Webtech Wireless Announces Q2 2012 Results

Marketwired

VANCOUVER, BRITISH COLUMBIA--(Marketwire -08/10/12)- Webtech Wireless Inc. (WEW.TO) ("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 six month period ended June 30, 2012.

Q2 2012 Financial and Operational Highlights

 

-- Total revenue was $9.5 million in Q2 2012 compared to $9.8 million in Q2
2011, and $19.7 million year to date in 2012 compared to $19.2 million
year to date in 2011. Revenue decreased 3% year on year for the quarter,
but increased 3% on a year to date comparable basis. In the quarter,
recurring revenue growth of 13% and growth in predictive arrival
hardware and services of 38% was offset by decreases in telematics
hardware and service revenue. The telematics decrease was the result of
a decreased focus on low margin OEM, low average revenue per unit
("ARPU") theft recovery verticals and government sales.
-- Adjusted EBITDA was $0.6 million in Q2 2012 compared to $0.6 million in
Q2 2011.
-- Notable new sales, renewals and implementations during the quarter
included Cascade Sierra, Prince George's County, Maryland; Foothill
Transit; Omnitrans; Harrisonburg Department of Public Transportation,
Virginia; CyRide - City of Ames, Iowa; Handhelds Pro and Masternaut
Limited.
-- Recurring revenue for Q2 2012 increased 13% to $5.9 million or 62% of
total revenue compared to $5.2 million or 53% of total revenue for Q2
2011. Recurring revenue increased compared to the prior period due to an
increase in high ARPU subscribers.
-- Subscribers at June 30, 2012 totalled approximately 85,000 (combined
direct and enterprise), compared to 102,000 at both March 31, 2012 and
December 31, 2011, and 99,000 at June 30, 2011. Telematics subscribers
were 73,000 at June 30, 2012 compared to 91,000 at both March 31, 2012
and December 31, 2011. As expected, the drop in telematics subscribers
is due to the decreased focus on and planned exit of the consumer theft
recovery vertical in Mexico during Q2 2012 which resulted in a reduction
of 14,000 subscribers, and the cancelation of 6,000 Brazilian
subscribers as the Company has wound up operations in that jurisdiction.
NextBus subscribers included in the above, were 12,000 at June 30, 2012
compared to 11,000 at December 31, 2011. The Company's focus on high
ARPU subscribers has increased recurring revenue despite the drop in
subscribers.
-- Gross margin increased to 55% of total revenue from 54% in Q2 2011, and
53% of total revenue from 50% year to date in 2011 due to the improved
recurring revenue mix.
-- Cash operating expenses (sales and marketing, research and development,
and general and administration excluding depreciation, amortization,
share based payments, restructuring and non-recurring items as defined
below) declined 2% to $4.6 million in Q2 2012 from $4.7 million in Q2
2011. The decrease for the quarter was the direct result of
restructuring efforts undertaken in 2011 and reductions in discretionary
spending.
-- The Company completed its previously announced strategic review of its
Nextbus operations, and on June 5, 2012, the Company announced it has
decided to retain ownership of its NextBus subsidiary for the
foreseeable future after making certain operational changes. Among the
operational changes, the Company announced the appointment of Michael
Smith to General Manager and Chief Technology Officer of NextBus
following the departure of the former General Manager.
-- In July 2012, the Company began the process of closing its UK branch
which it expects to complete by September 30, 2012. The UK office's
operations, which largely involve OEM hardware sales into the UK market,
will be managed from the Vancouver headquarters. The Company also
adjusted its telematics workforce at that time.
-- In July 2012, Mr. Harald Fritz the Senior Vice President of Sales and
Marketing, Telematics left the Company. The Company is actively
recruiting a replacement for this role.

"Improving gross margins and the reduction of cash operating expenses to $1.3 million below recurring revenues are the positives we take from this quarter's results," said Scott Edmonds, President and CEO. "We are not yet satisfied however with the revenue growth we are reporting and are working to replace the sunset OEM and theft recovery business with higher margin, stickier revenue from our core verticals that produce not only one-time hardware margin, but also recurring subscription margins, and will continue to invest in doing so. While we are pleased to continue to report positive Adjusted EBITDA, revenue growth and overall profitability has to be our goal and the workforce and operational changes we have made in July are designed to continue our progress towards those goals."

