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TeleCommunication Systems, Inc.
Financial Highlights and Guidance
($000 except per share numbers)
2011
Actual Q1
2011
Actual Q2
2011
Actual Q3
2011
Actual Q4
2011
Actual YTD
2012
Actual Q1
2012
Actual Q2
2012
Actual Q3
2012
Actual YT D 2012 Outlook1
Services revenue 74,802$ 75,993$ 74,181$ 78,945$ 303,921$ 72,348$ 70,539$ 79,096$ 221,983$
Year-over-year growth 25% 20% 12% 8% 16% -3% -7% 7% -1% Systems revenue 15,564 24,686 38,439 42,802 121,491 27,687 44,083 60,960 132,730
Year-over-year growth -50% -16% 5% 45% -4% 78% 79% 59% 69%
Total Revenue 90,366 100,679 112,620 121,747 425,412 100,035 114,622 140,056 354,713 $480M - $490M
Year-over-year growth -1% 9% 9% 19% 9% 11% 14% 24% 17% 13% - 15%
Direct cost of services 41,707 40,597 42,800 45,873 170,977 44,241 40,641 45,545 130,427
Direct cost of systems 12,065 22,009 32,514 36,610 103,198 21,404 39,455 50,385 111,244
Total cost of revenue 53,772 62,606 75,314 82,483 274,175 65,645 80,096 95,930 241,671
Services gross profit 33,095 35,396 31,381 33,072 132,944 28,107 29,898 33,551 91,556% of revenue 44% 47% 42% 42% 44% 39% 42% 42% 41%
Systems gross profit 3,499 2,677 5,925 6,192 18,293 6,283 4,628 10,575 21,486% of revenue 22% 11% 15% 14% 15% 23% 10% 17% 16%
Total gross profit 36,594 38,073 37,306 39,264 151,237 34,390 34,526 44,126 113,042
% of revenue 40% 38% 33% 32% 36% 34% 30% 32% 32% Research and development 8,543 9,633 8,610 10,312 37,098 8,662 8,931 9,799 27,392Sales and marketing expenses 7,350 6,932 7,292 7,820 29,394 7,505 7,598 8,041 23,144
General and administrative expenses 10,566 11,421 11,570 12,661 46,218 12,367 12,978 14,931 40,276
Total operating expenses incl. non-cash charges 26,459 27,986 27,472 30,793 112,710 28,534 29,507 32,771 90,812
Non-cash stock-based compensation expense 2,581 2,125 2,204 2,762 9,672 2,807 1,938 2,015 6,760Amortization of capitalized soft ware development costs 2,551 2,660 2,774 2,787 10,772 2,798 1,412 1,701 5,911
15,267 14,872 14,812 14,020 58,971 11,461 8,369 15,071 34,901 $47M - $51M
Non-cash operating charges
Depreciation/amortization of fixed assets 3,099 2,552 3,147 3,337 12,135 3,439 3,371 3,689 10,499Non-cash stock-based compensation expense 2,581 2,125 2,204 2,762 9,672 2,807 1,938 2,015 6,760Amortization of capitalized soft ware development costs 2,551 2,660 2,774 2,787 10,772 2,798 1,412 1,701 5,911Amortization of acquired intangib le assets 1,325 1,402 1,404 1,404 5,535 1,374 715 1,431 3,520Impairment of goodwill and long-lived assets - - - - - - 125,703 - 125,703
9,556 8,739 9,529 10,290 38,114 10,418 133,139 8,836 152,393 $161M
Income from operations (EBIT) 5,711 6,133 5,283 3,730 20,857 1,043 (124,770) 6,235 (117,492) ($114M) - ($110M)Interest and other, net (1,885) (2,043) (1,870) (1,845) (7,643) (1,538) (1,709) (2,203) (5,450)
Amortization deferred finance f ees (187) (237) (187) (187) (798) (188) (190) (190) (568)
Income before income taxes 3,639 3,853 3,226 1,698 12,416 (683) (126,669) 3,842 (123,510)
Income taxes - non-cash (1,776) (1,674) (1,073) (398) (4,921) 808 15,867 510 17,185
Income taxes - cash 196 (116) (312) (259) (491) (494) (315) (173) (982)Effective income tax rate 43% 46% 43% 39% 44% 46% 12% -9% 13% 9%
