ID Watchdog Announces Results for Third Quarter 2015

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Nov 16, 2015, 06:00 ET

ID Watchdog, Inc. logo.

DENVER, Nov. 16, 2015 /PRNewswire/ --

Employee Benefit revenues increased 130.2%
Total revenues increased 55.2%
Gross profit increased 52.5%

ID Watchdog, Inc. (TSX VENTURE: IDW) (PINKSHEETS: IDWAF) ("ID Watchdog" or the "Company"), provider of consumer-facing identity theft protection and resolution services, today announced its results for the 3rd quarter ended September 30, 2015. All amounts are in U.S. dollars.

3rd Quarter 2015 Highlights:

Revenue: Revenue totaled $1,377,583 for the third quarter of 2015, an increase of $489,898, or 55.2%, from the third quarter of 2014. Revenue from our Employee Benefit Channel increased $566,642, or 130.2%, from $435,172 for the three months ended September 30, 2014 to $1,001,814 for the three months ended September 30, 2015.
Gross Profit: Gross profit increased by $344,540, or 52.5%, from $655,747 during the third quarter of 2014 to $1,000,287 during the third quarter of 2015. The gross margin rates for the third quarter of 2015 and 2014 were 72.6% and 73.9%, respectively.
Adjusted EBITDA: For the third quarter of 2015, adjusted EBITDA improved by $107,831 to $211,150 as compared with $103,319 for the similar period in 2014. The adjusted EBITDA as a percentage of revenues for the third quarter of 2015 and 2014 were 15.3% and 11.6%, respectively.
Cash Balances: Cash and cash equivalents as of September 30, 2015, totaled $946,364, an increase of $59,888 from our cash balances at December 31, 2014.

ID Watchdog CEO, Michael Greene, stated, "We are pleased to report strong top line growth for the third quarter in our Employee Benefit channel as well as for total revenue. We continue to enhance our identity theft service offerings, and in the third quarter we added two new features: social network alerts and sex offender notifications. We now provide alerts from a subscriber's social media accounts on potential cyberbullying, cyber predators, and reputation-damaging items, including racist, violent, derogatory, vulgar or inappropriate comments directed at the subscriber and their family members. Additionally, subscribers may select an address to continuously monitor and receive alerts when sex offenders move into and leave that neighborhood. Alerts display information including location, photo ID, and the offense the sex offender committed."

Mr. Jay Lewis, ID Watchdog's CFO, commented, "As we look forward to the end of 2015, we anticipate that Employee Benefit Channel revenue growth and total revenue growth will range between 135%-140% and 48%-52% for the fourth quarter of 2015, respectively, over the similar quarter in 2014. Also, we anticipate that in the fourth quarter of 2015 our adjusted EBITDA as a percentage of revenues will range between 10%-13%."

Mr. Lewis continued, "We are projecting that approximately 83% of our Employee Benefit Channel revenue growth during 2015 will be generated from employees who subscribed to our identity theft services through their employers benefit plans and whose enrollments were effective as of January 1, 2015. We anticipate that our January 2016 enrollments will drive a modestly higher percentage of our 2016 Employee Benefit Channel revenue as we contract with larger employers that typically enroll their employees for benefits on January 1. Also, we intend to issue a press release by early January 2016, which will provide guidance for our projected first quarter 2016 revenue."

ID Watchdog, Inc.
Unaudited Consolidated Condensed Statements of Operations

	Three Months Ended September 30,		Nine Months Ended September 30,
	2015	2014	2015	2014
Revenue	$ 1,377,583	$ 887,685	$ 3,943,534	$ 2,520,632
Cost of revenue	377,296	231,938	1,054,230	734,330
Gross profit	1,000,287	655,747	2,889,304	1,786,302
Operating expense:
General and administrative expense	333,187	356,122	1,042,086	997,215
Sales and marketing expense	455,950	196,306	1,314,639	511,938
Share-based compensation expense	13,054	24,029	38,413	118,967
Depreciation and amortization expense	12,049	14,597	33,217	47,963
	814,240	591,054	2,428,355	1,676,083
Operating income	186,047	64,693	460,949	110,219
Other income (expense):
Gain (loss) on warrant liability	66,298	(79,863)	265,957	(39,932)
Interest expense, net	(202,495)	(210,021)	(735,369)	(639,755)
Litigation provision	(160,000)	—	(160,000)	—
	(296,197)	(289,884)	(629,412)	(679,687)
Net loss and comprehensive loss applicable to ordinary shares…	$ (110,150)	$ (225,191)	$ (168,463)	$ (569,468)
Basic and diluted net loss per share applicable to ordinary shares	$ (0.00)	$ (0.00)	$ (0.00)	$ (0.00)
Weighted average number of shares outstanding - basic and diluted	121,834,997	121,834,997	121,834,997	121,834,997

