Inseego Corp. - Board of Directors
Oct 28, 2010

Novatel Wireless Announces Third Quarter 2010 Financial Results

SAN DIEGO, Oct 28, 2010 /PRNewswire via COMTEX News Network/ -- Novatel Wireless, Inc. (Nasdaq: NVTL), a leading provider of wireless broadband access solutions, today reported financial results for the third quarter ended Sept. 30, 2010.


                                    3Q 2010      3Q 2009      2Q 2010
    Revenues                             $75.6M       $94.3M        $71.8M
    GAAP Net Income (Loss)              $(7.1M)        $6.2M      $(22.0M)
    GAAP EPS (Loss)                      $(0.22)       $0.20        $(0.70)
    Non-GAAP Net Income (Loss)          $(4.3M)        $7.7M       $(4.3M)
    Non-GAAP EPS (Loss)                  $(0.14)       $0.24        $(0.14)
                                         ------


"Our revenue showed modest growth of 5.3 percent compared to the sequential second quarter of 2010," said Peter Leparulo, chairman and CEO of Novatel Wireless. "In the fourth quarter, we expect revenues to increase by more than 45 percent sequentially based on the fast growing backlog for our current MiFi(R) Intelligent Mobile Hotspot product family.

"During the fourth quarter, we also expect to begin launching next-generation products and our first MiFi OS software platform as we continue to roll out integrated hardware/software solutions that we believe will increase our product differentiation. Additionally, we have had a number of important design wins and expect embedded products to return to growth in 2011, as new OEM customers launch platforms with next-generation wireless access -- enabled by our 4G embedded modules. Looking forward, we will continue to focus on diversifying our revenue and customer base, introducing innovative products with higher software content, and growing our addressable market."

Operating Results

Third quarter revenues were within our guidance range of $75 to $80 million. While unit volumes for core products and MiFi intelligent mobile hotspots were at all-time highs, average selling prices were lower as mature 3G products continue to experience significant pricing pressures.


    Revenue by Product Category     3Q 2010      3Q 2009       2Q 2010
    Core Products                        $43.6M        $48.7M      $46.4M
    MiFi Products                        $31.8M        $37.9M      $25.0M
    Embedded Modules                      $0.2M         $7.7M       $0.4M
                                          -----         -----       -----
      Total                              $75.6M        $94.3M      $71.8M
                                         ------


Gross margins of 17.4 percent were below our expectations primarily due to a variance in our product mix, with a higher than anticipated percentage of lower margin products. Margins were also affected by industry-wide freight cost increases.

"We continued to maintain disciplined control over operating expenses as we scale to meet demand and introduce new products," said CFO Ken Leddon. "Operating expenses were $19.6 million, compared to $22.5 million in the prior year period, and $21.6 million in the second quarter of 2010."

Tax Adjustment

During the second quarter of 2010, the company recorded a valuation allowance of $15.5 million against the book value of deferred tax assets generated prior to 2010. During the third quarter of 2010, we determined that the valuation allowance recorded during the second quarter included an over-accrual of $0.8 million attributable to deferred tax assets previously reserved. We have also determined that there were certain other uncertain tax liabilities that were over accrued by a cumulative amount of $0.5 million as of December 31, 2009, which had accumulated over a number of years. We have analyzed the potential impact of these items and concluded that while the accumulation of these two errors was significant to the three months ended September 30, 2010, their correction would not be material to any individual periods. As a result we have recorded $0.5 million as an adjustment to the three and nine months ended September 30, 2010 while the correction of the $0.8 million error is included as an adjustment to the nine months ended September 30, 2010, as provided by the applicable accounting literature.

Both of these tax benefit adjustments have been excluded from non-GAAP results.

EPS Summary

GAAP loss per share was $0.22, compared to our previous guidance of $0.23 to $0.26. On a non-GAAP basis, the loss was $0.14 per share, compared to our previous guidance of $0.10 to $0.13 per share.


