UPDATE: IDC shifts sales model as losses shrink

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Courtney Symons
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‘Tremendous concern in the shareholder base,’ analyst says

International Datacasting Corp. (TSX:IDC) executives say a revised business model and a newly created division will help the Ottawa-based firm scale its business and achieve profitability.

International Datacasting Corp.'s Kanata headquarters.

President and CEO Doug Lowther, who just finished his first month in the position, told shareholders and analysts on a Thursday morning conference call that IDC is shifting its sales model toward repeatable product sales instead of one-off contracts.

The completion of one such contract, a direct-to-home broadcasting project in Kenya, is the reason why the company saw a 45 per cent decrease in revenues during its first quarter of fiscal 2013.

The local digital content distributor brought in $5.4 million in revenues, compared to $9.7 million during the same period last year.

“I believe this change will allow us to scale the business more effectively and more profitably,” Mr. Lowther said during the conference call held the morning after the release of the company’s financial results.

The adjusted business model, implemented this quarter, led to a 31 per cent increase in product sales year-over-year, helping IDC to cut its net loss in half despite the lower revenues.

IDC recorded a net loss of $102,000 in its first quarter of fiscal 2014, an improvement on its net loss of $207,000 during the same period the year previous.

Future opportunities include capitalizing on the company’s latest products –  targeted ad insertion platforms called Laser Two and Star Pro Audio Receiver as well as Digital Tattoo, which allows satellite companies to offer full services to multi-dwelling units.

Since these products are new, the sales cycle is longer with customers wanting to conduct lab tests and field trials before committing to purchases, Mr. Lowther said.

Converting a sales pipeline into contract wins is IDC’s goal for the rest of the year, and Mr. Lowther said he’s “cautiously optimistic” that the second half of the fiscal year will be stronger than the first.

The company will also be looking to Asia to market its wares, and will debut its products at a trade show in Singapore next week.

“We have significant opportunities in front of us, and of course, a lot of hard work in front of us to achieve those opportunities,” Mr. Lowther said.

Chief financial officer Rick Clements explained that although the company’s product division will remain the same, IDC’s systems segment has been split into two: customer and broadcast services and system processes, which include the recently completed large-scale Kenya contract.

IDC’s top 10 customers accounted for 67 per cent of total segment revenue; 27 per cent of which was from one customer and 11 per cent of which was from another.

When the conference call was opened up for questions, analyst Frank Helt of TD Waterhouse noted that this was one of the lowest revenue-generating quarters in years.

“There is a tremendous concern in the shareholder base,” Mr. Helt said. “We seem to have invested an awful lot on three new products, and we’re hearing about a pipeline, but we haven’t really seen anything turn into dollars yet.”

Mr. Lowther explained that the company is pursuing several potential contracts worth more than $1 million, many of which are multi-phase, long-term or recurring. He reiterated that the slower sales cycle is the reason why more contracts have not yet been finalized, but that many customers are currently testing the product.

“I don’t think, at all, the issue is lack of innovation,” Mr. Lowther said. “I think the issue is excellent execution, delivering products on time and with the required functionality, and making sure everything is in place to support those products in the market.”

The company had liquid assets of $7.2 million as of April 30.

Operating expenses of $2.8 million were down slightly year-over-year from $2.9 million.

Mr. Lowther was named president and CEO of the firm in April, moving back to Ottawa from his Beijing post with Irdeto, an international digital TV supplier.

IDC’s CEO position opened up in December when Fred Godard stepped down from the position.

Mr. Godard had been at the heart of a proxy battle fought between executives about IDC’s business strategy earlier that year, and had been serving as the CEO of the Ottawa-based satellite technology firm since his predecessor, Ron Clifton, stepped down from the position in April 2010.

Despite a difficult year, IDC managed to cut its net loss in half at the end of its 2013 fiscal year, even with a small dip in revenues.

IDC describes itself as a digital content distributor for broadcasters in mediums including radio, television, data and digital cinema.

The company will discuss its financial results during a conference call Thursday morning.

Organizations: IDC

Geographic location: Kenya, Ottawa, Beijing

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