WaveDancer Releases Second Quarter 2022 Results

$500,000 of Revenue Recognized from Blockchain Platform Development as Company Nears Full Production; Revenue up 44% from First Quarter


FAIRFAX, Va., Aug. 15, 2022 (GLOBE NEWSWIRE) -- WaveDancer (NASDAQ: WAVD), reported its results for the second quarter ended June 30, 2022, which was characterized by continued investment in its software development team and strategic efforts focused on maintaining and growing profitability in the Company’s professional services work. The Company recognized significant revenues after achieving substantial project milestones on their key United States government contract to bring a blockchain-enabled supply chain and logistics platform into full production.

WaveDancer CEO Jamie Benoit commented, “The various investments we have made in WaveDancer are helping establish a strong foundation for growth. Our revenue has increased 44% from first quarter levels, while our gross profit has increased by 147%, in part due to the significant revenue recognized by our United States Government contracts. As we drive aggressively toward Authority to Operate our supply chain platform with our government customer, we are simultaneously readying our Maverix product for the broader commercial markets.”

Mr. Benoit continued, “Our focus on higher margin professional service opportunities, which resulted in our second quarter gross margin expanding to 30.9%, will continue in following quarters and establish a strong foundation upon which we can continue with our long-term strategic transformation into a leading technology company. I am optimistic, based on the strong interest we are hearing from customers, that our blockchain offering meets a large demand in the marketplace and am likewise optimistic about acquisition opportunities that will be immediately accretive.”

WaveDancer CFO Tim Hannon added, “The increase in expenses this quarter, in comparison to last year, was driven in part by one-time professional fees and other costs to conduct due diligence related to our intended acquisition of Knowmadics. The dramatic change in market sentiment during the first half of 2022 that made closing the transaction impossible was unfortunate, but ultimately in the best interests of our shareholders. Our strategic focus on profitability and investment in product development will ultimately allow us to emerge stronger and better positioned for the massive growth we expect in the blockchain and zero trust sector.”

Second Quarter 2022 Key Financial Items (all comparisons to prior year period unless otherwise noted)

  • Total revenues decreased 8.8% to $4.3 million, compared with $4.7 million.
  • Professional fees decreased 14.5% to $2.8 million down from $3.3 million.
  • Gross profit decreased slightly to $0.93 million, compared with $0.96 million.
  • Gross margin expanded to 30.9%; higher-margin professional fees accounted for 65.9% of revenues.
  • Net loss of $(1.5) million, compared with net income of $0.04 million.
  • Adjusted EBITDA1 of ($1.4) million, compared with $0.6 million

Six Months 2022 Key Financial Items (all comparisons to prior year period unless otherwise noted)

  • Total revenues decreased to $7.3 million, compared with $8.2 million.
  • Professional fees decreased to $4.9 million down from $5.8 million
  • Gross margin improved significantly, increasing to 25.1%, compared with 24.2%; higher-margin professional fees accounted for 67.2% of revenues.
  • Net loss of ($3.6) million, compared with a net income of $0.3 million
  • Adjusted EBITDA of ($3.0) million, compared with $0.05 million.

About WaveDancer
WaveDancer (www.wavedancer.com), headquartered in Fairfax, Virginia, is a provider of zero trust software solutions, specializing in secure blockchain supply chain management (SCM), asset tracking and security. Our technologies are deployed and being used to help organizations manage very complex supply chain challenges. Initially developed to secure a complex international supply chain for a global U.S. Government (USG) national security organization, the technology has matured to address multiple operational capabilities. Customers are using the WaveDancer platform to gain unprecedented levels of accountability, auditability, and predictability from their data, while giving insights to their partners and suppliers through a controlled, distributed ledger that is immutable and can be trusted by all parties. The sophisticated blockchain technology is now available to the entirety of the USG through GovCloud.

Additional information for investors
This release may contain forward-looking statements regarding the Company's business, customer prospects, or other factors that may affect future earnings or financial results. Such statements involve risks and uncertainties which could cause actual results to vary materially from those expressed in the forward-looking statements. Investors should read and understand the risk factors detailed in the Company's 10-K for the fiscal year ended December 31, 2021 and in other filings with the Securities and Exchange Commission.

For additional information contact:
Jeremy Hellman, CFA
Vice President
The Equity Group
(212) 836-9626
jhellman@equityny.com

1 Please see non-GAAP reconciliation on page 6

WAVEDANCER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
Unaudited

  Three Months Ended
June 30,
 
  
2022
   2021  
Revenues        
Professional fees $2,844,694   $    3,328,274  
Software sales  1,472,688    1,403,687  
Total revenues  4,317,382    4,731,961  
         
Cost of revenues        
Cost of professional fees  1,965,611    2,397,895  
Cost of software sales  1,421,990    1,378,138  
Total cost of revenues  3,387,601    3,776,033  
         
Gross profit  929,781    955,928  
         
Selling, general and administrative expenses  3,240,388    819,193  
Acquisition costs  356,159    82,756  
Change in fair value of contingent consideration  (942,609)   -  
         
(Loss) income from operations  (1,724,157)   53,979  
         
Other income (expense):        
Interest expense  (19,818)   (15,226) 
Other income (expense), net  195    4,404  
         
(Loss) income before provision for income taxes  (1,743,780)   43,157  
         
Income tax benefit      218,338    -  
         
Net (loss) income $(1,525,442)  $43,157  
         
Comprehensive (loss) income $(1,525,442)  $43,157  
         
Basic (loss)/earnings per share $(0.09)  $-  
Diluted (loss)/earnings per share $(0.09)  $-  
         
