TeleCommunication Systems, Inc.

Financial Highlights and Guidance

($000 except per share numbers)

Quarterly Results

2011
Actual Q1

Services revenue

74,802

2011
Actual Q2

75,993

2011
Actual Q3

74,181

2011
Actual Q4

2011
Actual YTD

78,945

$ 303,921

2012
Actual Q1

72,348

2012
Actual Q2

70,539

2012
Actual Q3

79,096

2012
Actual YTD

2012 Outlook1

221,983

Year-over-year growth

25%
15,564

20%
24,686

12%
38,439

8%
42,802

16%
121,491

-3%
27,687

-7%
44,083

7%
60,960

-1%
132,730

Year-over-year growth

-50%
90,366
-1%

-16%
100,679
9%

5%
112,620
9%

45%
121,747
19%

-4%
425,412
9%

78%
100,035
11%

79%
114,622
14%

59%
140,056
24%

69%
354,713
17%

Direct cost of services

41,707

40,597

42,800

45,873

170,977

44,241

40,641

45,545

130,427

Direct cost of systems

12,065

22,009

32,514

36,610

103,198

21,404

39,455

50,385

111,244

53,772
33,095
44%
3,499
22%
36,594
40%
8,543
7,350
10,566
26,459

62,606
35,396
47%
2,677
11%
38,073
38%
9,633
6,932
11,421
27,986

75,314
31,381
42%
5,925
15%
37,306
33%
8,610
7,292
11,570
27,472

82,483
33,072
42%
6,192
14%
39,264
32%
10,312
7,820
12,661
30,793

274,175
132,944
44%
18,293
15%
151,237
36%
37,098
29,394
46,218
112,710

65,645
28,107
39%
6,283
23%
34,390
34%
8,662
7,505
12,367
28,534

80,096
29,898
42%
4,628
10%
34,526
30%
8,931
7,598
12,978
29,507

95,930
33,551
42%
10,575
17%
44,126
32%
9,799
8,041
14,931
32,771

241,671
91,556
41%
21,486
16%
113,042
32%
27,392
23,144
40,276
90,812

2,581
2,551

2,125
2,660

2,204
2,774

2,762
2,787

9,672
10,772

2,807
2,798

1,938
1,412

2,015
1,701

6,760
5,911

15,267

14,872

14,812

14,020

58,971

11,461

8,369

15,071

34,901

3,099
2,581
2,551
1,325
-

2,552
2,125
2,660
1,402
-

3,147
2,204
2,774
1,404
-

3,337
2,762
2,787
1,404
-

12,135
9,672
10,772
5,535
-

3,439
2,807
2,798
1,374
-

3,371
1,938
1,412
715
125,703

3,689
2,015
1,701
1,431
-

10,499
6,760
5,911
3,520
125,703

9,556

8,739

9,529

10,290

38,114

10,418

133,139

8,836

152,393

$161M

5,711
(1,885)
(187)
3,639
(1,776)
196
43%
2,059

6,133
(2,043)
(237)
3,853
(1,674)
(116)
46%
2,063

5,283
(1,870)
(187)
3,226
(1,073)
(312)
43%
1,841

3,730
(1,845)
(187)
1,698
(398)
(259)
39%
1,041

20,857
(7,643)
(798)
12,416
(4,921)
(491)
44%
7,004

1,043
(1,538)
(188)
(683)
808
(494)
46%
(369)

(124,770)
(1,709)
(190)
(126,669)
15,867
(315)
12%
(111,117)

6,235
(2,203)
(190)
3,842
510
(173)
-9%
4,179

(117,492)
(5,450)
(568)
(123,510)
17,185
(982)
13%
(107,307)

($114M) - ($110M)

Systems revenue
Total Revenue
Year-over-year growth

Total cost of revenue

Services gross profit
% of revenue
Systems gross profit
% of revenue
Total gross profit
% of revenue
Research and development
Sales and marketing expenses
General and administrative expenses
Total operating expenses incl. non-cash charges
Add back non-cash charges in costs and expenses above
Non-cash stock-based compensation expense
Amortization of capitalized software development costs
EBITDA 3
Non-cash operating charges
Depreciation/amortization of fixed assets
Non-cash stock-based compensation expense
Amortization of capitalized software development costs
Amortization of acquired intangible assets
Impairment of goodwill and long-lived assets
Subtotal: non-cash operating charges including impairment of
goodwill and long-lived assets
Income from operations (EBIT)
Interest and other, net
Amortization deferred finance fees
Income before income taxes
Income taxes - non-cash
Income taxes - cash
Effective income tax rate
GAAP Net Income
Add back tax-effected convertible debt interest expense