    Revenues                                           $75.6 million
    Gross Margin                                                17.4%

    GAAP Loss Per Share                                       $(0.22)
    Adjustments:
      Stock-based compensation expense                         $0.05
      Net M&A-related charges *                                -----
      Tax asset valuation adjustment                           $0.05
                                                               -----
                                                              $(0.02)
                                                              ------
    Non-GAAP Loss Per Share                                   $(0.14)
                                                              ======


    * M&A expenses excluded from non-GAAP results in the third quarter
    of 2010 were a net $1.7 million related primarily to the company's
    unsuccessful bid during the second quarter for the assets of
    Cinterion Wireless Modules.

Recent Business Highlights

  • Verizon Wireless and Apple announced that the iPad will be available at over 2,000 Verizon Wireless Stores nationwide beginning October 28. Verizon Wireless is offering three bundles, all featuring an iPad Wi-Fi model and the Novatel Wireless MiFi 2200 Intelligent Mobile Hotspot.
  • Novatel Wireless announced the continued evolution of its USB product line with the launch of the Ovation(TM) MC545 to support operators rolling out Dual-Carrier HSPA+ (DC-HSPA+) networks. At a press event in Madrid, Telefonica Moviles showcased the Ovation MC545's over-the-air download speed of 40.5 megabits per second supported by Ericsson's DC-HSPA+ network infrastructure. The Ovation MC545 modem is the world's most compact and light-weight DC-HSPA+ USB modem in the market place.
  • Virgin Mobile introduced new prepaid pricing plans that will provide access on the Sprint nationwide broadband network without a contract. Virgin Mobile offers two different mobile broadband devices as part of the Broadband2Go portfolio: the Novatel Wireless Ovation(TM) MC760 USB device; and the MiFi 2200, the nation's first prepaid Mobile Intelligent Hotspot.
  • Novatel Wireless demonstrated the MiFi 2372 Intelligent Mobile Hotspot at CTIA Enterprise and Applications trade show in San Francisco. The MiFi 2372 was pre-loaded with the new MiFi OS and applications aiming to help businesses benefit from secure mobile broadband and providing access to information and resources anytime, anyplace.
  • Novatel Wireless announced the readiness of its 4G portfolio for next-generation technology. Novatel Wireless provides a full portfolio of mobile broadband solutions to supply its carrier and OEM customers with leading consumer and business connectivity solutions as carriers deploy new wireless networks or evolve their existing networks to 4G.
  • KDDI Corporation in Japan began offering the MiFi 2372 as a rental service for Japanese consumers and business travelers who want to stay connected when traveling overseas. The service offers wireless rental data plans without long-term contracts for business and leisure travelers with international carriers in 23 countries.

Fourth Quarter 2010 Business Outlook

The following statements are forward-looking and actual results may differ materially. Please see the section titled, "Cautionary Note Regarding Forward-Looking Statements" at the end of this press release. A more detailed description of risks related to our business is included in the reports filed by the company with the Securities and Exchange Commission.

The following summarizes the company's financial guidance for the fourth quarter of 2010, which is based on our current business outlook as of the date of this press release.


                                                Fourth Quarter 2010
                                                -------------------
    Revenues (in millions)
                                                 $110 - $115 million
    Gross Margin                                           19% - 20%

    Non-GAAP Earnings Per Share                       $0.02  - $0.05
                                                      ==============


Conference Call Information

Novatel Wireless will host a conference call and live webcast for analysts and investors today at 5:00 p.m. ET. For parties in the United States and Canada, call 877-941-2068 to access the conference call. International parties can access the call at 480-629-9712.

Novatel Wireless will offer a live webcast of the conference call, which will also include forward-looking information. The webcast will be accessible from the "Investor Relations" section of the Company's website at www.novatelwireless.com. The webcast will be archived for a period of 90 days. A telephonic replay of the conference call will also be available two hours after the call and will run for two days. To hear the replay, parties in the United States and Canada should call 800-406-7325 and enter pass code 4361768. International parties should call 303-590-3030.

