Reiterates 2023 Guidance: Revenue up 59%-74% to $43 million-$47 million, Driving Positive Operating Income, Cash Flow and Adjusted EBITDA
BATAVIA, Ill., May 18, 2023 — High Wire Networks, Inc. (OTCQB: HWNI), a leading global provider of managed cybersecurity and technology enablement, reported results for the three months ended March 31, 2023. All comparisons are to the same year-ago period unless otherwise noted.
On March 8, 2023, High Wire announced the sale of its legacy staffing business. The following financial results are provided on a pro forma basis that excludes this divested business and provides only the results from the company’s continuing managed cybersecurity and technology enablement business. GAAP results for the first quarter of 2023 can be found at www.sec.gov in the company’s quarterly report as filed on Form 10-Q.
Q1 2023 Financial Highlights
- Revenue up 91% to a record $10.2 million.
- Total contract value (TCV) for the company’s Overwatch managed cybersecurity business totaled $5.1 million at quarter end and is currently at $5.2 million (see TCV defined below).
- Total project delivery backlog from the company technology enablement business totaled $6.5 million at quarter end and is currently at $9.6 million (see total project delivery backlog defined below).
- Net loss from continuing operations totaled $186,000 or $(0.00) per basic and diluted share, compared to a net income from continuing operations of $1.7 million or $0.02 per diluted share.
- Total liabilities decreased 52% or $14.0 million to $12.8 million at March 31, 2023, compared to $26.8 million at December 31, 2022.
- Cash totaled $978,000 at March 31, 2023, compared to $649,000 at December 31, 2022.
Q1 2023 Operational Highlights
- Sold legacy staffing subsidiary in $11.5 million transaction, enabling company to turn focus on faster-growing managed cybersecurity and tech enablement business. The sale eliminated a substantial amount of debt and reduced the company’s convertible Series D preferred shares which effectively reduced the fully diluted share count by about 17% or 60.3 million shares and eliminated $3.9 million in debt payments on an annualized basis.
- Signed $1.2 million contract renewal to provide technology managed services for a Fortune 500 healthcare company with more than 3,000 medical clinics nationwide. Building upon a seven-year relationship, added management of thousands of additional end user compute (EUC) devices and doubled the contact value.
- Secured expanded three-year, $300,000 contract renewal to provide Overwatch managed cybersecurity services for a global aerospace company which embraced High Wire’s defense-in-depth strategy of incorporating multiple Overwatch cybersecurity tools, increasing financial commitment by 40%.
- Frost & Sullivan ranked High Wire Networks as a Top 12 Managed Security Service Provider (MSSP) in the categories of growth and innovation. Report noted that High Wire’s “growth potential is high and its revenue growth is impressive, reaching triple digits and surpassing most competitors for the last three years.”
- Named to CRN MSP 500 list of Nation’s Top IT Managed Service Providers, which recognizes leading MSPs “whose forward-thinking approach to providing managed services is changing the landscape of the IT channel.”
- Also named to CRN MSP Elite 150 list that recognizes MSPs that “have an extensive managed services portfolio, including on-premises and off-premises capabilities, weighted toward mid-market and enterprise customers.”
- Completed the integration of the company’s proprietary Overwatch Security Orchestration Automation and Response™ (SOAR™) technology at its 24/7 network and security operation centers in Batavia, Illinois. SOAR automatically consolidates alerts from various threat prevention and detection-and-response platforms, providing enhanced visibility, improved correlation and faster remediation.
- Appointed company director, Stephen LaMarche, as chief operating officer, bringing to the position more than 25 years of executive leadership for private and public companies, including extensive experience in operations management, product innovation, sales and marketing, finance and M&A.
Outlook
High Wire continues to expect revenue from continuing operations to grow 59% to 74%, reaching $43 million to $47 million for the full year of 2023, along with positive operating income, cash flow and adjusted EBITDA by yearend.
Management Commentary
“Q1 2023 was another quarter of strong top-line performance, with revenue nearly doubling over the same year-ago period,” stated High Wire CEO, Mark Porter. “This was driven by recurring revenue growth generated by our Overwatch cybersecurity managed services and large-scale technology upgrades by our tech enablement service teams.
“Underpinning this growth is the strengthening numbers and overall sales performance of our channel partners, whose global presence has helped us expand our Overwatch user base over the past year by more than 430% to nearly 1,000 SMB and enterprise customers worldwide, including a number of Fortune 500 global companies.