GAAP Net Income 2,059 2,063 1,841 1,041 7,004 (369) (111,117) 4,179 (107,307) ($111M) - ($107M)Add back tax-effected convertible debt interest expense 2 - - - - - - - 718 -
GAAP Net Income for Diluted EPS 2,059$ 2,063$ 1,841$ 1,041$ 7,004$ (369)$ (111,117)$ 4,897$ (107,307)$
57,837 59,263 59,199 58,003 58,581 57,572 58,059 68,505 57,806 58.4GAAP Net Income per Share - Diluted 0.04$ 0.03$ 0.03$ 0.02$ 0.12$ (0.01)$ (1.91)$ 0.07$ (1.86)$ ($1.90) - ($1.83)
GAAP Net Income 2,059$ 2,063$ 1,841$ 1,041$ 7,004$ (369)$ (111,117)$ 4,179$ (107,307)$ ($111M) - ($107M)
Impairment of goodwill and long-lived assets - - - - - - 125,703 125,703 125.7M
Non-cash stock-based compensation expense 2,581 2,125 2,204 2,762 9,672 2,807 1,938 2,015 6,760 9.1MAmortization of acquired intangib le assets 1,325 1,402 1,404 1,404 5,535 1,374 715 1,431 3,520 5.4MAmortization deferred finance f ees 187 237 187 187 798 188 190 190 568 0.8MNon-cash tax expense 1,776 1,674 1,073 398 4,921 (808) (15,867) (510) (17,185) (12M) - (11.5M)
Adjusted Net Income3
7,928 7,501 6,709 5,792 27,930 3,192 1,562 7,305 12,059 $18M - $23M
Add back tax-effected convertible debt interest expense 2 659 624 664 714 2,627 - - 718 - -Adjusted Net Income 8,587$ 8,125$ 7,373$ 6,506$ 30,557$ 3,192$ 1,562$ 8,023$ 12,059$ $18M - $23M
67,839 69,265 69,201 68,005 68,583 57,572 58,059 68,505 57,806 58.4
Adjusted Net Income per Share - diluted3
0.13$ 0.12$ 0.11$ 0.10$ 0.45$ 0.06 0.03$ 0.12$ 0.21$ $0.32 - $0.391 Company guidance issued and effective only on 10/25/122 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.3 See accompanying GAAP to non-GAAP reconciliation and explanation.
Weighted average number of shares for GAAP Diluted EPS 2
Weighted average number of shares for Adjusted Diluted EPS2
Quarterly Results
Add back non-cash charges in costs and expenses above
EBITDA 3
Subtotal: non-cash operating charges including impairment ofgoodwill and long-lived assets
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TeleCommunication Systems, Inc.
Financial Highlights and Guidance
($000 except per share numbers)
2006
Total Year
2007
Total Year
2008
Total Year
2009
Total Year
2010
Total Year
2011
Total YearServices revenue 88,380$ 88,062$ 101,359$ 151,944$ 262,279$ 303,921$
Year-over-year growth 18% 0% 15% 50% 73% 16%
Systems revenue 36,556 56,106 118,783 148,143 126,524 121,491
Year-over-year growth 35% 53% 112% 25% -15% -4%
Total Revenue 124,936 144,168 220,142 300,087 388,803 425,412
Year-over-year growth 22% 15% 53% 36% 30% 9%
Direct cost of services 52,540 52,161 61,594 84,122 152,227 170,977
Direct cost of systems 17,883 37,906 77,291 102,111 98,613 103,198
Total cost of revenue 70,423 90,067 138,885 186,233 250,840 274,175Services gross profit 35,840 35,901 39,765 67,822 110,052 132,944
% of revenue 41% 41% 39% 45% 42% 44%
Systems gross profit 18,673 18,200 41,492 46,032 27,911 18,293
% of revenue 51% 32% 35% 31% 22% 15%
Total gross profit 54,513 54,101 81,257 113,854 137,963 151,237
% of revenue 44% 38% 37% 38% 35% 36% Research and development 12,586 13,072 16,161 22,351 30,074 37,098
Sales and marketing expenses 11,713 11,917 13,715 15,967 23,880 29,394
