2023 Guidance Remains on Track for Revenue up 59%-74% to $43 million-$47 million, Driving Positive Operating Income, Cash Flow and Adjusted EBITDA
BATAVIA, Ill., August 15, 2023 — High Wire Networks, Inc. (OTCQB: HWNI), a leading global provider of managed cybersecurity and technology enablement, reported results for continuing operations for the three and six months ended June 30, 2023. All comparisons are to the same year-ago period unless otherwise noted.
Financial Highlights
- First half 2023 revenue increased 32% to $16.1 million.
- Monthly recurring revenue exceeded a record $1 million.
- Total contract value (TCV) for Overwatch managed cybersecurity services totaled $6.0 million at quarter end, up from $5.1 million at the end of the previous quarter (see TCV defined below).
- Project delivery backlog of the company’s technology enablement business totaled $8.6 million at quarter end and is currently at $9.0 million (see total project delivery backlog definition below).
- Eliminated more than 8.6 million in common stock equivalents, substantially reducing fully diluted shares outstanding.
- Total liabilities decreased 59% or $15.7 million to $11.1 million at June 30, 2023, compared to $26.8 million at December 31, 2022, and down sequentially 13% from $12.8 million at March 31, 2023.
- Cash totaled $1.2 million at June 30, 2023, increasing from $978,000 at the end of the previous quarter and $649,000 at December 31, 2022.
Q2 2023 Operational Highlights
- Awarded $5.3 million mobile Wi-Fi access refresh project for a nationwide retail store chain with more than 2,000 locations. The deployment is ongoing in the current quarter, with the award of a second phase anticipated to follow.
- Signed an expanded $1.6 million annual contract renewal to provide a technology managed services and maintenance for a Fortune 500 national environmental solutions provider.
- Won major new contract to provide Overwatch OT/IoT Security™ for a U.S. health care system comprised of more than 25 hospitals and clinics and dozens of ancillary care facilities. Includes deployment of agentless, zero trust, managed cybersecurity services for more than 2,000 IoMT-type (Internet-of-Medical-Things) devices across multiple campuses.
- Selected as the exclusive provider of managed cybersecurity services for business customers of EverFast Fiber Networks, the first independent fiber optic Internet Service Provider (ISP) headquartered in the Kansas City metro area. The program bundles High Wire’s Overwatch cybersecurity managed services with EverFast’s networking technology and Internet broadband.
- Launched new Overwatch Cyber Warranty™ Program that provides a financial safety net for managed service providers (MSPs) and their business clients in the event of a cybersecurity breach. The program addresses the increase in cybercrime that results in costly remediation, lost sales, fines and penalties.
- Added new benefits to the company’s Overwatch Managed Cybersecurity Partner Program for managed service providers (MSPs) designed to help them increase recurring revenue generated by cybersecurity services.
- As a select member of the DoD SkillBridge, launched a cybersecurity job training program for retiring military service members and veterans in partnership with the U.S. Department of Defense (DoD).
- Appointed Curtis Smith as chief financial officer, who brings to High Wire more than 30 years of finance and operational experience, including as CFO for Nasdaq-listed and privately held companies.
- Promoted VP of marketing and communications, Susanna Song, to the new position of chief marketing officer (CMO). In May, she was named to the CRN ® Women of the Channel list for 2023.
- Added industry veterans to sales team who have expanded technology services pipeline to over $150 million at quarter end versus $80 million in the same year-ago period.
Outlook
High Wire expects additional IT deployments and cybersecurity wins in the second half of the year, keeping revenue on track to grow 59% to 74%, reaching $43 million to $47 million for the full year of 2023, and generating positive operating income, cash flow and adjusted EBITDA by yearend.
Management Commentary
“We had an exceptionally strong first half, with revenue up 32% to a $16.1 million,” stated High Wire CEO, Mark Porter. “The second quarter was lower sequentially due to typical seasonality in our business, and lower from a year ago due to lingering supply chain issues, but moreover a change in revenue mix to higher quality revenue in terms of margin and recurring revenue. In fact, in the second quarter we hit a record monthly rate of more than $1 million in recurring revenue and we see this up trend continuing. “An increasing portion of our recurring revenue is being generated by our Overwatch managed cybersecurity services, where our investment in greater levels of automation has substantially increased scalability, margins, and leverage in the model. Overwatch is now positioned to double its revenue stream without requiring additional personnel to support it.
