Transaction Bolsters TCS’ Public Safety Communications Solution Set and Distribution
ANNAPOLIS, MD July 6, 2012 TeleCommunication Systems, Inc. (TCS) (NASDAQ:TSYS), a world leader in highly reliable and secure mobile communication technology, today announced it has acquired privately-held microDATA GIS, Inc., a leading provider of Next Generation 9-1-1 (NG9-1-1) software and solutions.
The aggregate acquisition consideration is approximately $37 million, comprised of $20 million in cash at closing, plus $14 million in promissory notes and performance-based earn-out opportunities. TCS is financing the cash portion with an updated bank term loan arrangement.
microDATA¹s technology and expertise expands TCS¹ end-to-end public safety communication solutions in several ways. As a pioneer in Geographical Information Systems (GIS), microDATA has a mature GIS product and tools suite, comprehensive training programs and large, highly scalable GIS data gathering and consolidation capabilities.
These capabilities are key to the business, because NG9-1-1 solutions require a detailed and comprehensive GIS data set in order to operate.
microDATA also adds a comprehensive suite of Public Safety Answering Point (PSAP)-based customer premise equipment, including computer-aided dispatch integration, dashboards and call management products to the TCS suite of solutions. microDATA¹s three channel alliances with CenturyLink, a second large nationwide operator, and regional operator Cincinnati Bell all industry leaders in public safety communications enhance distribution for TCS, public safety solutions. microDATA’s market position and history of accomplishments has grown steadily since its inception in 1983 and complements TCS¹ history of serving the public safety community, including its recent SMS911 and mobile alert solutions. For more information on microDATA, visit www.md-911.com.
NG9-1-1 technology is a significant and growing market, driven by the need for public safety agencies to lower operating costs through conversion to less-expensive IP (Internet protocol)-based systems, and the desire to provide the public with more advanced communications options, such as
text-to-911 and other multi-media communications (video, photos, etc.). In a September 2011 report, the Federal Communications Commission (FCC) predicted that state and local governments will spend up to $1.2 billion over the next
10 years for NG9-1-1 upgrades, with an additional $1.5 billion spent on recurring connectivity, hosting and operations and maintenance. With the addition of microDATA’s assets to its existing capabilities, TCS is now able to offer solutions for the entire ecosystem, creating the opportunity for a stream of recurring software maintenance and network monitoring revenue.
Bruce Heinrich, founder of microDATA, said: “Combining our expertise and technology with TCS’ existing 9-1-1 technology and deeper bench of support will provide a winning combination that the industry has yet to experience.
We are excited to join forces with TCS, because it is clear that they share our commitment to NENA i3 and our compliant solution roadmap, and we feel we can increase the pace of industry adoption with this visionary partner.
Exciting times are ahead!”
microDATA executive Christine Heinrich will lead the newly constituted and TCS’ wholly-owned subsidiary as vice president of NG9-1-1. microDATA executive Jason Heinrich will become vice president of NG9-1-1 product development. Both will report to Chris Nabinger, senior vice president of TCS’ Safety and Security Group.
microDATA expects to generate more than $20 million in systems and services revenue in CY 2012, with EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of 30- 35%. This is expected to enhance TCS’ projected average EBITDA margin. The acquisition is anticipated to be immediately accretive to TCS’ GAAP earnings and will be reported as part of TCS’ Commercial segment.
“The E9-1-1 business is a foundation stone of our Commercial segment, providing us with stable, growing and recurring revenue and cash flow,” said Maurice B. Tosé, TCS chairman and CEO. “We know that this business, and particularly Next Generation 9-1-1, has high barriers to entry, because state-level homeland security departments and public safety jurisdictions have rigorous selection criteria and processes for 9-1-1 equipment procurement. microDATA has been very successful at winning contracts, including with the Department of Defense, using its standards-based solutions that are engineered in a manner that is highly complementary to our technology.”
More at www.telecomsys.com