27% 41% 64% 21% 46%
Gross
profit-
systems 1.9 2.8 4.7 4.1 4.5 8.6 (2.2) (1.7) (3.9)
As % of
rev 33% 12% 16% 53% 13% 20%
----- ----- ------ ----- ----- ----- ----- ----- -----
Total
gross
profit $24.2 $10.3 $ 34.5 $21.8 $ 8.6 $30.4 $ 2.4 $ 1.7 $ 4.1
===== ===== ====== ===== ===== ===== ===== ===== =====
As % of
rev 47% 20% 34% 62% 16% 33%
Twelve months ended December 31
--------------------------------------------------------------
2010 2009 Incr. (Decr.)
-------------------- ------------------- -------------------
Coml. Govt. Total Coml. Govt. Total Coml. Govt. Total
------ ----- ------ ----- ----- ------ ----- ----- ------
Revenue
($ millions)
Services $169.0 $93.3 $262.3 $89.7 $62.2 $151.9 $79.3 $31.1 $110.4
Systems 32.7 93.8 126.5 37.6 110.6 148.2 (4.9) (16.8) (21.7)
------ ------ ------ ------ ------ ------ ----- ----- ------
Total
revenue $201.7 $187.1 $388.8 $127.3 $172.8 $300.1 $74.4 $14.3 $88.7
====== ====== ====== ====== ====== ====== ===== ===== ======
Gross profit
($ millions)
Gross
profit-
services $ 83.3 $ 26.8 $110.1 $ 54.4 $ 13.4 $ 67.8 $28.9 $13.4 $ 42.3
As % of
rev 49% 29% 42% 61% 22% 45%
Gross
profit-
systems 18.3 9.6 $ 27.9 27.0 19.1 46.1 (8.7) (9.5) (18.2)
As % of
rev 56% 10% 22% 72% 17% 31%
----- ----- ------ ----- ----- ----- ----- ----- -----
Total
Gross
Profit $101.6 $36.4 $138.0 $81.4 $32.5 $113.9 $20.2 $ 3.9 $24.1
====== ====== ====== ====== ====== ====== ===== ===== ======
As % of
rev 50% 19% 35% 64% 19% 38%
(Gross Profit = revenue minus direct cost of revenue, including amortization of software development costs and related non-cash stock-based compensation. Noncash charges = depreciation/amortization of fixed assets, acquired intangible assets, software development costs and stock-based compensation expense.)
Commercial Segment Revenue and Gross Profit:
Commercial Segment revenue for the fourth quarter of 2010 was $51.2 million, up 45% from $35.4 million in the same year-ago quarter. Commercial Segment gross profit was $24.2 million or 47% of commercial revenue, an improvement from $21.8 million a year-ago. The growth reflects higher contributions from services and systems for carrier wireless location-based services, including navigation, E9-1-1, other applications, and infrastructure -- more than offsetting the decline in revenue and gross profit from no new text messaging license sales in the quarter. Commercial services gross profit as a percentage of revenue was 49% in 2010 versus 64% in 2009.
For the full year, commercial segment revenue was a record $201.7 million, up 58% from $127.3 million in 2009, and gross profit was a record $101.6 million, up 25% from $81.4 million in 2009. Location business grew in the second half of 2010 as the company continued to address opportunities in a global market, which is viewed to still be in its early stages of adoption.
Government Segment Revenue and Gross Profit:
Revenue from government customers for the fourth quarter was $51.1 million, down 8% from the same year-ago quarter. Services revenue of $27.4 million was up $7.6 million or 38% over the fourth quarter of 2009, while systems sales were down $11.9 million or 33% lower than the year-ago quarter. Systems sales at TCS have become a component of a solution sale that typically includes field support, maintenance, and sometimes airtime/space segment with overall margins that are attractive. Year-end 2010 federal budget pressures on funding adversely affected many defense vendors in 2010, and TCS experienced less federal fiscal year end purchases through its contract vehicles. Total government segment fourth quarter gross profit was up 20% from 2009. Government services gross profit was $7.5 million or 27% of government services revenue, up from $4.1 million or 21% of government services revenue in the fourth quarter of 2009, while systems gross profit was down on lower volume.
