WebTech Wireless Inc.
TSX : WEW

WebTech Wireless Inc.

November 08, 2010 16:01 ET

WebTech Wireless Records $10.3 Million in Revenue for Third Quarter

- Company Reduces EBITDAS Loss to $0.3 Million -

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 8, 2010) - WebTech Wireless Inc. (TSX:WEW), a leading provider of vehicle fleet location-based services and telematics technology, today announced its third quarter (Q3) financial results for the three-month and nine-month periods ended September 30, 2010.

Q3 2010 Highlights



-- Revenue of $10.3 million for Q3 2010, compared to $5.0 million in Q3
2009.
-- Recurring subscription revenue of $5.0 million or 48% of total revenue
for Q3 2010 continues the Company's trend toward its Software as a
Service (SaaS) model.
-- Other non-hardware revenue, which is comprised of software licenses and
services, was $2.6 million for Q3 2010, taking non-hardware sales to 73%
of overall revenue.
-- Gross profit was $6.4 million for Q3 2010, compared to $2.9 million in
Q3 2009.
-- Gross profit margin for the quarter was 61.6%, which includes a one-time
license extension agreement with an existing U.S. transportation and
logistics client, compared with 59.0% for Q3 2009.
-- Loss per share was $0.01 for Q3 2010, compared with $0.04 per share in
Q3 2009.
-- EBITDAS was a loss of $0.3 million or nil per share for Q3 2010,
compared to an EBITDAS loss of $1.0 million or $0.01 per share for Q3
2009, achieving management's stated goal of achieving break even in the
third quarter.
-- Net loss and comprehensive loss of $1.3 million for Q3 2010, compared to
$2.2 million in Q3 2009, with close to $1.0 million in non-cash
amortization and stock-based compensation charges in 2010.
-- Full-service subscribers totalled 74,000 and data pump subscriptions
totalled 8,000 at the end of the quarter for a sequential increase of
2,000.
-- Subsequent to quarter end, WebTech signed a $229,000 three-year contract
expansion with St. Albert Transit Systems, of Alberta, an existing
InterFleet® customer, to include the NextBus® Real Time Passenger
Information System (RTPIS) on 55 vehicles across 22 routes.


"We achieved total revenue in excess of $10 million despite the strong Canadian dollar and tough economic conditions in the U.S. this quarter. Our recurring revenue continues to grow and contribute to a larger portion of our overall business as we pursue our SaaS model. The benefits of the operational efficiencies we have implemented since January have placed us in a strong position to reach our stated goal of positive EBITDAS in Q4," said Scott Edmonds, President and CEO of WebTech Wireless. "We continue to build a solid pipeline of new business with the announcement of nine new contracts signed since we reported our Q2 results. We have traction across all of our business lines and that sets us up for strong revenue growth in 2011. For instance, the initial Hino contract is a great win that will produce revenue in Q4 and beyond, and provides an additional distribution channel for our Quadrant® solution. Meanwhile, the LA Metro NextBus® contract, gives us four of the top ten transit agencies in North America, clearly establishing us as the leading real time predictive arrival solution."

Financial Highlights

Revenue

Revenue was $10.3 million and $30.4 million, for the three-month and nine-month periods ended September 30, 2010, compared to $5.0 million and $18.9 million for the corresponding periods in 2009. The growth in revenue is primarily the result of the acquisition of Grey Island Systems (GIS), completed in October 2009. Excluding revenue from GIS, the revenue growth was primarily the result of a one-time sale of an extended enterprise license for Quadrant® to a second operating division of WebTech's marquee U.S. transportation and logistics client as well as from recurring subscriptions.

Recurring subscriptions, software and services revenue was $7.5 million and $19.8 million for the three-month and nine-month periods ended September 30, 2010, compared with $2.2 million and $9.8 million for the corresponding periods last year. This shift away from a reliance on hardware sales reflects management's focus on developing the SaaS model. The increase is primarily a result of the additional sales contributed by NextBus® and Interfleet®, increased subscription revenue as a result of the growing subscriber base, as well as, the one-time sale of a Quadrant® enterprise extension license mentioned above.

