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Webtech Wireless Announces Q3 2011 Results
Monday, November 14, 2011

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Vancouver, BC, November 14, 2011--(T-Net)--Webtech Wireless Inc. (TSX: WEW.TO), a leading provider of vehicle fleet location-based services and telematics technology, today announced its financial results for the three and nine-month period ended September 30, 2011.


Q3 2011 Financial and Operational Highlights


--  Total revenue increased 4% to $10.8 million in Q3 2011 compared to $10.3
   million in Q3 2010. On a constant currency basis total revenue increased
   8% over the same period. The increase was due to improved performance of
   the Quadrant® and NextBus® lines of business.
--  Notable new sales, renewals and implementations during the quarter
   included the Tampa Electric Company, Mammoet Canada Western Ltd., W.W.
   Gay Mechanical Contractor, Inc., Carmichael, Ramelli Waste LLC, Waste
   Management of Canada Corporation, Strike Construction LLC, City of
   Hamilton, Washington State Department of Transport, City of Mississauga,
   City of St. Thomas, Aero Snow Removal Corp., City of Kalamazoo,
   Massachusetts Bay Transportation Authority (MBTA) and Toronto Transit
   Commission (TTC).
--  Recurring revenue increased 10% to $5.4 million or 50% of total revenue
   compared to $4.9 million or 48% of total revenue for Q3 2010. On a
   constant currency basis recurring revenue increased 14% over the same
   period. Constant currency recurring revenue increased year over year due
   to the increase in subscribers, which was partially offset by the
   conversion of subscriber customers to enterprise licences in late 2010.
--  Subscribers at September 30, 2011 totalled approximately 101,200
   (combined direct and enterprise), compared to 98,500 at June 30, 2011.
--  Gross margin decreased to 56% of total revenue from 64% in Q3 2010 due
   primarily to a single high margin enterprise software sale recorded in
   the third quarter of 2010 that did not recur in Q3 2011.
--  Operating expenses (sales and marketing, research and development, and
   general and administration excluding one-time items) declined 13% to
   $5.5 million in Q3 2011 from $6.2 million in Q3 2010. This decrease was
   the direct result of restructuring efforts undertaken earlier in 2011.
--  Adjusted EBITDA was $0.6 million in Q3 2011 compared to $0.4 million in
   Q3 2010.
--  As reported in the second quarter of 2011, as part of its ongoing review
   of all significant operations and processes, the Company determined that
   there were calculation errors in prior year figures. As a result, 2010
   comparative figures presented in the September 30, 2011 Consolidated
   Condensed Interim Financial Statements have been restated. These
   adjustments did not have any impact on the Company's cash or financial
   position, or the results for the quarter and nine months ended September
   30, 2011.

"We are pleased to report our second consecutive quarter of Adjusted EBITDA, which was an improvement on Q2 2011, and a significant improvement of $0.3 million compared to Q3 2010 when we made a very lucrative but non-recurring licence sale. We remain cautiously optimistic regarding revenue for the remainder of the year particularly as we should see the addition of seasonal revenue from our InterFleet winter maintenance business in Q4 2011," said Scott Edmonds, President and Chief Executive Officer. "We continue to benefit from our focus on our highest margin verticals which produce a more attractive hardware margin as well as a two or three year subscription contract and where we have a sustainable competitive advantage thanks to our depth of offering - these being Transport and Oil and Gas for Quadrant, Winter Maintenance for InterFleet, and Predictive Arrival for Transit at NextBus. Our overriding goal continues to be matching our costs to our revenues and achieving an acceptable level of profitability, a goal to which we have made considerable progress. We believe we have the right people, products and execution strategy to achieve our objectives, and be a leading player in the strong growth of the telematics marketplace."


