DDD Group Releases 2012 Financial Results

Mon Apr 8, 2013 5:28am EDT

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LOS ANGELES, April 8, 2013 (GLOBE NEWSWIRE) -- DDD Group plc (AIM:DDD) (OTCQX:DDDGY) ("DDD" or
"the Group"), the 3D solutions company, has published its full year results for the year ended 31
December 2012.

Highlights

Financial

* Over 15m units of TriDef 2D to 3D conversion solutions shipped by TV, PC and mobile licensees
* Turnover up 56% to $8,620,000 (2011: $5,534,000)
* Adjusted* EBITDA up 132% to $3,213,000; 37% margin (2011: $1,383,000, 25% margin)
* Profit from continuing operations before tax of $1,314,000 (2011: loss of $96,000)
* Profit per share of 0.57c (2011: loss of 0.43c)
* Net cash inflow from operating activities of $2,217,000 (2011: $120,000 inflow)
* Net cash at 31 December 2012 of $3,595,000 (2011: $3,143,000)

* Adjusted for non-cash share based payments

Operational

* Licence deals and licence renewals totaled 7 in 2012
* 16 licensees shipping royalty bearing products by year-end
* First patent IP licence agreement completed during the year
* Yabazam streaming 3D video business model beginning to create recurring revenue following launch
of VOD and subscription services for Smart TVs during the second half of the year
* Attained market leading position in 3D PC market
* Listed ADRs on OTC-QX exchange to enable US investors to access DDD shares more easily

Chris Yewdall, Chief Executive of DDD, said:

"The Group has recorded its second consecutive year of strong revenue growth as the 3D consumer
market continues to develop internationally. More than 15 million products with DDD's 2D to 3D
solution were manufactured during the year, delivering the Group's maiden full year profit after
tax, following our transition into profitability in the second half of 2011.

"In addition to strong shipments of the Group's TriDef technology licences, Samsung signed a
patent licence to use the Group's intellectual property for a 2D to 3D conversion application
aimed at the growing number of 3D consumer devices marketed by Samsung.

"During the year, we also launched the Yabazam 3D streaming movie service on Samsung and LG Smart
TVs, providing a further opportunity for the Group to generate recurring revenues from the fast
growing installed base of 3D Smart TVs.

"In 2013, the Group plans to build upon its growing technology licensing income, expanding onto
new 3D devices including glasses-free tablet PCs. The Group also plans to further augment the
Yabazam streaming service by adding new content, delivering solutions to additional brands of
Smart TV and expanding the service to new categories of 3D products including tablet PCs."

Enquiries

DDD Group Chris Yewdall, President & CEO
Victoria Stull, Chief Financial Officer +1 310 566 3340
 
Canaccord Genuity (UK Nomad)
Simon Bridges +44 (0) 207 523 8000
 
College Hill (UK IR)
Kay Larsen / Adrian Duffield +44 (0) 207 457 2020
 
Berns and Berns (US PAL)
Jim Berns +1 212 332 3320
  
About DDD Group

DDD transforms the visual experience by bringing 3D to the consumer. Its TriDefTM3D solutions
convert 2D to 3D automatically, and enable delivery to 3D TVs, PCs and mobile devices. Leading
brands including Samsung, LG Electronics, Lenovo and Sony license these solutions. Over 26 million
TriDef 3D products have been shipped by DDD's licensees worldwide. DDD's shares are quoted on the
London Stock Exchange's AIM Market (AIM: DDD; OTCQX: DDDGY). For more information please visit
www.DDD.com
http://www.globenewswire.com/newsroom/ctr?d=10027655&l=5&a=www.DDD.com&u=http%3A%2F%2Fwww.DDD.com
.
 
Overview

During 2012, the Group built upon the momentum established in 2011 to deliver another consecutive
year of record revenues together with the Group's first net profit after tax. The Group's
licensees shipped over 15 million units of TriDef 2D to 3D conversion technology during the year,
bringing the cumulative total to over 26 million units shipped at the end of 2012.

The Group also added two additional licensees in the PC market and one new licensee in the TV
market.  Existing software licence agreements with four licensees including LG, AOC and Lenovo
were also renewed during the year. 

DDD continued to focus on developing the market for its TriDef 3D PC software products, which
resulted in an increase in annual OEM shipments of 172% to approximately 2.4 million units.
Additionally the Group focused on developing opportunities for its TriDef 3D PC software in the
sizeable internet café market in China and formed an alliance with the i-Café market leader,
ShunWang Technology Co. Ltd, towards the end of the year.

