Executive Summary

Q3 2021 delivered a mixed print: revenue rose 9.6% year over year to $4.30M, gross margin expanded to 22.8% (from 15.7%), but the quarter swung to a net loss of $(0.10)M and diluted EPS of $(0.01), as SG&A increased with growth investments and leadership transition costs .
The business mix continues to pivot toward higher-margin professional fees (65.1% of revenue), driving margin gains; however, sequential revenue declined versus Q2 as software sales fell due to non-recurring and timing dynamics .
Management highlighted a strategic shift and foundation-building under the new CEO, capitalized by a late-August ~$3M private placement, which flowed into Q3 SG&A to support growth and transformation .
No formal guidance or sell-side consensus was available; near-term stock catalysts center on sustaining professional fee momentum, executing SBA 7a modernization, and realizing acquisition synergies while normalizing SG&A .

What Went Well and What Went Wrong

What Went Well
- Strong professional fee growth (+77% YoY to $2.80M) and continued mix shift toward services (65.1% of revenue), expanding gross margin to 22.8% .
- Strategic foundation-building under new leadership: “We are ready to seize the opportunity ahead of us,” with emphasis on higher-margin services and transformation initiatives .
- SBA 7a modernization contract continues to underpin revenues through May 2027, supporting visibility in professional fees .
What Went Wrong
- Sequential softening: total revenue fell versus Q2, and the quarter flipped to a net loss as SG&A increased (some non-recurring) due to investments and leadership transition costs .
- Software sales declined 35.9% YoY given their non-recurring nature and timing of orders, pressuring sequential total revenue despite services strength .
- Adjusted EBITDA decreased to $0.13M from $0.34M in Q2, reflecting higher operating expenses while the company invests for growth .

Financial Results

Metric	Q3 2020	Q1 2021	Q2 2021	Q3 2021
Total Revenue ($USD Millions)	$3.92	$3.42	$4.73	$4.30
Gross Profit ($USD Millions)	$0.61	$1.02	$0.96	$0.98
Gross Margin (%)	15.7%	N/A	20.2%	22.8%
Operating Income ($USD Millions)	$0.21	$0.27	$0.05	$(0.08)
Net Income ($USD Millions)	$0.21	$0.27	$0.04	$(0.10)
Diluted EPS ($USD)	$0.02	$0.02	—	$(0.01)

Segment Revenue ($USD Millions)	Q3 2020	Q1 2021	Q2 2021	Q3 2021
Professional Fees	$1.58	$2.44	$3.33	$2.80
Software Sales	$2.34	$0.98	$1.40	$1.50
Professional Fees Mix (%)	N/A	N/A	70.3%	65.1%

Key Operating Metrics	Q3 2020	Q1 2021	Q2 2021	Q3 2021
Professional Fees Gross Margin (%)	N/A	N/A	28.0%	34.5%
Software Sales Gross Margin (%)	N/A	N/A	1.8%	0.9%
SG&A Expense ($USD Millions)	$0.34	$0.55	$0.80	$1.00
Acquisition Costs ($USD Millions)	—	$0.07	$0.08	$0.04
Adjusted EBITDA ($USD Millions)	$0.23	N/A	$0.34	$0.13

Balance Sheet Highlights ($USD Millions)	Dec 31, 2020	Jun 30, 2021	Sep 30, 2021
Cash & Cash Equivalents	$1.86	$1.53	$3.68
Total Assets	$3.77	$6.85	$9.42
Total Liabilities	$2.16	$4.01	$3.78
Stockholders’ Equity	$1.61	$2.85	$5.64

Q3 2021 Actual vs Consensus	Actual	Consensus	Notes
Revenue ($USD Millions)	$4.30	N/A	S&P Global consensus unavailable for WAVD
Diluted EPS ($USD)	$(0.01)	N/A	S&P Global consensus unavailable for WAVD

S&P Global consensus unavailable: estimates could not be retrieved due to missing CIQ mapping for WAVD.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY/Quarter	None provided	None provided	Maintained (no formal guidance)
Gross Margin	FY/Quarter	None provided	None provided	Maintained (no formal guidance)
OpEx/SG&A	FY/Quarter	None provided	None provided; noted higher SG&A from investments and non-recurring items	Informational only (no formal guidance)
EPS	FY/Quarter	None provided	None provided	Maintained (no formal guidance)
Segment Guidance	FY/Quarter	None provided	None provided	Maintained (no formal guidance)

Note: The Q3 press release focused on results and strategy; no numeric forward guidance ranges were issued .

