Q1 2024 Revenue Outlook of $7.7 Million+, up 58% Sequentially, Driving Positive Adjusted EBITDA.
BATAVIA, Ill., April 19, 2024 — High Wire Networks, Inc. (OTCQB: HWNI), a leading global provider of managed cybersecurity and technology enablement, reported results for continuing operations for the 12 months ended December 31, 2023. All comparisons are to the same year-ago period unless otherwise noted.
2023 Financial Highlights
- Full year 2023 revenue was $27.0 million, as company implemented strategic transition during the year to greater mix of higher margin Overwatch cybersecurity recurring revenue. Growth achieved despite transitory industry downturn in Q4 2023 as evidenced by an anticipated 58% return to growth in Q1 2024.
- Monthly recurring revenue exceeded $1.0 million by year-end or $12.0 million on an annualized basis. For the year ended December 31, 2023, Overwatch managed cybersecurity services recurring revenue increased 75% to $4.0 million.
- Growth in recurring revenue driven primarily by a 106% increase in total contract value (TCV) for Overwatch managed cybersecurity services that totaled $10.3 million at December 31, 2023, as compared to $5.0 million at December 31, 2022 (see TCV definition, below).
- Project delivery backlog of the company’s technology enablement business totaled $6.4 million at yearend and continues to expand (see project delivery backlog definition below).
- In November, the company implemented a successful cost reduction and operational optimization program that reduced operating expenses by more than $3 million on an annualized basis.
- Eliminated more than 8.6 million in common stock equivalents, substantially reducing fully diluted shares outstanding.
- Balance sheet strengthened with total liabilities declining 49% to $13.6 million at December 31, 2023, from $26.8 million at December 31, 2022.
- Raised total net proceeds of $600,000 from a debt financing in offering for up to $1.5 million. The proceeds were used to fund operations and support future growth.
2023 Technology Enablement Highlights
- Awarded $5.3 million mobile Wi-Fi access refresh project for a nationwide retail store chainwith 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. A recently contracted new project will bring the total value of the current engagement to more than $2.8 million.
- 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.
- 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.
2023 Managed Cybersecurity Highlights
- 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. Included deployment of agentless, zero trust, managed cybersecurity services for more than 2,000 IoMT-type (Internet-of-Medical-Things) devices across multiple campuses.
- Partnered with Exclusive Networks (Euronext Paris: EXN), a global leader in cybersecurity, to provide enhanced capabilities for Managed Endpoint Detection and Response (MEDR).Integrated High Wire’s Overwatch Managed Cybersecurity Services with Exclusive’s Endpoint Detection and Response (EDR) offering that is provided by SentinelOne (NYSE: S), a global leader in AI security.
- Secured expanded three-year, $300,000 contract renewal to provide Overwatch managed cybersecurity services for a global aerospace company. Its embrace of High Wire’s defense-in-depth strategy of incorporating multiple Overwatch cybersecurity tools increased financial commitment by 40%.
- Launched 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 pervasive 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.
- 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.
- Fully onshore U.S.-based 24/7 Network Operations Center and Security Operations Center in Chicago, contributing to improved service delivery and reduced costs. Supports incremental revenue growth.
- 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).
2023 Awards
- Frost & Sullivan ranked High Wire Networks as a Top 12 Managed Security Service Provider (MSSP) in the categories of growth and innovation. Report noted 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.”
- Added to CRN MSP Elite 150 list which recognizes MSPs that “have an extensive managed services portfolio, including on-premises and off-premises capabilities, weighted toward mid-market and enterprise customers.”
2023 Operational Highlights
- Appointed Curt Smith as chief financial officer, bringing to High Wire more than 30 years of finance and operational experience, including as CFO of Nasdaq-listed companies.
- Promoted VP of marketing and communications, Susanna Song, to the new position of chief marketing officer. In May, she was named to the CRN® Women of the Channel list for 2023 and to the inaugural 2023 Inclusive Channel Leaders list by CRN® magazine.
- 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.
- Expanded technology services pipeline to over $110 million at year end.