General and administrative expenses 16,959 19,334 28,238 35,387 37,175 46,218
Total operating expenses incl. non-cash charges 41,258 44,323 58,114 73,705 91,129 112,710
Non-cash stock-based compensation expense 3,116 4,333 3,758 5,859 10,172 9,672
Amortization of capitalized soft ware development costs 1,273 1,522 2,089 3,069 9,303 10,772
17,643 15,633 28,990 49,077 66,309 58,971
Patent-related gains, net of expenses 8,060 15,700 - -17,643 15,633 37,050 64,777 66,309 58,971
Non-cash operating charges
Depreciation/amortization of fixed assets 7,956 6,200 5,865 6,035 9,758 12,135
Non-cash stock-based compensation expense 3,116 4,333 3,758 5,859 10,172 9,672
Amortization of capitalized soft ware development costs 1,273 1,522 2,089 3,069 9,303 10,772
Amort. of other intangibles 147 148 147 870 4,664 5,535
Subtotal: non-cash operating charges 12,492 12,203 11,859 15,833 33,897 38,114Operating profit (EBIT) 5,153 3,430 25,191 48,944 32,412 20,857
Interest and other, net (1,728) (1,267) (700) (1,479) (7,636) (7,643)Amortization of debt discount and deferred finance f ees (1,447) (718) (180) (401) (750) (798)
Debt conversion expense, discount write-off - (2,458) - - - -Income/(Loss) from continuing operations before income taxes 1,976 (1,014) 24,311 47,064 24,026 12,416
Income taxes - non-cash - - 33,816 (17,429) (5,010) (4,921)
Income taxes - cash - - (559) (1,366) (3,137) (491)Effective income tax rate - - NM 40% 34% 44%
Income/(Loss) from continuing operations 1,976 (1,014) 57,568 28,269 15,879 7,004
(23,671) (275) - - - -GAAP Net Income/(Loss) (21,695)$ (1,289)$ 57,568$ 28,269$ 15,879$ 7,004$
Add back tax-effected conver tible debt interest expense1 - - - 380 - -GAAP Net Income/(Loss) for Diluted EPS (21,695)$ (1,289)$ 57,568$ 28,649$ 15,879$ 7,004$
40,166 41,453 46,644 53,946 56,032 58,581
Net Income/ Loss er share diluted from continuin o erations 0.05 $ 0.02$ 1.23$ 0.53$ 0.28$ 0.12$
Net Income /( Loss) per share diluted from d isc ontinued oper atio ns ( 0.59 ) (0.01) - - - -
Net Income/(Loss) per Share - Diluted (0.54)$ (0.03)$ 1.23$ 0.53$ 0.28$ 0.12$
GAAP Net Income/(Loss) (21,695)$ (1,289)$ 57,568$ 28,269$ 15,879$ 7,004$Non-cash stock-based compensation expense 3,116 4,333 3,758 5,859 10,172 9,672Amortization of acquired intangi ble assets 147 148 147 870 4,664 5,535Amortization of debt discount and deferred finance f ees 1,447 3,176 180 401 750 798Non-cash tax expense - - (33,816) 17,429 5,010 4,921Patent and enterprise (gain)/loss 23,671 275 (8,060) (15,700) - -
Adjusted Net Income/(Loss)2
6,686$ 6,643$ 19,777$ 37,128$ 36,475$ 27,930$
Add back tax-effected conver tible debt interest expense1
- - - 380 3,044 2,627
Adjusted Net Income/(Loss) for Diluted EPS 6,686$ 6,643$ 19,777$ 37,508$ 39,519$ 30,557$
40,166 41,453 46,644 53,946 66,034 68,583
0.16$ 0.16$ 0.42$ 0.70$ 0.60$ 0.45$
Annual Results
Add back noncash charges included in cost of revenue and op.exp.above
1 Shares issuable via the convertible debt are included if dilutive, in which case tax-effected interest expense on the debt is excluded from Income per Share. 2 See accompanying GAAP to
non-GAAP reconciliation and explanation.
