BATAVIA, Ill., Aug. 23, 2024 (GLOBE NEWSWIRE) -- High Wire Networks, Inc. (OTCQB:HWNI), a leading global provider of managed cybersecurity, reported results for continuing operations for the three months and six months ended June 30, 2024. All comparisons are to the same year-ago period unless otherwise noted.
Q2 2024 Operational Highlights
On June 27, 2024, High Wire sold its technology enablement services business in a transaction valued at $11.2 million.
Proceeds from the sales of the technology enablement business were used to reduce debt by approximately $5 million, including eliminating approximately $1.1 million in convertible debentures, $3.2 million in notes payable, and a factoring facility. The company was also able to restructure the remaining debt of $3.1 million, including a reduction of $1.3 million in principle due as well as extension of the payment terms, thereby preserving cash on the balance sheet.
Awarded a major new contract to deliver High Wire's Overwatch OT/IoT Security™ for a U.S. health system comprised of more than 25 hospitals and clinics and dozens of ancillary care facilities.
Integrated new Security Information Event Management (SIEM) system into Overwatch managed cybersecurity services, enhancing Overwatch Managed Extended Detection and Response (MXDR).
Appointed Edward Vasko, CISSP, as strategic advisor to help accelerate the growth and development of the company's Overwatch managed cybersecurity services.
Chief marketing officer, Susanna Song, was named a 2024 Women of the Channel Power 100 Solution Provider—an elite subset of prominent leaders selected from the CRN® 2024 Women of the Channel list by CRN®, a brand of The Channel Company.
Q2 2024 Financial Highlights
Revenue increased 14% to $1.9 million, primarily due to growth in the company's Overwatch managed cybersecurity business.
Revenue from Overwatch increased 24% to $1.05 million.
Gross margin expanded to 40.8% from 25.4% in the same year-ago quarter, primarily due to a greater mix of higher margin recurring revenue, particularly from Overwatch.
Net loss from continuing operations totaled $3.1 million or $(0.01) per diluted share, compared to net loss of $4.7 million or $(0.02) per diluted share in the same year-ago quarter.
Net income attributable to common shareholders was $4.8 million or $0.02 diluted share, as compared to a loss of $4.1 million or $(0.02) per diluted share in the same year-ago quarter.
Total contract value (TCV) for Overwatch managed cybersecurity services totaled $10.4 million at June 30, 2024, compared to $6.0 million at June 30, 2023 (see definition of TCV, below).
Management Commentary
"In Q2, we continued to transform our company to better align its operations with the best opportunities for growth and profitability, particularly under a more scalable model where we can leverage proprietary technology for greater profitability," stated High Wire CEO, Mark Porter.
"Our pursuit of this strategy led to the sale of our technology services business at the end of the quarter. This further streamlined our operations and enabled us to better focus on delivering our best-in-class managed cybersecurity services as provided by our Overwatch division. This business, with its long-term, renewing contracts, provides a more reliable and predictable revenue stream. Such revenue models also garner higher market valuations that enhance shareholder value.
"We have also now moved from defense to offense, no longer being subject to today's sky-high cost of capital and burdensome financial instruments. We believe we can now better scale and potentially double again the total contract value of our managed cybersecurity engagements over the near term.
"Our cybersecurity pipeline continues to strengthen, driven by the growth of our global portfolio of channel partners and their clients, including 23 new partners in the first half of the year. Many of these new partners are larger than existing partners, with more clients and wider industry reach.
"As the result of this strengthening pipeline, our Overwatch managed cybersecurity revenue grew 24% over the past year, with gross margins improving to 66.4%.
"From the sale proceeds of our IT business, we have also significantly reduced most of our outstanding debt and were able to restructure the remaining amount, cutting it by approximately $1.3 million with extended payment terms and reduced interest. Our continued cost-cutting measures during the quarter also resulted in a further reduction of expenses by more than $1.1 million on an annualized basis and bringing us closer to profitability for our continuing operations.
"We have transitioned to a key technology partner, Fluency Security, a leading SIEM provider that leverages proprietary streaming analytics. Their powerful and adaptable behavioral security solution is second-to-none yet ties in seamlessly with our Overwatch cybersecurity managed detection and response services and security orchestration automation response (or SOAR).
"This integrated solution delivers unmatched managed cybersecurity for our growing global portfolio of channel partners and end-clients. We look forward to announcing additional details regarding this partnership over the next few weeks.
"Also, in the second quarter we secured substantial renewal contracts and add-on services for Overwatch. In fact, an end-customer increased spend by 4.5x for the renewal of its contract for our enhanced MXDR platform hosted by Overwatch which delivers faster detection and response capability.
We have so far transitioned about 15% of our user base to this new MXDR system, with many reporting greater success with preventing critical security breaches.
"We see a significant leverage opportunity for converting additional users to this MXDR platform. Given that only approximately 15% of our current base was able to afford XDR services, the new platform's superior performance and price point gives us the opportunity to double adoption rates, which alone could more than double our total current monthly recurring revenue (or MRR). We also have already seen that this more powerful and adaptable behavioral security solution will help attract new larger channel partners and end customers.