GAAP Net Income for Diluted EPS

Weighted average number of shares for GAAP Diluted EPS
GAAP Net Income per Share - Diluted

$
$

GAAP Net Income

Impairment of goodwill and long-lived assets
Non-cash stock-based compensation expense
Amortization of acquired intangible assets
Amortization deferred finance fees
Non-cash tax expense
Adjusted Net Income

Add back tax-effected convertible debt interest expense

Adjusted Net Income 2

Weighted average number of shares for Adjusted Diluted EPS

Adjusted Net Income per Share - diluted

$
2

2,059
57,837
0.04
2,059
2,581
1,325
187
1,776
7,928
659
8,587
67,839
0.13

$
$
$

$
$

2,063
59,263
0.03
2,063
2,125
1,402
237
1,674
7,501
624
8,125
69,265
0.12

$
$
$

$
$

1,841
59,199
0.03
1,841
2,204
1,404
187
1,073
6,709
664
7,373
69,201
0.11

$
$

1,041
58,003
0.02

1,041
2,762
1,404
187
398
5,792
714
6,506
68,005

0.10

$
$
$

$
$

7,004
58,581
0.12
7,004
9,672
5,535
798
4,921
27,930
2,627
30,557
68,583
0.45

$
$
$

(369) $ (111,117) $
57,572
58,059
(0.01) $
(1.91) $

718
4,897
68,505
0.07

(369) $ (111,117) $
125,703
2,807
1,938
1,374
715
188
190
(808)
(15,867)

4,179

3,192
3,192
57,572

0.06 $

1,562
1,562
58,059
0.03

$
$

$
$
$

2,015
1,431
190
(510)
7,305
718
8,023
68,505
0.12

13% - 15%

$47M - $51M

9%
($111M) - ($107M)

(107,307)
57,806
(1.86)

58.4
($1.90) - ($1.83)

(107,307)
125,703
6,760
3,520
568
(17,185)

($111M) - ($107M)
125.7M
9.1M
5.4M
0.8M
(12M) - (11.5M)

12,059
12,059
57,806

$18M - $23M

0.21

$0.32 - $0.39

Company guidance issued and effective only on 10/25/12

Shares issuable via the convertible debt are included if dilutive, in which case tax-effected interest expense on the debt is excluded from the determination of Net Income per Share and Adjusted Net Income per Share.

See accompanying GAAP to non-GAAP reconciliation and explanation.

Page 1 of 7

$480M - $490M

$18M - $23M
58.4

10/25/2012

TeleCommunication Systems, Inc.

Financial Highlights and Guidance
($000 except per share numbers)

Annual Results
Services revenue
Systems revenue

2006
2007
2008
2009
2010
2011
Total Year
Total Year
Total Year
Total Year
Total Year
Total Year
$
88,380 $
88,062 $
101,359 $
151,944 $
262,279 $
303,921
Year-over-year growth
18%
0%
15%
50%
73%
16%
36,556
56,106
118,783
148,143
126,524
121,491
Year-over-year growth
35%
53%
112%
25%
-15%
-4%

Total Revenue
Direct cost of services

124,936
22%
52,540

144,168
15%
52,161

Direct cost of systems

17,883
70,423
35,840
41%
18,673
51%
54,513
44%
12,586
11,713
16,959
41,258

Year-over-year growth

Total cost of revenue

Services gross profit
% of revenue
Systems gross profit
% of revenue
Total gross profit
% of revenue
Research and development
Sales and marketing expenses
General and administrative expenses
Total operating expenses incl. non-cash charges
Add back noncash charges included in cost of revenue and op.exp.above
Non-cash stock-based compensation expense
Amortization of capitalized software development costs
EBITDA before patent-related gains
Patent-related gains, net of expenses
EBITDA including patent-related gains 2
Non-cash operating charges
Depreciation/amortization of fixed assets
Non-cash stock-based compensation expense
Amortization of capitalized software development costs
Amort. of other intangibles
Subtotal: non-cash operating charges
Operating profit (EBIT)
Interest and other, net
Amortization of debt discount and deferred finance fees
Debt conversion expense, discount write-off
Income/(Loss) from continuing operations before income taxes
Income taxes - non-cash
Income taxes - cash
Effective income tax rate
Income/(Loss) from continuing operations
Loss from operations of Enterprise assets held for sale, including non-cash
impairment charges in 2006
GAAP Net Income/(Loss)
Add back tax-effected convertible debt interest expense
GAAP Net Income/(Loss) for Diluted EPS