For the full year, revenue from government customers totaled a record $187.1 million, up 8% from a previous record $172.8 million in 2009. Services revenue of $93.3 million was up $31.1 million or 50% over 2009. Systems revenue in 2010 was $93.8 million compared to $110.6 million in 2009. Gross profit from government segment business in 2010 was $36.4 million, up 12% from $32.5 million in 2009. Gross profit as a percentage of government segment revenue was 19%, about the same as 2009.
Operating Costs and Expenses:
R&D: Fourth quarter 2010 R&D expense was $7.5 million (7% of revenue), compared to $6.7 million (7% of revenue) in the fourth quarter of 2009. For the full year, R&D expense was $30.1 million (8% of revenue), up $7.7 million from $22.4 million (7% of revenue) in 2009. TCS continues to invest aggressively in location-based technology and related applications for wireless carriers, as well as telematics, messaging, and secure, highly reliable tactical communication solutions.
SG&A: Fourth quarter 2010 selling, general and administrative expense was $14.8 million (14% of revenue), down from $16.7 million (18% of revenue) in the fourth quarter of 2009. For the full year, selling, general and administrative expense was $61.1 million (16% of revenue), up from $51.4 million (17% of revenue) in 2009. Higher year-over-year SG&A expenditures reflect the costs associated with the larger scale of the company, and higher expenses related to intellectual property.
Non-cash charges: Total non-cash charges to operating income were $9.2 million in the fourth quarter of 2010, compared to $5.3 million in the same year-ago quarter, and for the full year, total non-cash charges to operating profit were $33.9 million versus $15.8 million in 2009. The increases reflect accounting for acquired intangibles associated with 2009 acquisitions, depreciation and amortization of higher fixed asset balances including hosted software, as well as higher non-cash stock-based compensation expense associated with a larger employee base, resulting mainly from the 2009 acquisitions.
Patent-Related 2009 Gain:
In January 2010, the company received a $23 million payment from a settlement of patent litigation with Sybase that was signed and recorded in the fourth quarter of 2009, which involved licensing TCS patents related to cell phone carrier messaging technology. TCS incurred $7.3 million in legal and other expenses related to the settlement, so that the net pre-tax proceeds to TCS were $15.7 million, which represented a contribution of about $0.17 per share, net of related income tax expense, to fourth quarter and full year 2009 results.
Income from Operations:
Income from operations was $8.1 million for the fourth quarter of 2010, up 66% from $4.9 million in the same year-ago quarter (excluding the patent-related gains, net of expenses). For the full year, income from operations was $32.4 million, down 3% from $33.2 million (excluding the patent-related gain, net of expenses) in the same year-ago period.
Income Taxes:
The company recorded a $1.7 million provision for income taxes against pre-tax income for the fourth quarter of 2010, representing an effective tax rate of 34%, and recorded a $8.1 million provision for income taxes (34% effective rate) for the full year. In the fourth quarter of 2009, the company recorded a $7.9 million provision for income taxes against pre-tax income, representing an effective tax rate of 40%, and recorded a $18.8 million provision for income taxes (40% effective rate) for the full year against pre-tax income. Accounting for investment tax credit estimates has affected the book tax rate.
Net Income:
Net income for the fourth quarter of 2010 was $3.5 million or $0.06 per diluted share, compared to net income of $11.4 million or $0.20 per diluted share in the fourth quarter of 2009, which included net patent-related gains. Full year 2010 net income was $15.9 million or $0.28 per diluted share, compared to net income of $28.3 million or $0.53 per diluted share in 2009 which included net patent-related gains. Per share amounts were partly affected by the higher number of shares outstanding in 2010. Also, the convertible debt is anti-dilutive for 2010's Q4 and full year diluted earnings per share calculations, so that the share count for diluted earnings per share excludes convertible debt shares.
