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Form 8-K

Form 8-K
Table of Contents

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

Date of Report (Date of earliest event reported): February 20, 2008

 

 

NOVATEL WIRELESS, INC.

(Exact name of Registrant as specified in its charter)

 

DELAWARE   COMMISSION FILE:   86-0824673

(State or other jurisdiction or

incorporation or organization)

  000-31659  

(I.R.S. Employer

Identification No.)

9645 Scranton Road

San Diego, CA 92121

(Address of principal executive offices)

Registrant’s telephone number, including area code: (858) 320-8800

Not applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Table of Contents

TABLE OF CONTENTS

 

ITEM 2.02. Results of Operations and Financial Condition

  2

ITEM 9.01. Financial Statements and Exhibits

  2

SIGNATURES

  3

INDEX TO EXHIBITS

  4

EXHIBIT 99.1

 

 

Item 2.02. Results of Operations and Financial Condition

The information in this Form 8-K that is furnished under “Item 2.02. Results of Operations and Financial Condition” and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. It may be incorporated by reference in a filing under the Exchange Act or the Securities Act of 1933, as amended only if such filing specifically references this Form 8-K.

On February 20, 2008, Novatel Wireless, Inc. announced its financial results for the fourth quarter ended December 31, 2007 in a press release dated February 20, 2008. The press release is attached as Exhibit 99.1 to this Form 8-K.

 

Item 9.01. Financial Statements and Exhibits

(d) Exhibits.

The following exhibit is furnished with this Report:

 

99.1    Press release dated February 20, 2008 containing financial results for Novatel Wireless, Inc. for the fourth quarter ended December 31, 2007.

 

2


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

    Novatel Wireless, Inc.
Date: February 20, 2008     By:   /s/ Brad Weinert
        Brad Weinert
        President

 

3


Table of Contents

EXHIBIT INDEX

 

EXHIBIT NO.

 

DESCRIPTION

99.1

  Press Release, dated February 20, 2008 containing financial results for Novatel Wireless, Inc. for the fourth quarter ended December 31, 2007.

 

4

Press Release

Exhibit 99.1

LOGO

NOVATEL WIRELESS ANNOUNCES FOURTH QUARTER AND FY2007 RESULTS

Revenues Increase 97% in 2007 and 53% in Q4

GAAP Net Income Reaches $1.19 per Diluted Share in 2007; More than Triples in

Q4 Y-Y to $0.34 per Diluted Share

SAN DIEGO, CA—February 20, 2008—Novatel Wireless, Inc. (Nasdaq: NVTL), a leading provider of wireless broadband access solutions, today announced financial results for the fourth quarter and year ended December 31, 2007. Novatel Wireless reported fourth quarter revenue increased 53% to $118 million compared to the fourth quarter ended December 31, 2006. Net income on a generally accepted accounting principles (GAAP) basis increased to $11.1 million or $0.34 per diluted share, compared to GAAP net income of $2.6 million or $0.09 per diluted share in the prior year period. GAAP net income includes $2.0 million in stock-based compensation expenses, net of income tax. Excluding these charges, non-GAAP net income was $13.1 million or $0.40 per diluted share, compared to non-GAAP net income of $4.4 million or $0.14 per diluted share for the prior year period.

For the full year, the Company reported revenue of $430 million, GAAP net income of $38.4 million or $1.19 per diluted share, and non-GAAP net income of $45.3 million or $1.40 per diluted share.

“Novatel Wireless delivered outstanding 2007 results with 97% revenue growth year over year, and record order growth driven by our industry-leading USB products,” said Peter Leparulo, executive chairman of Novatel Wireless. “Our ability to bring highly innovative products to market well ahead of our competitors has been key to our success. During the year, we introduced seven new products, including two generations of USB products, and made significant progress on our goal to steadily increase our product momentum throughout EMEA. As we enter 2008, our innovation pipeline is in excellent shape, we are focused on profitable growth, and we will continue to execute on our long-term diversification strategy. During 2007, cash and investments increased by $69 million and our balance sheet is strong with $153 million in cash and investments, or $4.61 per diluted share, with no debt.”

 

--more--


Novatel Wireless Announces Fourth Quarter and 2007 Results    Page 2 of 10

 

Financial Results Summary (Unaudited)

 

Q4 GAAP

   Q4 2007     Q4 2006  

Revenue

   $ 118.0M     $ 77.0M  

Gross Margin

     29.9 %     26.6 %

OpEx (% of Rev)

     17.3 %     23.3 %

Income Taxes*

   $ 5.4M     $ 1.1M  

Net Income

   $ 11.1M     $ 2.6M  

EPS - Diluted

   $ 0.34     $ 0.09  

Q4 Non-GAAP

   Q4 2007     Q4 2006  

Income Taxes*

   $ 6.2M     $ 1.9M  

Net Income

   $ 13.1M     $ 4.4M  

EPS - Diluted

   $ 0.40     $ 0.14  

FY GAAP

   2007     2006  

Revenue

   $ 429.9M     $ 218.0M  

Gross Margin

     30.4 %     25.3 %

OpEx (% of Rev)