Weighted average number of shares for GAAP Diluted EPS

Net Income/(Loss) per share diluted from discontinued operations

Net Income/(Loss) per Share - Diluted
GAAP Net Income/(Loss)
Non-cash stock-based compensation expense
Amortization of acquired intangible assets
Amortization of debt discount and deferred finance fees
Non-cash tax expense
Patent and enterprise (gain)/loss
Adjusted Net Income/(Loss) 2

Adjusted Net Income/(Loss) per Share - Diluted

425,412
9%
170,977

37,906

77,291

90,067
35,901
41%
18,200
32%
54,101
38%
13,072
11,917
19,334
44,323

138,885
39,765
39%
41,492
35%
81,257
37%
16,161
13,715
28,238
58,114

102,111

98,613

103,198

186,233
67,822
45%
46,032
31%
113,854
38%
22,351
15,967
35,387
73,705

250,840
110,052
42%
27,911
22%
137,963
35%
30,074
23,880
37,175
91,129

274,175
132,944
44%
18,293
15%
151,237
36%
37,098
29,394
46,218
112,710

3,116
1,273

4,333
1,522

3,758
2,089

5,859
3,069

10,172
9,303

9,672
10,772

17,643

15,633

28,990
8,060
37,050

49,077
15,700
64,777

66,309
66,309

58,971
58,971

17,643

15,633

7,956
3,116
1,273
147
12,492
5,153
(1,728)
(1,447)
1,976
1,976

6,200
4,333
1,522
148
12,203
3,430
(1,267)
(718)
(2,458)
(1,014)
(1,014)

5,865
3,758
2,089
147
11,859
25,191
(700)
(180)
24,311
33,816
(559)
NM
57,568

6,035
5,859
3,069
870
15,833
48,944
(1,479)
(401)
47,064
(17,429)
(1,366)
40%
28,269

9,758
10,172
9,303
4,664
33,897
32,412
(7,636)
(750)
24,026
(5,010)
(3,137)
34%
15,879

12,135
9,672
10,772
5,535
38,114
20,857
(7,643)
(798)
12,416
(4,921)
(491)
44%
7,004

(23,671)
(21,695) $

(275)
(1,289) $

57,568

28,269

15,879

7,004

(21,695) $

(1,289) $

57,568

380
28,649

15,879

7,004

41,453

46,644

$
$

$
1

0.05

$
1

(0.02) $

1.23

(0.59)
(0.54) $

(0.01)
(0.03) $

1.23

(21,695) $
3,116
147
1,447
23,671

(1,289) $
4,333
148
3,176
275

57,568 $
3,758
147
180
(33,816)
(8,060)

6,686

6,686
0.16

6,643

40,166
$

53,946

Adjusted Net Income/(Loss) for Diluted EPS

388,803
30%
152,227

Weighted average number of shares for Adjusted Diluted EPS

300,087
36%
84,122

40,166

Net Income/(Loss) per share diluted from continuing operations

Add back tax-effected convertible debt interest expense

220,142
53%
61,594

6,643

0.16

0.53

0.53

19,777

0.42

0.12

0.28

0.12

28,269 $
5,859
870
401
17,429
(15,700)

15,879
10,172
4,664
750
5,010
-

7,004
9,672
5,535
798
4,921
-

36,475

27,930

30,557

3,044
$

53,946

Shares issuable via the convertible debt are included if dilutive, in which case tax-effected interest expense on the debt is excluded from Income per Share.
non-GAAP reconciliation and explanation.
Page 2 of 7

37,508

0.70
2

58,581

0.28

380

46,644
$

56,032
$

37,128

41,453
$

19,777

39,519

2,627

66,034
$

0.60

68,583
$

0.45

See accompanying GAAP to

10/25/2012

TeleCommunication Systems, Inc.