The Company's hardware revenue for the three-month period ended September 30, 2010 of $2.8 million was in line with the prior comparable quarter, reflecting higher than normal sales in the prior year as the Company fulfilled a large one-time sale.

Gross Profit and Gross Margin

Gross profit was $6.4 million and $16.9 million, for the three-month and nine-month periods ended September 30, 2010 compared to $2.9 million and $11.2 million for the corresponding periods in 2009, in line with revenue growth.

Gross margin for the three-month period ended September 30, 2010 was 61.6% compared with 59.0% for the corresponding period last year. Gross margin for the nine-months ended September 30, 2010 was 55.6% compared to 59.2% for the corresponding period last year. The Company expects gross margins to remain above 50% as higher margin non-hardware sales increase as a percentage of overall sales. Fluctuations in gross margin above the 50% level will continue to occur during certain periods due to one-time revenue events, such as the large software license sale in 2009 and the additional enterprise license sale in the current period.

Operating Expenses

Operating expenses were $7.7 million and $22.0 million, respectively, for the three-month and nine-month periods ended September 30, 2010, compared to $4.2 million and $12.6 million for the corresponding periods in 2009. The change is primarily a result of the addition of expenses from GIS, large non-cash charges for amortization attributable to the intangible assets acquired through the acquisition of GIS, conservative allowances for doubtful accounts and additional consulting and legal fees.

As part of the restructuring announced in January 2010, the Company continues to pursue operational efficiencies which have resulted in more than $3.5 million in net annualized reductions to costs and expenses.

Net Loss

Net loss and comprehensive loss was $1.3 million or $0.01 per share and $4.7 million or $0.05 per share, for the three-month and nine-month periods ended September 30, 2010 compared with $2.2 million or $0.04 per share and $2.3 million or $0.04 per share for the corresponding periods in 2009. The change is primarily a result of a one-time sale of a high margin software license, lower gross margins contributed by GIS, additional expenses at GIS, additional amortization attributable to the intangible assets acquired through the acquisition of GIS, conservative allowances for doubtful accounts, additional consulting and legal fees, and increased spending on research and development efforts.

EBITDAS(1)

The Company recorded an EBITDAS loss of $0.3 million and $2.0 million, respectively, for the three-month and nine-month periods ended September 30, 2010, compared to a loss of $1.0 million and $0.5 million for the corresponding periods in 2009. EBITDAS for the third quarter included non-core and non-recurring expenses of approximately $0.2 million.

Results on a non-GAAP EBITDAS basis are determined as follows (millions):



Three months ended Nine months ended
30-Sept-10 30-Sept-10
----------------------------------------
Net loss as reported $ (1.3) $ (4.7)
Add/Deduct
Amortization 0.8 2.3
Stock based compensation 0.2 0.8
Tax recovery (0.2) (0.6)
Foreign Exchange Loss 0.2 0.2
----------------------------------------
EBITDAS (loss) (0.3) (2.0)
----------------------------------------


(1) Non-GAAP Financial Measures

EBITDAS is a non-GAAP financial measure and is not recognized under either Canadian or US accounting standards; as a result it does not have any standardized meaning. EBITDAS is therefore not directly comparable to similar measures provided by other issuers. EBITDAS is most closely comparable to the Net Profit (Loss) reported in the Company's financial statements, however EBITDAS differs from Net Profit (Loss) by reversing the impact of the revenue and expenses associated with interest, taxes, depreciation, amortization, stock-based compensation arrangements, and foreign exchange. Management believes that EBITDAS provides useful information about the Company's operations from active business without the effect of certain passive and non-cash adjustments required under accounting standards.

Cash and Working Capital

As at September 30, 2010, the Company's available cash position amounted to $4.7 million, which consisted of cash and cash equivalents and short-term investments, compared with $7.2 million on December 31, 2009.

As at September 30, 2010, the Company had net working capital of $15.9 million, compared with $16.7 million on December 31, 2009. The Company does not anticipate any large capital or other cash outlays in the near future which would require it to seek financing.