“Our strong growth in the first quarter also reflects the success of the strategic corporate initiatives we implemented over the last several months designed to strengthen our capitalization and organizational structure, eliminate high interest debt and secure more favorable growth capital from strategic investors. Also key to this plan was divesting our legacy staffing subsidiary so we could focus on our faster-growing, higher-margin businesses.
“The transaction also eliminated $325,000 in monthly debt payments. We are applying this savings to several growth initiatives, including the rollout and potential acquisition of a number of new or expanded product and service offerings.
“During the quarter we expanded the benefits of our Overwatch Managed Cybersecurity Partner Program for the thousands of managed service providers (MSPs) across the globe looking to secure a new recurring revenue stream by offering cybersecurity services to their business customers. Several valuable new benefits will help MSP partners of all sizes grow their managed cybersecurity business, from demand generation and service delivery to onboarding and enablement.
“Our Overwatch platform is now being sold by 225 MSSP channel partners worldwide. This number continues to grow because no other provider can deliver a more comprehensive suite of cybersecurity services, and especially with powerful security tools that can be deployed as quickly and easily and cost-effectively as Overwatch.
“We recently announced a major $5.3 million Wi-Fi network refresh project for a nationwide retail store chain with more than 2,000 locations. Initial deployments are already underway, setting the project on track for completion by the end of November. This marquee customer win was secured through one of the world’s largest technology resellers and integrators who has now brought us more than $35 million in projects over the last several years.
“This major win highlights how our channel partners increasingly rely on us to deliver such multi-site technology for their high-profile clients. It also reflects the growth in demand for next-generation Wi-Fi technology by retailers who are looking to deploy new in-store shopping technology that can drive greater sales. In-store Wi-Fi is effectively becoming a new profit center for major retailers and we expect High Wire to be a major beneficiary of this trend.
“In fact, this latest wireless upgrade win follows a similar engagement for a multi-site, multi-tech rollout with another major retailer that we announced last fall that quickly expanded from a $5 million project to one exceeding $12 million.
“We also recently announced an expanded $1.6 million annual contract renewal to provide technology managed services and maintenance program for a Fortune 500 national environmental solutions provider. This compares to the preceding program that generated more than $1.3 million in billed services.
“At the end of April we announced a major new contract from a channel partner to provide our Overwatch OT/IoT Security™ service for a major U.S. health systems comprised of more than 25 hospitals and clinics and dozens of ancillary care facilities. The win validates the superior capabilities of our cybersecurity solutions, especially after the healthcare system evaluated multiple competitive alternatives before choosing Overwatch. The channel partner has since referred us to other healthcare providers that we’re currently pursuing.
“These new prospects have been added to a sales pipeline that is the strongest it has ever been in terms of both the number and size of prospective deals. Combined with our recent wins and backlog of contracted deployments, we believe we remain well on track for growth of 59% to 74% this year or $43 million to $47 million in revenue.
“We expect this to be increasingly comprised of recurring revenue streams under long-term contracts that will help drive positive operating income, strong cash flow and positive adjusted EBITDA by year end. To be sure, we expect to experience the traditional seasonality inherent in our primary project-based tech enablement business that tends to make for a stronger second half of the year. However, over time, we expect our growing Overwatch recurring revenue streams and potentially other subscription-based technology services to help offset such seasonality.
“All of these positive trends—both with our internal progress and recent major wins reflecting a favorable market growth outlook—are helping us advance our plans for an uplist to a major U.S. stock exchange. We expect the listing to greatly enhance shareholder value, as well as provide a higher level of prestige and strengthen the confidence of our channel partners and end-customers. The uplisting process is well underway and we look forward to making this and other major announcements very soon.”
Q1 2023 Financial Summary (Continuing Operations Pro Forma)
Revenue in the first quarter of 2023 totaled $10.1 million, up 91% from $5.3 million in the same year-ago quarter. The increase was primarily due to a substantial increase in technology enablement projects, as well as strong growth in recurring revenues.
Gross profit totaled $1.4 million or 14.1% of revenue in the first quarter as compared to $1.9 million or 35.6% of revenue in the same year-ago quarter. The decrease was primarily attributable to a project that was subsequently re-negotiated, allowing a return to normalized margin levels in the later part of the first quarter of 2023, such as in line with the year-ago gross margin.
Total operating expenses increased to $4.1 million compared to $3.5 million in the same year-ago quarter. The increase was primarily due to increases in amortization and general and administrative expenses, which was partially offset by decreases in depreciation and salaries and wages.