Shipments of the Group's 2D to 3D video conversion solution for the new 'glasses-free' smartphone
and tablet products fell during the year as expected, as the LG Optimus 3D smartphone reached end
of life. This temporary decline in shipments was due to the longer time required by 3D display
manufacturers to perfect the larger 7" and 10" glasses-free 3D displays that are expected to be
introduced in tablet PCs in 2013.

The Group also introduced the Yabazam! 3D movie streaming service to LG and Samsung Smart TVs in
six countries including the United Kingdom, United States and Germany, achieving over 175,000
Smart TV app downloads during the year. The service was upgraded to video on demand in the fourth
quarter, allowing viewers to download feature length 3D movies on demand for a fee.

DDD signed its first patent licence with Samsung in 2012. This agreement allows Samsung to exploit
DDD's extensive international patent library to perform offline 2D to 3D conversion of high
definition video content. This is the first such licence for the Group and augments the licence
and royalty income that is presently derived from the Group's technology licences.

In response to the increasing interest in the Group being shown by US investors, an American
Depository Receipts listing of the Group's AIM shares was completed on the OTC-QX stock exchange
in December. This cost effective program is expected to simplify the process of trading the
Group's shares for US-based investors. 

Significantly, the Group achieved positive cash flow from operations for the full year and
improved upon the profitability achieved in the second half of 2011. The Group expects its
technology-based licensing and royalty revenue, coupled with further patent licensing
opportunities, to deliver further growth in 2013. 

Financial review

Revenues for the year ended 31 December 2012 were $8,620,000 (2011: $5,534,000), an increase of
56%. The increase was driven by growth in shipments of 3D devices including: televisions, Blu-ray
players, PCs and smartphones incorporating the Group's TriDef 3D solutions.  

Recurring TriDef technology royalty revenues (including direct to consumer software sales)
increased to $8,549,000 (2011: $4,686,000) as shipments across TV, PC and mobile grew from 9.1
million to 15 million units. The mix of unit shipments by volume was:  82% TV, 16% PC and 2%
mobile devices.  Royalties from OEM agreements increased to $8,339,000 (2011: $4,556,000) while
software licensing sales were $210,000 (2011: $130,000) for the year.

Other licensing royalties were $64,000 (2011: $60,000).  This includes royalties received from IP
patent licensing as well as royalties from other licence agreements which are non-unit bearing in
nature.  Revenues from one-time licence fees were nil (2011: $374,000). 

Consulting revenues attributable to one-time development fees were nil (2011: $407,000) as custom
development work required for licensees had been performed and completed in earlier periods. Other
revenues were $7,000 (2011: $7,000). 

Gross profit increased by 60% to $8,376,000 (2011: $5,219,000) and gross margin to 97% (2011: 94%)
as a result of the continued shift in revenue mix towards higher margin royalties.

Administration expenses increased to $5,242,000 (2011: $4,259,000), with the full year impact of
the 2011 hiring and routine cost increases. The Group also added an OTC-QX listing of a new Level
I ADR program late in the year.

Other income decreased to $79,000 (2011: $423,000).  The majority of other income is normally
derived from the Australian R &D cash incentive; however rule changes applicable to the year did
not allow the Group to receive a cash incentive during the period.  A future tax credit for fiscal
year 2012 was granted instead and the Group expects to receive the cash incentive in 2013
following a further change in the rules.

The non-cash share-based incentive cost was $733,000 (2011: $621,000) reflecting the additional
expense from share options granted during 2012.

Adjusted Group profit before tax and share-based incentive costs was $2,047,000 (2011: profit
$525,000).  The reported pre-tax profit was $1,314,000 (2011: loss $96,000).  

Given continued profitability in the Australian subsidiary and the likelihood of profits in 2013
for the US subsidiary, the deferred tax asset increased to $1,096,000 (2011: $476,000), which
results in a benefit of $620,000 recognised through the consolidated statement of income during
the period.  The total taxation charge was $550,000 (2011: $486,000). Taxation includes foreign
withholding taxes withheld at source as well as local sales taxes, offset by the movement in the
Deferred Tax Asset and Liability accounts. 

The Group recorded a profit per share during the year of $0.57 cents (2011: loss 0.43 cents).

During the year the Group simplified its legal structure removing the dormant US entity (Dynamic
Digital Depth TV, Inc) and the quasi-dormant Canadian holding company (Dynamic Digital Depth,
Inc), which was the predecessor parent company prior to the creation of DDD Group plc.  The result
was a non-taxable distribution of the Canadian holding company's assets and liabilities to DDD
Group plc as part of the wind-up.  The assets primarily consisted of the loans to the subsidiary
operating companies as well as the subsidiary share certificates in issue on the date of wind-up.

