WaveDancer Releases Fiscal Year 2021 Results

Rhea-AI Summary

WaveDancer (NASDAQ: WAVD) reported its fiscal year results for 2021, highlighting a strategic shift towards higher-margin professional services. Total revenues grew by 8.1% to $15 million, driven by a significant 91.6% increase in professional fees to $10.6 million. Gross profit expanded to $3.6 million, with gross margins rising to 24.1%. Despite these gains, the company posted a net loss of $1.1 million, mainly due to increased SG&A expenses. Key developments include the completion of two acquisitions and a substantial partnership aimed at enhancing its cybersecurity solutions.

Positive

• Total revenues increased 8.1% to $15 million.
• Professional fees surged 91.6% to $10.6 million.
• Gross profit rose to $3.6 million with a gross margin expansion to 24.1%.
• Paid down $1.5 million of debt and ended the year debt-free.
• Partnership with Cyber Intell Solutions to enhance security.

Negative

• Net loss of $(1.1) million compared to net income of $0.4 million in the previous year.
• SG&A expenses increased significantly due to investments and acquisitions.

Strategic Shift to Higher Margin Professional Services Under the Tellenger Banner Continues

FAIRFAX, Va., April 12, 2022 (GLOBE NEWSWIRE) -- WaveDancer (NASDAQ: WAVD), today reported its results for the fiscal year ended December 31, 2021, with results highlighted by expansion in gross margins driven by a sharp shift away from lower margin 3rd party software sales and toward higher margin professional services. During 2021, WaveDancer completed two key acquisitions and successfully rebranded the company as a leading provider of secure, blockchain-based supply chain management solutions.

WaveDancer CEO Jamie Benoit commented, “2021 was a transformational year dominated by change as we assembled the pieces needed to become a leader in the zero trust, blockchain, and security supply chain market. Our up-listing to NASDAQ, rebranding from IAI to WaveDancer, acquisition of Gray Matters Inc., reorganization of our legacy services business into our Tellenger subsidiary, and the new members we added to our team, both at the board and senior management levels, comprised an eventful and positive end to the year. We are excited to continue our transformation in 2022 and beyond.”

Mr. Benoit continued, “This fiscal year was one of impressive growth in professional services revenues and gross profit. Our legacy business had sales of $12.6 million and its professional services revenues were 64.7% of total revenue for the fiscal year. The shift to higher margin professional services revenue helped drive substantial growth in gross margin, which expanded to 24.1% from 15.9% a year ago. We also paid down $1.5 million of debt related to the acquisition of Tellenger and began 2022 debt-free. SG&A increased in 2021 reflecting significant investments in the acquisitions that comprise the foundation of our transformation, new members of our management team, a new Maryland facility, up-listing to NASDAQ and an increase in professional fees to improve the quality of our communications, disclosures, and governance. I firmly believe that we are on the cusp of a sea-change in our business and our investments in 2021 reflect our commitment to a total transformation of WaveDancer.”

Twelve Months 2021 Financial Highlights (all comparisons to prior year period unless otherwise noted)

• Total revenues increased 8.1% to $15.0 million, compared with $13.9 million.
• Professional fees increased 91.6% to $10.6 million up from $5.5 million.
• Gross profit expanded significantly, increasing to $3.6 million, compared with $2.2 million; gross margin expanded to 24.1%; higher-margin professional fees accounted for 70.5% of revenues.
• Net loss of $(1.1) million, compared with net income of $0.4 million as our gross margin growth was more than offset by our investments in SG&A.
• Adjusted EBITDA¹ of $0.4 million, compared with $0.5 million, notwithstanding significant SG&A investments
  

Other Key Developments Subsequent to Year End

• Company paid down all its bank debt, had its PPP loan forgiven, and finished the year with $4.9 million of cash on hand, having raised $10 million in a private offering of common stock to fund its acquisition of Gray Matters.
• SG&A increases were driven by non-cash share-based compensation, acquisition activities and investments in the infrastructure needed to execute the Company’s transformational shift in business strategy to a Software-as-a-Service (“SaaS”) provider of secure, blockchain-based supply chain management solutions.
• Approved for inclusion on Amazon Web Services (AWS) GovCloud, which significantly expands the availability of WaveDancer’s secure supply chain management solutions.
• Announced a partnership with Cyber Intell Solutions which is expected to enhance supply chain and communications security for customers.
• Announced a definitive agreement to acquire Knowmadics, Inc. for $90 Million in cash and stock, which will continue the company’s transformation into a leading provider of cybersecurity and blockchain enabled software solutions.
  

