Saskatoon, SK - April 13, 2017 - International Road Dynamics Inc. (TSX: IRD), one of the world’s leading providers of systems and solutions for the global Intelligent Transportation Systems (ITS) market, today announced financial results for the first quarter ended February 28, 2017. The first quarter of the Company’s fiscal year is typically weak due to seasonal weather conditions affecting project installations.
FIRST QUARTER 2017 HIGHLIGHTS:
“The winter weather affected project installations in our major North American business segment,” commented Terry Bergan, President and Chief Executive Officer. “Looking ahead, we continue to expect the full 2017 fiscal year will be consistent with, or ahead of, the prior year based on the increased levels of our in-house orders and strong demand for our products and services in the majority of our targeted geographic markets.”
For the first quarter ended February 28, 2017, consolidated revenue decreased 18.6% compared to the same prior year period reflecting the seasonal variability in the number and value of contracted projects during this period and the delay in timing of certain service contract renewals. In addition, changes in the value of the U.S. dollar relative to the Canadian dollar and Chilean peso compared to the prior year decreased consolidated revenue by approximately $0.5 million for the first quarter of fiscal 2017. The decline in revenue resulted in a decrease in gross margin in the quarter, although gross margin as a percentage of revenue increased to 32.2% from 30.5% for the same period last year due to positive changes in product mix.
Revenue in the Company’s Canada and United States segment for the first quarter of 2017 decreased 16.2% primarily due to a decline in the size and value of contracted projects and the delay in renewing certain service and maintenance contracts compared to the same prior year period. The Company believes that 2017 revenues in this segment will be consistent with, or higher than, the prior year based on current backlog levels and identified near-term business opportunities.
Latin America and Mexico segment revenue declined in the first quarter of 2017 as the Company’s prior year first quarter included several large projects that were substantially completed by the end of fiscal 2016. Management believes that revenue for the balance of 2017 will increase due to identified near-term contract opportunities.
The decline in India segment revenue reflects the Company’s decision to reduce the level of business activity in this region. The Company remains committed to accepting new business in this market only with acceptable profitability and payment terms.
Administrative and marketing expenses for the first quarter of 2017 declined mainly due to a reduction in sales commissions and other variable compensation, plus other administrative cost savings in the Company’s Latin America and Mexico segment. R&D expenses increased in the first quarter of 2017 compared to the prior year as the Company continues to allocate resources to accelerate near term business opportunities and to advance the development and introduction of new products such as VectorSense® and VI²M™.
Earnings before interest, income taxes, depreciation and amortization (EBITDA), including gains or losses from foreign exchange and derivatives and earnings or losses from the Company’s equity accounted investment was a negative value of $35,026 in the first quarter of 2017 (2016 - positive $846,972) due to the lower revenues and reduced gross margin.
The Company recorded foreign exchange losses in the first quarter of fiscal 2017 reflecting the year to date decline in the value of the U.S. dollar relative to the Canadian dollar and Chilean peso, which resulted in a reduction in the carrying value of U.S. dollar net assets. In addition, the Company recorded a loss on outstanding U.S. dollar forward sales contracts and a decrease in accrued embedded derivative gains related to the realization of U.S. revenues on open contracts within its Chilean and Mexican subsidiaries. The Company partially reduces its exposure to the U.S. dollar foreign exchange volatility relative to the Canadian dollar by maintaining a portion of its bank indebtedness in U.S. funds and by hedging a portion of its future U.S. dollar cash flows.
The Company owns a 50% joint venture interest in Xuzhou-PAT Control Technologies Limited (XPCT), an ITS products and manufacturing service provider in China. The Company recorded its share of XPCT's loss in the first quarter of fiscal 2017 of $50,237 (2016 - earnings $119,232) as losses in its traffic division on limited project activity were only partially offset by strong performance of XPCT's wire harness division.
Net loss in the first quarter of fiscal 2017 was $211,103 or $(0.01) per common share compared to net earnings of $456,800 or $0.03 per common share in the prior year.
The Company generated cash from operations of $756,571 through the first quarter ended February 28, 2017 compared to a use of funds of $609,655 in the respected prior period. Working capital remained substantially unchanged at $14.6 million compared to November 30, 2016.
This news release contains forward-looking statements about the Company, including its business operations, strategy and expected financial performance and conditions. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or contain words such as “expects”, “anticipates”, “plans”, “believes”, “estimates”, “intends”, “forecasts”, or negative versions thereof and other similar expressions, or future or conditional future financial performance, on-going business strategies or prospects, and possible future action by the Company. Forward looking statements are based on current expectations and projections about future events and are inherently subject to, among other things, risks, uncertainties and assumptions about the Company, the general economic environment and ITS industry, business conditions in all geographic areas where the Company carries on business, interest and foreign exchange rates, changes in accounting policies and methods used to report financial condition, including uncertainties associated with critical accounting assumptions and estimates, the effect of applying future accounting changes, business competition, technological changes, changes in government regulation and legislation, changes in tax laws, unexpected judicial or regulatory proceedings, catastrophic events, and the Company’s success in managing the foregoing risks. Readers are cautioned, to consider these and other factors carefully and not place undue reliance on forward-looking statements. Forward-looking information contained in this news release is based on management’s current estimates, expectations and projections, which management believes are reasonable as of April 12, 2017. However, actual future operating results and economic performance could differ materially from what is currently expected. While the Company may elect to, it is under no obligation and does not undertake to update any forward-looking statements at any particular time, unless required by applicable securities law. Additional information on the Company, including our most recently filed Annual Information Form can be found on SEDAR at www.sedar.com.
As used herein, "EBITDA" means earnings before interest, income taxes, depreciation and amortization, and includes gains or losses from foreign exchange and derivatives and earnings or losses from the Company’s equity investments. EBITDA is not a recognized measure under International Financial Reporting Standards ("IFRS"). Management believes that EBITDA is a useful supplemental measure to net earnings, as it provides investors with an indication of operating performance prior to debt service, capital expenditures and income taxes. Investors should be cautioned, however, that EBITDA should not be construed as an alternative to net earnings determined in accordance with IFRS as an indicator of the Company’s performance or to cash flows from operating, investing and financing activities as a measure of liquidity and cash flows. The Company’s method of calculating EBITDA may differ from the methods by which other companies calculate EBITDA and, accordingly, EBITDA may not be comparable to measures used by other companies.
Additionally, as used herein, 'Shareholders' equity per share' means total shareholders' equity divided by the number of shares outstanding as at the reporting date. Shareholders' equity per share is not a recognized measure under IFRS however, management believes it is an important metric that shareholders use as an indicator of the Company's value relative to its stock price. The Company’s method of calculating Shareholders' equity per share may differ from methods used by other companies and, accordingly, it may not be comparable to measures used by other companies.
IRD is a highway traffic management technology company specializing in supplying products and systems to the global Intelligent Transportation Systems (ITS) industry. IRD is a North American company based in Saskatoon, Saskatchewan Canada with sales and service offices throughout the United States and overseas. Private corporations, transportation agencies and highway authorities around the world use IRD's products and advanced systems to manage and protect their highway infrastructures.