Net cash generated by operating activities was $2,217,000 (2011: inflow of $120,000).  Capitalised
expenditure was $1,873,000 (2011: $1,545,000). This cash flow was supplemented by $72,000 raised
from the issue of new shares through employee stock option exercises during the year (2011:
$291,000), resulting in cash of $3,595,000 at the end of 2012 (2011: $3,143,000).

Business update

During 2012, the Group realised the value of the licensing relationships and new product
development that had been undertaken during 2011. With continued growth in the shipments of IP for
television products and a full year of PC software shipments by multiple licensees, the Group's
licensees achieved a 65% annual increase in IP shipments.

The largest volume of shipments came from the TV market where Samsung continued to deploy the
Group's 2D to 3D conversion solution in its market-leading range of 3D televisions and 3D Blu-ray
players. ATEN Technology Inc. also commenced shipment of its IOGear 3D Complete+ video processor
that incorporates the Group's TriDef 3D conversion technology. Despite earlier setbacks, DDD's
other licensees in the TV chip market continued to make progress towards introducing their next
generation video processing chips that include TriDef 3D conversion and the Group believes these
additional licensees may become active during 2013.

The design of video processing chips for TVs continues to evolve with the latest chips including
single and dual core ARM-based processors. This evolution has allowed the Group to develop
ARM-compatible implementations of the TriDef 3D conversion for these next generation TV processors
and the Group expects that this new packaging may allow new devices to include the TriDef 3D
conversion feature implemented as lower risk software. The software approach is expected to reduce
delivery times (compared to conventional chip development projects) and reduce technical risk and
cost for OEM licensees.

In the PC market, the Group added two additional PC software licensees during the year and
continued to expand the range of games supported by the TriDef 3D software, which totalled 740 by
the year end, including the leading games in China, Korea and Japan. 

As part of its focus on developing opportunities in China in the Internet Café market, the Group
partnered with market leader Shunwang Technology Co. Ltd. to demonstrate 3D PC games at their
annual franchisee conference in Hangzhou China. Shunwang's 90,000 i-Café franchisees own over five
million PCs and this represents a very attractive upgrade market for DDD's PC monitor licensees
including AOC, LG Electronics and Lenovo.

Based on the increased interest being shown by game developers in the growing installed base of 3D
displays, the Group also introduced a software developer toolkit that enables game developers to
include support for 3D features directly from within the game. The toolkit was used by game
developer Ubisoft to add 3D support to the PC version of Tom Clancy's "Ghost Recon: Future
Soldier" that was released in September. Players can enable 3D from specially designed menus
within the game while the 3D version of the game is generated by the TriDef 3D software.

The introduction of Windows 8 in October 2012 is likely to slow the growth of new 3D PC shipments
by OEMs in 2013 since Windows 8 is a touch driven user experience and there are few large 3D PC
displays currently available that also include the touch screen capability. The arrival of Windows
8 is not expected to impact the Group's i-Café market development activities in China, since
Windows 8 is not used in Shunwang's i-Cafes.

The quality of 'glasses-free' 3D screens in the mobile phone and tablet market continues to make
good progress. During 2012, cost and yield issues delayed the introduction of next generation 3D
tablets however the Group is now seeing a steady increase in OEM interest, particularly in China. 

During the year, the Group continued to develop the TriDef 3D Mobile software for Android,
resulting in the debut of a new mobile game conversion feature at the Consumer Electronics Show in
January 2013. OEMs now have a wider choice of 3D content capabilities that are available for
licence including video conversion, photo conversion and game conversion for the latest popular
mobile and tablet games. The Group expects to conclude licence agreements for these products
during the first half of 2013 for the emerging 3D tablet market as evidenced by the licence
agreement with Chinese manufacturer Qingyuan Gadmei Electronics Technology Co. Ltd for its new
glasses-free 3D tablets that was announced on 27 March 2013. 

LG continued to ship its Optimus 3D smartphone during the year, introducing the second generation
Optimus 3D Max version. IP shipments for the Group's Android software were lower in 2012, however,
as the LG Optimus 3D smartphone reached end of line towards the end of the year. IP shipments of
the TriDef 3D Mobile software are expected to recover during 2013 as the new 3D tablets are
launched internationally.

