Webtech Wireless Inc.
TSX : WEW

Webtech Wireless Inc.

March 20, 2015 06:00 ET

Webtech Wireless Announces Q4 and FY 2014 Results

VANCOUVER, BRITISH COLUMBIA--(Marketwired - March 20, 2015) - Webtech Wireless Inc. (TSX:WEW) ("Webtech Wireless" or the "Company"), a leading provider of GPS fleet management solutions, today announced its financial results for the three and twelve-month periods ended December 31, 2014.

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

Q4 2014 and 2014 Financial and Operational Highlights

  • EBITDA was $0.4 million and $(0.2) million for the three and twelve months ended December 31, 2014 compared to $(0.3) and $0.2 million in the prior comparable periods.
  • The Company is reporting net loss of $0.3 million or $0.02 per share and net loss of $2.1 million or $0.10 per share for the three and twelve months ended December 31, 2014, including non-operating expense charges of $0.6 million and $1.8 million, respectively, for restructuring of the Company's operations, compared to a net loss of $0.3 million or $0.01 per share and net income of $0.3 million or $0.01 per share in the prior comparable periods.
  • Revenue was $6.6 million in the quarter compared to $7.2 million in the prior comparable period, with the decrease primarily due to a reduction in hardware deliveries to the Company's non-core business segments and lower recurring revenues. Revenue was $25.8 million for the year compared to $30.1 million in 2013 with the decrease largely the result of fewer hardware deliveries to commercial customers and non-core business segments.
  • Recurring revenue decreased 6% from $4.7 million to $4.4 million, and 5% from $18.4 million to $17.5 million for the three and twelve months, respectively, as a result of a net reduction in full service subscribers.
  • The Company's subscriber base at December 31, 2014 totalled approximately 78,300 compared to 80,000 at December 31, 2013. The decrease in total subscribers since December 31, 2013 was due to churn of commercial and government full service subscribers, which offset both the additions from new sales delivered in the year and net additions of enterprise and data pump subscribers.
  • Excluding enterprise and data pump subscribers, average revenue per unit ("ARPU") for full service subscribers was flat at $24.99 per subscriber and $24.54 per subscriber for the three and twelve months ended December 31, 2014 compared to the prior comparable periods.
  • Gross margin was 56% for the three and twelve months ended December 31, 2014 compared to 58% in the prior comparable periods as a result of lower overall revenues.
  • Cash operating expenses (sales and marketing, research and development, and general and administrative expenses) decreased 25% from $4.4 million in Q4 2013 to $3.3 million in Q4 2014, and 15% from $17.0 million to $14.5 million for the year due to headcount cost savings realized from the Company's restructuring efforts, reduction of bonuses related to financial performance, and strategic review costs incurred in 2013, which were not repeated in the current period. Cash operating expenses have been maintained at a level below the Company's recurring revenue base, a key target for cost control.
  • As at December 31, 2014, as part of its Normal Course Issuer Bid, the Company has repurchased 839,804 of its common shares for a total cost, including transaction fees, of $1.7 million. As at December 31, 2014, all of the re-purchased common shares have been cancelled.

"Despite the revenue improvement over the prior quarter, our performance remains below our expectations. We are totally focused on efforts to improve the dynamics of our sales funnel and grow our revenues across all of our business segments. We are only beginning to see the results from installing a new sales leadership team, the development and release of a new telematics platform, and a disciplined customer focus," said Andrew Gutman, Chairman of the Board & Interim Chief Executive Officer. "We are pleased with the changes in our cost structure from our ongoing cost control efforts and believe that the changes made will provide operating leverage as we push to return to revenue growth."

Financial Highlights

Three months ended Twelve months ended
('000 of CAD $) December 31,
2014
December 31,
2013
Restated
December 31,
2014
December 31,
2013
Restated
Recurring revenue $ 4,391 $ 4,652 $ 17,459 $ 18,415
Hardware revenue 1,800 2,073 6,988 10,107
Services and other revenue 439 443 1,392 1,561
6,630 7,168 25,839 30,083
Gross margin ($) 3,740 4,146 14,438 17,325
Gross margin (%) 56 % 58 % 56 % 58 %
Total operating expenses 3,562 4,608 15,496 17,726
Net (loss) income $ (327 ) $ (255 ) $ (2,144 ) $ 293
EBITDA (1) $ 400 $ (268 ) $ (221 ) $ 218
(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, restructuring expense and insurance recovery.

Revenue

Recurring revenues for the three and twelve months ended December 31, 2014 decreased over the prior comparable periods. ARPU from full service subscribers was flat at $24.99 per subscriber and $24.54 per subscriber for the three and twelve months ended December 31, 2014 compared to the prior comparable periods. The recurring revenue decrease for the quarter and year was the result of churn exceeding the impact of subscriber additions from commercial and government solution sales. This was partially offset by the net addition of lower ARPU enterprise and data pump subscribers. The Company's focus continues to be on the acquisition and retention of high margin recurring revenue.

Hardware revenues for the quarter declined due to a decreased focus on the OEM business, including reduced demand from the NextBus business sold in 2013. Hardware revenues for the year decreased due to fewer commercial hardware deliveries and a reduced focus on the OEM business.

Services and other revenues for the quarter were flat compared to Q4 2013, and decreased for the year due to a one-time revenue transaction in 2013 not repeated in the current period.

Gross Margin

Gross margin and margin percentage for the quarter and year ended December 31, 2014 were down compared to the prior comparable periods largely due to lower recurring revenues. The decrease for the year was also attributed to lower hardware volumes of higher margin hardware delivered in Q2 2013, not repeated in the current year.

Operating Expenses

Cash operating expenses for the three and twelve months ended December 31, 2014 decreased 25% and 15% compared to the prior periods, respectively. The decrease in cash operating expenses for the quarter was due to lower headcount costs as a result of restructuring efforts, reduction of bonuses related to financial performance and prior year development costs associated with the Company's MDT 3200 and MDT 3500 products. In addition to the variances discussed for the quarter, the decrease for the year was also attributed to strategic review costs and legal and settlement expenditures incurred in 2013, which were not repeated in the current period. The Company has also redirected resources to sales and marketing activities to increase lead generation capacity following the launch of our next generation fleet management software, Webtech Fleet Center™.

Cash and Working Capital

As at December 31, 2014, the Company's unrestricted cash position amounted to $22.8 million compared to $23.2 million at December 31, 2013. During the year ended December 31, 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 December 31, 2014, the Company had net working capital of $24.5 million compared with $26.4 million at December 31, 2013. As at March 19, 2014, Webtech Wireless had 20,108,747 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 Consolidated Financial Statements for the year ended December 31, 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, March 20, 2014, at 11:00 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 +1.416.340.2216 or +1.800.355.4959. 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). 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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