ABOUT NOVATEL WIRELESS

Novatel Wireless, Inc. is a leader in the design and development of innovative wireless broadband access solutions based on 3G and 4G wireless technologies. Novatel Wireless' Intelligent Mobile Hotspot products, software, USB modems and embedded modules enable high-speed wireless Internet access on leading wireless data networks. The Company delivers specialized wireless solutions to carriers, distributors, OEMs and vertical markets worldwide. Headquartered in San Diego, California, Novatel Wireless is listed on NASDAQ: NVTL. For more information please visit www.novatelwireless.com. (NVTLG)

Cautionary Note Regarding Forward-Looking Statements

Some of the information presented in this release constitutes forward-looking statements based on management's current expectations, assumptions, estimates and projections. In this context, forward-looking statements often address expected future business and financial performance and often contain words such as "may," "estimate," "anticipate," "believe," "expect," "intend," "plan," "project," "will" and similar words and phrases indicating future results. The information presented in this release related to our outlook for the fourth quarter of 2010 and statements regarding the future performance of our products are forward-looking. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated in such forward-looking statements. The Company therefore cannot guarantee future results, performance or achievements. Actual results could differ materially from the Company's expectations.

Factors that could cause actual results to differ materially from Novatel Wireless' expectations are set forth as risk factors in the Company's SEC reports and filings and include (1) the future demand for wireless broadband access to data, (2) the growth of wireless wide-area networking, (3) changes in commercially adopted wireless transmission standards and technologies including 3G and 4G standards, (4) continued customer and end user acceptance of the Company's current products and market demand for the Company's anticipated new product offerings, (5) increased competition and pricing pressure from current or new wireless market participants, (6) dependence on third party manufacturers in Asia and key component suppliers worldwide, (7) unexpected liabilities or expenses, (8) the Company's ability to introduce new products in a timely manner, (9) litigation, regulatory and IP developments related to our products or component parts of our products, (10) the outcome of pending or future litigation, including the current class action securities litigation, (11) the continuing impact of the recent global credit crisis on the value and liquidity of the securities in our investment portfolio, (12) dependence on a small number of customers, (13) the effect of changes in accounting standards and in aspects of our critical accounting policies and (14) the Company's plans and expectations relating to strategic relationships, international expansion, software and hardware developments, personnel matters and cost containment initiatives.

These factors, as well as other factors described in the reports filed by the Company with the SEC (available at www.sec.gov), could cause actual results to differ materially. Novatel Wireless assumes no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future, except as otherwise required pursuant to applicable law and our on-going reporting obligations under the Securities Exchange Act of 1934, as amended.

Non-GAAP Financial Measures

Novatel Wireless has provided in this release financial information that has not been prepared in accordance with GAAP. Non-GAAP operating expenses, net income and earnings per share exclude stock-based compensation expenses and charges related to M&A activities. Non-GAAP net income and diluted earnings per share also exclude the impact of establishing a valuation allowance related to deferred tax assets and assume a tax rate which management believes reflects its long-term effective tax rate.

Non-GAAP net income, diluted earnings per share, operating expenses, and gross margin are supplemental measures of our performance that are not required by, or presented in accordance with, GAAP. These non-GAAP financial measures are not intended to be used in isolation and, moreover, they should not be considered as a substitute for net income, diluted earnings per share, operating expenses, gross margin or any other performance measure determined in accordance with GAAP. We present non-GAAP net income, diluted earnings per share, operating expenses, and gross margin because we consider each to be an important supplemental measure of our performance.

Management uses these non-GAAP financial measures to make operational decisions, evaluate the Company's performance, prepare forecasts and determine compensation. Further, management believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company's performance when planning, forecasting and analyzing future periods. The stock-based compensation expenses are expected to vary depending on the number of new grants issued to both current and new employees, and changes in the Company's stock price, stock market volatility, expected option life and risk-free interest rates, all of which are difficult to estimate. In calculating non-GAAP operating expenses, net income and diluted earnings per share, management excludes stock-based compensation expenses and charges related to M&A activity to facilitate comparability of the Company's operating performance on a period-to-period basis because such expenses are not, in management's review, related to the Company's ongoing operating performance. Management uses this view of its operating performance for purposes of comparison with its business plan and individual operating budgets and allocation of resources.

We further believe that these non-GAAP financial measures are useful to investors in providing greater transparency to the information used by management in its operational decision making. We believe that the use of non-GAAP operating expenses, net income and diluted earnings per share also facilitates a comparison of Novatel Wireless' underlying operating performance with that of other companies in our industry, which use similar non-GAAP financial measures to supplement their GAAP results.