Liquidity and Capital Resources:
At December 31, 2010, TCS had $81.5 million of cash, equivalents, and marketable securities, compared to $112.8 million at the beginning of the quarter. Funds were generated in the fourth quarter from $17.4 million in EBITDA, $0.9 million in proceeds from exercise of employee stock options, and $1.2 million from new lease financing for fixed asset purchases. Uses of cash during the quarter were $6.3 million increase in working capital, $7.7 million for capital expenditures including software development, $33.6 million of scheduled debt principal and lease payments, including a $30 million payment to the sellers of Networks in Motion under the 2009 agreement, and $3.2 million for cash interest, financing and other expenses paid. The company had approximately $33 million of unused borrowing availability under its bank line of credit at year end.
Intellectual Property:
TCS was issued seven patents during the fourth quarter of 2010. As of December 31, 2010, the company's patent portfolio included 136 patents issued in the U.S. and abroad, and more than 300 patent applications pending. The company continued efforts to monetize its patents through licensing and other arrangements, as well as use them to position the company for competitive advantages.
Backlog:
9/30/2010 New Orders Revenue 12/31/2010
---------- ---------- --------- ----------
Funded Contract Backlog ($mil)
Commercial $ 228.9 $ 63.8 $ (51.2) $ 241.5
Government $ 107.6 $ 24.3 $ (51.1) $ 80.8
---------- ---------- --------- ----------
Total Funded Contract Backlog $ 336.5 $ 88.1 $ (102.3) $ 322.3
Customer Options $ 538.9 $ 279.4 $ 818.3
---------- ---------- --------- ----------
Total Backlog $ 875.4 $ 367.5 $ (102.3) $ 1,140.6
========== ========== ========= ==========
Funded contract backlog on December 31, 2010 was $322.3 million of which the company expects to recognize approximately $179.3 million in the next 12 months. Funded contract backlog represents contracts for which fiscal year funding has been appropriated by the company's customers (mainly federal agencies), and for hosted services (mainly for wireless carriers); backlog for which is computed by multiplying the most recent month's contract or subscription revenue times the remaining months under existing long-term agreements, which is the best available information for anticipating revenue under those agreements. Total backlog, as is typically measured by government contractors, includes orders covering optional periods of service and/or deliverables, but for which budgetary funding may not yet have been approved. Company backlog at any given time may be affected by a number of factors, including the availability of funding, contracts being renewed, or new contracts being signed before existing contracts are completed. Some of the company's backlog could be canceled for causes such as late delivery, poor performance and other factors. Accordingly, a comparison of backlog from period to period is not necessarily meaningful and may not be indicative of eventual actual revenue.
Conference Call
TCS will hold a conference call later today, Thursday, February 3, 2011 to discuss these financial results. The company's chairman, president and CEO, Maurice B. Tosé, and senior vice president and CFO, Tom Brandt, will host the call starting at 5:00 p.m. Eastern time. A question and answer session will follow management's presentation.
To participate in the call, dial the appropriate number 5-10 minutes prior to the start time, ask for the TeleCommunication Systems conference call and provide the conference ID:
Dial-In Number: 1-800-894-5910
International: 1-785-424-1052
Conference ID#: 7TELECOM
The conference call will be broadcasted simultaneously on the company's Web site at www.telecomsys.com. For the webcast, please go to the Web site at least 15 minutes early to register, download, and install any necessary audio software. If you have any difficulty connecting with the conference call or webcast, please contact Liolios Group at 949-574-3860.
A replay of the call will be available after 8:00 p.m. Eastern time on the same day and until February 17, 2011:
Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay pin number: 12422
About TeleCommunication Systems, Inc.
TeleCommunication Systems, Inc. (TCS) (NASDAQ: TSYS) is a world leader in highly reliable and secure mobile communication technology. TCS infrastructure forms the foundation for market leading solutions in E9-1-1, text messaging, commercial location and deployable wireless communications. TCS is at the forefront of new mobile cloud computing services providing wireless applications for navigation, hyper-local search, asset tracking, social applications and telematics. Millions of consumers around the world use TCS wireless apps as a fundamental part of their daily lives. Government agencies utilize TCS' cyber security expertise and professional services. Headquartered in Annapolis, MD, TCS maintains technical, service and sales offices around the world. To learn more about emerging and innovative wireless technologies, visit www.telecomsys.com.
