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, CFAVice PresidentThe Equity Group(212) 836-9626jhellman@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 SUBSIDIARIESCONSOLIDATED 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 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
       
(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    

 

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