Earnings Call Themes & Trends

No earnings call transcript was available for Q3 2021 in our document catalog; themes below reflect management commentary from press releases.

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2021)	Trend
Mix shift to higher-margin services	Q2: Services at 70.3% of revenue; margin uplift to 20.2% . Q1: Strong professional fees drove profitability .	Services 65.1% of revenue; gross margin 22.8%; professional fees margin 34.5% .	Sustained mix shift; margin improving.
SBA 7a modernization contract	Q2: Contract supports revenue visibility through May 2027 .	Reaffirmed duration to May 2027 .	Stable long-term driver.
Acquisition/integration (Tellenger)	Q2: Closed Tellenger; integration seamless; expanded capabilities and clearances . Q1: Announced Tellenger acquisition post-quarter .	Focus on foundation and transformation; acquisition costs continued in Q3 .	Integration ongoing; capability expansion.
Leadership and governance	Q1: Added board members Jack Johnson and Donald Tringali .	Appointed Jamie Benoit CEO; Tim Hannon Interim CFO .	Leadership transition complete; strategic refresh.
Financing/liquidity	Q2: Secured $1M term loan and $1M revolver .	Raised just under $3M in late August; funds used for SG&A investments .	Strengthened capital base; investing ahead.
Operating expenses	Q2: SG&A increased with acquisition/investments .	SG&A up with non-recurring and investment-related items; impacted bottom line .	Elevated near term; expected to normalize.

Management Commentary

“Our third quarter was highlighted by continued strong growth in professional fees… driving professional services is having a significant, positive effect on gross margins.” – Jamie Benoit, CEO .
“We raised just under $3 million at the end of August as a down-payment on our plan, with that capital going directly into the SG&A investments made during the third quarter.” – Jamie Benoit, CEO .
“The integration of our two businesses has been seamless to date, and IAI is already seeing a meaningful expansion in our sales opportunities.” – Stan Reese, CEO (Q2) .
“This strategic acquisition significantly expands our cybersecurity, cloud, and data analytics capabilities.” – Stan Reese, CEO (Q1) .

Q&A Highlights

No Q3 2021 earnings call transcript was found in our document set; therefore, no Q&A highlights or call-based guidance clarifications are available from the quarter [List returned 0 earnings-call-transcript documents for Q3 timeline].

Estimates Context

Wall Street consensus estimates via S&P Global were unavailable for WAVD (tool returned missing CIQ mapping), so we cannot quantify beats/misses versus consensus for Q3 2021. As a result, estimate revisions and comparative analysis to sell-side expectations are not provided.
In the absence of consensus, investors should focus on the demonstrated margin trajectory (22.8% gross margin) and continuing services mix shift, alongside normalization of SG&A to assess near-term earnings power .

Key Takeaways for Investors

Services-led mix shift is intact; gross margin expanded to 22.8% with professional fees at 65.1% of revenue—watch for sustained services growth to offset volatility in non-recurring software sales .
Sequential softening and a swing to net loss reflect elevated Q3 SG&A tied to transformation and leadership transition; near-term earnings leverage hinges on opex normalization and scaling services .
The SBA 7a modernization contract provides multi-year visibility through May 2027; contract execution remains a core pillar for steady professional fees revenue .
Tellenger integration expands capabilities and addressable opportunities in government and private sectors; monitor synergies and incremental bookings tied to higher-level clearances .
Capital position improved with the ~$3M private placement; liquidity supports continued investment in growth infrastructure and potential M&A .
Without formal guidance or consensus estimates, trading may be headline-driven by periodic prints and contract updates; focus on quarterly services revenue, gross margin, and SG&A trendlines for near-term signals .
Over the medium term, the thesis rests on high-margin services scale, disciplined opex, and leveraging acquisitions to expand scope and margins; catalysts include new contract wins and evidence of opex normalization .

WAVEDANCER, INC. (WAVD)·Q3 2021 Earnings Summary