Weighted average number of shares for Adjusted Diluted EPS 1
Adjusted Net Income/(Loss) per Share - Diluted
EBITDA before patent-related gains
EBITDA including patent-related gains
Loss from operations of Enterprise assets held for sale, including non-cashimpairment charges in 2006
Weighted average number of shares for GAAP Diluted EPS 1
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TeleCommunication Systems, Inc.
Financial Highlights and Guidance
($000s)
Government2007
Total Year
2008
Total Year
2009
Total Year
2010
Total Year
2011
Actual Q1
2011
Actual Q2
2011
Actual Q3
2011
Actual Q4
2011
Total Year
2012
Actual Q1
2012
Actual Q2
2012
Actual Q3
2012
Total Year
RevenueServices 29,269$ 36,918$ 62,229$ 93,302$ 30,575$ 32,173$ 31,841$ 34,624$ 129,213$ 33,313$ 32,744$ 37,890$ 103,947$
Systems 39,585 81,354 110,589 93,836 10,817 20,913 34,409 38,884 105,023 23,525 40,765 53,846 118,136
Government revenue 68,854 118,272 172,818 187,138 41,392 53,086 66,250 73,508 234,236 56,838 73,509 91,736 222,083
Cost of revenueDirect cost of services1 22,815 29,192 48,804 66,516 21,848 21,233 21,982 24,863 89,926 25,211 24,329 28,076 77,616
Direct cost of systems1 32,882 68,298 91,504 84,207 8,901 18,393 29,196 33,467 89,957 18,355 36,638 45,912 100,905
Government direct cost of revenue 55,697 97,490 140,307 150,723 30,749 39,626 51,178 58,330 179,883 43,566 60,967 73,988 178,521
Gross ProfitServices 6,454 7,726 13,426 26,786 8,727 10,940 9,859 9,761 39,287 8,102 8,415 9,814 26,331
% of revenue 22% 21% 22% 29% 29% 34% 31% 28% 30% 24% 26% 26% 25%
Systems 6,703 13,056 19,086 9,629 1,916 2,520 5,213 5,417 15,066 5,170 4,127 7,934 17,231
% of revenue 17% 16% 17% 10% 18% 12% 15% 14% 14% 22% 10% 15% 15%
Government gross profit 13,157 20,782 32,511 36,415 10,643 13,460 15,072 15,178 54,353 13,272 12,542 17,748 43,562
% of revenue 19% 18% 19% 19% 26% 25% 23% 21% 23% 23% 17% 19% 20%
Markets:
Competitors:
TCS Strengths:
1 Includes non-cash stock compensation expense as detailed in the accompanying Non-cash Stock Compensation Allocation schedule.
Satcom technology vendors like Globecomm, Rockwell Collins and Viasat, Federal systems integrators and contractors with requisite securityclearances; e.g. General Dynamics, CSC, CACI.
20 plus years of government/military relationships and successful track record with highly secure, highly reliable communications solutions,skilled staff with top security clearances, and cleared facilities. TCS SwiftLink is a de-facto DoD standard for deployable ground terminal platform,with over 2,500 deployments.
Products and services:
Historical GAAP
Services: Cyber security services and training; Maintenance and field support service on installed base of deployable ground terminal systems;Satellite fixed teleport services; Resale of "space segment" airtime; Communications engineering.
Systems: SwiftLink and other deployable ground terminal systems, based on satellite, line-of-sight, and troposcatter wireless technology;SwfitCell secure cellular, custom communication systems, related integration projects, and special government work usually involving thehighest levels of security.
Federal, including Departments of Defense, State, Justice, & Homeland Security and state, local, international government customers
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TeleCommunication Systems, Inc.
