I-ON Digital Reports September Financial Results; Revenue up 18% YTD; Operating cash-flow positive; Pipeline Remains Healthy; Guidance Reaffirmed

SEOUL, South Korea, Nov. 13, 2019 /PRNewswire/ -- I-ON Digital Corp. (OTCQB:IONI) ("I-ON" or the "Company"), www.i-on.net, a Seoul, South Korea based global enterprise software company focused on delivering leading unstructured data management solutions including digital experience (DXP), CMS, and digital marketing offerings, is pleased to announce financial results for the quarter ended September 30, 2019 reflected in I-ON's current report on Form 10-Q filed with the SEC on November 13, 2019.

Summary

During the September quarter, total revenue came in at $1.82 million, flat sequentially and year over year, but which followed high double-digit top line growth in both the March and June 2019 quarters due partially to easier year over year comparisons. Similar to most recent periods, revenue mix remained healthy and virtually unchanged, composed primarily of customized solutions, services and licensing associated with existing DXP implementation and migration backlog, and slightly more royalty and subscription contribution out of Korea, Japan and South East Asia versus a year ago. As a result, gross margin improved slightly to 41.1% versus last year. New and ongoing client engagements included Samsung Card, LG CNS, Seoul Broadcasting System, CJ Entertainment, Jeju Tourism and a major cosmetics company (CMS/DXP), the KLPGA and Korea's 3x3 Basketball League (sports data management/TAMM), ASPN and SK D&D (eForm), as well as Seoul City and Malaysia-based utility Tenaga for smart energy initiatives. Top ten customer concentration in the period remained stable and consistent with prior periods at approximately 50%. CMS and DXP reflected over 80% of total revenue.

The Company invested 21% more versus last year on G&A and marketing to drive sales- partly public company costs and product launches- while R&D declined as a percentage of revenue, resulting in total operating expenses to decline 9% to $0.6 million during the quarter. This generated operating income of $0.15 million, a 33% increase over last year and reversal from the seasonal operating loss typically generated in the June quarter. Excluding FX, GAAP net income grew 7% year over year to $0.2 million, translating to earnings per share (EPS) of $0.01.

Year to Date Assessment

On the basis of year to date ending September 30, 2019, revenue increased 18% versus last year, with significant gross and operating margin improvements owing to better expense control, easier comparisons and improving revenue mix, specifically related to DXP, sports and energy ICT initiatives.

Chairman and CEO, Mr. James Oh commented, "Our revenue growth and profitability improvements year to date compared to last year are clear indications that our strategy is being executed according to plan, especially when considering the competitive environment and sometimes unpredictable macro-economic headwinds across parts of the Asia Pacific. Our 18% growth year over year shows that we are gaining market share and that sales and marketing efforts in Korea and Japan will continue to pay off quarter over quarter, as we diversify revenue streams internationally through established channel partners. Furthermore, domestic adoption of our next generation DXP continues to exceed expectations, and is proving to significantly advance our clients' cloud capabilities by connecting CMS with marketing technology trends across enterprise, energy and sports sectors. This should suggest more predictable higher margin revenue streams over time. Our engagements with the KLPGA, Pacific Pro football, H9Pitch and multiple Korea-based amateur sports leagues continue to progress nicely as well. Overall, we remain confident in our ability to grow revenue organically and sustainably at a double-digit pace and look forward to keeping the market and shareholders abreast of exciting new opportunities as they finalize."

Balance Sheet

I-ON's balance sheet remained stable and healthy as of the end of September 30, 2019, reflecting cash and equivalents of approximately $3.0 million, $4.8 million in working capital, total assets of $8.9 million, $0.5 million in short and long-term debt, and shareholders' equity of approximately $6.4 million. I-ON also continued to have available lines of credit with financial institutions for up to $3.6 million, of which there were no outstanding balances as of the close of the period or currently. In addition, the Company continues to have access to qualified R&D grants from sovereign institutions such as the Ministry of Trade, Industry and Energy, which are primarily aimed towards accelerating I-ON's speed to market within Industry 4.0 sectors.

Financial Guidance

I-ON's pipeline and backlog as of the end of October stood at approximately $10 million and $4 million, respectively, with a more diversified mix of longer-term sports and energy ICT contracts or letter of intents. The Company expects to recognize a majority of the DXP related backlog as revenue by the end of this year. Mobile e-contract and signature offering eForm continues to make inroads domestically and in South East Asia. Considering year to date revenue growth of 18%, I-ON continues to maintain its rolling twelve-month pro forma revenue guidance of $15 million, which assumes the consummation of the H9Pitch acquisition, with at least 42% gross margin and break-even for full year 2019.  Management will also continue to pursue a multi-faceted strategy to attain a revenue run-rate goal of $25 million by 2020, which would likely reflect more international contribution and an improving revenue mix of PaaS and SaaS revenue, yielding higher year over year gross, and operating margins well above 45% and 15%, respectively.

About I-ON Digital Corp.

I-ON Digital Corp. (www.i-on.net) is a Seoul, South Korea-based software and solutions developer as well as provider founded in 1999. After being awarded its first of six key patents by 2003, I-ON has sold to over 1,600 clients across numerous verticals in both the private and public sectors, primarily throughout South Korea, Japan and Southeast Asia. The Company's core offerings include DXP (Digital Experience Platform) and revolve around unstructured data management, Sports data software and Energy ICT solutions. 

Forward Looking Statements

Statements in this document contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on many assumptions and estimates and are not guarantees of future performance. These statements may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. The Company assumes no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Our actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation those set forth as "Risk Factors" in our filings with the Securities and Exchange Commission ("SEC"). There may be other factors not mentioned above or included in the Company's SEC filings that may cause actual results to differ materially from those projected in any forward-looking statement. The Company assumes no obligation to update any forward-looking statements as a result of new information, future events or developments, except as required by securities laws.

Press/IR Contact
Bruce S. Lee
I-ON Digital Corp.
[email protected]

SOURCE I-ON Digital Corp.

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