Financial Highlights

 

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Three months ended Six months ended
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('000 of Cdn $) Q2 2012 Q2 2011 Q2 2012 Q2 2011
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Hardware revenue $ 2,923 $ 3,297 $ 5,750 $ 6,575
Recurring revenue 5,899 5,227 12,091 10,423
Services and other revenue 699 1,318 1,865 2,176
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9,521 9,842 19,706 19,174
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Gross margin ($) 5,254 5,339 10,485 9,508
Gross margin (%) 55% 54% 53% 50%

Total operating expenses 5,659 5,413 11,438 11,741

Net income (loss) for the period $ (668) $ (739) $ (1,259) $ (7,002)

Adjusted EBITDA (Loss) $ 631 $ 620 $ 1,017 $ (619)
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Revenue

Revenue in Q2 2012 was impacted by declines in telematics hardware and services revenue that resulted from a decreased focus on low margin OEM and low ARPU theft recovery verticals, and prior restructuring. Year to date revenues exceeded the prior period as a result of strong recurring revenues.

Recurring revenue as a percentage of total revenue was 62% for the quarter compared to 53% in Q2 2011. The increase in recurring revenue is due to growth from the addition of new high ARPU subscribers from sales and implementations over the past twelve months across all product lines. The continued shift away from hardware to a majority of subscription, software and services revenue reflects management's focus on developing the Software as a Service ("SaaS") model.

Gross Margin

The increase in gross margins relative to Q2 2011 is due to the revenue mix as high margin recurring revenues made up a larger portion of total revenue. Margins on recurring revenues also improved year over year resulting largely from an increase in subscription revenue and realized cost savings in Q2 2012.

Operating Expenses

Operating expenses in Q2 2012 excluding non-cash charges for depreciation and amortization, share based payments, restructuring and non-recurring (as defined below), decreased by 2% and 6% over the prior three and six month periods. This decrease was the direct result of restructuring efforts undertaken in 2011 to reduce both staff levels and administrative overhead.

Adjusted EBITDA(1)

The Adjusted EBITDA was $0.6 million in Q2 2012 compared to Adjusted EBITDA of $0.6 million in Q2 2011.

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

 

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Three months ended Six months ended
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June 30, June 30, June 30, June 30,
2012 2011 2012 2011
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Net loss as reported $ (668) $ (739) $ (1,259) $ (7,002)
Add (deduct)
Depreciation and amortization 538 543 1,071 1,065
Restructuring cost, including
share based payments 275 669 275 4,709
NextBus strategic review 190 - 334 -
Intellectual property and other
litigation 128 - 128 253
Work force realignment 95 - 234 -
Share based payments 85 151 203 296
Finance expense 7 21 29 55
Income tax expense 3 (130) 3 (261)
Foreign exchange (gain) / loss (22) 105 (1) 266
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Adjusted EBITDA (Loss) (1) $ 631 $ 620 $ 1,017 $ (619)
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(1) Adjusted EBITDA (Loss) is not defined under IFRS. Adjusted EBITDA is
defined by the Company as earnings (loss) before interest, tax,
depreciation, amortization, share based payments, foreign exchange loss
on operations, restructuring charges, and one-time expenses.

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.

Cash and Working Capital

As at June 30, 2012, the Company's unrestricted cash position amounted to $5.5 million, which consisted of cash and cash equivalents, compared with $4.9 million at March 31, 2012 and $5.9 million at December 31, 2011.

As at June 30, 2012, the Company had net working capital of $11.6 million, compared with $11.9 million at December 31, 2011. The Company has historically invested in product and market development, and as a result had negative cash flows but has recently taken a number of steps to improve its ability to generate cash from operations and as a result has shown positive cash flows from operations of $0.5 million for the six months ended June 30, 2012.

As at August 9, 2012, Webtech Wireless had 105,424,265 common shares outstanding.

Financial Statements and Management Discussion & Analysis

The Condensed Interim Consolidated Financial Statements for the three and six months ended June 30, 2012 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, August 10, 2012, at 11:00 am ET hosted 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 +1.416.340.8530 or +1.877.240.9772. 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. (WEW.TO) 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.

All amounts in Canadian dollars (CAD$) unless otherwise noted. Trademarks are the property of their owners.

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

Contact:

Webtech Wireless Inc. - Investor Relations
Andrew Morden
Chief Financial Officer
+1 604.434.7337
investors@webtechwireless.com
Webtech Wireless Inc. - Press and Media
David Greer
Vice President Marketing
+1 604.628.5194
press@webtechwireless.com
www.webtechwireless.com

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