-Ended the quarter with 83,883 total subscribers, up 6 percent from Q2 2010, with almost 3,000 additional subscribers in backlog anticipated to be activated in fiscal year 2011.
-Application related subscribers increased 60 percent to 59,713, now representing 71 percent of total subscribers.
-Total revenues were $8.7 million, compared to $10.3 million in Q2 2010.
-Application-related revenue increased 27 percent to $3.5 million.
-Improved service gross margin from 71 percent to 79 percent in Q2 2011.
-Overall gross margin was 62 percent compared to 55 percent a year earlier.
-Adjusted EBITDA* of $0.9 million, compared to $1.0 million in Q2 2010.
-Net loss of $1.3 million or $0.02 per share, compared to a net loss of $280,000 or $0.00 per share in Q2 2010.
-Closed San Francisco facility and successfully migrated functions to Herndon headquarters in September.
-Commenced a deployment with a leader in the residential services space that has led to an initial roll-out of 1,600 subscribers with the potential to expand to 40,000 subscribers next year.
"We have overcome some challenges in the first half of the fiscal year towards making significant progress in refocusing on our SaaS offerings for improved long-term growth and profitability," said J. Richard Carlson, president and chief executive officer of Wireless Matrix. "Our strategy of outsourcing devices is on track and will lead to sizable savings in the second half of the year. We have been pleased with the early results of our expansion into the small-to-medium business market. More importantly, we continue to have success in winning major customers in the enterprise space, as evidenced by the recent contract win that could lead to a substantial increase in our subscriber base."
Financial and Operating Review
Application-related services revenue was $3.4 million in the second quarter of fiscal 2011, an increase of $0.7 million or 27 percent from $2.7 million in Q2 2010. This growth was offset by a $0.4 million decrease in hardware and license revenues, and by a $1.9 million decrease in satellite-related services revenues which totaled $2.7 million in Q2 2011. Satellite services revenues have been declining as the Company transitions its legacy subscriber base to application subscriptions enabled by lower cost wireless communication services. Satellite communication subscribers represented 29 percent of total subscribers and 31 percent of total revenues in Q2 2011, compared to 53 percent of subscribers and 44 percent of revenues one year earlier. Wireless Matrix's total revenues in the second quarter of fiscal 2011 were $8.7 million, a decrease of $1.6 million or 15 percent compared to Q2 2010 revenues.
Wireless Matrix ended the quarter with 83,883 subscribers, a 6 percent increase over the 79,277 subscribers at October 31, 2009. The Company added 1,254 gross subscribers in the second quarter of fiscal 2011, including 845 application-related subscribers. Total subscribers decreased by 1,234 units during the quarter, however, due to churn or disconnects of 2,488 subscribers resulting primarily from reduction-in-forces leading to fleet reductions by a major customer. Subsequent to quarter end, the Company has shipped units to generate over 1,900 application and wireless network subscribers during the third quarter fiscal 2011.
Gross margin percentage grew to 62 percent in the second quarter of fiscal 2011 from 55 percent in Q2 2010, despite the decrease in revenue. Margin improvement resulted from the layering of additional subscribers onto a relatively fixed infrastructure while at the same time reducing the costs of that infrastructure over the past year. Gross margins on service revenues were 79 percent in the Q2 2011, up from 71 percent a year earlier.
Adjusted EBITDA of $0.9 million in Q2 2011 was down 13 percent from $1.0 million in the previous year's second quarter, due to the decline in revenues. While operating expenses declined 3 percent from Q2 2010, they included $568,000 of expenses related to operations scheduled to be discontinued by Q3 2011. In the absence of those expenses, proforma adjusted EBITDA for this quarter would have been $1.4 million. Management anticipates EBITDA improvements in the second half of the fiscal year as more subscribers are added and cost savings are realized from the ongoing restructuring of the business.
In addition to amounts charged to operating expenses, the Company incurred $1.0 million of corporate restructuring costs in the second quarter of 2011 as a result of the closing and relocation of certain facilities, compared to $0.3 million in Q2 2010. These costs contributed to a net loss of $1.3 million in Q2 2011, compared to a net loss of $0.3 million a year earlier.
Wireless Matrix had a cash balance of $12.1 million at October 31, compared to $13.6 million at July 31. Cash was primarily used to fund infrastructure projects that are intended to lead to improved margins. The Corp. has no debt, and its $4 million line of credit remains unused.
Outlook
Wireless Matrix provided an updated outlook for fiscal 2011 in a recent news release. Current expectations for the year are as follows:
-Total revenue of approximately $33.5 to $36.0 million, comprised of:
-Recurring Services revenue of approximately $25 to $26.5 million
-Hardware revenues of approximately $8.5 to $9.5 million
-Adjusted EBITDA of $4.7 to $5.5 million
-Total subscribers greater than 90,000
"We are on track with our restructuring initiatives, which have already led to savings in both our cost of goods and operating expenses," said Maria C. Izurieta, chief financial officer of Wireless Matrix. "In the second half of fiscal 2011 we expect to continue to deliver significant year-over-year improvement in gross margins. We also anticipate generating EBITDA at levels above that of the first half, resulting in double-digit EBITDA growth for the year. We are optimistic that the current opportunities in our sales pipeline will enable us to return to our pattern of subscriber growth." For the latest updates PRESS CTR + D or visit Stock Market news Today
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