“We are also focused on adding more long-term higher margin IT support programs to supplement ou project-based IT enablement engagements. Our IT enablement pipeline has nearly doubled over the last year, to now more than $150 million. This was largely due to the addition of key new hires in our sales force who have brought many deep connections with enterprise c-level executives.
“We also renewed an IT support program to provide technology managed services and maintenance for a Fortune 500 national environmental solutions provider. The annual contract renewal increased 23% in value over the preceding year. This opportunity is one example of how we can expand recurring revenue from an IT service program to a managed service offering.
“At the end of April, we announced a new contract to provide our Overwatch OT/IoT Security™ service for a U.S. healthcare system with more than 25 hospitals. This major win validates the superior capabilities of our managed cybersecurity solutions, especially after the client evaluated multiple competitive alternatives. This expanded engagement is a good example of how we can transition an IT project into a long-term IT services contract that generates recurring revenue.
“Another important win in the second quarter was a $5.3 million Wi-Fi network refresh project for a marquee nationwide retail store chain. This 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.
“Earlier this month, the same channel partner helped us secure the first phase of a major Wi-Fi upgrade project for a Fortune 200, nationwide department store chain. It involves the installation of 6,000 Wi-Fi access points across more than 100 stores. The upgrade will enable the retailer to execute on its digital transformation strategy of enhancing the in-store shopping experience to create a competitive advantage.
“We believe this major win reflects how our partners look to High Wire as a service delivery leader capable of efficiently and cost-effectively delivering on multi-site technology deployments at scale. It demonstrates how our ability to coordinate large-scale projects from our global service center and draw from our network of more than 15,000 highly qualified technicians worldwide are key factors that truly set us apart from the competition.
“This win also highlights the overall 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 to be a major beneficiary of this trend.
“During the quarter we also expanded our product offerings to support long-term revenue growth. This included adding features and options to our Overwatch Managed Cybersecurity Partner Program for the thousands of managed service providers (MSPs) across the globe seeking additional recurring revenue streams.
“In July, we introduced a next-gen, industry-disruptive cybersecurity technology to be delivered through our new Overwatch CyberLab™ security browser security module. Compared to other solutions on the market today, this universally compatible web browser module will deliver greater protection at the edge, better user experience, and more responsive actions to active threats.
“The introduction of this new technology advances our transformation from being only a master managed security services provider (MSSP) to also becoming a cybersecurity technology IP leader with patented products and unique software-as-a-service offerings. It elevates our Overwatch cybersecurity platform value proposition to a whole new level. For our partners, it opens new doors and creates new recurring revenue streams on top of managed services.
“By combining the capabilities of this technology with our existing broad market reach, we believe we will be able to take the cybersecurity world by storm, adding both a major recurring revenue stream as well as creating opportunities for larger enterprise cybersecurity deployments. We see its upcoming official launch and rollout adding significant revenue by the fourth quarter.
“The Overwatch web browser security module is the first product introduced by our newly formed Overwatch CyberLab™ division. This division represents our new cybersecurity technology platform that will serve as the incubator and IP manager for our cybersecurity product research and development. “This division will be headed by our new chief product officer, John “JP” Peterson, an award-winning cybersecurity industry veteran, patent inventor, and thought leader. As the inventor of our new browser security module, we see JP’s exceptional vision, knowledge, and capabilities having an immediate impact on the valuation and potential of our company.
“Looking ahead, we see our revenue being increasingly comprised of recurring revenue streams under long-term contracts, with this helping to drive consistent operating income, strong cash flow and positive adjusted EBITDA.
“While this year we expect to experience the traditional seasonality inherent in our mostly project- based tech enablement business that tends to make for a stronger second half of the year, over time we expect our growing revenue streams from Overwatch and IT enablement programs services to smooth out this seasonality.
