Webtech Wireless Inc.
TSX : WEW

Webtech Wireless Inc.

November 14, 2013 06:00 ET

Webtech Wireless Announces Q3 2013 Results

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Nov. 14, 2013) - Webtech Wireless Inc. (TSX:WEW) ("Webtech Wireless" or the "Company"), a leading provider of vehicle fleet location-based services and telematics technology, today announced its financial results for the three and nine month periods ended September 30, 2013.

The Company is reporting Adjusted EBITDA of $0.2 million and $1.8 million for the three and nine months ended September 30, 2013, and a net loss of $0.4 million and net income of $0.6 million from continuing operations, respectively.

Unless otherwise noted, figures quoted in this press release relate to the Company's business excluding the NextBus business, which was sold to Cubic Transportation Systems, Inc., a division of Cubic Corporation on January 24, 2013.

Q3 2013 and YTD 2013 Financial and Operational Highlights

  • Adjusted EBITDA was $0.2 million and $1.8 million for the three and nine months ended September 30, 2013 compared to $0.5 million and $0.7 million in the prior comparable periods.
  • The Company is reporting a net loss of $0.4 million or $0.00 per share and net income of $0.6 million or $0.01 per share from continuing operations for the three and nine months ended September 30, 2013 compared to a loss of $1.5 million or $0.01 per share and $3.4 million or $0.03 per share in the prior comparable periods, respectively.
  • Revenue was $7.4 million in the quarter compared to $6.9 million in the prior year, and $22.9 million year to date compared to $21.8 million year to date in 2012.
  • Recurring revenue was relatively flat at $4.4 million in Q3 2013 compared to $4.5 million in Q3 2012, and $13.8 million year to date compared to $13.9 million year to date in 2012. The recurring revenue decrease was the result of the exit from the low average revenue per unit ("ARPU") theft recovery vertical. Excluding the theft recovery, recurring revenue rose 2% year on year.
  • Notable new sales, implementations and expansions during the quarter included continued expansion of the City of Cleveland and City of Toronto fleets; repeat sales with Strike Construction, Coach Canada and a Fortune 100 fleet client; new contracts with Vedder Transport, MTS Freight, AG Data Services and Direct Traffic Control; and continued sales to the new owners of NextBus.
  • The Company's subscriber base at September 30, 2013 totalled approximately 79,000 compared to 72,000 at December 31, 2012, and 72,000 at September 30, 2012. The increase in subscribers since September 30, 2012 and December 31, 2012 is due to the addition of subscribers from sales and implementations to both end users and enterprise customers in 2013, as well as new data pump subscribers from the recently sold NextBus business.
  • Excluding the NextBus data pump subscribers, ARPU decreased to $19.18 per subscriber for the quarter versus $20.75 per subscriber in the prior comparable quarter, and $20.06 year to date in 2013 compared to $21.30 year to date in 2012. The decrease is the result of fleet expansions at Enterprise customers, which garnered a lower ARPU than pure SaaS subscribers.
  • Gross margin was 54% for the quarter, a decline from 58% in the prior comparable period. The decrease over the prior comparable period was driven by a lower proportion of high margin recurring revenue in relation to total revenue.
  • Cash operating expenses (sales and marketing, research and development, and general and administration excluding non-recurring items) increased to $3.8 million in Q3 2013 versus $3.5 million in Q3 2012 due to an increased focus on sales and marketing and R&D aimed at our new Driver Center product.

"Q3 has traditionally been our slowest revenue quarter each year, so revenue and EBITDA results are in line with our expectations", said Scott Edmonds, President and CEO, continuing, "We are pleased with the growth in subscriber count and the overall mix of revenues from subscriptions and the overall increase in hardware margins we are producing. We are looking forward to the roll-out and market launch of the Webtech Drive Center in Q4 and in early 2014. With this product, we believe that we will be able to increase throughput and repeatable sales on a cost effective basis, increasing not just our overall revenue but more importantly, our subscriber count and recurring revenue each quarter".

Mr Edmonds continued, "Since the sale of the NextBus business in January 2013, the board of directors along with management have been actively considering options to maximize the value of the company, including determining the use of its excess cash. At the present time, we are focused on growing and improving the profitability of our current telematics operations and considering the best use of our available cash. The results of these deliberations will be reported to shareholders as soon as they are completed."

Financial Highlights of Continuing Operations

Three months ended Nine months ended
('000 of Cdn $) September 30,
2013
September 30,
2012
September 30,
2013
September 30,
2012
Hardware revenue $ 2,674 $ 2,066 $ 8,034 $ 6,688
Recurring revenue 4,437 4,505 13,763 13,868
Services and other revenue 263 342 1,118 1,210
7,374 6,913 22,915 21,766
Gross margin ($) 3,990 3,982 13,179 12,042
Gross margin (%) 54 % 58 % 58 % 55 %
Total operating expenses 4,173 5,103 13,118 14,974
Net (loss) income from continuing operations $ (411 ) $ (1,527 ) $ 562 $ (3,368 )
Adjusted EBITDA(1) from continuing operations $ 205 $ 531 $ 1,804 $ 674
(1) Adjusted EBITDA is not defined under IFRS. Adjusted EBITDA is defined by the Company as earnings (loss) before interest expense (income), taxes, depreciation, amortization, share-based payments, foreign exchange (gain) loss on operations, restructuring charges, and one-time expenses.

