Wireless Matrix Announces Fourth Quarter and Year End Fiscal 2011 Results

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 twelve months ended April 30, 2011.

All currency is expressed in U.S. dollars.

Fiscal 2011 Highlights

• Application-related subscribers increased to 59,825, now representing 71% of total subscribers.
• Application-related revenue was $13.6 million, an increase of 17% over 2010.
• Total revenues were $34.7 million.
• Overall gross margin was 63%, compared to 54% a year earlier.
• Service gross margin was 81%, compared to 72% a year earlier.
• Adjusted EBITDA* was $4.7 million, a 17% increase from $4.0 million in 2010.
• Successfully completed a reorganization exercise that resulted in a consolidation of facilities, outsourcing of hardware production, and improved operating model.
• Pro forma net income excluding reorganization costs was $182 or $0.00 per share in 2011.
• Net loss was $3.5 million or $0.04 per share, compared to a net loss of $682,000 or $0.01 per share in 2010.

Fourth Quarter 2011 Highlights

• Application-related revenue was $3.2 million.
• Total revenues were $8.0 million.
• Overall gross margin was 62% compared to 52% a year earlier.
• Service gross margin was 79%, compared to 72% a year earlier.
• Adjusted EBITDA* was $1.0 million, a 26% increase from $0.8 million in Q4 2010.
• Net loss was $100,000 or $0.00 per share, compared to a net loss of $183,000 or $0.00 per share in Q4 2010.

"We are excited to have fully executed our five-year strategy to transition into a leading software-as-a-service provider, having grown our application business to $18.6 million in revenues since launching services in fiscal 2007,” said J. Richard Carlson, president and chief executive officer of Wireless Matrix. "Our continued investment in our application platform has positioned us very well competitively and we are now poised to convert that advantage into subscriber growth through an increased focus on our go-to-market strategy.”

Mr. Carlson continued: "Our priority in fiscal 2012 is to continue to grow our applications business through new subscriber additions. We recently strengthened our sales and marketing team so that we can further capitalize on opportunities in the SMB space as well as our traditional strength in the enterprise space. We began to significantly focus on the small-to- medium business segment in the past year as it represents a large market opportunity that further leverages the FleetOutlook platform. We have added over 3,200 SMB subscribers and more than doubled our total number of customer accounts thereby further diversifying our customer base. While we expect this additional investment to begin to pay off in the second half of fiscal 2012, we have already seen improved sales momentum in the first few months of the fiscal year.”

Financial and Operating Review

Application-related service revenue was $13.6 million in fiscal 2011, an increase of $2.0 million or 17% from $11.6 million in fiscal 2010. The growth was primarily due to a 22% increase in wireless services subscribers during the year. Application-related revenue growth was offset by a $5.6 million decrease in satellite-related services revenues, and by a $4.1 million decrease in hardware and license revenues. Satellite service revenues have been declining as anticipated as the Company has transitioned its legacy subscriber base to higher gross margin application subscriptions enabled by lower cost wireless communication services, while hardware and license revenues have declined over time as the mix of hardware units sold has shifted from primarily higher priced satellite units to lower priced wireless communication devices. Total revenues in fiscal 2011 were $34.7 million, a decrease of $7.7 million or 18% compared to 2010 revenues.

Wireless Matrix ended the year with 83,679 subscribers, a decrease of 3,446 units compared to 87,125 one year earlier. Application-related subscribers increased to 59,825 at year-end from 59,322 at the end of fiscal 2010, as gross additions of 9,916 subscribers were sufficient to offset unusually high churn or disconnects of 9,413 units. The churn relates primarily to the ongoing economic challenges for several customers as well as unprecedented churn with the Corporation’s largest telecom customer who is reducing their fleet, sold certain of its regions to a competitor who does not currently use location-based services and has a need for technology that we do not currently provide. As expected, satellite subscribers decreased by 3,949 units during the year to 23,854 units, due to the ongoing transition of legacy customers to application subscriptions.

Gross margin percentage grew to 63% in fiscal 2011 from 54% in 2010. Margin improvement was driven by the reduction of costs to support and retain a relatively fixed infrastructure, as well as renegotiating existing contracts or switching vendors to reduce cost of goods. Gross margins on service revenues were 81% in fiscal 2011, up from 72% in the previous year, while hardware margins were flat at 19%.

Adjusted EBITDA* was a record $4.7 million in fiscal 2011, an increase of 17% from $4.0 million in the previous year, despite the decrease in revenues. As a percentage of total revenue, adjusted EBITDA grew from 9.5% to 13.6%. The improvement is primarily attributable to cost savings realized from the restructuring exercise undertaken during the year.

In addition to amounts charged to operating expense, the Corporation incurred $3.7 million of corporate restructuring costs in fiscal 2011 as a result of the closing and relocation of certain facilities, compared to $0.7 million in 2010. These costs contributed to a net loss of $3.5 million in 2011, compared to a net loss of $0.7 million the previous year.

Wireless Matrix had a cash balance of $12.0 million at April 30, 2011, compared to $13.5 million at January 31, 2010. The Corporation has no debt, and its $4 million line of credit remains unused.

Outlook

"We completed a significant restructuring of our operations in fiscal 2011, and saw tangible evidence of an improved business model as a result. Our gross margins grew materially, and EBITDA margins improved to 13.6% from 9.5% last year,” said Maria C. Izurieta, chief financial officer of Wireless Matrix. "We did face churn issues related to ongoing economic sluggishness and challenges with a single customer, but we have systematically added new subscribers throughout the year and have had added almost 2,400 new subscribers since year end.”

Normal Course Issuer Bid

Wireless Matrix also announced that its Board of Directors has approved the purchase by the Company of Common Shares by way of a Normal Course Issuer Bid (NCIB) through the facilities of the Toronto Stock Exchange (TSX) to repurchase for cancellation up to $1 million of outstanding Common Shares of the Company or such lesser number of Common Shares as determined in accordance with the rules of the TSX. This NCIB is subject to regulatory approvals, including by the TSX, and entering into a definitive agreement with a designated broker.

"In light of our recent successes and our outlook for fiscal 2012 and beyond, we consider the market price of our shares to be attractive," said Ms. Izurieta. "We believe a share repurchase program offers potential benefits to remaining shareholders and represents a good use of the Corporation’s cash resources. Our existing cash balance and our ongoing ability to generate cash from operations are sufficient to fund not only our near-term growth strategies, but also our acquisition strategy.”

Further details with respect to the NCIB, including the maximum number of Common Shares that the Company may purchase, will be announced in a subsequent press release upon acceptance of the NCIB by the TSX.

Conference Call

Wireless Matrix has scheduled a conference call to begin at 10:00 a.m. ET on Thursday, July 21, 2011, to discuss these results. The conference call dial-in number is 800.268.5851. A replay of the conference call will be available on the Company’s website subsequent to the call at www.wirelessmatrix.com or by dialing 800.558.5253 (code#21531845), until 11:59 p.m. ET on July 23, 2011.

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, 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.