"Our SVC telecom subsidiary's gross profit has also improved after we migrated to a new high-performing switch platform. We anticipate SVC to become profitable in the current third quarter and generate significant cash flow for the company.
"Looking ahead, we expect our margins to continue improving due to the scalability of our operational model. By leveraging our proprietary AI-driven cybersecurity technology, with every new customer we become incrementally more profitable. As we continue to downsize our overhead, we expect the anticipated growth in revenue to result in Overwatch becoming operationally profitable no later than the fourth quarter of this year.
"Given that the transition of our IT services divestiture is now virtually complete, our management team can now focus all of their efforts on growing Overwatch. Our strong cash position and ability to borrow at more reasonable rates as needed also positions us well for the many M&A opportunities we are seeing in the challenging liquidity environment for smaller cybersecurity companies.
"Now past the halfway mark through the third quarter, we are seeing our recurring revenue stream and margin improving, with this keeping us on track for another year of record growth in 2024 for our continuing operations along with increased value delivered for all stakeholders."
Q2 2024 Financial Summary Revenue in the second quarter of 2024 totaled $1.9 million, an increase of 14% from $1.7 million in the same year-ago quarter. The increase in revenue reflects an increase in revenue from the company's Overwatch managed cybersecurity business. Overwatch generated a monthly rate of approximately $0.4 million in recurring revenue.
Gross profit totaled $0.8 million or 40.8% of revenue in the second quarter, improving from $0.4 million or 25.4% of revenue in the same year-ago quarter. The increase in gross profit in the second quarter of 2024 was primarily due to the business moving towards a more scalable, efficient cyber platform as well as the efficiencies gained by continued improvements in the company's automation capabilities.
Total operating expenses increased 10% to $4.9 million compared to $4.5 million from the same year-ago quarter. The increase is due increases in salaries and wages of $829,000 and depreciation and amortization of $19,000.
Net loss from continuing operations in the second quarter of 2024 totaled $3.1 million or $(0.01) per diluted share, compared to a net loss from continuing operations of $4.7 million or $(0.02) per diluted share in the same year-ago quarter.
Net income attributable to High Wire Networks common shareholders in the second quarter of 2024 totaled $4.8 million or $0.02 per diluted share, compared to a net loss of $4.1 million or $(0.02) per diluted share in the same year-ago quarter. The second quarter of 2024 included a gain on the sale of the company's technology enablement business for approximately $8 million.
First Half of 2024 Financial Summary Revenue in the first half of 2024 totaled $4.0 million, an increase of 10% from $3.6 million in the same year-ago period. The increase in revenue reflects the same reasons described above. In the first half of 2024, the Overwatch managed cybersecurity business contributed revenue of $2.1 million, as compared to $1.9 million in the same year-ago period.
Gross profit totaled $1.7 million or 43.3% of revenue in the first half of 2024 as compared to $1.0 million or 28.0% of revenue in the same year-ago period. The increase in gross profit reflects the same reasons described above.
Total operating expenses increased 1% to $8.5 million compared to $8.4 million from the same year-ago period. The increase is primarily due to increases in salaries and wages of $1.4 million and depreciation and amortization of $6,000.
Net loss from continuing operations in the first half of 2024 totaled $5.4 million or $(0.02) per diluted share, compared to a net loss from continuing operations of $2.6 million or $(0.01) per diluted share in the same year-ago period.
Net income attributable to High Wire Networks common shareholders in the first half of 2024 totaled $4.4 million or $0.02 per diluted share, compared to a net loss of $4.0 million or $(0.02) per diluted share in the same year-ago period. The first half of 2024 included a gain on the sale of the company's technology enablement business for approximately $8 million.
About High Wire NetworksHigh Wire Networks, Inc. (OTCQB:HWNI) is a fast-growing, award-winning global provider of managed cybersecurity. Through over 230 channel partners, it delivers trusted managed services for more than 1,100 managed security customers worldwide. End-customers include Fortune 500 companies and many of the nation's largest government agencies. Its U.S. based 24/7 Network Operations Center and Security Operations Center is located in Chicago.
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 ValueThe 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.
Forward-Looking StatementsThe 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 ContactSusanna SongChief Marketing OfficerHigh Wire NetworksTel +1 (952) 974-4000 Email contact
Investor & Media Relations:Ronald Both or Grant StudeCMA Investor & Media RelationsTel +1 (949) 432-7557 Email contact
High Wire Networks, Inc.Condensed consolidated statements of operations(Unaudited)
For the three months ended
For the six months ended
June 30,
June 30,
2024
2023
2024
2023
Revenue
$
1,937,618
$
1,699,542
$
3,999,121
$
3,648,640
Operating expenses:
Cost of revenue
1,146,444
1,267,193
2,268,462
2,627,214
Depreciation and amortization
233,523
214,743
421,861
415,890
Salaries and wages
2,012,884
1,183,807
3,333,103
1,888,697
General and administrative
1,548,481
1,831,098
2,506,734
3,496,339
Total operating expenses
4,941,332
4,496,841
8,530,160
8,428,140