Outlook
High Wire expects to report revenue up 58% to more than $7.7 million in the first quarter of 2024, driving positive adjusted EBITDA. Momentum continues into the current second quarter, with outlook for another year of record growth in 2024.
Management Commentary
“2023 reflected a strategic transition in revenue mix to higher margin Overwatch cybersecurity recurring revenue,” stated High Wire CEO, Mark Porter. “In fact, Overwatch managed cybersecurity services recurring revenue increased 75% to $4.0 million for the year, with this upward trend continuing into the new year.
“During the year, we 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 fourth quarter.
“For the first quarter of this year, we expect to report a 58% sequential revenue increase due to our retailer end-customers delaying some major upgrade projects until after the holiday season. This includes a $1 million IT project that is the first phase of a broader Wi-Fi upgrade program for a Fortune 200 department store chain we announced last August. It also includes a $5.3 million Wi-Fi upgrade project we announced a year ago for another nationwide retailer.
“At the beginning of this year, we announced the launch of a major pilot project with a national wireless network operator for a large U.S. government agency. We see the launch of this project as a further indicator that the market for our tech enablement business is rebounding from last fall.
“Our project delivery backlog is expanding even as we continue to recognize revenue at an increasing pace. We expect backlog to keep growing with our strong near-term sales funnel and newer strategic relationships starting to produce.
“Earlier this month, we were awarded an additional fiber installation project for a national environmental solutions provider, that will bring the total value of the engagement to more than $2.8 million. As our first fiber deployment for this customer, we believe we were chosen for our years of experience in multi-site, nationally deployed managed services for hundreds of Fortune 500 companies and the largest government agencies.
“Looking ahead, we anticipate our new cybersecurity offerings, such as our enhanced Managed Extended Detection and Response (MXDR) solution, will continue to ramp this year and drive continued expansion of our recurring revenue streams. Given the momentum and progress we’ve made with our revenue mix, broadening our channel reach and winning new recurring business, we expect to drive another year of record topline with positive adjusted EBITDA.”
Full Year 2023 Financial Summary
Revenue in full year of 2023 totaled $27.0 million, as compared to $26.8 million in 2022. The minor growth in revenue reflects the company’s strategic transition to higher margin Overwatch cybersecurity recurring revenue. In the fourth quarter of 2023, the company generated a monthly rate of more than $1.0 million in recurring revenue.
Gross profit totaled $6.7 million or 24.8% of revenue in the full year as compared to $7.4 million or 27.8% of revenue in 2022. The decrease in gross profit in the full year of 2023 is due to the reduction in revenue for Secure Voice (VOIP) as the company retooled the Secure Voice platform to enable automation and set the company up for higher future margins.
Total operating expenses increased to $40.0 million compared to $39.9 million in 2022. The increase was primarily due to a $2.2 million goodwill impairment charge and intangible asset impairment charge of $438,000 in 2023 as compared to none in 2022. The increased operating expenses was also due to increased general and administrative expenses of $1.5 million. The increase was also due to increased cost of revenue of $965,000 and increased depreciation and amortization of $30,000. The increase in operating expenses was partially offset by a decrease in salaries and wages expenses of $5.0 million.
Net loss from continuing operations in the full year of 2023 totaled $13.1 million or $(0.06) per diluted share, compared to a net loss from continuing operations of $11.3 million or $(0.16) per diluted share in 2022. The net loss from continuing operations for the full year of 2023 included non-cash stock-based compensation of $1.5 million; amortization of discounts on convertible debentures and loans payable of $1.1 million; depreciation and amortization of $844,000; and interest expense of $2.5 million.
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 625 channel partners, it delivers trusted managed services for more than 1,100 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 80 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 United Kingdom.
High Wire was ranked by Frost & Sullivan as a Top 12 Managed Security Service Provider in the Americas for 2023. It was also named to CRN’s MSP 500 and Elite 150 lists of the nation’s top IT managed service providers for 2023 and 2024.
Learn more at HighWireNetworks.com. Follow the company on X, 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
Media Relations:
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