Financial Highlights and Guidance

($000s)

Historical GAAP

Government

2007
Total Year

2008
Total Year

2009
Total Year

2010
Total Year

2011
Actual Q1

2011
Actual Q2

2011
Actual Q3

2011
Actual Q4

2011
Total Year

2012
Actual Q1

2012
Actual Q2

2012
Actual Q3

2012
Total Year

$ 29,269
39,585

$ 36,918
81,354

$ 62,229
110,589

$ 93,302
93,836

$ 30,575
10,817

$ 32,173
20,913

$ 31,841
34,409

$ 34,624
38,884

$ 129,213
105,023

$ 33,313
23,525

$ 32,744
40,765

$ 37,890
53,846

$ 103,947
118,136

68,854

118,272

172,818

187,138

41,392

53,086

66,250

73,508

234,236

56,838

73,509

91,736

222,083

22,815
32,882

29,192
68,298

48,804
91,504

66,516
84,207

21,848
8,901

21,233
18,393

21,982
29,196

24,863
33,467

89,926
89,957

25,211
18,355

24,329
36,638

28,076
45,912

77,616
100,905

55,697

97,490

140,307

150,723

30,749

39,626

51,178

58,330

179,883

43,566

60,967

73,988

178,521

6,454
22%
6,703
17%
13,157
19%

7,726
21%
13,056
16%
20,782
18%

13,426
22%
19,086
17%
32,511
19%

26,786
29%
9,629
10%
36,415
19%

8,727
29%
1,916
18%
10,643
26%

10,940
34%
2,520
12%
13,460
25%

9,859
31%
5,213
15%
15,072
23%

9,761
28%
5,417
14%
15,178
21%

39,287
30%
15,066
14%
54,353
23%

8,102
24%
5,170
22%
13,272
23%

8,415
26%
4,127
10%
12,542
17%

9,814
26%
7,934
15%
17,748
19%

26,331
25%
17,231
15%
43,562
20%

Revenue
Services
Systems
Government revenue

Cost of revenue
Direct cost of services1
Direct cost of systems1

Government direct cost of revenue

Gross Profit
Services
% of revenue
Systems
% of revenue
Government gross profit
% of revenue

Services: Cyber security services and training; Maintenance and field support service on installed base of deployable ground terminal systems;
Satellite fixed teleport services; Resale of "space segment" airtime; Communications engineering.
Products and services:

Systems: SwiftLink and other deployable ground terminal systems, based on satellite, line-of-sight, and troposcatter wireless technology;
SwfitCell secure cellular, custom communication systems, related integration projects, and special government work usually involving the
highest levels of security.

Markets:

Federal, including Departments of Defense, State, Justice, & Homeland Security and state, local, international government customers

Competitors:

Satcom technology vendors like Globecomm, Rockwell Collins and Viasat, Federal systems integrators and contractors with requisite security
clearances; e.g. General Dynamics, CSC, CACI.

TCS Strengths:

20 plus years of government/military relationships and successful track record with highly secure, highly reliable communications solutions,
skilled staff with top security clearances, and cleared facilities. TCS SwiftLink is a de-facto DoD standard for deployable ground terminal platform,
with over 2,500 deployments.

Includes non-cash stock compensation expense as detailed in the accompanying Non-cash Stock Compensation Allocation schedule.

Page 3 of 7

10/25/2012

TeleCommunication Systems, Inc.

Financial Highlights and Guidance
($000s)

Historical GAAP

2007
Total Year

2008
Total Year

2009
Total Year

2010
Total Year

2011
Actual Q1

2011
Actual Q2

2011
Actual Q3

2011
Actual Q4

2011
Total Year

2012
Actual Q1

2012
Actual Q2

2012
Actual Q3

2012
Total Year

$ 58,792
16,521
75,313

$ 64,441
37,429
101,870

$ 89,715
37,554
127,269

$ 168,977
32,688
201,665

$ 44,227
4,747
48,974

$ 43,820
3,773
47,593

$ 42,340
4,030
46,370

$ 44,321
3,918
48,239

$ 174,708
16,468
191,176

$ 39,035
4,162
43,197

$ 37,795
3,318
41,113

$ 41,206
7,114
48,320

$ 118,036
14,594
132,630

Direct cost of services1

Amortization of capitalized software development
costs
Total direct cost of services