Financial Highlights and Guidance
($000s)
Commercial2007
Total Year
2008
Total Year
2009
Total Year
2010
Total Year
2011
Actual Q1
2011
Actual Q2
2011
Actual Q3
2011
Actual Q4
2011
Total Year
2012
Actual Q1
2012
Actual Q2
2012
Actual Q3
2012
Total Year
Revenue
Services 58,792$ 64,441$ 89,715$ 168,977$ 44,227$ 43,820$ 42,340$ 44,321$ 174,708$ 39,035$ 37,795$ 41,206$ 118,036$
Systems 16,521 37,429 37,554 32,688 4,747 3,773 4,030 3,918 16,468 4,162 3,318 7,114 14,594Commercial revenue 75,313 101,870 127,269 201,665 48,974 47,593 46,370 48,239 191,176 43,197 41,113 48,320 132,630
Cost of revenue
Direct cost of services1
29,346 32,402 35,012 78,970 18,134 17,638 19,093 19,285 74,150 16,680 15,990 17,147 49,817
Amortization of capitalized software developmentcosts - - 306 6,741 1,725 1,726 1,725 1,725 6,901 2,350 322 322 2,994
Total direct cost of services 29,346 32,402 35,318 85,711 19,859 19,364 20,818 21,010 81,051 19,030 16,312 17,469 52,811
Direct cost of systems1 3,502 6,904 7,539 11,844 2,338 2,681 2,269 2,082 9,370 1,904 1,727 3,094 6,725
Amortization of capitalized software developmentcosts 1,522 2,089 3,069 2,562 826 935 1,049 1,061 3,871 1,145 1,090 1,379 3,614
Total direct cost of systems 5,024 8,993 10,608 14,406 3,164 3,616 3,318 3,143 13,241 3,049 2,817 4,473 10,339
Commercial cost of revenue 34,370 41,395 45,926 100,117 23,023 22,980 24,136 24,153 94,292 22,079 19,129 21,942 63,150
Gross ProfitServices 29,446 32,039 54,397 83,266 24,368 24,456 21,522 23,311 93,657 20,005 21,483 23,737 65,225
% of revenue 50% 50% 61% 49% 55% 56% 51% 53% 54% 51% 57% 58% 55%Systems 11,497 28,436 26,946 18,282 1,583 157 712 775 3,227 1,113 501 2,641 4,255
% of revenue 70% 76% 72% 56% 33% 4% 18% 20% 20% 27% 15% 37% 29%
Commercial gross profit 40,943 60,475 81,343 101,548 25,951 24,613 22,234 24,086 96,884 21,118 21,984 26,378 69,480% of revenue 54% 59% 64% 50% 53% 52% 48% 50% 51% 49% 53% 55% 52%
Markets:
Competitors:
1 Includes non-cash stock compensation expense as detailed in the accompanying Non-cash Stock Compensation Allocation schedule.
TCS Strengths:
Products and Services:
Successful infrastructure deployments and high-volume wireless applications for leading service providers around the world, including: VerizonWireless, AT&T(Mobile), Sprint, Comcast, Telefonica (CALA).
Strong channel and product partners including AT&T, CenturyLink, Huawei, Alcatel-Lucent, and Level 3.
- NextGen 9-1-1 leader with depth of proven Unix and Microsoft platform-based ESINet and Customer Premise solutions.- Global leader in end-to-end precise LBS infrastructure and applications for mobile operators, including Verizon, AT&T, Sprint, Bell Mobility,MetroPCS, Leap, Hutchison (3), Vodafone, and Iusacell.
- Leading 9-1-1 provider for wireless and VoIP operators including Verizon, AT&T, MetroPCS, Leap Wireless, Comcast, and state and localgovernments.- Leading text messaging platform provider handling approximately one third of text messages sent in the US.
Historical GAAP
Services: End-to-end 9-1-1 Solutions include solutions for wireless E9-1-1, Voice over Internet Protocol (VoIP)E9-1-1 and Next Generation 9-1-1. LBS and Telematics Solutions including hosted infrastructure, middleware and applications including turn-by-turn Navigation, People-Finder,Workforce Management, Mobile Search and Emergency/Security.
Software-based systems: NextGen 9-1-1 ESiNet and Customer Premise Equipment software-based systems for f irst response call dispatch. End-to-end Xypoint LBS platform for wireless operators that includes infrastructure, middleware and geospatial information server (GIS);Messaging platforms for wireless operators include short message service center (SMSC), multimedia message management, and networksecurity solutions.
Wireless carriers globally, device and "over-the-top" wireless application solutions, state and local governments for next-generation 9-1-1, cableand VoIP operators, automotive telematics companies.
Intrado division of West Corporation, TeleNav, Intel Corporation through its acquistion of Telmap, Motorola Mobility, Ericsson, TomTom, Garmin,Comverse, Google, Apple
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TeleCommunication Systems, Inc.
