Webtech Wireless Inc.
TSX : WEW

Webtech Wireless Inc.

November 06, 2014 06:00 ET

Webtech Wireless Announces Q3 2014 Results

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Nov. 6, 2014) - 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, 2014.

Unless otherwise noted, figures quoted in this press release relate to the Company's Telematics business, referred to as continuing operations.

Q3 2014 and YTD 2014 Financial and Operational Highlights

  • EBITDA was a loss of $0.1 million and $0.6 million for the three and nine months ended September 30, 2014 compared to $Nil and income of $0.5 million in the prior comparable periods.
  • The Company is reporting net income of $0.1 million or $0.01 per share and net loss of $1.8 million or $0.09 per share for the three and nine months ended September 30, 2014, where the latter includes a non-operating expense charge of $1.1 million for restructuring of the Company's operations, compared to a net loss of $0.4 million or $0.02 per share and a net income of $0.5 million or $0.02 per share in the prior comparable periods.
  • Revenue was $5.5 million in the quarter compared to $7.4 million in the prior comparable period, with the decrease primarily due to the commercial sales performance, and $19.2 million year to date compared to $22.9 million year to date in 2013 with the decrease largely the result of hardware sales to a Fortune 100 corporate fleet customer in Q2 2013, which were not repeated in the current year, and year to date commercial sales performance.
  • Notable new sales, implementations and expansions during the quarter included City of Burlington, LA County Metro, and continued expansion with the Commonwealth of Kentucky and Macomb County.
  • Recurring revenue decreased 9% from $4.4 million to $4.0 million, and 5% from $13.8 million to $13.1 million year over year for the three and nine months respectively.
  • The Company's subscriber base at September 30, 2014 totalled approximately 78,700 compared to 80,000 at December 31, 2013. The decrease in total subscribers since December 31, 2013 was due to year to date churn of commercial and government subscribers, which offset both the additions from new sales delivered in the year and the net addition of enterprise and data pump subscribers.
  • Excluding enterprise and data pump subscribers, full service average revenue per unit ("ARPU") was flat at $22.90 per subscriber and $24.40 per subscriber for the quarter and year to date compared to the prior comparable periods.
  • Gross margin was 58% and 56% for the three and nine months ended September 30, 2014 compared to 54% and 58% in the prior comparable periods.
  • Cash operating expenses (sales and marketing, research and development, and general and administrative expenses) decreased 21% from $4.0 million to $3.3 million in Q3 2014 and 13% from $12.6 million to $11.2 million for the year to date due to headcount cost savings realized from the Company's restructuring efforts, the reversal of 2014 financial performance bonuses contingent on achieving certain financial targets and a one-time benefits recovery. Additionally, cash operating expenses improved over the prior year due to the timing of one-time costs incurred in 2013, including strategic review costs and litigation and settlement expenditures, which were not repeated in the current period. Management continues to align expenses with revenue expectations.
  • The Company completed its previously reported internal investigation of its former UK operations, which concluded that certain payments made from the Company's former UK operations to a UK tax authority were fraudulently diverted to unauthorized bank accounts, resulting in a liability owing to a UK tax authority of $0.8 million. The Company expects to receive insurance proceeds totaling $0.5 million, offset by $0.2 million in recovery costs associated with the investigation.
  • As at September 30, 2014, as part of its Normal Course Issuer Bid, the Company has repurchased 717,716 of its common shares for a total cost, including transaction fees, of $1.5 million. As at September 30, 2014, all of the re-purchased common shares have been cancelled.

"We are obviously disappointed with our revenue performance this past quarter, but believe the changes being made throughout the organization, not the least involving new sales management and release of industry leading telematics solutions, will yield stronger results in the quarters ahead," said Andrew Gutman, Chairman of the Board & Interim Chief Executive Officer. "We are already seeing such evidence in the form of an improved pipeline in the current quarter and anticipate a quarterly increase in recurring revenue due to the seasonality of our winter operations customers."