29,346

32,402

35,012

78,970

18,134

17,638

19,093

19,285

74,150

16,680

15,990

17,147

49,817

29,346

32,402

306
35,318

6,741
85,711

1,725
19,859

1,726
19,364

1,725
20,818

1,725
21,010

6,901
81,051

2,350
19,030

322
16,312

322
17,469

2,994
52,811

Direct cost of systems1

Amortization of capitalized software development
costs
Total direct cost of systems

3,502

6,904

7,539

11,844

2,338

2,681

2,269

2,082

9,370

1,904

1,727

3,094

6,725

1,522
5,024

2,089
8,993

3,069
10,608

2,562
14,406

826
3,164

935
3,616

1,049
3,318

1,061
3,143

3,871
13,241

1,145
3,049

1,090
2,817

1,379
4,473

3,614
10,339

34,370

41,395

45,926

100,117

23,023

22,980

24,136

24,153

94,292

22,079

19,129

21,942

63,150

29,446
50%
11,497
70%
40,943
54%

32,039
50%
28,436
76%
60,475
59%

54,397
61%
26,946
72%
81,343
64%

83,266
49%
18,282
56%
101,548
50%

24,368
55%
1,583
33%
25,951
53%

24,456
56%
157
4%
24,613
52%

21,522
51%
712
18%
22,234
48%

23,311
53%
775
20%
24,086
50%

93,657
54%
3,227
20%
96,884
51%

20,005
51%
1,113
27%
21,118
49%

21,483
57%
501
15%
21,984
53%

23,737
58%
2,641
37%
26,378
55%

65,225
55%
4,255
29%
69,480
52%

Commercial
Revenue
Services
Systems
Commercial revenue

Cost of revenue

Commercial cost of revenue

Gross Profit
Services
% of revenue
Systems
% of revenue
Commercial gross profit
% of revenue

Services: End-to-end 9-1-1 Solutions include solutions for wireless E9-1-1, Voice over Internet Protocol (VoIP)E9-1-1 and Next Generation 9-11. LBS and Telematics Solutions including hosted infrastructure, middleware and applications including turn-by-turn Navigation, People-Finder,
Workforce Management, Mobile Search and Emergency/Security.
Products and Services:

Markets:
Competitors:

TCS Strengths:

Software-based systems: NextGen 9-1-1 ESiNet and Customer Premise Equipment software-based systems for first response call dispatch. Endto-end Xypoint LBS platform for wireless operators that includes infrastructure, middleware and geospatial information server (GIS);
Messaging platforms for wireless operators include short message service center (SMSC), multimedia message management, and network
security solutions.
Wireless carriers globally, device and "over-the-top" wireless application solutions, state and local governments for next-generation 9-1-1, cable
and VoIP operators, automotive telematics companies.
Intrado division of West Corporation, TeleNav, Intel Corporation through its acquistion of Telmap, Motorola Mobility, Ericsson, TomTom, Garmin,
Comverse, Google, Apple
- NextGen 9-1-1 leader with depth of proven Unix and Microsoft platform-based ESINet and Customer Premise solutions.
- Global leader in end-to-end precise LBS infrastructure and applications for mobile operators, including Verizon, AT&T, Sprint, Bell Mobility,
MetroPCS, Leap, Hutchison (3), Vodafone, and Iusacell.
- Leading 9-1-1 provider for wireless and VoIP operators including Verizon, AT&T, MetroPCS, Leap Wireless, Comcast, and state and local
governments.
- Leading text messaging platform provider handling approximately one third of text messages sent in the US.
Successful infrastructure deployments and high-volume wireless applications for leading service providers around the world, including: Verizon
Wireless, AT&T(Mobile), Sprint, Comcast, Telefonica (CALA).
Strong channel and product partners including AT&T, CenturyLink, Huawei, Alcatel-Lucent, and Level 3.

Includes non-cash stock compensation expense as detailed in the accompanying Non-cash Stock Compensation Allocation schedule.
Page 4 of 7

10/25/2012

TeleCommunication Systems, Inc.