Financial Highlights and GuidanceCondensed Balance Sheet Data ($000s)
2008
Dec. 31
2009
Dec. 31
2010
Dec. 31
2011
Mar. 31
2011
Jun. 30
2011
Sep. 30
2011
Dec. 31
2012
Mar. 31
2012
Jun. 30
2012
Sep. 30AssetsCurrent assets:
Cash, equivalents, and marketable securities 38,977$ 61,426$ 81,527$ 54,709$ 62,403$ 52,182$ 60,130$ 51,293$ 61,648$ 64,634$Accounts receivable, net 61,827 65,476 52,073 63,491 59,578 51,383 64,716 58,539 60,760 62,254Unbilled receivables 21,797 23,783 32,358 23,401 22,746 42,244 31,247 31,006 20,273 30,034Inventory 2,715 9,331 5,440 5,764 6,583 7,323 7,143 8,309 11,129 10,597Deferred tax assets 9,736 9,507 8,179 6,737 4,488 3,103 8,602 8,861 9,159 9,497Deferred project costs and other current assets 3,869 30,083 8,961 16,364 14,276 17,060 16,158 15,294 20,737 15,442
Total current assets 138,921 199,606 188,538 170,466 170,074 173,295 187,996 173,302 183,706 192,458
Property and equipment, net 12,391 20,734 39,337 42,684 46,518 50,140 53,506 58,275 49,803 49,795Software development costs, net 2,773 45,384 39,427 37,854 35,635 33,509 31,151 28,445 14,984 19,166Intangible assets, net 562 33,975 28,264 36,032 34,483 33,079 31,675 30,301 15,622 28,516Goodwill 1,813 164,350 159,143 176,495 176,477 176,477 176,477 176,750 90,418 115,118Deferred income tax benefit 24,309 - - - - - - - 8,184 8,184Other assets 1,190 8,176 8,100 13,093 12,458 11,984 8,834 7,683 7,428 7,210
Total assets 181,959$ 472,225$ 462,809$ 476,624$ 475,645$ 478,484$ 489,639$ 474,756$ 370,145$ 420,447$
Liabilities and stockholders' equityCurrent liabilities:
Accounts payable and accrued expenses 51,588$ 72,264$ 56,403$ 46,570$ 50,308$ 56,490$ 61,867$ 49,835$ 63,601$ 63,264$Deferred revenue 4,349 9,938 18,063 21,666 22,786 17,279 14,358 17,796 21,895 26,896
Current portion of bank borrowings and capi ta l leases 3,837 39,731 24,519 24,818 19,961 20,138 24,761 18,903 15,481 22,853Total current liabilities 59,774 121,933 98,985 93,054 93,055 93,907 100,986 86,534 100,977 113,013
Notes payable and capital leases, less current portion 7,913 143,316 135,981 133,147 130,414 127,935 125,491 123,257 120,728 152,316Deferred tax liability 15,435 8,382 7,741 7,741 7,741 7,017 7,234 - -Other liabilities 5,755 3,916 9,735 6,609 6,596 5,396 4,321 3,954 4,189
Stockholders' equity:Common stock & add'l paid-in capital 298,593 284,270 298,150 313,493 316,309 318,947 326,350 330,252 331,573 335,813
Accumulated deficit (184,321) (98,484) (82,605) (80,546) (78,483) (76,642) (75,601) (76,842) (187,087) (184,884)Total stockholders' equity 114,272 185,786 215,545 232,947 237,826 242,305 250,749 253,410 144,486 150,929
Total liabilities and equity 181,959$ 472,225$ 462,809$ 476,624$ 475,645$ 478,484$ 489,639$ 474,756$ 370,145$ 420,447$
Working capital ($000s) 79,147$ 77,673$ 89,553$ 77,412$ 77,019$ 79,388$ 87,010$ 86,768$ 82,729$ 79,445$
Capital expenditures for period endedProperty and equipment incl. internal-use software, netof funding through leases 3,703$ 2,494$ 19,329$ 21,090$ 15,222$Capital purchases funded through leases 3,343 7,566 9,031 5,276 4,268
Subtotal fixed asset additions 7,046 10,060 28,360 26,366 19,490$Software (for resale) development 461 981 5,683 2,478 768
Total Capex 7,507$ 11,041$ 34,043$ 28,844$ 20,258$
Current ratio 2.3 1.6 1.9 1.8 1.8 1.8 1.9 2.0 1.8 1.7
Debt to equity ratio 0.1 1.0 0.7 0.7 0.6 0.6 0.6 0.6 0.9 1.2
Days revenue in accounts receivableBilled 70 65 46 63 53 41 48 53 48 40
Unbilled 25 24 28 23 20 34 23 28 16 19Total 95 88 74 87 74 75 71 81 64 59
Days revenue in payables and accruals 59 72 50 46 45 45 46 45 50 41Page 5 of 7 10/25/2012
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TeleCommunication Systems, Inc.
