BusinessTeleCommunication Systems acquires next-generation 9-1-1 technology specialist microDATA GIS

Annapolis, Maryland-based TeleCommunication Systems, Inc. (TCS), an actor in the secure mobile communication technology field, last week announced it has acquired privately-held microDATA GIS, Inc., a provider of Next Generation 9-1-1 (NG9-1-1) software and solutions.

The aggregate acquisition consideration is approximately $37 million, comprised $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.

TCS says that microDATA’s technology and expertise expands TCS’ 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, 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. microDATA’s three channel alliances with CenturyLink, a second large nationwide operator, and regional operator Cincinnati Bell – all active in public safety communications — enhance distribution for TCS’ public safety solutions. microDATA’s market position grown since its inception in 1983 and complements TCS’ emphasis on serving the public safety community, including its recent SMS911 and mobile alert solutions.

NG9-1-1 technology is a 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 multimedia 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 ten years for NG9-1-1 upgrades, with an additional $1.5 billion spent on recurring connectivity, hosting, and operations and maintenance. TCS says that with the addition of microDATA’s assets to its existing capabilities, it 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 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 percent. 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. Tose, 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.”