Financial Highlights and Guidance
Condensed Balance Sheet Data ($000s)
2008
Dec. 31
Assets
Current assets:
Cash, equivalents, and marketable securities
Accounts receivable, net
Unbilled receivables
Inventory
Deferred tax assets
Deferred project costs and other current assets
Total current assets
Property and equipment, net
Software development costs, net
Intangible assets, net
Goodwill
Deferred income tax benefit
Other assets
Total assets
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses
Deferred revenue
Current portion of bank borrowings and capital leases
Total current liabilities

Notes payable and capital leases, less current portion

Deferred tax liability
Other liabilities

38,977
61,827
21,797
2,715
9,736
3,869
138,921
12,391
2,773
562
1,813
24,309
1,190
181,959

51,588
4,349
3,837
59,774

2009
Dec. 31

7,913

61,426
65,476
23,783
9,331
9,507
30,083
199,606
20,734
45,384
33,975
164,350
8,176
472,225

72,264
9,938
39,731
121,933

2010
Dec. 31

81,527
52,073
32,358
5,440
8,179
8,961
188,538
39,337
39,427
28,264
159,143
8,100
462,809

56,403
18,063
24,519
98,985

42,684
37,854
36,032
176,495
13,093
476,624

46,570
21,666
24,818
93,054

62,403
59,578
22,746
6,583
4,488
14,276
170,074
46,518
35,635
34,483
176,477
12,458
475,645

50,308
22,786
19,961
93,055

52,182
51,383
42,244
7,323
3,103
17,060
173,295
50,140
33,509
33,079
176,477
11,984
478,484

56,490
17,279
20,138
93,907

2011
Dec. 31

60,130
64,716
31,247
7,143
8,602
16,158
187,996
53,506
31,151
31,675
176,477
8,834
489,639

61,867
14,358
24,761
100,986

2012
Mar. 31

51,293
58,539
31,006
8,309
8,861
15,294
173,302
58,275
28,445
30,301
176,750
7,683
474,756

49,835
17,796
18,903
86,534

2012
Jun. 30

61,648
60,760
20,273
11,129
9,159
20,737
183,706
49,803
14,984
15,622
90,418
8,184
7,428
370,145

63,601
21,895
15,481
100,977

2012
Sep. 30

49,795
19,166
28,516
115,118
8,184
7,210
420,447

63,264
26,896
22,853
113,013

130,414
7,741
6,609

127,935
7,741
6,596

125,491
7,017
5,396

123,257
7,234
4,321

284,270
(98,484)
185,786
472,225 $

298,150
(82,605)
215,545
462,809

313,493
(80,546)
232,947
476,624 $

316,309
(78,483)
237,826
475,645 $

318,947
(76,642)
242,305
478,484 $

326,350
(75,601)
250,749
489,639

330,252
331,573
335,813
(76,842)
(187,087)
(184,884)
253,410
144,486
150,929
474,756 $ 370,145 $ 420,447

87,010

21,090
5,276
26,366
2,478
28,844

79,147

77,673

89,553

3,703
3,343
7,046
461
7,507

2,494
7,566
10,060
981
11,041

19,329
9,031
28,360
5,683
34,043

77,412

77,019

79,388

86,768

120,728
3,954

64,634
62,254
30,034
10,597
9,497
15,442
192,458

133,147
7,741
9,735

Working capital ($000s)

54,709
63,491
23,401
5,764
6,737
16,364
170,466

2011
Sep. 30

135,981
8,382
3,916

298,593
(184,321)
114,272
$ 181,959 $

2011
Jun. 30

143,316
15,435
5,755

Stockholders' equity:
Common stock & add'l paid-in capital
Accumulated deficit
Total stockholders' equity
Total liabilities and equity

Capital expenditures for period ended

Property and equipment incl. internal-use software, net
of funding through leases
Capital purchases funded through leases
Subtotal fixed asset additions
Software (for resale) development
Total Capex

2011
Mar. 31

82,729

152,316
4,189

79,445

15,222
4,268
19,490
768
20,258

$
$

Current ratio

2.3

1.6

1.9

1.8

1.8

1.8

1.9

2.0

1.8

1.7

Debt to equity ratio

0.1

1.0

0.7

0.7

0.6

0.6

0.6

0.6

0.9

1.2

Days revenue in accounts receivable

Billed
Unbilled
Total

70
25
95

65
24
88

46
28
74

63
23
87

53
20
74

41
34
75

48
23
71

53
28
81

48
16
64

40
19
59

Days revenue in payables and accruals

59

72

50

46

45

45

46

45

50

Page 5 of 7

41
10/25/2012

TeleCommunication Systems, Inc.