Financial Highlights and Guidance
GAAP to non-GAAP Reconciliations
The following table reconciles the specific items excluded from GAAP in the calculation of EBITDA for the periods shown below:
2007
Total Year
2008
Total Year
2009
Total Year
2010
Total Year Q1 2011 Q2 2011 Q3 2011 Q4 2011
2011
Total Year Q1 2012 Q2 2012 Q3 2012
2012
Total Year
GAAP Net Income/(Loss) (1,289)$ 57,568$ 28,269$ 15,879$ 2,059$ 2,063$ 1,841$ 1,041$ 7,004$ (369)$ (111,117)$ 4,179$ (107,307)$
Impairment of goodwill and long-lived assets - - - - - - - - - - 125,703 125,703
Depreciation and amortization of fixed assets 6,200 5,865 6,035 9,758 3,099 2,552 3,147 3,337 12,135 3,439 3,371 3,689 10,499
Financing and other expenses, net 4,444 880 1,880 8,386 2,072 2,280 2,057 2,032 8,441 1,726 1,899 2,393 6,018Non-cash stock-based compensation expense 4,333 3,758 5,859 10,172 2,581 2,125 2,204 2,762 9,672 2,807 1,938 2,015 6,760
Amortization of capitalized software development costs 1,522 2,089 3,069 9,303 2,551 2,660 2,774 2,787 10,772 2,798 1,412 1,701 5,911Amortization of acquired intangible assets 148 147 870 4,664 1,325 1,402 1,404 1,404 5,535 1,374 715 1,431 3,520Provision (benefit) for income taxes - (33,257) 18,795 8,147 1,580 1,790 1,385 657 5,412 (314) (15,552) (337) (16,203)
Operations of Enterprise assets held for sale 275 - - - - - - - - - - - -Less: patent-related gains, net of expenses - (8,060) (15,700) - - - - - - - - - -
15,633$ 28,990$ 49,077$ 66,309$ 15,267$ 14,872$ 14,812$ 14,020$ 58,971$ 11,461$ 8,369$ 15,071$ 34,901$#
The following table reconciles the specific items excluded from GAAP in the calculation of Adjusted Net Income for the periods shown below:
2007
Total Year
2008
Total Year
2009
Total Year
2010
Total Year Q1 2011 Q2 2011 Q3 2011 Q4 2011
2011
Total Year Q1 2012 Q2 2012 Q3 2012
2012
Total Year
GAAP Net Income/(Loss) (1,289)$ 57,568$ 28,269$ 15,879$ 2,059$ 2,063$ 1,841$ 1,041$ 7,004$ (369)$ (111,117)$ 4,179$ (107,307)$
Impairment of goodwill and long-lived assets - - - - - - - - - - 125,703 125,703
Non-cash stock-based compensation expense 4,333 3,758 5,859 10,172 2,581 2,125 2,204 2,762 9,672 2,807 1,938 2,015 6,760Amortization of acquired intangible assets 148 147 870 4,664 1,325 1,402 1,404 1,404 5,535 1,374 715 1,431 3,520
Amortization of debt discount and deferred finance fees 3,176 180 401 750 187 237 187 187 798 188 190 190 568Non-cash tax expense - (33,816) 17,429 5,010 1,776 1,674 1,073 398 4,921 (808) (15,867) (510) (17,185)Patent and enterprise (gain)/loss 275 (8,060) (15,700) - - - - - - - - - -
Adjusted Net Income 6,643$ 19,777$ 37,128$ 36,475$ 7,928$ 7,501$ 6,709$ 5,792$ 27,930$ 3,192$ 1,562$ 7,305$ 12,059$Add back tax-effected convert ible debt interest expense - - 380 3,044 659 624 664 714 2,627 - - 718 -
Adjusted Net Income for Diluted EPS 6,643$ 19,777$ 37,508$ 39,519$ 8,587$ 8,125$ 7,373$ 6,506$ 30,557$ 3,192$ 1,562$ 8,023$ 12,059$
41,453 46,644 53,946 66,034 67,839 69,265 69,201 68,005 68,583 57,572 58,059 68,505 57,806
0.16$ 0.42$ 0.70$ 0.60$ 0.13$ 0.12$ 0.11$ 0.10$ 0.45$ 0.06$ 0.03$ 0.12$ 0.21$
1 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.