As the installed base of 3D televisions, personal computers and mobile devices continues to grow,
the Group is broadening the reach of the Yabazam 3D movie streaming service. Industry research
suggests that around 400 million 3D capable TVs will be in living rooms by the end of 2015, most
of which will have the Smart TV internet capabilities. The latest Smart TV trend in the television
market allows Yabazam 3D to be delivered as an app from the Smart TV app store. 

In February 2012, the Yabazam 3D app was launched for LG's range of 3D Smart TVs and in June the
app was introduced on Samsung's range of 3D Smart TVs. In September, the Group launched the
Yabazam video on demand service allowing Yabazam 3D users to download movies for a pay per view
fee. At the end of the year, the Yabazam service in the United States was upgraded to a
subscription model allowing users to pay a fixed monthly fee and download as many of the Yabazam
movies as they wish. 

In 2013, the Group expects to continue to expand the reach of the Yabazam 3D streaming service,
both geographically by introducing the service in more of the 154 countries where Smart TV
services are now available, and also by delivering the Yabazam app for new brands of 3D Smart TV
and additional 3D devices. Currently the service is available in 17 countries. The Group debuted
the Yabazam app for Android-based smartphones and tablets at the Consumer Electronics Show in
January 2013 and 3D tablet manufacturers are already showing solid interest in carrying the
service in their new products. 

At the end of 2012, the Group had increased the number of originally made 3D movies under contract
from 32 to 83 titles and had expanded the international content partner network from 13 to 24 3D
content producers. Driven by the popularity rankings achieved by the Yabazam Smart TV app, it had
been downloaded over 175,000 times by the end of the year and was being used by approximately
1,500 viewers each day to stream 3D content to their Smart TVs.

To date, the majority of the Group's licensing revenue has been derived from the technology
licensing program, whereby the Group provides a software application or reference design to the
licensee for inclusion with the licensee's 3D products. During 2012, the Group concluded its first
patent licence agreement with Samsung that allows Samsung to undertake offline 2D to 3D conversion
using the patent claims owned by DDD. Unlike a technology licence, the patent licence does not
require any software or reference design to be provided by DDD to the licensee since the licensee
has the skills to develop its own implementation.

With over 26 million 3D consumer products that include the Group's TriDef 3D technologies shipped
by leading manufacturers since early 2010, there is now an established value for the
internationally registered patent claims on which DDD's solutions have been founded. As new
revenue streams continue to be developed, the Group expects that patent licensing revenue will
grow as the Group establishes its patent rights with prospective licensees. The patent licensing
program also has the potential to create licence and royalty revenue from applications in 3D
markets that are outside the scope of the current technology licensing program. The Group is also
in discussions with third party licensing specialists regarding partnerships that may help
accelerate the contribution and growth of the patent licensing program.

Current trading and outlook

For 2013, the Group expects to derive revenue from existing and new TriDef technology licensees in
the TV, PC and mobile markets, supplemented by a more active approach to patent licensing within
the consumer electronics industry and other 3D consumer markets. As the 3D market continues its
strong growth, the Group is transitioning from a company that generates the majority of its income
solely from technology licensing, to one that generates a diversified range of revenue from the
emerging opportunities in the broader 3D consumer market, including content distribution. 

DDD has maintained its market leadership position, with over 15 million new 3D consumer products
produced with the Group's TriDef 3D technologies during 2012. The Group expects that shipments of
IP in the TV market and mobile/tablet markets will grow in 2013 while shipments in the PC market
will likely slow as more licensees introduce Windows 8 based PC products for which the larger 3D
touchscreens are not yet available.

Building on the momentum established from over 26 million products that have been shipped in the
past three years with the Group's patented TriDef 3D technologies, the Group also plans to place
more emphasis on the patent licensing program to augment the revenues that are currently derived
from the technology licensing program.

The Group will continue to invest in the Yabazam 3D movie streaming service, adding more 3D
movies, expanding onto new Smart TV platforms in more countries and delivering Yabazam to new
devices such as the emerging glasses-free 3D tablet market. As subscriber growth for Yabazam
continues to grow, the Group is exploring the acquisition of rights to 2D content libraries that
can be converted to 3D to deliver unique 3D programming exclusive to the Yabazam service.

The current year has started in line with the Board's expectations and the Board is confident it
can build further on the momentum achieved to date to maintain its profitable growth in 2013.
  
For full release including financial statements, click here
http://www.globenewswire.com/newsroom/ctr?d=10027655&l=5&a=click%20here&u=http%3A%2F%2Fwww.ddd.com%2F2012-preliminary-results%2F
.

CONTACT: Michelle LaPaglia
         DDD
         310 566 3346
         mlapaglia@ddd.com

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