Financial Highlights and Guidance

GAAP to non-GAAP Reconciliations

EBITDA is not a financial measure calculated and presented in accordance with generally accepted accounting principles (GAAP) and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and
presented, nor as an alternative to cash flow from operating activities as a measure of our liquidity. We define EBITDA as GAAP net income/(loss) before impairment of goodwill and long-lived assets, non-cash stock-based compensation expense; amortization of
capitalized software development costs, property and equipment and acquired intangibles, depreciation, interest expense, other non-cash financing costs, and provision (benefit) from income taxes. Other companies (including our competitors) may define EBITDA
differently. We present EBITDA because we believe it to be an important supplemental measure of our performance that is commonly used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. Management
also uses this information internally for forecasting and budgeting. It may not be indicative of the historical operating results of TCS nor is it intended to be predictive of potential future results. You should not consider EBITDA in isolation, or as a substitute for
analysis of our results as reported under GAAP. See GAAP to non-GAAP Reconciliation below for further information on our non-GAAP measure.
The following table reconciles the specific items excluded from GAAP in the calculation of EBITDA for the periods shown below:

EBITDA (amounts in thousands)

GAAP Net Income/(Loss)
Impairment of goodwill and long-lived assets
Depreciation and amortization of fixed assets
Financing and other expenses, net
Non-cash stock-based compensation expense
Amortization of capitalized software development costs
Amortization of acquired intangible assets
Provision (benefit) for income taxes
Operations of Enterprise assets held for sale
Less
Less:gain
patent-related
from sale ofgains,
patentnet of expenses

2007
2008
2009
Total Year
Total Year
Total Year
$
(1,289) $
57,568 $
28,269
6,200
5,865
6,035
4,444
880
1,880
4,333
3,758
5,859
1,522
2,089
3,069
148
147
870
(33,257)
18,795
275
(8,060)
(15,700)

2010
Total Year
$
15,879
9,758
8,386
10,172
9,303
4,664
8,147
-

EBITDA before patent-related gains, net of expenses

15,633

28,990

49,077

66,309

Q1 2011
$
2,059
3,099
2,072
2,581
2,551
1,325
1,580
-

Q2 2011
$
2,063
2,552
2,280
2,125
2,660
1,402
1,790
-

Q3 2011
$
1,841
3,147
2,057
2,204
2,774
1,404
1,385
-

Q4 2011
$
1,041
3,337
2,032
2,762
2,787
1,404
657
-

2011
Total Year
$
7,004
12,135
8,441
9,672
10,772
5,535
5,412
-

Q1 2012
Q2 2012
Q3
$
(369) $
(111,117) $
125,703
3,439
3,371
1,726
1,899
2,807
1,938
2,798
1,412
1,374
715
(314)
(15,552)
-

15,267

14,872

14,812

14,020

58,971

11,461

8,369

2012
Total Year
$
(107,307)
125,703
3,689
10,499
2,393
6,018
2,015
6,760
1,701
5,911
1,431
3,520
(337)
(16,203)
-

2012
4,179

15,071

34,901

Adjusted Net Income is not a financial measure calculated and presented in accordance with GAAP and should not be considered as an alternative to net income, operating income or any other financial measures so calculated and presented, nor as an alternative
to cash flow from operating activities as a measure of liquidity. Adjusted Net Income is defined as GAAP net income/(loss) adjusted for impairment of goodwill and long-lived assets, amortization of acquired intangibles, non-cash stock-based compensation
expense, non-cash tax and financing charges and credits, and patent gains. TCS has provided Adjusted Net Income in addition to GAAP financial results because management believes this non-GAAP measure helps provide a consistent basis for comparison
between quarters and fiscal year growth rates that are not influenced by certain non-cash charges and credits or items not part of our ongoing operations, and is helpful in understanding the underlying operating results.
The following table reconciles the specific items excluded from GAAP in the calculation of Adjusted Net Income for the periods shown below:

Adjusted Net Income (amounts in thousands)

