Mr. Terry Bergan reports

IRD ANNOUNCES THIRD QUARTER 2016 RESULTS AND LAUNCH OF INNOVATIVE NEW PRODUCT

International Road Dynamics Inc. has released its financial results for the three and nine months ended Aug. 31, 2016.

Nine-month fiscal 2016 highlights

• Revenues up 16.0 per cent to $48.4-million on growth in key North American markets;
• Solid increase in gross margin to 32.5 per cent;
• Earnings before interest, taxes, depreciation and amortization rise 18.8 per cent to $3.8-million;
• Net earnings increase 27.5 per cent to $2.2-million or 15 cents per common share;
• Solid financial position with working capital of $13.3-million;
• Innovative new VectorSense product line launched;
• Outlook for continued growth with strong confirmed order backlog and near-term business opportunities.

"Our strong operating performance continued in the third quarter, underpinned by a significant increase in gross margin and further growth in our solid base of recurring service and maintenance revenues," commented Terry Bergan, president and chief executive officer. "Looking ahead, we continue to believe fiscal 2016 will be another year of record revenues and net earnings as we continue to leverage our strong presence in the growing global ITS market.

"With our improved profitability and cash flow, we increased our focus on development projects to enhance our current product lines and introduce new solutions to our customers. A key new innovative product is our recently launched VectorSense tire sensor suite and the related Vehicle Information-In-Motion (VI2M) traffic data collection system. We are confident these advanced, leading-edge ITS solutions will meet the needs of our customers for the enhanced data necessary for improved tolling, increased road safety and more informed decisions on infrastructure spending."

VectorSense and VI2M were developed to meet the needs of highway and roadway authorities to provide previously unavailable traffic and vehicle data. This includes tire width and axle configuration including identification of single, dual and new super-single tires being used on large trucks, enhanced vehicle and truck identification, bicycle lane traffic, vehicle lane position, and safety information such as underinflated tires. These data are collected while vehicles travel at highway speed. More information on VectorSense and VI2M can be found at the company's website.

Solid operating performance

For the three and nine months ended Aug. 31, 2016, consolidated revenue increased 0.9 per cent and 16.0 per cent, respectively, compared with the same prior-year periods, reflecting the company's continued ability to complete an increasing number of contracted projects and service contracts, and improve year-to-date product sales. Changes in the value of the U.S. dollar compared with the prior year increased consolidated revenues by approximately $2.6-million for the first nine months of fiscal 2016.

Revenue in the company's Canada and U.S. segment for the three and nine months ended Aug. 31, 2016, increased 5.7 per cent and 24.8 per cent, respectively, compared with the same prior-year periods, primarily due to an increase in contracted project and service revenues. The company believes revenues in this segment will increase for the full fiscal 2016 year compared with the prior year based on current backlog levels and identified near-term business opportunities.

Latin America and Mexico segment revenue declined for the three and nine months ended Aug. 31, 2016, compared with the same respective prior-year periods due primarily to delays in scheduled delivery requirements on current projects. Gross margin as a percentage of revenue for the three and nine months ended Aug. 31, 2016, increased significantly to 61.9 per cent and 42.6 per cent due primarily to a high-margin product sale realized in the third quarter. Management believes revenues for the full fiscal 2016 year in this segment will increase to fiscal 2015 levels due to the completion of existing projects and potential 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 only accepting new business in this market with acceptable profitability and payment terms.

Gross margin for the three and nine months ended Aug. 31, 2016, increased by 30.0 per cent and 24.7 per cent, respectively, compared with the same respective prior-year periods due primarily to the higher sales volumes. As a percentage of revenue, gross margin for the three and nine months ended Aug. 31, 2016, increased to 35.4 per cent and 32.5 per cent, respectively, from 27.5 per cent and 30.2 per cent in the same periods last year, primarily due to an improved product mix and increased margins on specific project activities.

Administrative and marketing expenses for the first nine months of fiscal 2016 are largely consistent with the prior year. Research and development costs increased as the company continues to allocate resources to accelerate near-term business opportunities and to advance the development and introduction of new products to its markets, such as VectorSense and VI2M.

EBITDA, including gains or losses from foreign exchange and derivatives, and earnings or losses from the company's equity-accounted investment, was $2.2-million in the third quarter of fiscal 2016, consistent with the prior year's third quarter, For the nine months ended Aug. 31, 2016, EBITDA rose to $3.8-million from $3.2-million in fiscal 2015.

The company recorded foreign exchange losses in the third quarter and first nine months of fiscal 2016 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 U.S. currency volatility 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-per-cent joint venture interest in Xuzhou-PAT Control Technologies Ltd. (XPCT), an ITS products and manufacturing service provider in China, and reported equity earnings of $189,858 for the first nine months of fiscal 2016 compared with $473,198 in the prior year to date. Fiscal 2015 year-to-date earnings at XPCT included a $167,577 after-tax gain on the sale of land and a building.

Net earnings in the third quarter of fiscal 2016 were $1.4-million or 10 cents per common share compared with $1.5-million or 10 cents per common share in the prior year. For the first nine months of fiscal 2016, net earnings increased 27.5 per cent to $2.2-million or 15 cents per common share compared with $1.8-million or 12 cents per common share in the prior year.

The company generated cash from operations of $2.4-million through the nine months ended Aug. 31, 2016, compared with a use of funds of $1.3-million in the prior year. Working capital increased to $13.3-million compared with $11.3-million at Nov. 30, 2015.

                               FINANCIAL HIGHLIGHTS
                         (In thousands, except per share)

                        Three months ended Aug. 31, Nine months ended Aug. 31,
                                 2016         2015          2016         2015

Revenue                       $18,256      $18,086       $48,439      $41,746
Gross margin                    6,462        4,970        15,752       12,628
Gross margin percentage
of revenue (%)                  35.4%        27.5%         32.5%        30.2%
Net earnings                    1,410        1,458         2,235        1,752
Earnings per common
share, basic                     0.10         0.10          0.15         0.12
Earnings per common
share, diluted                   0.09         0.10          0.15         0.12
EBITDA                          2,176        2,188         3,808        3,206

We seek Safe Harbor.