About the Presentation of EBITDA
EBITDA is not a financial measure calculated and presented in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. The company defines EBITDA as net income/(loss) before depreciation; amortization of non-cash stock-based compensation; amortization of software development costs, property and equipment and other intangibles; taxes; and interest expense and other non-cash financing costs. Other companies (including competitors) may define EBITDA differently. The company presents EBITDA because management believes it to be an important supplemental measure of performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of TCS nor is it intended to be predictive of potential future results. Investors should not consider EBITDA in isolation or as a substitute for analysis of the company's results as reported under GAAP. See "GAAP to non-GAAP Reconciliation" above for further information on this non-GAAP measure. Shares used in the calculation of GAAP diluted earnings per share are the same as the shares used in the calculation of diluted adjusted operating income/(loss) per share except when the company reports a GAAP loss.
About the Presentation of Adjusted Net Income
Adjusted net income is not a financial measure calculated and presented in accordance with GAAP and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, nor as an alternative to cash flow from operating activities as a measure of liquidity. Adjusted net income is defined as GAAP net income adjusted for amortization of acquired intangibles, non-cash stock-based compensation expense, non-cash tax and financing charges, and patent gains and discontinued operations. TCS has provided adjusted net income in addition to GAAP financial results because management believes this non-GAAP measure helps provide a consistent basis for comparison between quarters and fiscal year growth rates that are not influenced by certain non-cash charges and credits or items not part of our ongoing operations, and is helpful in understanding the underlying operating results.
Forward-looking Statements
This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. These statements are based upon TCS' current expectations and assumptions that are subject to a number of risks and uncertainties that would cause actual results to differ materially from those anticipated. The words, "believe," "expect," "intend," "anticipate," "should," and variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. Statements in this announcement that are forward-looking include, but are not limited to statements (a) that are made in the management commentary section by Mr. Tosé and Mr. Brandt; (b) regarding our location business and our ability to address opportunities in the global market; (c) about attractive margins related to our systems sales; (d) about continued investments in location-based technology; (e) regarding our borrowing ability; (f) related to our intellectual property; and (g) related to our ability to recognize any of the reported backlog.
Additional risks and uncertainties are described in the company's filings with the Securities and Exchange Commission (SEC). These include without limitation risks and uncertainties relating to the company's financial results and the ability of the company to (i) sustain profitability, (ii) continue to rely on its customers and other third parties to provide additional products and services that create a demand for its products and services, and to do so at prices that will allow us to continue to fund our operations, (iii) conduct its business in foreign countries, (iv) adapt and integrate new technologies into its products and adequately expand its data centers and data delivery systems, (v) expand its sales and business offerings in the wireless communications industry, (vi) develop software and provide services without any errors or defects and with adequate security threat protections, (vii) protect its intellectual property rights, (viii) have sufficient capital resources to fund its operations, (ix) not incur substantial costs from product liability and IP infringement claims and indemnification demands relating to its software, (x) implement its sales and marketing strategy and (xi) successfully integrate the assets and personnel obtained in its acquisitions and investments. Existing and prospective investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to update or revise the information in this press release, whether as a result of new information, future events or circumstances, or otherwise.