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

		Year Ended December 31,
		2021				2020
Revenues
Professional fees		$	10,592,278			$	5,527,139
Software sales			4,441,226				8,375,932
Total revenues			15,033,504				13,903,071
Cost of revenues
Cost of professional fees			7,082,767				3,566,229
Cost of software sales			4,335,121				8,127,509
Total cost of revenues			11,417,888				11,693,738
Gross profit			3,615,616				2,209,333
Selling, general and administrative expenses			5,487,984				1,797,485
Acquisition costs			754,781				-
(Loss) income from operations			(2,627,149	)			411,848
Other income (expense):
Interest expense			(37,325	)			(3,125	)
Other income (expense), net			12,171				4,656
Gain on forgiveness of note payable			450,000				-
(Loss) income before provision for income taxes			(2,202,303	)			413,379
Income tax benefit			1,070,854				-
Net (loss) income		$	(1,131,449	)		$	413,379
Comprehensive (loss) income		$	(1,131,449	)		$	413,379
Basic (loss)/earnings per share		$	(0.09	)		$	0.04
Diluted (loss)/earnings per share		$	(0.09	)		$	0.03
Weighted average common shares outstanding
Basic			12,574,016				11,222,826
Diluted			12,574,016				12,049,322

WAVEDANCER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

		December 31,
		2021				2020
ASSETS
Current assets
Cash and cash equivalents		$	4,931,302			$	1,858,160
Accounts receivable			1,664,862				1,442,231
Prepaid expenses and other current assets			276,990				142,770
Total current assets			6,873,154				3,443,161
Intangible assets, net of accumulated amortization of $201,032 and $0			8,048,968				-
Goodwill			7,585,269				-
Contract assets - non-current			-				210,688
Right-of-use operating lease asset			672,896				51,405
Property and equipment, net of accumulated depreciation and amortization of $347,886 and $312,320			105,256				62,166
Other assets			77,100				6,281
Total assets		$	23,362,643			$	3,773,701
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable		$	650,499			$	103,646
Notes payable - current			-				93,009
Accrued payroll and related liabilities			524,055				375,168
Commissions payable			224,250				181,626
Other accrued liabilities			203,078				54,274
Contract liabilities			186,835				946,884
Operating lease liability- current			192,128				45,595
Interest payable			1,002				3,125
Total current liabilities			1,981,847				1,803,327
Note payable - non-current			-				356,991
Operating lease liability - non-current			507,120				-
Deferred income taxes			1,167,504				-
Other liabilities			2,265,000				-
Total liabilities			5,921,471				2,160,318
Stockholders' equity
Common stock at $0.001 and $0.01 par value; 100,000,000 and 30,000,000 shares authorized, 18,882,313 and 12,904,376 shares issued, 17,239,697 and 11,261,760 shares outstanding, as of December 31, 2021 and 2020, respectively			18,882				129,043
Additional paid-in capital			31,789,464				14,720,065
Accumulated deficit			(13,436,963	)			(12,305,514	)
Treasury stock, 1,642,616 shares at cost			(930,211	)			(930,211	)
Total stockholders' equity			17,441,172				1,613,383
Total liabilities and stockholders' equity		$	23,362,643			$	3,773,701

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
(in thousands)
		2021				2020
Net (loss) income	$	(1,131		)	$	413
Adjustments:
Interest expense (income), net		23				(2		)
Tax (benefit) expense		(1,071		)		0
Depreciation		35				12
Amortization		201				0
EBITDA		(1,932		)		424
Non-cash stock-based compensation		1,869				28
Acquisition Costs		755				0
PPP loan forgiveness		(450		)		0
Post-employment agreement		142				0
Moving expense		11				0
Adjusted EBITDA	$	384			$	452

 

FAQ

What were WaveDancer's total revenue figures for FY 2021?

WaveDancer reported total revenues of $15 million for the fiscal year 2021, an increase of 8.1% from the previous year.

How much did professional fees increase in 2021 for WAVD?

Professional fees increased by 91.6% to $10.6 million in 2021.

What was the net loss reported by WaveDancer for FY 2021?

WaveDancer reported a net loss of $(1.1) million for the fiscal year 2021.

How did WaveDancer's gross margins change in 2021?

WaveDancer's gross margins expanded to 24.1% in 2021, up from 15.9% the previous year.

What significant acquisitions did WaveDancer make recently?

WaveDancer completed two key acquisitions in 2021, including the acquisition of Gray Matters Inc. and a definitive agreement to acquire Knowmadics, Inc. for $90 million.