Calculating non-GAAP operating expenses, net income and diluted earnings per share have limitations as an analytical tool, and you should not consider these measures in isolation or as substitutes for GAAP operating expenses, net income and diluted earnings per share. In the future, we expect to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items in the presentation of our non-GAAP financial measures should not be construed as an inference that these costs are unusual, infrequent or non-recurring. Investors and potential investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool. Some of the limitations in relying on non-GAAP operating expenses, net income and diluted earnings per share are:

  • Other companies, including other companies in our industry, may calculate non-GAAP operating expenses, net income and diluted earnings per share differently than we do, limiting their usefulness as a comparative tool.
  • The Company's income tax expense will be ultimately based on its GAAP taxable income and actual tax rates in effect, which may differ significantly from the effective tax rate used in our non-GAAP financial measures.

In addition, the adjustments to our GAAP operating expenses, net income and diluted earnings per share reflect the exclusion of stock-based compensation expenses that are recurring and will be reflected in the Company's financial results for the foreseeable future. The Company compensates for these limitations by providing specific information regarding the GAAP amount excluded from the non-GAAP financial measures. The Company further compensates for the limitations of our use of non-GAAP financial measures by presenting comparable GAAP measures more prominently. The Company evaluates the non-GAAP financial measures together with the most directly comparable GAAP financial measures.

Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this press release with our GAAP operating expenses, net income, diluted earnings per share and gross margin. For more information, see the consolidated statements of operations and the "Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income" contained in this press release.

(C) 2010 Novatel Wireless. All rights reserved. MiFi is a registered trademark of Novatel Wireless, Inc. The Novatel Wireless name and logo are trademarks of Novatel Wireless, Inc. Other product or service names mentioned herein are the trademarks of their respective owners.


    Investor contact:

    William A. Walkowiak, CFA
    Novatel Wireless
    (858) 431-3711
    ir@nvtl.com

    Media contact:

    Charlotte Rubin
    Novatel Wireless
    (858) 812-3431
    crubin@nvtl.com



                            NOVATEL WIRELESS, INC.
                         CONSOLIDATED BALANCE SHEETS
                                (in thousands)




                                     September 30,      December 31,
                                                  2010              2009
                                                  ----              ----
                                      (Unaudited)
    ASSETS

    Current assets:

    Cash and cash
     equivalents                              $116,117          $100,025
    Marketable
     securities                                 31,302            27,664
    Accounts
     receivable, net                            32,419            36,299
    Inventories                                 15,982            24,973
    Deferred tax
     assets, net                                   236             6,465
    Prepaid expenses and
     other                                       5,093             4,738
                                                 -----             -----
      Total current
       assets                                  201,149           200,164

    Property and
     equipment, net                             13,627            14,911

    Marketable
     securities                                 35,554            48,355

    Intangible assets,
     net                                         1,006             1,513

    Deferred tax
     assets, net                                 2,903            12,135

    Other assets                                   186               316
                                                   ---               ---
      Total assets                            $254,425          $277,394
                                              ========          ========


    LIABILITIES AND
     STOCKHOLDERS'
     EQUITY

    Current
     liabilities:

    Accounts payable                           $38,660           $27,460
    Accrued expenses                            19,937            23,236
                                                ------            ------
      Total current
       liabilities                              58,597            50,696

    Capital lease
     obligations, long-
     term                                           83               184
    Other long-term
     liabilities                                12,101            15,359
                                                ------            ------

      Total liabilities                         70,781            66,239
                                                ------            ------

    Stockholders'
     equity:

    Common stock                                    32                31
    Additional paid-
     in capital                                421,585           416,579
    Accumulated other
     comprehensive
     income                                         30                15
    Accumulated
     deficit                                  (213,003)         (180,470)
                                              --------          --------
                                               208,644           236,155
    Treasury stock at
     cost                                      (25,000)          (25,000)
      Total
       stockholders'
       equity                                  183,644           211,155
                                               -------           -------

    Total liabilities
     and stockholders'
     equity                                   $254,425          $277,394
                                              ========          ========


                                      NOVATEL WIRELESS, INC.
                               CONSOLIDATED STATEMENTS OF OPERATIONS
                               (in thousands, except per share data)
                                            (unaudited)





