VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov 8, 2012) - 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 nine month period ended September 30, 2012.
Q3 2012 Financial and Operational Highlights
- Adjusted EBITDA was $0.8 million in Q3 2012 compared to $0.6 million in Q3 2011 and $1.8 million year to date compared to $0.0 million in 2011. The focus on high margin hardware and recurring revenue growth, combined with restructuring and cost management efforts, have materially increased the Company''s operating profitability.
- Total revenue was $9.3 million in Q3 2012 compared to $10.8 million in Q3 2011, and $29.0 million year to date in 2012 compared to $30.0 million year to date in 2011. In the quarter, year over year recurring revenue growth of 8% was offset by a decrease in telematics hardware revenue and related services revenue. The telematics hardware revenue decrease was largely the result of a decreased focus on the low margin OEM and low average revenue per unit ("ARPU") theft recovery verticals.
- Notable new sales, renewals and implementations during the quarter included Regional Transportation Commission - Washoe County; Town of Hempstead; Blue Bell Creameries; Effective Environmental; Reward Oilfield Services; Wood Group; and P&B Trucking.
- Recurring revenue for Q3 2012 increased 8% to $5.9 million or 63% of total revenue compared to $5.5 million or 51% of total revenue for Q3 2011. Recurring revenue increased compared to the prior period due to an increase in the number of high ARPU subscribers and lower rates of subscriber churn.
- Subscribers at September 30, 2012 totalled approximately 84,000 (combined direct and enterprise), compared to 85,000 at June 30, 2012 and 102,000 at December 31, 2011, and 101,000 at September 30, 2011. Telematics subscribers were 72,000 at September 30, 2012 compared to 91,000 at December 31, 2011. The drop in total and telematics subscribers in both the quarter and year to date is due to the exit in Q2 2012 from the consumer theft recovery vertical in Mexico which has resulted in a reduction of 16,000 subscribers, and the cancelation of 6,000 Brazilian subscribers as the Company has wound up operations in that jurisdiction. Offsetting the reduction in Telematics subscriber were additions of 3,000 full service subscribers year to date. NextBus subscribers included in the above, were 12,000 at September 30, 2012 compared to 11,000 at December 31, 2011. The Company''s focus on high ARPU subscribers has increased recurring revenue despite the overall drop in subscribers.
- Gross margin increased to 56% of total revenue from 52% in Q3 2011, and 54% of total revenue from 51% year to date in 2011 due to the improved recurring revenue mix. Despite the drop in revenue, year to date gross profit increased by 3% to $15.6 million from $15.1 million in 2011 due to increased focus on high margin hardware and recurring revenue.
- Cash operating expenses (sales and marketing, research and development, and general and administration excluding depreciation, amortization, share based payments and non-recurring items as defined below) decreased 12% to $4.4 million in Q3 2012 from $5.0 million in Q3 2011. The decrease for the quarter was the direct result of restructuring efforts and reductions in discretionary spending. Recurring revenue was 134% of cash operating expenses in the quarter compared to 109% in 2011.
- In October 2012, the Company completed the process of closing its UK branch. The UK office''s operations, which primarily relate to OEM hardware sales into the UK market, will be managed from the Vancouver headquarters. The Company also adjusted its telematics workforce during Q3 2012.
"With the closure of our UK office, and the near wind up of our theft recovery business in Mexico we have substantially completed the process of weaning Webtech Wireless off of low margin non-core revenue," said Scott Edmonds, President and CEO. "Our cash operating expenses are lower than they have been since the acquisition of Grey Island three years ago, and we have achieved our goal of producing Adjusted EBITDA from sustainable, repeatable, high margin business in our core verticals. We now need to focus on high quality revenue growth and taking a larger share of the growing telematics market."
|Three months ended||Nine months ended|
|(''000 of Cdn $)||Q3 2012||Q3 2011||Q3 2012||Q3 2011|
|Services and other revenue||914||1,649||2,778||3,826|
|Gross margin ($)||5,160||5,640||15,644||15,149|
|Gross margin (%)||56||%||52||%||54||%||51||%|
|Total operating expenses||6,056||5,923||17,494||17,664|
|Net (loss) income for the period||$||(1,312||)||$||634||$||(2,571||)||$||(6,368||)|
Revenue in Q3 2012 and for the year to date was primarily impacted by declines in telematics hardware revenue that resulted from a decreased focus on low margin OEM and low ARPU theft recovery verticals. The decrease in one-time hardware and service revenue offset recurring revenue growth of 8% and 13% over the prior three and nine month periods, respectively.