As at September 30, 2010 WebTech had 90,424,265 common shares outstanding.

Notice of Conference Call

WebTech Wireless will hold a conference call today, November 8, 2010, at 4:30 p.m. ET hosed by Mr. Scott Edmonds, President and Chief Executive Officer and Mr. Andrew Morden, Chief Financial Officer to discuss the Company's financial results and corporate developments. To access the conference call by telephone, dial (647) 427-7450 or 1 (888) 231-8191. 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 Inc. (TSX:WEW) is a provider of vehicle fleet location-based services (LBS) and telematics technology. It develops, manufactures and supports end-to-end wireless solutions that improve the productivity, profitability, environmental compliance and safety of vehicle fleets. Its comprehensive suite of products and services include: automatic vehicle location (AVL), mapping, vehicle diagnostics, CO2 reporting, navigation, messaging, and mobile resource management. The Company serves customers of all sizes in the transport, government, service, insurance and OEM markets in over forty-one countries, including Fortune 500 companies. Specialized products include: Quadrant® commercial fleet solutions, InterFleet® solutions for government, and NextBus® real-time passenger information services for transit fleets. For more information, please visit www.webtechwireless.com.

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

All amounts in Canadian dollars (CAD$) unless otherwise noted.

Trademarks are the property of their owners.



WEBTECH WIRELESS INC.
CONSOLIDATED BALANCE SHEET
(Amounts in thousands of Canadian dollars)

30-Sep-10 31-Dec-09
------------ ------------
(Unaudited)
ASSETS
Current
Cash and cash equivalents $ 4,713 $ 7,212
Accounts receivable, net of allowance 9,284 9,260
Inventory, net of allowance 9,111 9,362
Prepaid expenses and deposits 672 533
------------ ------------
23,780 26,367

Restricted cash 455 1,955
Property and equipment 1,918 2,331
Intangible assets 12,860 14,606
Goodwill 14,016 14,016
------------ ------------
$ 53,029 $ 59,275
------------ ------------
------------ ------------

LIABILITIES
Current
Bank indebtedness $ 1,310 $ -
Accounts payable and accrued liabilities 4,838 7,384
Capital lease obligation 106 124
Current portion of deferred revenue 1,654 2,152
------------ ------------
7,908 9,660

Deferred lease inducement 717 808
Capital lease obligation 257 318
Deferred revenue 321 638
Other long term liability 1,500 1,500
Future income tax liability 916 1,547
------------ ------------
3,711 4,811

11,619 14,471
------------ ------------

SHAREHOLDERS' EQUITY
Share capital 94,185 93,685
Contributed surplus 5,686 4,893
Deficit (58,461) (53,774)
------------ ------------

Total Shareholders' Equity 41,410 44,804

------------ ------------
$ 53,029 $ 59,275
------------ ------------
------------ ------------


WEBTECH WIRELESS INC.
CONSOLIDATED STATEMENT OF OPERATIONS, COMPREHENSIVE LOSS AND DEFICIT
(Amounts in thousands of Canadian dollars except Gross margin and
per share amounts)
(Unaudited)

Three months ended Nine months ended
30-Sep-10 30-Sep-09 30-Sep-10 30-Sep-09
-------------------- --------------------

Revenue $ 10,334 $ 4,965 $ 30,403 $ 18,883

Cost of goods sold 3,966 2,036 13,514 7,707
-------------------- --------------------

Gross profit 6,368 2,929 16,889 11,176
-------------------- --------------------

Gross margin 61.6% 59.0% 55.6% 59.2%

Expenses
Sales and marketing 1,942 1,588 6,740 5,632
Research and development 2,240 1,264 6,681 3,759
General and administrative 2,709 1,138 6,237 2,742
Amortization 773 162 2,334 465
-------------------- --------------------

7,664 4,152 21,992 12,598

-------------------- --------------------
Loss before other items (1,296) (1,223) (5,103) (1,422)