                                                  Three Months Ended
                                                  ------------------
                                                    September 30,
                                                    -------------
                                                   2010         2009
                                                   ----         ----


    Net revenues                                $75,602      $94,293
    Cost of revenues                             62,412       64,488
      Gross profit                               13,190       29,805
                                                 ------       ------

    Operating costs and expenses:
      Research and development                   11,576       11,707
      Sales and marketing                         4,163        5,462
      General and administrative                  3,833        5,386
        Total operating costs and expenses       19,572       22,555
                                                 ------       ------

    Operating income (loss)                      (6,382)       7,250

    Other income (expense):
      Interest income (expense), net             (2,292)         271
      Other income, net                             420          174
                                                    ---          ---

    Income (loss) before income taxes            (8,254)       7,695

    Income tax expense (benefit)                 (1,149)       1,472


    Net income (loss)                           $(7,105)      $6,223
                                                =======       ======

    Per share data:

    Net income (loss) per share:
      Basic                                      $(0.22)       $0.20
      Diluted                                    $(0.22)       $0.20


    Weighted average shares used in
     computation of
      net income (loss) per share:
      Basic                                      31,615       30,694
      Diluted                                    31,615       31,508



                                                   Nine Months Ended
                                                   -----------------
                                                     September 30,
                                                     -------------
                                                    2010          2009
                                                    ----          ----


    Net revenues                                $219,664      $248,786
    Cost of revenues                             175,113       184,369
      Gross profit                                44,551        64,417
                                                  ------        ------

    Operating costs and expenses:
      Research and development                    34,070        33,419
      Sales and marketing                         15,258        14,817
      General and administrative                  14,309        14,237
        Total operating costs and expenses        63,637        62,473
                                                  ------        ------

    Operating income (loss)                      (19,086)        1,944

    Other income (expense):
      Interest income (expense), net              (2,698)        1,122
      Other income, net                            1,671           171
                                                   -----           ---

    Income (loss) before income taxes            (20,113)        3,237

    Income tax expense (benefit)                  12,420           277

    Net income (loss)                           $(32,533)       $2,960
                                                ========        ======

    Per share data:

    Net income (loss) per share:
      Basic                                       $(1.04)        $0.10
      Diluted                                     $(1.04)        $0.10


    Weighted average shares used in
     computation of
      net income (loss) per share:
      Basic                                       31,414        30,539
      Diluted                                     31,414        31,078


                             NOVATEL WIRELESS, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)
                                  (unaudited)


                                                         Nine Months Ended
                                                           September 30,


                                                         2010            2009


    Cash flows from operating
     activities:
         Net income (loss)                           $(32,533)         $2,960
         Adjustments to reconcile net
          income (loss) to net cash
          provided by operating
          activities:
              Amortization of debt
               issuance costs                             541               -
              Loan fees recognized on
               extinguishment of debt                   2,370               -
              Depreciation and
               amortization                             7,970          10,236
              Impairment loss on equipment                146               -
              Provision for bad debts                     141             107
              Inventory provision                       1,030           1,910
              Share-based compensation
               expense                                  4,695           5,035
              Excess tax benefits from
               equity based compensation                  (89)           (282)
              Deferred income tax expense              11,579             (76)
              Changes in assets and
               liabilities:
                   Accounts receivable                  3,739          (8,654)
                   Inventories                          7,961          (3,443)
                   Prepaid expenses and other
                    assets                               (284)          5,707
                   Accounts payable                    10,569          20,757
                   Accrued expenses, income
                    taxes, and other                   (3,887)            (57)
                                                       ------             ---

                        Net cash provided by
                         operating activities          13,948          34,200
                                                       ------          ------

    Cash flows from investing
     activities:
         Purchases of property and
          equipment                                    (5,585)         (4,226)
         Purchases of intangible
          assets                                         (110)           (524)
         Purchases of securities                    (155,009)         (59,191)
         Securities maturities/sales                  164,187          55,718
                                                      -------          ------