Recurring revenue as a percentage of total revenue was 63% for the quarter compared to 51% in Q3 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.
The increase in gross margins relative to Q3 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 Q3 2012.
Operating expenses in Q3 2012 excluding depreciation and amortization, share based payments, restructuring and non-recurring items (as defined below), decreased by 12% and 8% over the prior three and nine month periods, respectively. This decrease was the direct result of restructuring and cost management efforts to reduce both staff levels and administrative overhead.
The Adjusted EBITDA was $0.8 million in Q3 2012 compared to Adjusted EBITDA of $0.6 million in Q3 2011.
Results on a non-GAAP EBITDA basis are determined as follows:
|Three months ended||Nine months ended|
|(''000 of Cdn $)||September |
|Net (loss) income as reported||$||(1,312||)||$||634||$||(2,571||)||$||(6,368||)|
|Depreciation and amortization||534||490||1,604||1,555|
|Intellectual property and other litigation||462||221||593||474|
|Work force realignment||338||-||572||-|
|Foreign exchange loss (gain)||254||(821||)||252||(560||)|
|Restructuring cost, including share based payments||157||-||433||4,709|
|Share based payments||84||127||286||423|
|Income tax recovery||(6||)||(132||)||(3||)||(393||)|
|NextBus strategic review||-||-||334||-|
|One time professional fees||-||83||-||83|
|(Gain) loss on sale of assets||-||(2||)||-||23|
|Adjusted EBITDA (1)||$||767||$||636||$||1,784||$||20|
|(1) Adjusted EBITDA is not defined under IFRS. Adjusted EBITDA is defined by the Company as earnings (loss) before interest, taxes, 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 September 30, 2012, the Company''s unrestricted cash position amounted to $5.1 million, which consisted of cash and cash equivalents, compared with $5.5 million at June 30, 2012 and $5.9 million at December 31, 2011. In addition, the Company has $1.0 million USD of restricted cash used to secure its bonding facility.
As at September 30, 2012, the Company had net working capital of $11.1 million, compared with $11.6 million at June 30, 2012 and $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 $0.1 million for the nine months ended September 30, 2012.
As at November 6, 2012, Webtech Wireless had 105,424,265 common shares outstanding.
Financial Statements and Management Discussion & Analysis
The Condensed Interim Consolidated Financial Statements for the three and nine months ended September 30, 2012 and the related Management Discussion & Analysis for the period has been filed on SEDAR at www.sedar.com, and also on the Company''s website at www.webtechwireless.com.
Notice of Conference Call
Webtech Wireless will hold a conference call today, November 8, 2012, at 11:00 am ET hosted by Mr. Scott Edmonds, President and Chief Executive Officer and Mr. Andrew Morden, Chief Financial Officer to discuss the Company''s financial results and corporate developments. To access the conference call by telephone, dial +1.416.340.2216 or +1.866.226.1792. A taped replay of the conference call will be archived on the Company''s corporate website at: www.webtechwireless.com.
About Webtech Wireless®
Webtech Wireless Inc. (WEW.TO) is a provider of vehicle fleet location-based services (LBS) and telematics technology. It develops, manufactures and supports end-to-end wireless solutions that improve the productivity, profitability, environmental compliance and safety of vehicle fleets. Its comprehensive suite of products and services include: automatic vehicle location (AVL), mapping, vehicle diagnostics, CO2 reporting, navigation, messaging, and mobile resource management. The Company serves customers of all sizes in the transport, government, service, insurance and OEM markets in over forty-one countries, including Fortune 500 companies. Specialized products include: Quadrant® commercial fleet solutions, InterFleet® solutions for government, and NextBus® real-time passenger information services for transit fleets. For more information, please visit www.webtechwireless.com.
All amounts in Canadian dollars (CAD$) unless otherwise noted. Trademarks are the property of their owners.