Weighted average common shares outstanding        
Basic  17,376,697    11,980,397  
Diluted  17,376,697    12,665,267  


WAVEDANCER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
Unaudited

  Six Months Ended
June 30,
 
  
2022
   2021  
Revenues        
Professional fees $4,911,384   $5,767,533  
Software sales  2,401,510    2,384,008  
Total revenues  7,312,894    8,151,541  
         
Cost of revenues        
Cost of professional fees  3,677,626    3,865,594  
Cost of software sales  2,329,422    2,310,369  
Total cost of revenues  6,007,048    6,175,963  
         
Gross profit  1,305,846    1,975,578  
         
Selling, general and administrative expenses  5,954,730    1,499,443  
Acquisition costs  790,861    153,286  
Change in fair value of contingent consideration  (930,000)   -  
         
(Loss) income from operations  (4,509,745)   322,849  
         
Other income (expense):        
Interest expense  (39,137)   (16,684))
Other income (expense), net  789    7,807  
         
(Loss) income before provision for income taxes  (4,548,093)   313,972  
         
Income tax benefit  944,344    -  
         
Net (loss) income $(3,603,749)  $313,972  
         
Comprehensive (loss) income $(3,603,749)  $313,972  
         
Basic (loss)/earnings per share $(0.21)  $0.03  
Diluted (loss)/earnings per share $(0.21)  $0.03  
         
Weighted average common shares outstanding        
Basic  17,335,979    11,633,464  
Diluted  17,335,979    12,305,182  

WAVEDANCER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

  Unaudited
June 30, 2022
  December 31,
2021
 
ASSETS        
Current assets        
Cash and cash equivalents $ 578,982   $4,931,302  
Accounts receivable   3,583,136    1,664,862  
Prepaid expenses and other current assets   298,179    276,990  
Total current assets   4,460,297    6,873,154  
         
Intangible assets, net of accumulated amortization of $900,818 and $201,032   7,349,182    8,048,968  
Goodwill   7,585,269    7,585,269  
Right-of-use operating lease asset   582,500    672,896  
Property and equipment, net of accumulated depreciation and amortization
of $374,185 and $347,886
   109,990    

105,256
  
Other assets   77,100    77,100  
Total assets $ 20,164,338   $23,362,643  
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities        
Accounts payable $ 1,546,945   $650,499  
Accrued payroll and related liabilities   721,927    524,055  
Commissions payable   250,227    224,250  
Other accrued liabilities   562,428    204,080  
Contract liabilities   165,843    186,835  
Operating lease liability- current   199,553    192,128  
Total current liabilities   3,446,923    1,981,847  
         
Operating lease liability - non-current   405,763    507,120  
Deferred income taxes   223,160    1,167,504  
Other liabilities   1,374,137    2,265,000  
Total liabilities   5,449,983    5,921,471  
         
Stockholders' equity        
Common stock at $0.001 and $0.01 par value; 100,000,000 shares authorized, 19,039,313 and 18,882,313 shares issued,
17,396,697 and 17,239,697 shares outstanding, as of
June 30,2022 and December 31, 2021, respectively
   





           19,039
    





            18,882
  
Additional paid-in capital   32,666,239    31,789,464  
Accumulated deficit   (17,040,712)   (13,436,963) 
Treasury stock, 1,642,616 shares at cost   (930,211)   (930,211) 
Total stockholders' equity   14,714,355    17,441,172  
Total liabilities and stockholders' equity $ 20,164,338   $23,362,643  

Non-GAAP Financial Measures
In assessing the performance of our business, management utilizes a variety of financial and performance measures. The key measure is Adjusted EBITDA, a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss) plus depreciation and amortization expense, net interest expense (income), and taxes, as further adjusted to eliminate the impact of, when applicable, expenses that are unusual or non-recurring that we believe do not reflect our core operating results. and non-cash stock-based compensation. We believe that Adjusted EBITDA is meaningful to our investors to enhance their understanding of our financial performance for the current period and our ability to generate cash flows from operations that are available for taxes, capital expenditures and debt service. We understand that Adjusted EBITDA is frequently used by securities analysts, investors and other interested parties as a measure of financial performance and to compare our performance with the performance of other companies that report Adjusted EBITDA. Our calculation of Adjusted EBITDA, however, may not be comparable to similarly titled measures reported by other companies. When assessing our operating performance, investors and others should not consider this data in isolation or as a substitute for net income (loss) calculated in accordance with GAAP. Further, the results presented by Adjusted EBITDA cannot be achieved without incurring the costs that the measure excludes. A reconciliation of net income (loss) to Adjusted EBITDA, the most comparable GAAP measure, is provided below.

Reconciliation of Net (loss) income to Adjusted EBITDA (Unaudited)    
 Three months endedSix months ended
(in thousands)June 30,June 30,
  2022   2021  2022   2021
Net (loss) income$ (1,525) $ 314  $ (3,604) $ 43
Adjustments:       
Interest expense (income), net 20   11  38   9
Income taxes (218)  -  (944)  -
Depreciation 13   7  26   12
Amortization 350   -  700   44
EBITDA  (1,360)   332    (3,784)   108
Non-cash stock-based compensation 530   112  842   140
Acquisition Costs 356   71  791   153
Change in FV of earnout (943)  -  (930)  -
Post-employment agreement -   36  -   71
Moving expense -   8  -   8
        
Adjusted EBITDA$ (1,417) $ 559  $ (3,081) $ 480