TeleCommunication Systems, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands)
December 31, December 31,
2010 2009
------------- -------------
(Unaudited)
Assets
Current assets:
Cash, equivalents, and marketable
securities $ 81,527 $ 61,426
Accounts receivable, net 52,073 65,476
Unbilled receivables 32,358 23,783
Inventory 5,440 9,331
Deferred income tax benefit 8,179 9,507
Receivable from settlement of patent matter - 15,700
Income tax refund receivable - 5,438
Deferred costs and other current assets 8,961 8,945
------------- -------------
Total current assets 188,538 199,606
Property and equipment, net 39,337 20,734
Software development costs, net 39,427 45,384
Acquired intangible assets, net 28,264 33,975
Goodwill 159,143 164,350
Other assets 8,100 8,176
------------- -------------
Total assets $ 462,809 $ 472,225
============= =============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 56,403 $ 72,264
Deferred revenue 18,063 9,938
Current portion of capital leases and notes
payable 24,519 39,731
------------- -------------
Total current liabilities 98,985 121,933
Capital leases and notes payable, less
current 135,981 143,316
Deferred income taxes 8,382 15,435
Other long-term liability 3,916 5,755
Total stockholders' equity 215,545 185,786
------------- -------------
Total liabilities and stockholders'
equity $ 462,809 $ 472,225
============= =============
TeleCommunication Systems, Inc.
Consolidated Statements of Income
(amounts in thousands, except per share data)
Three months ended Twelve months ended
December 31, December 31,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
(unaudited) (unaudited)
Revenue
Services $ 72,811 $ 47,426 $ 262,279 $ 151,944
Systems 29,464 43,415 126,524 148,143
--------- --------- --------- ---------
Total revenue 102,275 90,841 388,803 300,087
Direct costs of revenue
Direct cost of services
revenue 43,032 25,688 152,227 84,122
Direct cost of systems 24,756 34,804 98,613 102,111
--------- --------- --------- ---------
Total direct cost of
revenue 67,788 60,492 250,840 186,233
Services gross profit 29,779 21,738 110,052 67,822
As a % of revenue 41% 46% 42% 45%
Systems gross profit 4,708 8,611 27,911 46,032
As a % of revenue 16% 20% 22% 31%
--------- --------- --------- ---------
Total gross profit 34,487 30,349 137,963 113,854
Total gross profit as a
% of revenue 34% 33% 35% 38%
Operating costs and expenses
Research and development
expense 7,462 6,739 30,074 22,351
Sales and marketing expense 5,946 4,225 23,880 15,967
General and administrative
expense 8,851 12,432 37,175 35,387
Depreciation and amortization
of property and equipment 2,953 1,576 9,758 6,035
Amortization of acquired
intangible assets 1,160 489 4,664 870
--------- --------- --------- ---------
Total operating costs and
expenses 26,372 25,461 105,551 80,610
--------- --------- --------- ---------
Income from operations before
gain on sale of patent 8,115 4,888 32,412 33,244
Gain on sale of patent - 15,700 - 15,700
--------- --------- --------- ---------
Income from operations 8,115 20,588 32,412 48,944
Interest expense (2,337) (1,010) (9,225) (1,794)
Amortization of debt issuance
expenses (187) (327) (750) (401)
Other income/(expense), net (392) (12) 1,589 315
--------- --------- --------- ---------
Income before income taxes 5,199 19,239 24,026 47,064
Provision for income taxes (1,747) (7,854) (8,147) (18,795)
--------- --------- --------- ---------
Net income $ 3,452 $ 11,385 $ 15,879 $ 28,269
Add back tax-effected
convertible debt interest
expense to net income for
diluted EPS, when using
if-converted method - 380 - 380
--------- --------- --------- ---------
Net income for diluted EPS
calculation $ 3,452 $ 11,765 $ 15,879 $ 28,649
========= ========= ========= =========
Net income per share-basic $ 0.06 $ 0.23 $ 0.30 $ 0.59
========= ========= ========= =========
Net income per share-diluted $ 0.06 $ 0.20 $ 0.28 $ 0.53
========= ========= ========= =========
Weighted average shares
outstanding-basic 53,321 49,872 53,008 47,623
Weighted average shares
outstanding-diluted 55,955 59,564 56,032 53,946
Company Contacts:
Tom Brandt
Senior Vice President and CFO
TeleCommunication Systems, Inc.
Tel 410-280-1001
tbrandt@telecomsys.com
Evan Weisel
Media Contact
Welz & Weisel Communications
Tel 703-218-3555
evan@w2comm.com
Scott Liolios
Investor Relations
Liolios Group, Inc.
Tel 949-574-3860
info@liolios.com
