SEOUL, South Korea, March 24, 2020 /PRNewswire/ -- I-ON Digital Corp. ("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 fiscal year ended December 31, 2019 reflected in I-ON's current report on Form 10-K filed with the SEC on March 24, 2020.
Thanks to a strong first half of the year that saw double-digit top line growth, revenue for the full year increased 12.2% year over year to $7.9 million, which was driven by growth in DXP and easier comparisons versus 2018, but offset by relative weakness in the latter half of 2019 as a result of COVID 19 and macro uncertainty within end markets. Growth and composition reflected a healthy mix of customized solutions (+31.8%), maintenance and services (+23.4%) predominantly stemming from $6.9 million in DXP contracts associated with an increase in paying customers to 65 from 61. System integration and installation fell 43% due to less on-premise services provided and a decline in new customers, particularly in the second half of the year. The improving mix yielded a 500bp gross margin improvement to 30.6% versus last year despite an increase in outsourced contracting that lifted cost of services.
Key engagements included cosmetics e-commerce bellwether Amore Pacific, SBDC, Kyowon Creative, Seoul Broadcasting System, CJ Entertainment (DXP), the KLPGA and Korea's 3x3 Basketball League (sports data management), SK D&D (eForm), as well as Seoul City and Malaysia-based utility Tenaga for smart energy initiatives. Top ten customer concentration of 63% was higher than normal due to a decline in new customer engagements in the second half, while DXP comprised over 85% of total revenue.
G&A and marketing reflected 23.5% and R&D was 10.5% as a percentage of sales, resulting in total operating expenses of $2.7 million. This generated an operating loss of $0.3 million and a GAAP net income loss of $0.5 million, translating to a loss per share (EPS) of $0.02.
Chairman and CEO Mr. James Oh commented, "Our top-line growth and profitability improvements throughout the year compared to last year were clear indications that our strategy was being executed according to plan, considering the competitive environment and macro-economic headwinds across parts of the Asia Pacific region. Despite our aggressive sales and marketing efforts that lead to market share gains and growth in DXP backlog, the onset of COVID-19 adversely and unpredictably impacted our seasonally strongest December quarter, resulting in lower than expected revenue growth of 12.2% for the full year. Unfortunately, the clear global and domestic economic impact of COVID-19 has clouded near and intermediate-term visibility across sectors and thus our ability to fulfill existing DXP backlog and ramp pipeline as would be the normal course of our business. This will negatively impact the first half of this year's financial results and also means that the full implementation and ongoing execution of our previously announced engagements with Pacific Pro football, H9Pitch and multiple Korea-based amateur sports leagues are likely to be pushed out until at least the second half of 2020 at the earliest. That being said, we remain confident in our longer-term strategy to significantly enhance our clients' cloud capabilities by connecting CMS with marketing technology trends across enterprise, energy and sports sectors, which will boost our revenue organically and sustainably at a double-digit rate. In the interim, we look forward to keeping the market and shareholders abreast of where we stand with existing engagements and how we intend to better leverage our expanding patent portfolio as we and the world economy continue to confront unforeseen and uncertain challenges."
I-ON's balance sheet remained stable and healthy as of the end of 2019, reflecting cash and equivalents of approximately $1.3 million, $5.2 million of working capital, total assets of $9.8 million, approximately $0.7 million in short and long-term debt, and shareholders' equity of $6.6 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.
I-ON's pipeline and backlog as of the end of the year stood at approximately $11 million and $5 million, respectively, with a more diversified mix of longer-term sports and energy ICT contracts or letter of intents. As previously noted, the Company was expecting to recognize a majority of this DXP related backlog throughout the course of this year, but the onset of COVID 19 and its ongoing economic impact has compelled the Company to roll back its forward twelve-month pro forma revenue guidance to $10 million from $15 million, which still reflects 26% year over growth. Despite headwinds, management will continue to pursue a multi-faceted strategy to attain a revenue run-rate target of $25 million by the end of 2021, 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.
Bruce S. Lee
I-ON Digital Corp.
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