Financial Highlights


----------------------------------------------------------------------------
----------------------------------------------------------------------------
   For the three months   For the nine months
   ended   ended
----------------------------------------------------------------------------
('000 of Cdn $)   Q3 2011   Q3 2010   Q3 2011   Q3 2010
----------------------------------------------------------------------------
Hardware revenue   $ 3,642   $ 2,800   $ 10,079   $ 10,697
Recurring revenue   5,442   4,945   15,833   15,567
Services and other revenue   1,701   2,589   4,047   4,139
----------------------------------------------------------------------------
   10,785   10,334   29,959   30,403
----------------------------------------------------------------------------

Gross margin ($)   6,091   6,617   16,629   17,409
Gross margin (%)   56%   64%   56%   57%

Total operating expense   6,373   7,762   19,144   22,495

Net income (loss) for the
 period   $ 634   $ (1,384)   $ (6,368)   $ (7,150)

Adjusted EBITDA (Loss)   $ 638   $ 379   $ 20   $ (596)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Revenue


The increase in revenue in the quarter over the prior year comes from a focus on higher priced, higher margin sales. Recurring revenue related to the Company's NextBus product has also had strong growth in the quarter. Year-to-date revenue declined marginally due to this shift in focus away from hardware OEM sales towards higher margin recurring revenue streams in Webtech's core market verticals and due to currency effect.


Recurring revenue as a percentage of total revenue was 50% for the quarter compared to 48% in Q3 2010 and was 53% year-to date compared to 51% in the prior year. The Company grew its subscriber base particularly in its NextBus business and in the theft-recovery vertical as a result of a large new NextBus customer and hardware sales in prior periods. The subscriptions to the Quadrant and InterFleet web portal reporting solutions also grew in all geographic segments. The shift away from hardware to a majority of subscription, software and services revenue reflects management's focus on developing the Software as a Service ("SaaS") model and is expected to continue.


Gross Margin


In the quarter, gross margins dropped due primarily to a significant enterprise licence sale with an exceptionally high margin recorded in the third quarter of 2010. In addition, the hardware sales were strong in the current quarter impacting the mix of margins produced. Margins were positively impacted by a significant drop in cost of sales resulting from the shift away from in-house manufacturing as well as other costs savings related to the restructuring program. The strength of the Canadian dollar relative to the US dollar for the majority of the quarter also had an impact, as 58% of revenue is denominated in US dollars and the majority of costs are incurred in Canadian dollars.


Operating Expenses


Operating expenses in Q3 2011, which include non-cash charges for depreciation and amortization, stock based compensation and one time expenses (as defined below), decreased by 18% over the prior period. This decrease resulted from restructuring efforts in early 2011.


Adjusted EBITDA(1)


The Adjusted EBITDA for the quarter was $0.6 million in Q3 2011 compared to Adjusted EBITDA of $0.4 million in Q3 2010.


Results on a non-GAAP EBITDA basis are determined as follows:

 

----------------------------------------------------------------------------
   Three months ended   Nine months ended
   ------------------------------------------------
('000 of Cdn $)   Sept 30,   Sept 30,
   Sept 30,   2010   Sept 30,   2010
   2011   Restated   2011   Restated
----------------------------------------------------------------------------
Net profit (loss) as
 reported   $ 634   $ (1,384)   $ (6,368)   $ (7,150)
Add (deduct)
Depreciation and
 amortization   490   825   1,555   2,490
Interest and other expenses   37   22   74   26
Loss (gain) on sale of
 assets   (2)   -   23   -
Stock based compensation   127   453   423   1,414
Tax recovery   (132)   (210)   (393)   (631)
Foreign exchange loss (gain)   (820)   137   (560)   584
Restructuring cost including
 stock based compensation   -   290   4,709   2,085
Intellectual property
 litigation   221   246   474   586
One time professional fees   83   -   83   -
----------------------------------------------------------------------------
Adjusted EBITDA (Loss) (1)   $ 638   $ 379   $ 20   $ (596)
----------------------------------------------------------------------------
(1) Adjusted EBITDA (Loss) is not defined under IFRS and is therefore not
   universally defined. Adjusted EBITDA is defined by the Company as
   earnings (loss) before interest, tax, depreciation, amortization, stock
   based compensation, foreign exchange loss on operations, restructuring
   charges, and one-time expenses.