Financial Highlights

Three months ended Nine months ended
('000 of Cdn $) September 30,
2014
September 30,
2013
Restated
September 30,
2014
September 30,
2013
Restated
Recurring revenue $ 4,030 $ 4,437 $ 13,068 $ 13,763
Hardware revenue 1,172 2,674 5,188 8,034
Services and other revenue 315 263 953 1,118
5,517 7,374 19,209 22,915
Gross margin ($) 3,173 3,990 10,698 13,179
Gross margin (%) 58 % 54 % 56 % 58 %
Total operating expenses 3,521 4,173 11,934 13,118
Net income (loss) $ 123 $ (435 ) $ (1,817 ) $ 489
EBITDA (1) $ (139 ) $ (29 ) $ (621 ) $ 486

(1) EBITDA is a non-GAAP measure and is therefore not universally defined. EBITDA is defined as earnings before finance income, taxes, depreciation and amortization, foreign exchange (gain) loss, restructuring expense and insurance recovery.

Revenue

Recurring revenues for the three and nine months ended September 30, 2014 decreased over the prior comparable periods. ARPU from full service subscribers were flat at $22.90 per subscriber and $24.40 per subscriber for the three and nine months ended September 30, 2014 compared to the prior comparable periods. The recurring revenue decrease for the quarter and year to date was the result of churn of full service subscribers and the impact of lower year to date subscriber additions from commercial and government solution sales. The Company's focus continues to be on the acquisition and retention of high margin recurring revenue and the development of a Software as a Service model.

Hardware revenues for the quarter decreased due to lower commercial sales performance and a decreased focus on the OEM market. Hardware revenues for the year to date decreased largely due to hardware sales to a Fortune 100 corporate fleet customer in Q2 2013, not repeated in the current period, lower commercial sales and slower hardware demand from NextBus.

Services and other revenues increased slightly for the quarter and decreased for the year to date compared to the prior comparable periods, with the latter due to a deposit that was forfeited by an OEM customer in Q2 2013, not repeated in 2014.

Gross Margin

Gross margin for the quarter and year to date were down compared to the prior comparable periods largely due to the hardware revenue performance discussed above. Margin percentage for the quarter and year to date were in line with the prior comparable periods.

Operating Expenses

Cash operating expenses for the three and nine months ended September 30, 2014 decreased 21% and 13% compared to the prior periods, respectively. The decrease for the quarter and year to date was largely due to lower headcount costs as a result of restructuring efforts, and one-time items in 2013, including strategic review costs and litigation and settlement expenditures, which were not fully repeated in the current year. The Company has also redirected resources to sales and marketing activities to increase lead generation capacity following the launch of the Webtech Driver Center™ and Webtech Fleet Center™ solutions. Cash operating expenses have been maintained at a level below the Company's recurring revenue base, a key target for cost control.

Cash and Working Capital

As at September 30, 2014, the Company's unrestricted cash position amounted to $23.6 million compared to $23.2 million at December 31, 2013. During the three months ended September 30, 2014, $2.1 million USD in restricted cash related to the holdback from the sale of the NextBus business in January 2013 was released and the Company received the amount in full.

As at September 30, 2014, the Company had net working capital of $25.3 million compared with $26.3 million at December 31, 2013. As at November 5, 2014, Webtech Wireless had 20,362,342 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.

Financial Statements and Management's Discussion & Analysis

The Condensed Interim Consolidated Financial Statements for the three and nine months ended September 30, 2014 and the related Management's 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 6, 2014, at 10:00 am ET hosted by Mr. Andrew Gutman, Interim 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 +1.416.340.9432 or +1.800.952.4972. 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 solutions, Webtech Fleet Center™ and InterFleet®, and our products, Webtech Driver Center™ and Webtech 511®, provide advanced fleet management solutions for winter maintenance, public works and waste management fleets; and, for commercial fleet operations and compliance (HOS, ELD).

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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