     17.9 %     28.3 %

Income Taxes*

   $ 21.6M     ($ 2.7M )

Net Income

   $ 38.4M     $ 443,000  

EPS - Diluted

   $ 1.19     $ 0.01  

FY Non-GAAP

   2007     2006  

Income Taxes*

   $ 24.1M     ($ 99,000 )

Net Income

   $ 45.3M     $ 7.8M  

EPS - Diluted

   $ 1.40     $ 0.26  

 

A full reconciliation from GAAP to Non-GAAP Net Income can be found on page 10.

* The Company is in the process of finalizing its tax provision and these amounts may change.


Novatel Wireless Announces Fourth Quarter and 2007 Results    Page 3 of 10

 

2007 Business Highlights

 

   

Delivered award-winning, patent-pending small form factor second generation USB products for worldwide markets, based on CDMA EV-DO Rev A and HSDPA/HSUPA.

 

   

Shipped industry’s first and smallest 2-in-1 Mobile Broadband second generation USB device for worldwide markets, based on CDMA EV-DO Rev A.

 

   

Introduced a family of HSDPA/HSUPA products, including the world’s first HSUPA Express mini card embedded modules and another patent-pending module with an integrated SIM. These products feature advanced wireless functionalities including antennae diversity, advanced receiver technology, increased bandwidth and throughput performance up to 7.2 Mbps, as well as location-based GPS functionality.

 

   

Strengthened intellectual property position with two issued and 12 new patent applications, bringing the total portfolio to 34 issued U.S. and international patents.

 

   

Increased momentum in embedded products with approximately 45 platforms now supported with leading PC and device manufacturers worldwide.

 

   

Launched strategic initiative to deliver mobile computing applications and services, including Location Based Services, enhanced wireless notebook capabilities, computer asset tracking, and IP-based voice and multimedia applications.


Novatel Wireless Announces Fourth Quarter and 2007 Results    Page 4 of 10

 

   

Delivered first-to-market CDMA EV-DO Rev. A PC/Express cards and first generation USB products to major North American carriers.

First Quarter 2008 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 for a description of risks. Please see the Company’s quarterly and annual reports on file with the Securities and Exchange Commission (SEC) for a more detailed description of risk factors.

The following table summarizes the Company’s financial guidance for the first quarter of 2008, which is based on the Company’s current business outlook as of the date of this press release. Revenue and earnings guidance for the first quarter of 2008 include expectations of strong demand for the Company’s products, particularly its USB products, as well as assumptions about industry wide supply constraints on certain components. Non-GAAP earnings per diluted share are based on a projected tax rate of 36% and exclude FAS 123R share-based compensation expenses.

 

     First Quarter
2008

Revenue (in millions)

   $ 110

GAAP Earnings Per Share, Diluted

   $ 0.22

Adjustment:

  

Share-based compensation expense, net of income taxes

   $ 0.05
      

Non-GAAP Earnings Per Share, Diluted

   $ 0.27
      

Conference Call

The Company will host a live conference call for equity analysts and investors today to discuss its quarterly results at 4:30 p.m. ET. The conference call will be webcast live on the Novatel Wireless website at www.novatelwireless.com, under the “Investor Relations” section. Following the live webcast, an archived version will be available on the Novatel Wireless website. A telephonic replay of the conference call will also be available approximately two hours after the call and will be accessible for two business days. To hear the replay, parties in the United States and Canada should call 800-218-0530 and enter pass code 11107528. International parties should call 303-275-2170 and enter pass code 11107528.


Novatel Wireless Announces Fourth Quarter and 2007 Results    Page 5 of 10

 

About Novatel Wireless

Novatel Wireless, Inc. is revolutionizing wireless communications. The Company is a leader in the design and development of innovative wireless broadband access solutions based on 3G WCDMA (HSDPA & UMTS), CDMA and GSM technologies. Novatel Wireless’ MerlinTM PC Cards and ExpressCards, Expedite® Embedded Modules, MobiLinkTM Communications Software Suite, OvationTM Fixed Mobile Convergence Products and ConversaTM Software Suite enable high-speed wireless Internet access. The company delivers innovative 3G solutions to operators, distributors 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. Forward-looking statements, including without limitation, the information above under “Fourth Quarter 2007 Outlook”, 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.

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, without limitation, (1) the future demand for wireless broadband access to data, (2) the future growth of wireless wide-area networking, (3) changes in commercially adopted wireless transmission standards and technologies, (4) continued acceptance of the Company’s current products and market demand for the Company’s anticipated new product offerings in 2008, (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) dependence on a small number of customers, (11) the effect of changes in accounting standards and in aspects of our critical accounting policies and (12) 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 detailed from time to time in the Company’s SEC reports and filings (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.