                        Net cash provided (used) by
                         investing activities           3,483          (8,223)
                                                        -----          ------
    Cash flows from financing
     activities:
         Proceeds from the issuance
          of short-term debt, net of
          issuance costs                               27,415               -
         Principal repayments of
          short-term debt                             (30,000)              -
         Principal payments under
          capital lease obligations                      (105)           (178)
         Proceeds from stock option
          exercises net of taxes paid
          on vested restricted stock
          units                                           580           1,799
         Excess tax benefits from
          equity based compensation                        89             282
         Deposit of restricted funds                (188,890)               -
         Remittance from restricted
          funds                                       188,890               -


                        Net cash (used in) provided
                         by financing activities       (2,021)          1,903
    Effect of exchange rates on
     cash and cash equivalents                            682             283
                                                          ---             ---

                        Net increase in cash and
                         cash equivalents              16,092          28,163
    Cash and cash equivalents,
     beginning of period                              100,025          77,733
                                                            -               -
                                                          ---             ---
    Cash and cash equivalents,
     end of period                                   $116,117        $105,896
                                                     ========        ========

    Supplemental disclosures of
     cash flow information:
         Cash paid during the year
          for:
              Interest                                   $216             $10
              Income taxes                                299             294
    Supplemental disclosures of
     non-cash financing
     activities:
         Accrued debt issuance costs                      326               -



                    Novatel Wireless, Inc.
     Reconciliation of GAAP Net Loss to Non-GAAP Net Loss
        Three and Nine Months Ended September 30, 2010
            (in thousands, except per share data)
                         (unaudited)





                                              Three Months Ended
                                              September 30, 2010
                                              ------------------

                                                           Earnings (Loss)
                                                              Per Share,
                                             Net Loss          Diluted
                                             --------          -------

    GAAP net loss                             $(7,105)              $(0.22)

    Adjustments:
         Share-based compensation
          expense (a)                           1,552                 0.05
         Acquisition bid costs
          (b):
            (1) Professional fees     $(662)
            (2) Bridge loan costs -
             fee amortization and
             interest expense         2,378
            (3) Foreign exchange
             gains on Euro
             denominated currency,
                 net of hedging costs     -     1,716                 0.05
                                        ---
             Total bid costs

        Deferred tax asset
         valuation allowance (c )                (501)               (0.02)


    Non-GAAP net loss                         $(4,338)              $(0.14)
                                              =======               ======




                                               Nine Months Ended
                                               September 30, 2010
                                               ------------------

                                                             Earnings (Loss)
                                                                Per Share,
                                              Net Loss           Diluted
                                              --------           -------

    GAAP net loss                              $(32,533)              $(1.04)

    Adjustments:
         Share-based
          compensation expense
          (a)                                     4,695                 0.15
         Acquisition bid costs
          (b):
            (1) Professional fees      $1,387
            (2) Bridge loan costs -
             fee amortization and
             interest expense           3,065
            (3) Foreign exchange
             gains on Euro
             denominated currency,
                 net of hedging costs (1,753)     2,699                 0.09
                                       ------
             Total bid costs

        Deferred tax asset
         valuation allowance (c
         )                                       14,192                 0.45


    Non-GAAP net loss                          $(10,947)              $(0.35)
                                               ========               ======







    (a) Adjustments reflect share-based compensation expense recorded under ASC Topic 718.

    (b) The company incurred the following expenses related to M&A activities:

    1.  Professional fees to perform due diligence procedures. Activity for the quarter ended September 30, 2010 reflects a reduction in estimated professional fees.

    2.  Amortization of financing costs and interest expense related to a
    $30 million short-term loan facility. The Company repaid  the loan in full on July 1, 2010.

    3.  The Company realized a foreign exchange gain of $2.9 million upon
    the conversion of Euro denominated funds. The Euro denominated funds were held
    to fund the proposed acquisition price for the transaction. The foreign
    exchange gains were offset by $1.2 million in premiums paid for protective puts
    to hedge the Company's Euro exposure during the bidding process.

