WAVEDANCER, INC. (WAVD)·Q1 2022 Earnings Summary

Executive Summary

• Q1 2022 revenue was $3.00M, down 12.4% year over year, with gross margin at 12.6% and a net loss of $(2.08)M as the company accelerated transformation investments and pivoted away from low-margin reselling toward higher-margin professional services .
• Mix shift continued: professional fees were $2.07M (69% of revenue), while software sales were $0.93M; adjusted EBITDA was $(1.68)M due to higher SG&A, acquisition costs, and stock-based compensation .
• Management expects transformation investments and sales capacity additions to begin driving revenue growth in Q2 2022, citing new hires, partnerships, and a definitive acquisition agreement to further its zero trust and blockchain supply chain positioning .
• The narrative: margin structure is improving on mix, but near-term profitability is pressured by higher operating expenses; the key near-term catalyst is the anticipated revenue inflection in Q2 from the strategic pivot and go-to-market expansion .

What Went Well and What Went Wrong

What Went Well

• Continued strategic shift toward higher-margin professional services (69% of Q1 revenue), supporting margin quality despite lower total revenue; management emphasized adding three blockchain sales professionals and six engineers to drive growth .
• Clear articulation of non-GAAP Adjusted EBITDA drivers and reconciliation, enhancing transparency as investors assess underlying performance amid transformation costs .
• Management maintained conviction in its zero trust and secure blockchain supply chain offering, highlighting GovCloud availability and partnerships to expand reach into U.S. government markets .

What Went Wrong

• Revenue decreased 12.4% YoY to $2.996M and gross profit fell to $0.376M, while SG&A surged to $2.714M, driving a GAAP net loss of $(2.078)M versus $0.271M income a year ago .
• Adjusted EBITDA deteriorated to $(1.675)M from $0.408M in Q1 2021 as transformation-related acquisition costs ($0.435M) and stock-based compensation ($0.312M) weighed on profitability .
• No quantitative guidance was provided; the release framed Q2 as a prospective revenue-growth inflection without ranges for revenue, margins, or EPS, limiting external estimate anchoring or model precision .

Financial Results

Summary vs Prior Periods

Notes: The Q1 2021 gross margin percentage is derived directly from the reported gross profit and revenue in Exhibit 99.1 .

Segment/Mix Breakdown

KPIs (Non-GAAP)

Non-GAAP reconciliation elements above are excerpted directly from the Adjusted EBITDA reconciliation tables .

Guidance Changes

Management did not issue quantitative ranges for revenue, margin, or EPS in Q1 materials; commentary indicated anticipated revenue acceleration beginning Q2 .

Earnings Call Themes & Trends

No Q1 2022 earnings call transcript was available; the company appears not to have published a call transcript for the period. Trends below reflect press releases and 8-K disclosures for Q2 2021, Q3 2021, and Q1 2022.

Management Commentary

• “Our first quarter 2022 saw the company continue to prioritize investments in key operational areas… we have also added three new blockchain sales professionals as well as six engineers and developers.” – CEO Jamie Benoit .
• “Our lower revenue over first quarter 2021 is a result of our continued effort in the Tellenger business to move away from low margin distribution and reselling and towards higher margin professional services opportunities.” – CEO Jamie Benoit .
• “2021 was a transformational year… up-listing to NASDAQ, rebranding from IAI to WaveDancer, acquisition of Gray Matters Inc., reorganization… we are on the cusp of a sea-change in our business.” – CEO Jamie Benoit .
• “Approved for inclusion on Amazon Web Services (AWS) GovCloud… Announced a partnership with Cyber Intell Solutions… and a definitive agreement to acquire Knowmadics, Inc. for $90 Million…” – Company release .

Q&A Highlights

No Q1 2022 earnings call transcript was available; therefore, no Q&A highlights can be provided for this period [Search returned no WAVD call content in the Q1 2022 window].

Estimates Context

• We attempted to retrieve Wall Street consensus estimates (EPS and revenue) via S&P Global for Q1 2022; consensus figures were unavailable due to missing Capital IQ mapping for WAVD, indicating limited or no coverage at the time. As a result, estimate comparisons are not provided [SpgiEstimatesError].

Key Takeaways for Investors

• The mix shift toward professional services is structurally positive for margins, but Q1 profitability was impacted by elevated SG&A, acquisition costs, and stock-based compensation as the company scales its software and sales infrastructure .
• Management signals a Q2 revenue inflection driven by strategic investments and expanded sales capacity; monitoring Q2 print for confirmation is the near-term catalyst .
• Government-focused blockchain SCM positioning, AWS GovCloud availability, and partnerships expand addressable opportunities in USG markets, supporting medium-term growth potential .
• Cash and equivalents decreased from $4.93M at year-end to $2.999M at March 31, 2022, reflecting investment pace; runway management and disciplined opex scaling will be key to bridging to growth .
• Absent quantitative guidance or consensus estimates, investors should track revenue trajectory, gross margin progression, and Adjusted EBITDA trends as leading indicators of transformation efficacy .
• Legacy software reselling decline is intentional; sustained professional fees growth and new SaaS adoption are critical to margin improvement and eventual EPS normalization .
• Execution on the Knowmadics acquisition and integration milestones, plus continued USG wins under GovCloud, could materially shape FY22/23 revenue composition and visibility .

Sources: Q1 2022 8-K press release and exhibits ; FY2021 8-K press release ; Q2 2021 8-K 2.02 press release and exhibits ; Q3 2021 8-K 2.02 press release and exhibits .