WaveDancer (NASDAQ: WAVD), reported its results for the third quarter ended September 30, 2022, which was characterized by an increased emphasis on professional services that generate higher gross margin for the company, as well as continued investment in the Company’s move to become a leading provider of blockchain software as it signed its first commercial customer.

WaveDancer CEO Jamie Benoit commented, “After developing a blockchain solution for a United States government supply chain, in 2022 we invested significant time and financial resources toward the development of a new and vastly improved platform suitable for deployment at scale into commercial and government environments. While sales efforts were slowed while we completed development work on our new Maverix platform, we believe that investment can pay off as we are working with our first commercial customer and are in advanced discussions with others. We remain optimistic that we have established a foundation for future growth.”

Benoit added, “In our professional services business we continued our shift toward professional services that generate higher gross margin for the company. Part of this transition is a decreased emphasis on sales of low-margin third-party software, which led to a decline in our consolidated revenue compared with the prior year period. In addition, the prior year quarter benefited from a significant amount of higher-margin overtime work as our engineers worked to meet key milestones associated with a software modernization project.”

Mr. Benoit concluded, “Our recently announced commercial agreement is an important step toward validating the potential of our Maverix platform in the marketplace. Our predecessor platform has been stress-tested in critical use cases by the US Government, providing us with an excellent technical foundation to bring a new and formidable commercial product to the market.”

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

  • Total revenues decreased to $2.3 million, compared with $4.3 million.
  • Professional fees decreased to $2.1 million down from $2.8 million.
  • Gross profit decreased to $0.48 million, compared with $0.98 million.
  • Gross margin declined to 20.9% from 22.8%; higher-margin professional fees accounted for 91.7% of revenues.
  • Net loss of $(4.7) million, including a goodwill impairment charge of $2.3 million, compared with net loss of $(0.1) million.
  • Adjusted EBITDA1 of $(1.5) million, compared with $0.1 million

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

  • Total revenues decreased to $9.6 million, compared with $12.5 million.
  • Professional fees decreased to $7.0 million down from $8.6 million
  • Gross margin for our Tellenger business unit improved to 25.8% compared with 23.7%; higher-margin professional fees accounted for 71.3% of revenues.
  • Net loss of $(8.3) million, including a goodwill impairment charge of $2.3 million, compared with net income of $0.2 million
  • Adjusted EBITDA of $(4.6) million, compared with $0.9 million.

About WaveDancerWaveDancer (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, CFAVice PresidentThe Equity Group(212) 836-9626jhellman@equityny.com

WAVEDANCER, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOMEUnaudited

    Three Months Ended September 30,  
    2022       2021    
Revenues                
Professional fees   $ 2,114,012       $ 2,798,105    
Software sales     192,367         1,501,820    
Total revenues     2,306,379         4,299,925    
                 
Cost of revenues                
Cost of professional fees     1,724,040         1,832,812    
Cost of software sales     100,717         1,488,238    
Total cost of revenues, excluding depreciation and amortization     1,824,757         3,321,050    
                 
Gross profit     481,622         978,875    
                 
Selling, general and administrative expenses     2,926,243         1,023,897    
Acquisition costs     38,617         39,245    
Goodwill impairment     2,254,624         -    
                 
(Loss) income from operations     (4,737,862 )       (84,267 )  
                 
Other income (expense):                
Interest expense     (20,437 )       (15,055 )  
Other income (expense), net     3,188         3,795    
                 
(Loss) income before provision for income taxes     (4,755,111 )       (95,527 )  
                 
Income tax benefit     54,592         -    
                 
Net (loss) income   $ (4,700,519 )     $ (95,527 )  
                 
Comprehensive (loss) income   $ (4,700,519 )     $ (95,527 )  
                 
Basic (loss)/earnings per share   $ (0.26 )     $ (0.01 )  
Diluted (loss)/earnings per share   $ (0.26 )     $ (0.01 )  
                 
Weighted average common shares outstanding                
Basic     18,382,131         12,596,126    
Diluted     18,382,131         12,596,126    

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

    Nine Months Ended September 30,  
    2022       2021    
Revenues                
Professional fees     $ 7,025,396       $ 8,565,639    
Software sales       2,593,877         3,885,828    
Total revenues       9,619,273         12,451,467    
                 