EBITDA is not a financial measure calculated and presented in accordance with 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 andpresented, nor as an alternative to cash flow from operating activities as a measure of our liquidity. We define EBITDA as GAAP net income/(loss) before impairment of goodwill and long-lived assets, non-cash stock-based compensation expense; amortization ofcapitalized software development costs, property and equipment and acquired intangibles, depreciation, interest expense, other non-cash financing costs, and provision (benefit) from income taxes. Other companies (including our competitors) may define EBITDA
differently. We present EBITDA because we believe it to be an important supplemental measure of our performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Managementalso 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. You should not consider EBITDA in isolation, or as a substitute foranalysis of our results as reported under GAAP. See GAAP to non-GAAP Reconciliation below for further information on our non-GAAP measure.
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 alternativeto cash flow from operating activities as a measure of liquidity. Adjusted Net Income is defined as GAAP net income/(loss) adjusted for impairment of goodwill and long-lived assets, amortization of acquired intangibles, non-cash stock-based compensationexpense, non-cash tax and financing charges and credits, and patent gains. 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 comparisonbetween 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.
Adjusted Net Income per Share - Diluted
Weighted average number of shares for Adjusted Net Income -
Diluted1
Adjusted Net Income (amounts in thousands)
EBITDA (amounts in thousands)
EBITDA before patent-related gains, net of expenses
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TeleCommunication Systems, Inc.
Financial Highlights and Guidance
Non-Cash Stock-Based Compensation Allocation ($000s):
2009
Total Year
2010
Total Year
2011
Actual Q1
2011
Actual Q2
2011
Actual Q3
2011
Actual Q4
2011
Total Year
2012
Actual Q1
2012
Actual Q2
2012
Actual Q3
2012
Total Year
Commercial Applications:
Direct cost of services 1,638$ 2,117$ 660$ 538$ 558$ 703$ 2,459$ 625$ 432$ 449$ 1,506$
Direct cost of systems 274 229 74 60 63 79 276 72 50 52 174
Subtotal- Commercial Applications cost of revenue 1,912 2,346 734 598 621 782 2,735 697 482 501 1,680
Government:
Direct cost of services 736 2,689 639 520 540 680 2,379 873 603 627 2,103
Direct cost of systems 1,126 1,362 349 308 318 387 1,362 337 233 241 811
Subtotal- Government cost of revenue 1,862 4,051 988 828 858 1,067 3,741 1,210 836 868 2,914
Subtotal- Cost of revenue of Continuing Operations 3,774 6,397 1,722 1,426 1,479 1,849 6,476 1,907 1,318 1,369 4,594
Other operating expenses
Research and development 1,365 2,655 503 410 425 535 1,873 497 344 357 1,198
Sales and marketing expenses 472 618 135 109 114 143 501 151 103 108 362
General and administrative expenses 248 502 221 180 186 235 822 252 173 181 606
Total operating expenses 2,085 3,775 859 699 725 913 3,196 900 620 646 2,166
Total allocated non-cash stock-based compensation 5,859$ 10,172$ 2,581$ 2,125$ 2,204$ 2,762$ 9,672$ 2,807$ 1,938$ 2,015$ 6,760$
As a result of the implementation of ASC 718-10, portions of our non-cash stock-based compensation expense have been allocated to direct cost of revenue, research and development, sales
and marketing, and general and administrative expenses. The amounts of non-cash stock-based compensation expense that have been allocated are as follows:
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