WebTech Wireless Inc.

WebTech Wireless Inc.

March 24, 2010 04:49 ET

WebTech Wireless Reports $27.2 Million in Revenue, Large One Time Charges for Year Ended December 31, 2009

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 24, 2010) - WebTech Wireless Inc. (TSX:WEW), a leading supplier of location-based and fleet Telematics services, today reported revenue of $27.2 million for the fiscal year ended December 31, 2009. This compares to $20.8 million for the fiscal year ended July 31, 2008, the Company's most recently ended comparable period. Included in these figures are approximately two months of revenue and expenses contributed by the former Grey Island Systems, acquired during the quarter ended December 31, 2009.

On a run rate basis, the Company is reporting approximately $5 million in recurring revenue per quarter, and is reporting backlog revenue in excess of $5 million as it enters 2010.

The Company is reporting a loss of $8.6 million for the quarter and $10.7 million for the year ended December 31, 2009, primarily due to large one-time cash and non cash charges related to a previously announced management restructuring and adjustments to the carrying value of inventory as well as the write down of receivables, particularly in its Middle East operations.

WebTech Wireless is comparing its results for the year ended December 31, 2009, to its results for the year ended July 31, 2008 as it has changed its fiscal year end from July 31 to December 31, and July 31, 2008 represents the nearest prior year reporting date to these results.

Revenues for the quarter at $8.3 million were comprised of a variety of hardware and services sales from the Company's three brands, Quadrant, NextBus and Interfleet and were positively impacted by a large of small and medium sized sales during the quarter. A number of larger shipments, which had been forecast for the fourth quarter, were delayed until the first quarter of 2010.

Profit margins at 45% for the quarter before a one-time inventory obsolescence charge of approximately $700k, and 55% YTD are above target and historical levels due to continuing economies of scale. Gross margins also benefit from the effect of high margin recurring revenue being a higher than normal percentage of total sales, and a one-time contribution from a large high margin license sale earlier in the year.

Expenses for the quarter of $9.7 million include approximately $2.8 mm in one time charges, a new charge related to amortization of intangibles acquired in the Grey Island transaction and approximately 2 months of expenses from the former Grey Island. Year to date expense of $22.3mm are approximately 40% above prior year, and include the aforementioned one time charges, and amortization. One time charges incurred in the year are as follows:

Cost of Sales:  
                   Inventory impairment            $0.8mm
                   Litigation settlement and related            $1.0mm
                   Allowance for doubtful accounts - Middle East            $0.7mm
                   Other one-time charges            $0.6mm
                   November staff reduction            $0.5mm
Other items:  
                   Management changes            $1.4mm
                   Loss on sale of MAV II notes            $0.3mm
Total one time charges            $5.3mm

Charges related to the amortization of intangible assets acquired as part of the Grey Island acquisition total $0.4mm for the quarter and the year, and are expected to generate an annual non-cash charge of $2.2mm in 2010 and declining thereafter.

Net Loss for the three months was $8.6 million ($0.13 per common share) and includes the non-recurring cash and non-cash charges mentioned above. For the year, the Company is reporting Net Loss of $10.7 million or 17 cents per share being largely influenced by the one-time charges.

As of December 31, 2009, the Company is reporting total assets of $59.3 million (December 31, 2008: $25.4 million) and working capital of $16.7 million (December 31, 2008: $17 million) primarily due to an increase in cash and other assets acquired from Grey Island.

"The acquisition of Grey Island has had a positive impact on revenue, and we are beginning to see the benefit of the combined sales reach of the Interfleet Tracker and the Quadrant Locator, as well as benefitting from the ability to sell NextBus throughout our distribution chain, said Scott Edmonds, WebTech Wireless, President and CEO. The one-time cash charges and the large non-cash charges are of course disappointing, but do allow us to enter 2010 with a clean balance sheet and able to articulate a vision for profitability and positive EBITDA for the coming year."

Added Owen Moore, Chief Operating Officer, "The integration of our three brands, our sales messaging and our back office operations are continuing, and are expected to generate significant savings in the coming year. This was, admittedly a clean-up quarter, but as we look out to 2010, we are encouraged by our funnel, our distribution channels, the savings we are generated and our ability to delivery world class solutions to our customers."

The Company will be holding a Conference Call to discuss its financial results today, March 24th at 8:30 am Eastern Time (5:30 am Pacific Time). Interested parties may participate in the call by dialing 1-800- 925-4693 or (212) 231-2901 (for international callers). The conference call will be archived on the Company's website at: www.webtechwireless.com.

About WebTech Wireless Inc.

WebTech Wireless Inc. (TSX:WEW) is a global Telematics, location-based services provider that develops, manufactures, and delivers turnkey wireless solutions designed to improve productivity and profitability. WebTech Wireless products include wireless hardware and software services running on cellular and satellite networks, and include Automatic Vehicle Location, Mapping, Reporting, Vehicle Diagnostics, Driver Status, In-vehicle Telemetry, Messaging, In-vehicle Navigation, and wireless application and Internet connectivity. WebTech Wireless is currently providing devices and services worldwide in eight languages to over forty-one countries covering five continents. WebTech Wireless' scalable solutions are used by a broad range of small, medium and Fortune 500 companies and by governments. For more information, please visit www.webtechwireless.com.

Forward Looking Statements

This press release contains forward-looking statements involving risks and uncertainties pertaining to, but not limited to product plans, timing, content, and pricing of products, market and industry expectations, the wireless communications industry, the mobile fleet industry, and general economic and political conditions. Given the risks and uncertainties inherent in the markets and industries referred to in this press release, WebTech Wireless cannot guarantee that any forward looking statements will be realized.

Trademarks are the property of their owners.