GAAP Net Income/(Loss)
Impairment of goodwill and long-lived assets
Non-cash stock-based compensation expense
Amortization of acquired intangible assets
Amortization of debt discount and deferred finance fees
Non-cash tax expense
Patent and enterprise (gain)/loss
Adjusted Net Income
Add back tax-effected convertible debt interest expense
Adjusted Net Income for Diluted EPS

2007
2008
2009
Total Year
Total Year
Total Year
$
(1,289) $
57,568 $
28,269
4,333
3,758
5,859
148
147
870
3,176
180
401
(33,816)
17,429
275
(8,060)
(15,700)
$
6,643 $
19,777 $
37,128
380
$
6,643 $
19,777 $
37,508

Weighted average number of shares for Adjusted Net Income Diluted 1

Adjusted Net Income per Share - Diluted
1

41,453
$

0.16

46,644
$

0.42

2010
Total Year
$
15,879
10,172
4,664
750
5,010
$
36,475
3,044
$
39,519

53,946
$

0.70

Q1 2011
$
2,059
2,581
1,325
187
1,776
$
7,928
659
$
8,587

66,034
$

0.60

Q2 2011
$
2,063
2,125
1,402
237
1,674
$
7,501
624
$
8,125

67,839
$

0.13

Q3 2011
$
1,841
2,204
1,404
187
1,073
$
6,709
664
$
7,373

69,265
$

0.12

Q4 2011
$
1,041
2,762
1,404
187
398
$
5,792
714
$
6,506

69,201
$

0.11

2011
Total Year
$
7,004
9,672
5,535
798
4,921
$
27,930
2,627
$
30,557

68,005
$

0.10

Q1 2012
Q2 2012
Q3
$
(369) $
(111,117) $
125,703
2,807
1,938
1,374
715
188
190
(808)
(15,867)
$
3,192 $
1,562 $
$
3,192 $
1,562 $

68,583
$

0.45

57,572
$

0.06

58,059
$

0.03

2012
Total Year
$
(107,307)
125,703
2,015
6,760
1,431
3,520
190
568
(510)
(17,185)
7,305 $
12,059
718
8,023 $
12,059

2012
4,179

68,505
$

0.12

57,806
$

Shares issuable via the convertible debt are included if dilutive, in which case tax-effected interest expense on the debt is excluded from the determination of Net Income per Share and Adjusted Net Income per Share.

Page 6 of 7

10/25/2012

0.21

TeleCommunication Systems, Inc.

Financial Highlights and Guidance

Non-Cash Stock-Based Compensation Allocation ($000s):

As a result of the implementation of ASC 718-10, portions of our non-cash stock-based compensation expense have been allocated to direct cost of revenue, research and development, sales
and marketing, and general and administrative expenses. The amounts of non-cash stock-based compensation expense that have been allocated are as follows:

Commercial Applications:
Direct cost of services

2009
Total Year

2010
Total Year

2011
Actual Q1

2011
Actual Q2

2011
Actual Q3

2011
Actual Q4

2011
Total Year

2012
Actual Q1

2012
Actual Q2

2012
Actual Q3

2012
Total Year

Direct cost of systems

1,638

2,117

660

538

558

703

2,459

625

432

449

1,506

274

229

74

60

63

79

276

72

50

52

174

1,912

2,346

734

598

621

782

2,735

697

482

501

1,680

Government:
Direct cost of services

736

2,689

639

520

540

680

2,379

873

603

627

2,103

Direct cost of systems

1,126

1,362

349

308

318

387

1,362

337

233

241

811

Subtotal- Government cost of revenue

1,862

4,051

988

828

858

1,067

3,741

1,210

836

868

2,914

Subtotal- Cost of revenue of Continuing Operations

3,774

6,397

1,722

1,426

1,479

1,849

6,476

1,907

1,318

1,369

4,594

1,365
472
248
2,085

2,655
618
502
3,775

503
135
221
859

410
109
180
699

425
114
186
725

535
143
235
913

1,873
501
822
3,196

497
151
252
900

344
103
173
620

357
108
181
646

1,198
362
606
2,166

Subtotal- Commercial Applications cost of revenue

Other operating expenses

Research and development
Sales and marketing expenses
General and administrative expenses
Total operating expenses
Total allocated non-cash stock-based compensation

5,859

10,172

2,581

Page 7 of 7

2,125

2,204

2,762

9,672

2,807

1,938

2,015

10/25/2012

6,760