“All of these positive trends—both with internal progress and recent major wins—reflect a favorable market outlook, and this is helping to advance our plans for an uplist to a major U.S. stock exchange in the coming months. We expect the listing to strengthen our ability to make complementary acquisitions, and elevate the confidence of our channel partners and end-customers, which we see supporting greater shareholder value creation over the long term.”
Q2 2023 Financial Summary
Revenue in the second quarter of 2023 totaled $5.9 million, down 13% from $6.8 million in the same year-ago quarter. The decline was primarily due to a decrease in technology enablement projects as a result of exiting a substantial low margin project, as well as due to some lingering supply chain issues that the company expects to improve in the second half of the year. The decrease in overall revenue in the second quarter of 2023 was partially offset by strong growth in recurring revenues.
Gross profit totaled $2.5 million or 42.2% of revenue in the second quarter as compared to $2.4 million or 35.4% of revenue in the same year-ago quarter. The gross profit percentage increase was primarily attributable to an increased level of automation of the company’s Overwatch cybersecurity offering and an increase in efficiency in project performance.
Total operating expenses decreased to $8.2 million compared to $8.4 million in the same year-ago quarter. The decrease was primarily due to a reduction in cost of revenues of over $980,000, which was partially offset by increases in depreciation and amortization expenses of $94,000 and general and administrative expenses of $690,000. The increase in general and administrative expenses was due to additional headcount, including chief operating officer, chief financial officer and chief revenue officer positions, as well as expansion and investment in the company’s Overwatch division support.
Net loss from continuing operations in the second quarter of 2023 totaled $4.0 million or $(0.02) per diluted share, compared to a net income from continuing operations of $5.1 million or $0.07 per diluted share in the same year-ago period. The net loss from continuing operations for the second quarter of 2023 included non-cash stock-based compensation of $335,000; amortization of discounts on convertible debentures and loans payable of $329,000; depreciation and amortization of $216,000; and interest expense of $402,000.
Cash and cash equivalents totaled $1.2 million at June 30, 2023, compared to $978,000 at March 31, 2023 and $649,000 at December 31, 2022.
First Half 2023 Financial Summary
Revenue in the first half of 2023 totaled $16.1 million, up 32% from $12.2 million in the same year-ago period. The increase was primarily due to large-scale technology upgrades by its technology enablement service teams and recurring revenue growth generated by the company’s Overwatch cybersecurity managed services.
Gross profit totaled $3.9 million or 24.5% of revenue in the first half as compared to $4.3 million or 35.5% of revenue in the same year-ago period. The decrease in revenue in the first half of 2023 is due to the reasons discussed in reference to Q2.
Total operating expenses increased to $21.0 million compared to $15.3 million in the same year-ago period. The increase was primarily due to increases in cost of revenue of $4.3 million, which matches the increase in revenue, additional increases were general and administrative expenses of $1.2 million and depreciation and amortization of $176,000. The increase in general and administrative expenses was due to additional headcount, including certain chief officer positions, and expansion and investment in the company’s Overwatch division support. The increase in operating expenses was partially offset by a decrease in salaries and wages expenses of $48,000.
Net loss from continuing operations in the first half of 2023 totaled $4.1 million or $(0.02) per diluted share, compared to a net income from continuing operations of $6.8 million or $0.10 per diluted share in the same year-ago period. The net loss from continuing operations for the first half of 2023 included non-cash stock-based compensation of $863,000; amortization of discounts on convertible debentures and loans payable of $837,000; depreciation and amortization of $418,000; and interest expense of $588,000.
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.
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.
To learn more about High Wire and its award-winning managed cybersecurity and IT enablement services, visit HighWireNetworks.com or view the company’s video series on YouTube.
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, liquidity damages related to escrow shares 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.
High Wire Contact
Susanna Song
Chief Marketing Officer
High Wire Networks
Tel +1 (952) 974-4000
Email contact
Media Relations:
Tim Randall
CMA Media Relations
Tel +1 (949) 432-7572
Email contact
Investor Relations:
Ronald Both or Grant Stude
CMA Investor Relations
Tel +1 (949) 432-7557
Email contact
