Annualized Recurring Revenue at Record $15.6 Million, up 30% from Previous Quarter, Generated by Managed Cybersecurity and Tech Services
Overwatch Managed Cybersecurity TCV up 53% Sequentially to Record $9.5 Million
BATAVIA, Ill., Dec. 11, 2023 (GLOBE NEWSWIRE) -- High Wire Networks, Inc. (OTCQB: HWNI), a leading global provider of managed cybersecurity and technology enablement, reported preliminary results for continuing operations for the three and nine months ended September 30, 2023. All comparisons are to the same year-ago period unless otherwise noted.
The company plans to report its full official results for the third quarter and nine months following a restatement of its first and second quarter 2023 results which will remove a non-cash derivative liability. The restatements are anticipated to have a substantial positive effect on the company’s net income for these periods as it prepares to qualify for an uplist to a national exchange. The company anticipates filing the restatements before the end of this month.
Preliminary Financial Results
- Third quarter 2023 revenue increased 1% sequentially to $6.0 million and declined 5% from the same year-ago quarter. The slowed growth and decline was primarily due to an overall industry slowdown and customer delays in the deployment of major multi-site Wi-Fi upgrade projects, which was partially offset by growth in recurring revenue from long-term contracts. Market conditions have improved in the current fourth quarter.
- First nine months revenue increased 20% to $22.1 million. The increase was primarily due to an increase in recurring revenue from new customers, along with an increase in project revenue.
- Monthly recurring revenue increased 30% from the previous quarter to a record $1.3 million or $15.6 million on an annualized basis.
- Total contract value (TCV) for Overwatch managed cybersecurity services totaled a record $9.5 million at quarter end, up 58% from $6.0 million at the end of the previous quarter (see TCV defined below).
- Project delivery backlog of the company’s technology enablement business totaled $7.0 million at quarter end and is currently at $11.5 million (see total project delivery backlog definition below).
- Secured $1.15 million of a $5 million convertible note offering which was announced on September 29, 2023 and has now closed. Buyers of the notes included two institutional investors, along with High Wire’s CEO who purchased $70,000 of the note offering.
- Implemented successful cost-cutting and operational optimization program that reduced expenses by more than $3 million on an annualized basis and enabled the paydown of $5 million in debt.
- Technology services sales pipeline totaled $102 million at quarter-end and has since expanded to currently total $105 million.
Q3 2023 Operational Highlights
- Secured $1 million mobile Wi-Fi upgrade project for a department store chain through a premier channel partner. Project involves installation of 6,000 new or upgraded Wi-Fi access points across more than 100 store locations nationwide.
- Named to MSSP Alert’s annual list of the world’s Top 250 Managed Security Services Providers (MSSPs).
- Formed Overwatch CyberLab™ division. The division represents the company’s new cybersecurity technology platform that will serve as the incubator and IP manager for its cybersecurity product research and development.
- Chief marketing officer, Susanna Song, was named to the inaugural 2023 Inclusive Channel Leaders list by CRN® magazine.
Subsequent Event
On December 8, the company initiated a debt financing offering for up to $1.5 million, with High Wire’s CEO contributing $150,000 to the offering. The proceeds from the raise, which is expected to close in the next week, will be used to fund operations, pay down more expensive debt, and cover higher one-time professional and consulting fees in the current quarter related to preparation for the company’s planned uplist to a national exchange.
Management Commentary
“We had a strong first nine months of the year, with revenue up 20% to $20.1 million,” commented High Wire CEO, Mark Porter. “Our monthly recurring revenue stream also grew 30% sequentially to a record $15.6 million on an annualized basis.
“Revenue was up only slightly on a sequential quarterly basis primarily due to customer delays with two major multi-site, multi-tech projects we announced earlier this year. These national retailers are currently focused on the busy holiday shopping season, so the completion of these projects has been pushed out to early next year. Combined with improving industry conditions, we anticipate this will make for a particularly strong first quarter.
“Our tech enablement business has also been impacted by a fairly sudden industry-wide contraction that intensified in September despite the underlying need for technology upgrades and better network security. We believe this was due to inflationary factors and especially high interest rates for financing such projects. Despite these economic headwinds, we believe we still outperformed the industry in the third quarter.
“In light of these challenges, we have refocused on higher margin opportunities and making our operations more streamlined and cost efficient. This included suspending the operations of our AWS Puerto Rico and Tropical Communications subsidiaries which were not operating profitably. While the suspension of operations of these two entities reduced their revenue contribution, we were also able to reduce the cash burn. Altogether, we estimate we have reduced expenses by more than $3 million on an annualized basis.
“We also completed the overhaul and virtualization of our Secure Voice Corp (SVC) telecom subsidiary to enable greater scale and provide resiliency in line with the best network practices. This also allowed us to pay off $5 million in debt. SVC is now generating positive cash flow, as its revenues have returned to growth in the current quarter.
“All together, we believe our more cost-efficient operating structure puts us on track to close in on positive adjusted EBITDA in the first quarter of next year. We are also seeing strong indications that the environment for our tech enablement business is rebounding, particularly with our project delivery backlog growing from $7.0 million at quarter-end to now at $11.5 million and growing.
“While the growth in our cybersecurity business slowed slightly over the first two quarters of 2023, in the third quarter we saw a step up in activity in this higher margin segment of our business. This was reflected in the sequential 30% growth in our monthly recurring revenue and especially the 50% growth in Overwatch TCV—both reaching record levels. We see this momentum continuing into the current quarter and new year, leading to new wins and productive partnerships.
“This includes our recent announcement of a new partnership with Exclusive Networks, a global leader in cybersecurity. Exclusive will distribute our Overwatch Managed EDR to its 2,500 clients, with this solution powered by industry-leading technology provided by SentinelOne. This major win is another indicator of the growing strength and reach of our Overwatch cybersecurity platform and the valuable capabilities it delivers to our channel partner network.
“We continue to work toward a listing on a national exchange. We anticipate such a listing will strengthen our ability to make complementary acquisitions, while elevating the confidence of our channel partners and end customers. Combined with the fine-tuning of our operations, new wins and the expansion of our recurring revenue streams, we see the listing enabling greater shareholder value over the long term.
“While it is unfortunate that the process of restating our first and second quarter of the year has delayed the full reporting of our third quarter results, we anticipate the elimination of the derivative liability to have a substantial positive effect on our net income for these periods as we prepare to qualify for the uplist to a national exchange.”
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 an additional regional office in the 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, 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