    (c ) During the second quarter of 2010, the company recorded a
    valuation allowance of $15.5 million against the book value of deferred tax assets generated prior to 2010. During the third quarter of 2010, we determined that the valuation allowance recorded during the second quarter included an over accrual of $0.8 million attributable to deferred tax assets previously reserved. We have also determined
         that there were

         certain other uncertain tax liabilities that were over accrued by a
         cumulative amount of

                                           $0.5 million as of December 31, 2009, which had accumulated over a number of

         years.  We have analyzed the potential impact of these items and
         concluded that

         while the accumulation of these two errors was significant to the
         three months ended

         September 30, 2010, the correction of these errors would not be
         material to any

         individual periods.  As a result we have recorded $0.5 million as an
         adjustment to the

         three and nine months ended September 30, 2010 while the correction
         the $0.8 million

         error is included as an adjustment to the nine months ended September
         30, 2010, as

         provided by the applicable accounting literature.


    See "Non -GAAP Financial Measures" for information regarding our use
    of Non-GAAP financial measures.



                                     Novatel Wireless, Inc.
           Reconciliation of GAAP Operating Costs and Expenses to Non-GAAP
                             Operating Costs and Expenses
                        Three Months Ended September 30, 2010
                                    (in thousands)
                                     (unaudited)





                                         GAAP        Share-based
                                         ----        compensation
                                                     expense (a)
                                                     -----------

    Cost of revenues                   $62,412               $156
                                       =======               ----

    Operating costs and
     expenses:
      Research and development          11,576                545
      Sales and marketing                4,163                266
      General and administrative         3,833                585

        Total operating costs and
         expenses                      $19,572              1,396
                                       =======              -----

      Total                                                $1,552
                                                           ======



                                        Bid Costs
                                           (b)         Non-GAAP
                                        ---------      --------

    Cost of revenues                           $-        $62,256
                                              ===        =======

    Operating costs and
     expenses:
      Research and development                  -         11,031
      Sales and marketing                       -          3,897
      General and administrative             (662)         3,910

        Total operating costs and
         expenses                           $(662)       $18,838
                                            =====        =======

      Total




    (a) Adjustments reflect share-based compensation expense recorded
    under ASC Topic 718.

    (b) Professional fees to perform due diligence procedures. Activity
    for the quarter ended
        September 30, 2010 reflects a reduction in estimated professional
        fees.

    See "Non -GAAP Financial Measures" for information regarding our use
    of Non-GAAP financial measures.

                         Novatel Wireless, Inc.
     Reconciliation of GAAP Operating Costs and Expenses to Non-GAAP
                      Operating Costs and Expenses
                  Nine Months Ended September 30, 2010
                             (in thousands)
                               (unaudited)





                                          GAAP        Share-based
                                          ----        compensation
                                                      expense (a)
                                                      -----------

    Cost of revenues                    $175,113              $473
                                        ========              ----

    Operating costs and expenses:
      Research and development            34,070             1,687
      Sales and marketing                 15,258               838
      General and administrative          14,309             1,697

        Total operating costs and
         expenses                        $63,637             4,222
                                         =======             -----

      Total                                                 $4,695
                                                            ======



                                        Bid Costs
                                           (b)         Non-GAAP
                                        ---------      --------

    Cost of revenues                           $-      $174,640
                                              ===      ========

    Operating costs and expenses:
      Research and development                  -        32,383
      Sales and marketing                       -        14,420
      General and administrative            1,387        11,225

        Total operating costs and
         expenses                           1,387       $58,028
                                            =====       =======

      Total




    (a) Adjustments reflect share-based compensation expense recorded
    under ASC Topic 718.

    (b) Professional fees to perform due diligence procedures. Activity
    for the quarter ended
        September 30, 2010 reflects a reduction in estimated professional
        fees.

    See "Non -GAAP Financial Measures" for information regarding our use
    of Non-GAAP financial measures.


                            Novatel Wireless, Inc.
           Reconciliation of GAAP Loss before Income Taxes to EBITDA
                     Three Months Ended September 30, 2010
                                (in thousands)
                                  (unaudited)

                                         Three Months Ended
                                         September 30, 2010
                                         ------------------

    Loss before income taxes                         $(8,254)
    Depreciation and amortization
     charges                                           2,561
    Share-based compensation expense                   1,552
    M&A related activities                              (662)
    Other expense (income)                             1,872
      EBITDA                                         $(2,931)
                                                     =======




    See "Non -GAAP Financial Measures" for information regarding
     our use of Non-GAAP financial measures.




SOURCE Novatel Wireless, Inc.

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