(Amounts in 000's)
      31-Dec-09       31-Dec-08
Cash and cash equivalents $ 7,212 $ 3,889
Accounts receivable, net of allowance (Note 7)   9,260       7,769
Inventory, net of allowance (Note 9)   9,362       8,629
Prepaid expenses and deposits     533       452
        26,367       20,739
Restricted cash   1,955       -
Property and equipment (Note 10)   2,331       1,591
Intangible assets (Note 6 and 11)   14,606       33
Goodwill (Note 6)   14,016       -
Long term investments (Note 5)     -       3,000
      $ 59,275     $ 25,363
Bank indebtedness $ - $ 1,000
Accounts payable and accrued liabilities   7,384       1,991
Current portion of capital lease obligation (Note 12)   124       -
Current portion of deferred revenue     2,152       685
        9,660       3,676
Deferred lease inducement   808       642
Deferred revenue   638       274
Capital lease obligation (Note 12)   318       -
Other long term liabilities (Note 6)   1,500       -
Future income tax liability     1,547       -
        4,811       916
        14,471       4,592
Share Capital (Note 13)   93,685       59,689
Contributed Surplus (Note 14)   4,893       4,131
Deficit     (53,774)     (43,049)
Total Shareholders' Equity     44,804       20,771
      $ 59,275     $ 25,363
Commitments and Contingencies and Guarantees (Note 18 and 20)            
  "Signed"         "Signed"  
Scott Edmonds   Peter W. Roberts


(Amounts in 000's except number of shares and per share amounts)

  For the twelve-   For the five-   For the twelve-
  month period   month period   month period
  ended   ended   ended
  31-Dec-09   31-Dec-08   31-Jul-08
Revenue $ 27,217 $ 11,401 $ 20,810
Cost of goods sold   13,057     6,496     10,610
Gross profit   14,160     4,905     10,200
Gross margin   52.03%     43.02%     49.01%
  Sales and marketing   7,665     3,855     7,044
  Research and development   5,945     2,150     3,935
  General and administrative   7,657     2,476     4,516
  Amortization   1,052     221     523
    22,319     8,702     16,018
Loss before other items   (8,159)     (3,797)     (5,818)
Other items                
  Interest and other income   81     22     466
  Foreign exchange gain/(loss) on operations   (1,141)     875     (110)
  Restructuring costs (Note 16)   (1,461)     -     -
  Loss on restructuring and sale of long term investments   (50)     (669)     (2,331)
  Stock-based compensation expense - cancelled stock options   -     (2,020)     -
Net loss before taxes   (10,730)     (5,589)     (7,793)
Income taxes (Note 17)   5     -     -
Net loss and comprehensive loss for the period $ (10,725)   $ (5,589)   $ (7,793)
Deficit, beginning of the period   (43,049)     (37,460)     (28,187)
Shares repurchased - excess of purchase price over carrying value   -     -     (1,480)
Deficit, end of period $ (53,774)   $ (43,049)   $ (37,460)
Basic and fully diluted earnings loss per share $ (0.17) $ (0.10) $ (0.13)
Weighted average shares outstanding during the year   63,910,423     57,908,624     58,060,842
(Amounts in 000's)
  For the twelve-     For the five-   For the twelve-
  month period     month period   month period
  ended     ended   ended
  31-Dec-09     31-Dec-08   31-Jul-08
Operating Activities                
  Net loss for the period $ (10,725) $ (5,589) $ (7,793)
  Add items not affecting cash:                
    Amortization   1,052     221     523
    Stock based compensation   826     341     1,024
    Stock based compensation expense - cancelled stock options   -     2,020     -
    Future income tax recovery   (158)            
    Amortization of leasehold inducement   (120)     24     (49)
    Unrealized foreign exchange gain   364     -     -
    Inventory impairment   777     -     -
    Loss in fair value of long-term investments   -     669     2,331
    Loss on impairment of long term investments   259     -     -
    (7,725)     (2,314)     (3,964)
Changes in non-cash working capital items related to operations:                
  Accounts receivable   3,061     (3,424)     (217)
  Inventory   706     1,441     (2,430)
  Prepaid expense and deposits   51     679     452
  Accounts payable and accrued liabilities   2,419     (1,233)     (309)
  Deferred revenue   198     483     216
  Deferred lease inducement   244     84     473
    (1,046)     (4,284)     (5,779)
Financing Activities                
  Common shares issued for cash, net of issuance costs   75     48     233
  Shares repurchased   -     -     (2,326)
  Bank indebtedness   -     1,000     -
  Repayment of bank loan   (1,000)     -     -
  Repayment - bank line   (1,710)     -     -
  Borrowing - bank line   1,710     -     -
  Repayment of capital lease obligation   (29)     -     -
    (954)     1,048     (2,093)
Investing Activities                
  Purchase of capital assets   (264)     (121)     (1,226)
  Restricted cash   (1,955)     -     -
  Proceeds from sale of long term investments   2,741     -     -
  Purchase of long-term investment   -     -     (6,000)
  Cash acquired from acquisition, net of cash paid   4,964     -     -
    5,486     (121)     (7,226)
Effects of foreign exchange rate changes on cash and cash equivalents   (163)     -     -
Net increase (decrease) in cash during the period   3,323     (3,357)     (15,098)
Cash and cash equivalents, beginning of period   3,889     7,246     22,344
Cash and cash equivalants, end of period $ 7,212   $ 3,889   $ 7,246
Cash and cash equivalants consist of:                
  Cash $ 7,212   $ 3,889   $ 7,246
Supplemental cash flow information                
  Interest paid $ 24 $ 15 $ 3
  Income taxes paid   -     -     -
Noncash Transactions                
  Transfer of property under development to property and equipment $ - $ 86 $ 448

The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information