Reconciliation of Net Income (Loss) to Adjusted EBITDA

	Three Months Ended September 30,		Nine Months Ended September 30,
	2015	2014	2015	2014
Net loss	$ (110,150)	$ (225,191)	$ (168,463)	$ (569,468)
Depreciation and amortization expense	12,049	14,597	33,217	47,963
Interest expense, net	202,495	210,021	735,369	639,755
EBITDA	104,394	(573)	600,123	118,250
Loss (gain) on warrant liability	(66,298)	79,863	(265,957)	39,932
Litigation provision	160,000	—	160,000	—
Share-based compensation expense	13,054	24,029	38,413	118,967
Adjusted EBITDA	$ 211,150	$ 103,319	$ 532,579	$ 277,149

ID Watchdog, Inc.
Unaudited Consolidated Statements of Financial Position


			September 30, 2015		December 31, 2014
ASSETS
Cash and cash equivalents			$	946,364	$	886,476
Accounts receivable, net				382,091		168,602
Prepaid expenses and other				177,227		123,617
	Total current assets			1,505,682		1,178,695
Property and equipment, net				83,168		79,879
Customer agreements, net				17,456		22,482
		Total Assets	$	1,606,306	$	1,281,056

LIABILITIES
Accounts payable, accrued liabilities and other			$	1,201,093	$	977,657
Current portion of credit facility				—		84,422
Deferred revenue				555,272		439,794
	Total current liabilities			1,756,365		1,501,873
Credit facility, net				—		99,500
Deferred rent				29,230		28,440
Finance lease obligation, net of current portion				1,558		14,876
Series C Preferred mandatorily redeemable preferred shares, net of discount and conversion feature				4,840,889		4,334,395
Warrant liability				133,361		399,318
		Total Liabilities		6,761,403		6,378,402
		Total Shareholders' Deficit		(5,155,097)		(5,097,346)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT			$	1,606,306	$	1,281,056

About Non-IFRS Financial Measures

To supplement the Company's consolidated financial results presented in accordance with International Financial Reporting Standards ("IFRS"), the Company reports "Adjusted EBITDA" (net income (loss) before deducting net interest expense, income tax expense, depreciation and amortization, share-based compensation, gain (loss) on warrant liability and litigation provision) and uses this metric to measure the performance of our business. Adjusted EBITDA is not a performance measure defined under IFRS and is not considered an alternative to income from operations or net earnings (loss) in the context of measuring the Company's performance. Adjusted EBITDA does not have a standardized meaning and is therefore not likely to be comparable with similar measures used by other publicly traded companies. Adjusted EBITDA should not be used as an exclusive measure of cash flow since it does not account for the impact of working capital changes, income taxes, interest payments, capital expenditures, debt principal reductions and other sources and uses of cash, and is not meant to be considered in isolation or as a substitute for financial information prepared in accordance with IFRS.

Financial information contained in this press release should be read in conjunction with the unaudited consolidated interim condensed financial statements and notes thereto included in our most recent quarterly reports and our annual report. These documents are available online at www.sedar.com and in the "Company Overview" section of our website at www.IDWatchdog.com.

About ID Watchdog, Inc.

ID Watchdog was founded in 2005 and is headquartered in Denver, Colorado. The Company provides comprehensive monitoring, detection and resolution for identity theft. ID Watchdog proactively detects identity theft problems at their source and provides immediate resolution services to ensure complete peace of mind for individuals. All the Company's services have been developed with input from industry experts; national consumer advocacy groups; federal, state, and local law enforcement agencies; consumer protection agencies; and adhere to guidelines published by the Consumer Federation of America. For more information, please visit www.IDWatchdog.com.

Forward-Looking Statement

This news release includes certain "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 which address future events and conditions which are subject to various risks and uncertainties. The actual results could differ materially from those anticipated in such forward-looking statements as a result of numerous factors, some of which may be beyond the Company's control. Although the Company believes that its expectations reflected in these forward-looking statements are reasonable, no assurance can be given that actual results will be consistent with these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements are disclosed in the company's filings with Canadian regulators at www.sedar.com. ID Watchdog assumes no obligation to update the forward-looking statements of management beliefs, opinions, projections, or other factors should they change.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Company Contact:
Jay B. Lewis
Chief Financial Officer
ID Watchdog, Inc.
303-339-8099
[email protected]
www.idwatchdog.com

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SOURCE ID Watchdog, Inc.