Other items
Interest and other income/
(expense) (22) 14 (26) 95
Foreign exchange loss on
operations (173) (712) (189) (855)
Gain on restructuring of
long term investments - - - 207
Loss on sale of long term
investments - (289) - (289)

-------------------- --------------------
Net loss before taxes (1,491) (2,210) (5,318) (2,264)

Future income tax recovery 210 - 631 -

-------------------- --------------------
Net loss and comprehensive
loss for the period $ (1,281) $ (2,210) $ (4,687) $ (2,264)
-------------------- --------------------

Deficit, beginning of the
period (57,180) (43,103) (53,774) (43,049)
Loss for the period (1,281) (2,210) (4,687) (2,264)

-------------------- --------------------
Deficit, end of period $ (58,461) $ (45,313) $ (58,461) $ (45,313)
-------------------- --------------------
-------------------- --------------------
Accumulated other
comprehensive earnings
Balance - beginning and end
of period $ - $ - $ - $ -

Basic and fully diluted
earnings loss per share $ (0.01) $ (0.04) $ (0.05) $ (0.04)
Weighted average shares
outstanding during the year 90,424,265 58,193,788 90,149,541 58,125,539


WEBTECH WIRELESS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands of Canadian dollars)
(Unaudited)

Three months ended Nine months ended
30-Sep-10 30-Sep-09 30-Sep-10 30-Sep-09
--------------------- ---------------------
Operating Activities
Net loss for the period $ (1,281) $ (2,210) $ (4,687) $ (2,264)
Add items not affecting cash:
Amortization 773 162 2,334 465
Stock based compensation 191 91 793 477
Amortization of leasehold
inducement (31) (28) (91) (90)
Future income tax recovery (210) - (631) -
Loss on sale of long term
investments - 289 - 289
Unrealized foreign exchange
gain 340 266 411 222
Foreign exchange loss on
translation (137) - (327) -
--------------------- ---------------------

(355) (1,430) (2,198) (901)

Changes in non-cash working
capital items related to
operations:
Accounts receivable (596) 828 (424) 807
Inventory (483) (151) 238 358
Prepaid expense and deposits 449 81 (21) (192)
Accounts payable and accrued
liabilities (430) (216) (955) (34)
Deferred revenue (46) (226) (654) (272)
Deferred lease inducement - - - 244
--------------------- ---------------------

(1,461) (1,114) (4,014) 10
--------------------- ---------------------

Financing Activities
Common shares issued, net of
costs - 42 500 77
Long term loan 1,500 - - -
Borrowing/(Repayment) -
against line of credit (155) - 1,310 -
Borrowing - against long term
investments - - - 1,710
Repayment of capital lease
obligation (29) - (79) -
Repayment of borrowing
against long term investments - (1,710) - (1,710)
Repayment of bank loan - - - (1,000)
--------------------- ---------------------

1,316 (1,668) 1,731 (923)
--------------------- ---------------------

Investing Activities
Purchase of property and
equipment (37) (82) (159) (272)
Disposal/(Purchase) of
intangible assets 2 - (18) -
Proceeds from sale of long
term investments - 2,710 - 2,710
Deferred charges - GIS
acquisition - (211) (211)
--------------------- ---------------------

(35) 2,417 (177) 2,227
--------------------- ---------------------

Effect of exchange rate
changes on cash (44) - (39) -

Net increase/(decrease) in
cash during the period (224) (365) (2,499) 1,314

Cash and cash equivalents,
beginning of period 4,937 5,568 7,212 3,889
--------------------- ---------------------

Cash and cash equivalents,
end of period $ 4,713 $ 5,203 $ 4,713 $ 5,203
--------------------- ---------------------
--------------------- ---------------------

Cash and cash equivalents
consist of:
Cash $ 4,713 $ 5,203 $ 4,713 $ 5,203
--------------------- ---------------------
--------------------- ---------------------
Supplemental cash flow
information
Interest paid $ 13 $ 2 $ 25 $ 20
Income taxes paid - - - -


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

Contact Information