Ottawa-based International Datacasting Corporation’s stock has been at an all-time low for the past month, at roughly five cents per share, and depending on who you talk to, the company is on the verge of a rebound or a flop.
IDC, which develops products and solutions to distribute digital content from radio, television, digital-cinema, and data broadcasters to consumers, has been struggling for a few years. It has reported annual net losses for the past four out of five years: losses of $6.5 million in 2010, $2.3 million in 2012, $1.0 million in 2013 and $8.2 million in 2014 – and a profit of $800,000 in 2011.
The company’s long-term debt increased to $386,354 in the second quarter, from $71,474 in the same period a year earlier. Debt also increased quarter to quarter, from $258,806 in the first quarter ending April 30, 2014 to $386,354 in the second quarter ending July 31, 2014.
The company’s 2015 fiscal year ends on Jan. 31, 2015. It’s unlikely to report a profit for the year following the termination of its Canadian Forces contract that ended in April.
The contract to deliver live and recorded radio content to Canadian soldiers worldwide accounted for approximately 17 per cent of the company’s revenues in the first three quarters of fiscal 2014. The contract was not renewed in part because of fewer troops being deployed, but also because of more advanced technology available for streaming content, according to a Feb. 5, 2014 press release.
This is a problem that IDC has been facing for a while, said Adam Adamou, the company’s former board chairman from 2010 to 2012. He sat down in January with IDC’s newly appointed CEO Doug Lowther and a member of the board to discuss the future of the company.
Adamou said he left the meeting without any confidence in the company and, shortly after, sold his remaining shares, a non-material amount, which he began selling in 2012. (He also said he did not receive any material information about the company at the meeting.)
The problem with the company, Adamou said, is it has a spending problem that doesn’t match its earnings.
“With the rate at which … revenues are declining, (they’re) going to run out of money and (they’re not) going to pick up anytime soon,” said Adamou. “(The) only thing (they) can do is cut costs now, you know, cut your expenses, cut your research and development, and reduce spending, because if (they) run out of money, nobody’s going to give (them) any.”
Adamou said the company’s technology is outdated and overpriced. “Everybody is going digital and … fibre (optics) and using the internet. They don’t have a solution to that.”
IDC declined to be interviewed for this article or respond to Adamou’s comments.
The company’s plan to turn around IDC would suggest its managers feel the opposite way.
Its plan, implemented during the first half of fiscal 2015, is reducing costs as Adamou had supported, while also increasing the company’s research and development budget, something he adamantly opposed.
The company cut costs by reducing its global workforce of 75 full- and part-time workers, by about 25 per cent, and by consolidating its manufacturing and supply activities in its Ottawa location.
Research and development costs were increased by about 18 per cent, from $2.1 million in the first half of fiscal 2014, to $2.5 million in same period in fiscal 2015.
Seventy-five per cent of the research and development costs will be put towards new and enhanced video products, which the company says will provide opportunities for revenue growth, according to its 2014 management discussion and analysis filing for the company’s fourth quarter.
Ian Lee, a professor at Carleton University’s Sprott School of Business, says research and development should not be overlooked, especially in the technology sector.
He says any company can come back from losses—such as the $1.3 million loss IDC faced in its second quarter that ended July 31 of this year—as long as it is of interest to consumers and differentiates itself enough from other products on the market.
“The strategy of any company is dependent on creating some product or some service that in the customer’s eyes is unique … First and foremost, you try to build the proverbial, stereotypical better mouse trap,” says Lee. “Build a better product than your competitor’s (and hope) that the customer will come to you (instead).”
For IDC, the better mousetrap embodies two products: Titan 3 and Laser MPS.
“We believe that our new and enhanced products will enable IDC to increase product revenues from those achieved in the last few quarters, and continue to anticipate a return to profitability during the second half of Fiscal 2015,” Lowther said in a press release on Sept. 4, 2014.
The Titan 3 Contribution Encoder leads the industry in video and audio compression quality, the company says. It has an extremely low latency, also known as an encoding delay, which “enables broadcasters to be first to air with breaking news, and to conduct the most natural live interviews from remote locations.”
“Audiences everywhere are becoming more demanding, and challenging applications such as live news and sports require the best possible image quality as well as very low latency performance,” Lowther said in a press release on June 4, 2014.
So far, Titan 3 is being used in Ecuador to deliver education programming across cities, by Mexican broadcaster Grimsat, and for live coverage of the Oklahoma City Memorial Marathon.
The Laser Multi Program Splicer (MPS) enables seamless content and ad insertion on multiple channels simultaneously.
IDC showcased this product during a seminar in Indonesia about the future of broadcast advertising. The targeted advertising technology would allow broadcasters to tailor ads according to local regulations, language and cultural preferences, making them more effective and increasing ad sales.
Any impacts of the company’s plan may show up in IDC’s annual financial results for the end of its 2015 fiscal year. Those are not likely to be released until April.