Net loss from continuing operations in the first quarter of 2023 totaled $186,000 or $(0.00) per diluted share, compared to a net income from continuing operations of $1.7 million or $0.02 per diluted share in the same year-ago period. The net loss from continuing operations for the first quarter of 2023 included non-cash stock-based compensation of $528,000; amortization of discounts on convertible debentures and loans payable of $509,000; depreciation and amortization of $203,000; and interest expense of $186,000.
Cash and cash equivalents totaled $978,000 at March 31, 2023, as compared to $649,000 at December 31, 2022.
About High Wire Networks
High Wire Networks, Inc. (OTCQB: HWNI) is a fast-growing, award-winning global provider of managed cybersecurity and IT enablement services. Through more than 625 channel partners, it delivers trusted managed services for nearly 1,000 managed security customers and tens of thousands of technology customers. Its end-customers include hundreds of Fortune 500 companies and the nation’s largest government agencies. The company’s Overwatch by High Wire Networks™ platform offers a range of subscription services for threat prevention, detection and response to meet the security and compliance requirements of organizations large and small. The company’s IT enablement services provide the foundation for growing its higher-margin Overwatch business. High Wire has 125 full-time employees worldwide and four U.S. offices, including a U.S. based 24/7 Network Operations Center and Security Operations Center in Chicago, with additional regional offices in Puerto Rico and United Kingdom.
High Wire was recently ranked by Frost & Sullivan as a Top 12 Managed Security Service Provider in the Americas. It was also recently named to CRN’s MSP 500 and Elite 150 lists of the nation’s top IT managed service providers. Learn more at HighWireNetworks.com. Follow the company on Twitter, view its extensive video series on YouTube or connect on LinkedIn.
Total Contract Value
The company defines Total Contract Value (TCV) as the aggregate monetary value of its customer contracts remaining under the duration of annual or multi-year contracts, including associated one-time fees, such as onboarding and training fees.
Total Project Delivery Backlog
The company defines Total Project Delivery Backlog as the aggregate monetary value of customer contracts remaining for deployment by the company’s technology enablement services which are project based, such as for technology installations, upgrades and related training.
About the Use of Non-GAAP Measures
The company believes that the use of adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, is helpful for an investor to assess the performance of the company. The company defines adjusted EBITDA as income (loss) before interest, taxes, depreciation, amortization, acquisition expenses, impairment of long-lived assets, gain/loss on change of fair value of derivatives, amortization of discounts on debt, financing costs, fair value adjustments from purchase accounting, stock-based compensation expense and expenses related to discontinued operations.
Adjusted EBITDA is not a measurement of financial performance under generally accepted accounting principles in the United States, or GAAP. Because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company’s non-cash operating expenses, the company believes that providing a non-GAAP financial measure that excludes non-cash and non-recurring expenses allows for meaningful comparisons between its core business operating results and those of other companies, as well as providing the company with an important tool for financial and operational decision making and for evaluating its own core business operating results over different periods of time.
The company’s adjusted EBITDA measure may not provide information that is directly comparable to that provided by other companies in its industry, as other companies in the company’s industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. The company’s adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to operating income or as an indication of operating performance or any other measure of performance derived in accordance with GAAP. The company does not consider adjusted EBITDA to be a substitute for, or superior to, the information provided by GAAP financial results.
Forward-Looking Statements
The above news release contains forward-looking statements. The statements contained in this document that are not statements of historical fact, including but not limited to, statements identified by the use of terms such as “anticipate,” “appear,” “believe,” “could,” “estimate,” “expect,” “hope,” “indicate,” “intend,” “likely,” “may,” “might,” “plan,” “potential,” “project,” “seek,” “should,” “will,” “would,” and other variations or negative expressions of these terms, including statements related to expected market trends and the Company’s performance, are all “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and involve a number of risks and uncertainties. These statements are based on assumptions that management believes are reasonable based on currently available information, and include statements regarding the intent, belief or current expectations of the Company and its management. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performances and are subject to a wide range of external factors, uncertainties, business risks, and other risks identified in filings made by the company with the Securities and Exchange Commission. Actual results may differ materially from those indicated by such forward-looking statements. The Company expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances upon which any statement is based except as required by applicable law and regulations.
Company Contact
Mark Porter, CEO
High Wire Networks
Tel +1 (952) 974-4000
Media Relations
Susanna Song
VP of Marketing and Communications
High Wire Networks
Tel +1 (952) 974-4000
Tim Randall
CMA Media Relations
Tel +1 (949) 432-7572
Investor Relations
Ronald Both or Grant Stude
CMA Investor Relations
Tel +1 (949) 432-7557