Non-GAAP Financial Measures


In addition to the results reported in accordance with IFRS, the Company uses various non-GAAP financial measures, which are not recognized under IFRS, as supplemental indicators of the Company's operating performance and financial position. These non-GAAP financial measures are provided to enhance the user's understanding of the Company's historical and current financial performance and its prospects for the future. Management believes that these measures provide useful information in that they exclude amounts that are not indicative of the Company's core operating results and ongoing operations and provide a more consistent basis for comparison between quarters. Details of such non-GAAP financial measures and how they are derived are provided in conjunction with the discussion of the financial information reported.


Cash and Working Capital


As at September 30, 2011, the Company's unrestricted cash position amounted to $5.1 million, which consisted of cash, cash equivalents and short-term investments, compared with $4.0 million at December 31, 2010.


As at September 30, 2011, the Company had net working capital of $12.0 million, compared with $11.8 million at December 31, 2010. The Company has historically invested in product and market development, and as a result had negative cash flows but has recently taken a number of steps to improve its ability to generate cash from operations and as a result, has improved its working capital position.

As at November 14, 2011 Webtech Wireless had 105,424,265 common shares outstanding.


IFRS Changes


The Company adopted International Financial Reporting Standards ("IFRS") during the first quarter of 2011, and accordingly, restated all 2010 comparables figures to conform with IFRS. A number of changes in the financial information previously reported under Canadian GAAP resulted from this process as detailed in Note 22 of the Condensed Consolidated Interim Financial Statements.


Financial Statements and Management Discussion & Analysis


The Condensed Consolidated Interim Financial Statements for the three and nine-months ended September 30, 2011 and the related Management Discussion & Analysis for the period has been filed on SEDAR at www.sedar.com, and also on the Company's website at www.webtechwireless.com.


Notice of Conference Call


Webtech Wireless will hold a conference call today, November 14, 2011, at 11:00am ET hosted by Mr. Scott Edmonds, President and Chief Executive Officer and Mr. Andrew Morden, Chief Financial Officer to discuss the Company's financial results and corporate developments. To access the conference call by telephone, dial +1.416.340.8530 or +1.877.240.9772. A taped replay of the conference call will be archived on the Company's corporate website at: www.webtechwireless.com.


About Webtech Wireless®


Webtech Wireless Inc. (TSX: WEW.TO) is a provider of vehicle fleet location-based services (LBS) and telematics technology. It develops, manufactures and supports end-to-end wireless solutions that improve the productivity, profitability, environmental compliance and safety of vehicle fleets. Its comprehensive suite of products and services include: automatic vehicle location (AVL), mapping, vehicle diagnostics, CO2 reporting, navigation, messaging, and mobile resource management. The Company serves customers of all sizes in the transport, government, service, insurance and OEM markets in over forty-one countries, including Fortune 500 companies. Specialized products include: Quadrant® commercial fleet solutions, InterFleet® solutions for government, and NextBus® real-time passenger information services for transit fleets. For more information, please visit www.webtechwireless.com.


This News Release may contain forward-looking statements involving risks and uncertainties pertaining to, but not limited to, product plans, timing, content, pricing of products, market and industry expectations, the wireless communications and mobile fleet industries, and general economic and political conditions. Given the risks and uncertainties inherent in the markets and industries referred to in this News Release, Webtech Wireless cannot guarantee that any forward-looking statements will be realized. - All amounts in Canadian dollars (CAD$) unless otherwise noted. - Trademarks are the property of their owners.

The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.


Contact:


Webtech Wireless Inc. - Investor Relations
Andrew Morden
Chief Financial Officer
+1 604.434.7337
investors@webtechwireless.com


Webtech Wireless Inc. - Press and Media
David Greer
Vice President Marketing
+1 604.628.5194
press@webtechwireless.com
www.webtechwireless.com


WebTech Wireless Inc.

Burnaby, BC (Wireless)
140 Employees In BC (140 Total)
Founded: 1999 | Revenues: $40.00 Million

WebTech Wireless develops, manufactures and delivers proven GPS vehicle tracking and telematic solutions to large and small scale commercial fleets and consumer vehicles around the world.

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WebTech Wireless Inc.

Posted: Nov 14, 2011

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