Cost of revenues                
Cost of professional fees       5,401,666         5,698,407    
Cost of software sales       2,430,139         3,798,607    
Total cost of revenues, excluding depreciation and amortization       7,831,805         9,497,014    
                 
Gross profit       1,787,468         2,954,453    
                 
Selling, general and administrative expenses       8,880,973         2,523,340    
Acquisition costs       829,478         192,530    
Change in fair value of contingent consideration       (930,000 )       -    
Goodwill Impairment       2,254,624         -    
                 
(Loss) income from operations       (9,247,607 )       238,583    
                 
Other income (expense):                
Interest expense       (59,574 )       (31,738 )  
Other income (expense), net       3,977         11,600    
                 
(Loss) income before provision for income taxes       (9,303,204 )       218,445    
                 
Income tax benefit       998,936         -    
                 
Net (loss) income   $   (8,304,268 )     $ 218,445    
                 
Comprehensive (loss) income   $   (8,304,268 )     $ 218,445    
                 
Basic (loss)/earnings per share   $   (0.47 )     $ 0.02    
Diluted (loss)/earnings per share   $   (0.47 )     $ 0.02    
                 
Weighted average common shares outstanding                
Basic       17,688,528         11,957,878    
Diluted       17,688,528         12,584,914    

WAVEDANCER, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

    UnauditedSeptember 30, 2022     December 31, 2021  
ASSETS                
Current assets                
Cash and cash equivalents   $ 1,521,651       $ 4,931,302    
Accounts receivable     1,532,174         1,664,862    
Prepaid expenses and other current assets     302,443         276,990    
Total current assets     3,356,268         6,873,154    
                 
Intangible assets, net of accumulated amortization of $1,250,711 and $201,032     6,999,289         8,048,968    
Goodwill     5,330,645         7,585,269    
Right-of-use operating lease asset     536,455         672,896    
Property and equipment, net of accumulated depreciation and amortization of $381,473 and $347,886     305,729         105,256    
Other assets     79,305         77,100    
Total assets   $ 16,607,691       $ 23,362,643    
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities                
Accounts payable   $ 227,560       $ 650,499    
Accrued payroll and related liabilities     701,652         524,055    
Commissions payable     225,096         224,250    
Other accrued liabilities     680,269         204,080    
Contract liabilities     37,686         186,835    
Operating lease liability- current     203,342         192,128    
Total current liabilities     2,075,605         1,981,847    
                 
Operating lease liability - non-current     353,486         507,120    
Deferred income taxes     154,252         1,167,504    
Other liabilities     1,394,467         2,265,000    
Total liabilities     3,977,810         5,921,471    
                 
Stockholders' equity                
Common stock at $0.001 par value; 100,000,000 shares authorized, 20,808,654 and 18,882,313 shares issued, 19,135,603 and 17,239,697 shares outstanding, as of September 30,2022 and December 31, 2021, respectively     20,809         18,882    
Additional paid-in capital     35,315,514         31,789,464    
Accumulated deficit     (21,741,231 )       (13,436,963 )  
Treasury stock, 1,673,051 and 1,642,616 shares at cost, as of September 30, 2022 and December 31, 2021, respectively     (965,211 )       (930,211 )  
Total stockholders' equity     12,629,881         17,441,172    
Total liabilities and stockholders' equity   $ 16,607,691       $ 23,362,643    

Non-GAAP Financial MeasuresIn 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 ended Nine months ended
(in thousands) September 30, September 30,
    2022       2021       2022       2021
Net (loss) income $ (4,701 )   $ (96 )   $ (8,304 )   $ 218
Adjustments:              
Interest expense (income), net   17       11       56       20
Income taxes   (55 )     -       (999 )     -
Depreciation   7       11       34       23
Amortization   350       44       1,050       88
EBITDA   (4,382 )     (30 )     (8,163 )     349
Goodwill impairment   2,255       -       2,255       -
Non-cash stock-based compensation   614       81       1,456       220
Acquisition Costs   39       39       829       193
Change in FV of earnout   -           (930 )     -
Post-employment agreement   -       36           107
Adjusted EBITDA $ (1,474 )   $ 126     $ (4,553 )   $ 869

1 Please see non-GAAP reconciliation on page 6

 

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