High Wire Networks, Inc. (OTCQB: HWNI), a leading global provider of managed cybersecurity and technology enablement, reported results for continuing operations for the three months ended March 31, 2024. All comparisons are to the same year-ago period unless otherwise noted.
Q1 2024 Financial Highlights
- Revenue totaled $7.7 million, up 57% sequentially but 25% lower than the year-ago quarter reflecting the company’s strategic transition last year to focus on a greater mix of higher margin recurring revenue, particularly Overwatch managed cybersecurity. Sequential growth also reflects recovery from transitory industry downturn in technology enablement business in Q4 2023.
- Net loss from continuing operations in the first quarter of 2024 totaled $414,000 or $(0.00) per diluted share.
- Adjusted EBITDA was $674,000 (see definition of adjusted EBITDA, a non-GAAP term, and its reconciliation to GAAP, below).
- Monthly recurring revenue was approximately $1.0 million by quarter-end or $12.0 million on an annualized basis.
- Total contract value (TCV) for Overwatch managed cybersecurity services totaled $10.4 million at March 31, 2024, as compared to $5.1 million at March 31, 2023 (see company’s definition of TCV, below).
- Gross margin expanded from 14.1% to 45.7%.
- Gross profit increased 144% to $3.5 million.
- Continued a successful cost reduction and operational optimization program that has reduced operating expenses in the first quarter by more than $3.5 million on an annualized basis.
- Raised total net proceeds of $315,000 from a debt financing in offering for up to $1.5 million. This is in addition to $600,000 raised in the fourth quarter of 2024. The proceeds were used to fund operations and support future growth.
Q1 2024 Operational Highlights
- Signed a major pilot project with a national wireless network operator for a large U.S. government agency. Secured through a premier channel partner, the project represents the initial phase of the operator’s $2.4 billion network modernization program for the agency’s 4,000 locations across the U.S. that is planned for implementation over the next 10 years.
- Awarded an annual contract renewal to provide technology managed services to a Fortune 500 national environmental solutions provider. Similar to last year’s renewal, the base contract is valued at $1.6 million with the potential for additional services and projects to be provided at additional cost.
- Expanded sales pipeline to over $112 million at quarter end.
- Named to CRN’s MSP 500 and Elite 150 lists of the nation’s top IT managed service providers for the second year in a row.
Management Commentary
“In Q1, our 57% sequential revenue increase was largely due to completion of projects for retailer end-customers who had delayed the completion of their technology upgrades until after the holiday season,” stated High Wire CEO, Mark Porter. “This included revenue generated under a completed $1 million IT project that represents the first phase of a broader Wi-Fi upgrade program for a Fortune 200 department store chain which we announced last August. It also includes revenue recognized from a completed $5.3 million Wi-Fi upgrade project we announced a year ago for another nationwide retailer.
“As the result of being more selective for higher margin projects, we generated less revenue in the first quarter compared to the year-ago, but increased gross profit by 144% to $3.5 million with gross margin up 31.6 percentage points to 45.7%. The improvements reflect greater project profitability that we secured during the bid quoting process and more efficient project delivery management. The improvement in gross profit and margin were also due to our decision to suspend operations of two unprofitable business segments, Tropical Communications and AW Solutions Puerto Rico, in Q3 of last year.
“Our cost-cutting measures during the quarter enabled a reduction of expenses by more than $3.5 million on an annualized basis. These measures and our focus on higher margin business resulted in a positive adjusted EBITDA quarter.
“During the first quarter we secured a major pilot project with a national wireless network operator whose customer is a large U.S. government agency. We launched the pilot just last week and see it as a further indication that the market for our tech enablement business is rebounding from last fall. We anticipate generating meaningful revenues from the project in the second half of this year and over the course of the 10-year implementation plan.
“We currently have a strong total contract backlog in managed cybersecurity and are gaining recurring revenue in our technology services business.
“Our pipeline of business remains strong across all business segments, with this driven by the signing of several new large-scale partners and global system integrators. We have also signed a global OEM partner founded by a world-famous behemoth in technology for which we have begun to provide a Firewall as a Service (FWaaS). To date we have migrated about 13 end customers to our FWaaS under their OEM brand. We anticipate a significant ramp-up in migrating additional businesses from the channel partner to our FWaaS later this year.
“Our Q1 momentum has continued into the current second quarter, keeping us on track for another year of record growth in 2024. Along with an expanding topline that includes growth in recurring revenue, we anticipate further improvement in gross profit for our managed cybersecurity business. We see this driving continued adjusted EBITDA improvement through the rest of the year and increasing value for our shareholders.”
Q1 2024 Financial Summary
Revenue in the first quarter of 2024 totaled $7.7 million, as compared to $10.2 million in the same year-ago quarter. The decrease in revenue reflects the company’s strategic transition to higher margin Overwatch cybersecurity recurring revenue. In the first quarter of 2024, the company generated a monthly rate of approximately $1.0 million in recurring revenue.
Excluding revenue from Tropical Communications and AW Solutions Puerto Rico, which the company suspended as unprofitable business segments in the third quarter of 2023, the company’s revenue was $9.7 million in the first quarter of 2023.
Gross profit totaled $3.5 million or 45.7% of revenue in the first quarter as compared to $1.4 million or 14.1% of revenue in the same year-ago quarter. The increase in gross profit in the first quarter of 2024 was primarily due to a more efficient project management delivery effort, improved project profitability during the bid quoting process, as well as the suspension Tropical Communications and AW Solutions Puerto Rico in the third quarter of 2023.
Total operating expenses decreased 43% to $7.3 million compared to $12.8 million from the same year-ago quarter. The decrease is due to a lower cost of revenue associated with the efficiencies in the project delivery efforts and the improved bid process discussed above. In addition, the decrease was also due to a reduction in general and administrative expenses of $674,000 and salaries and wages of $223,000 as a result of certain cost-cutting measures.
Net loss from continuing operations in the first quarter of 2024 totaled $414,000 or $(0.00) per diluted share, compared to a net income from continuing operations of $1.5 million or $0.01 per diluted share in the same year-ago quarter.
Adjusted EBITDA in the first quarter of 2024 totaled $674,000, as compared to an adjusted EBITDA loss of $1.9 million in the same year-ago quarter.
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, stock-based compensation, amortization of debt discounts, warrant expense, change in fair value of warrant liabilities, exchange loss, financing costs, change in fair value of derivative liabilities, extinguishment of derivatives, and loss from 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.
A reconciliation of net income to adjusted EBITDA for the three months ended March 31, 2024 and 2023 is as follows:
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