Revenue

Hardware revenues for the three and nine months ended September 30, 2013 increased 29% and 20%, respectively, over the prior comparable periods largely due to hardware deliveries to new and repeat customers and to the new owners of the recently sold NextBus business.

Recurring revenues were flat for the quarter and year to date compared to the prior periods. The Company has replaced the lost subscription revenue from the planned exit of the theft recovery vertical with new, higher ARPU subscribers from sales and implementations to both end users and enterprise customers over the past 12 months. The Company's shift away from hardware to a majority of subscription, software and services revenue continues to reflect management's focus on developing the Software as a Service ("SaaS") model. Excluding the theft recovery vertical, recurring revenues for the quarter and year to date increased 2% over the prior period.

Service and other revenues for the three and nine months ended September 30, 2013 decreased 23% and 8% respectively, over the prior comparable periods as a result of lower volumes of installations.

Gross Margin

Gross margin percentage for the three months ended September 30, 2013 was weaker compared to the prior comparable period due to a lower proportion of high margin recurring revenue in relation to total revenue. The improvement in the gross margin percentage for the nine months ended September 30, 2013 was driven by high margin hardware sales and the exit from and winding down of the theft recovery vertical which yielded historically low margins.

Operating Expenses

Operating expenses for continuing operations excluding depreciation and amortization, share-based payments and non-recurring items for the three and nine months ended September 30, 2013 increased 10% and were flat compared to the prior periods, respectively. The increase for the quarter was largely due to research and development projects primarily focused on the new Webtech Driver Center product and an increased sales and marketing spend.

Cash and Working Capital

As at September 30, 2013, the Company's unrestricted cash position amounted to $22.2 million compared with $21.3 million at June 30, 2013 and $4.3 million at December 31, 2012. In addition, the Company has $2.1 million USD in restricted cash related to the holdback from the NextBus transaction and $1.0 million USD in restricted cash used to secure a bonding facility with a US client.

As at September 30, 2013, the Company had net working capital of $26.4 million, compared with $9.6 million at December 31, 2012. As at November 12, 2013, Webtech Wireless had 105,471,783 common shares outstanding.

Non-GAAP Financial Measures

In addition to the results reported in accordance with IFRS, the Company uses various non-GAAP financial measures, which are not recognized under IFRS, as supplemental indicators of the Company's operating performance and financial position. These non-GAAP financial measures are provided to enhance the user's understanding of the Company's historical and current financial performance and its prospects for the future. Management believes that these measures provide useful information in that they exclude amounts that are not indicative of the Company's core operating results and ongoing operations and provide a more consistent basis for comparison between quarters. Details of such non-GAAP financial measures and how they are derived are provided in conjunction with the discussion of the financial information reported.

Results on a non-GAAP EBITDA basis are determined as follows:

Three months ended Nine months ended
('000 of Cdn $) September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Net (loss) income from continuing operations $ (411 ) $ (1,527 ) $ 562 $ (3,368 )
Add (deduct)
Finance (income) expense (29 ) 11 (315 ) 39
Income tax expense (recovery) 20 (6 ) 39 (3 )
Depreciation and amortization 154 525 425 1,580
Share-based payments 29 84 70 287
Foreign exchange loss (gain) 238 253 (225 ) 252
Restructuring cost including share-based payments - 148 - 148
Litigation settlement and other one-time costs 205 705 1,141 1,167
Work force realignment - 338 107 572
Adjusted EBITDA(1) from continuing operations $ 205 $ 531 $ 1,804 $ 674
(1) Adjusted EBITDA is not defined under IFRS. Adjusted EBITDA is defined by the Company as earnings (loss) before interest expense (income), taxes, depreciation, amortization, share-based payments, foreign exchange (gain) loss on operations, restructuring charges, and one-time expenses.

Financial Statements and Management Discussion & Analysis

The Condensed Interim Consolidated Financial Statements for the three and nine months ended September 30, 2013 and the related Management Discussion & Analysis for the period has been filed on SEDAR at www.sedar.com, and also on the Company's website at www.webtechwireless.com.

Notice of Conference Call

Webtech Wireless will hold a conference call today, November 14, 2013, at 11:00 am ET hosted by Mr. Scott Edmonds, President and Chief Executive Officer and Mr. Trevor Greene, Chief Financial Officer to discuss the Company's financial results and corporate developments. To access the conference call by telephone, dial +1.416.695-7806 or +1.888.789.9572, participant passcode 7860622. A taped replay of the conference call will be archived on the Company's corporate website at: www.webtechwireless.com.

About Webtech Wireless®

Webtech Wireless (TSX:WEW) is a leader in providing fleet management telematics, GPS and automatic vehicle location (AVL) solutions that improve efficiency, accountability and reduce costs. Our end-to-end solutions automate record keeping and regulatory compliance, reduce fuel burn and idling, mitigate risk, and keep drivers safe. Managers trust us to ensure people are accountable and vehicles are visible. Through the cloud, in the office, or straight to mobile devices, we deliver Fleet Intelligence Anywhere™. Our products are InterFleet®, for government winter maintenance, public works and waste management fleets; and Quadrant®, for commercial fleet operations and compliance (HOS, EOBR). Please visit www.webtechwireless.com.

All amounts in Canadian dollars (CAD$) unless otherwise noted. The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release. Trademarks are the property of their owners.

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