Novatel Wireless Announces Fourth Quarter and 2007 Results    Page 6 of 10

 

Non-GAAP Financial Measures; GAAP EPS

Novatel Wireless has provided in this release financial information that has not been prepared in accordance with GAAP. Non-GAAP net income and diluted earnings per share exclude share-based compensation expenses, net of income taxes. Non-GAAP net income and diluted earnings per share assume a tax rate which management believes reflects its long-term effective tax rate. Novatel Wireless uses these non-GAAP financial measures internally in analyzing its financial results and making operating decisions and believes they are useful to investors, as a supplement to GAAP measures, in evaluating ongoing operating results and trends and in comparing its financial measures with other companies in Novatel Wireless’ industry, many of which present similar non-GAAP financial measures to investors.

Non-GAAP net income and diluted earnings per share 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 and diluted earnings per share or any other performance measure determined in accordance with GAAP. We present non-GAAP net income and diluted earnings per share 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 share-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 net income and diluted earnings per share, management excludes share-based compensation expenses to facilitate its review of the 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 net income and diluted earnings per share also facilitates a comparison of Novatel Wireless’s 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 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 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.


Novatel Wireless Announces Fourth Quarter and 2007 Results    Page 7 of 10

 

Some of the limitations in relying on non-GAAP net income and diluted earnings per share are:

 

   

Other companies, including other companies in our industry, may calculate non-GAAP 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 financial measures reflect the exclusion of share-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 net income and diluted earnings per share. For more information, see the consolidated statements of income and the “Reconciliation of GAAP Net Income to Non-GAAP Net Income” contained in this press release.

©2007 Novatel Wireless. All rights reserved. The Novatel Wireless logo, Merlin, Expedite, MobiLink, Ovation and Conversa are trademarks of Novatel Wireless, Inc. Other product or service names mentioned herein are the trademarks of their respective owners.

For more information, contact:

Contacts:

Julie Cunningham

Vice President, IR & Communications

(858) 431-3711

ir@nvtl.com

or

Mike Bishop

The Blueshirt Group

(415) 217-4968

mike@blueshirtgroup.com


Novatel Wireless Announces Fourth Quarter and 2007 Results    Page 8 of 10

 

NOVATEL WIRELESS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 

     As of  
     December 31,
2007
    December 31,
2006
 

ASSETS

    

Current Assets:

    

Cash and cash equivalents

   $ 84,600     $ 34,612  

Marketable securities

     68,412       48,071  

Accounts receivable, net

     71,943       47,774  

Inventories

     25,876       25,662  

Deferred tax assets, net

     8,716       5,931  

Prepaid expenses and other

     3,874       3,344  
                

Total current assets

     263,421       165,394  

Property and equipment, net

     22,151       15,501  

Marketable securities

     —         1,479  

Intangible assets, net

     1,535       2,411  

Deferred tax assets, net

     7,820       6,630  

Other assets

     315       230  
                
   $ 295,242     $ 191,645  
                

LIABILITIES AND STOCKHOLDERS' EQUITY

    

Current liabilities:

    

Accounts payable

   $ 38,547     $ 39,346  

Accrued expenses

     39,412       18,063  
                

Total current liabilities

     77,959       57,409  

Capital lease obligations, long-term

     362       —    
                

Total liabilities

     78,321       57,409  

Stockholders' equity:

    

Common stock

     33       30  

Additional paid-in capital

     400,344       356,138  

Accumulated other comprehensive loss

     65       (31 )

Accumulated deficit

     (183,521 )     (221,901 )
                

Total stockholders' equity

     216,921       134,236  
                
   $ 295,242     $ 191,645  
                


Novatel Wireless Announces Fourth Quarter and 2007 Results    Page 9 of 10

 

NOVATEL WIRELESS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)

 

     Three Months Ended
December 31,
   Twelve Months Ended
December 31,
 
     2007     2006    2007    2006  

Revenue

   $ 118,012     $ 77,016    $ 429,903    $ 217,972  

Cost of revenue

     82,748       56,567      299,014      162,749  
                              

Gross margin

     35,264       20,449      130,889      55,223  
                              

Operating costs and expenses:

          

Research and development

     8,889       8,768      37,511      31,317  

Sales and marketing

     5,339       4,249      20,889      14,168  

General and administrative

     6,134       4,891      18,600      16,306  
                              

Total operating costs and expenses

     20,362       17,908      77,000      61,791  
                              

Operating income (loss)

     14,902       2,541      53,889      (6,568 )

Other income (expense):

          

Interest income and expense, net

     1,634       982      5,592      2,898  

Other income (expense), net

     (31 )     177      479      1,407  
                              

Income (loss) before income taxes

     16,505       3,700      59,960      (2,263 )

Provision (benefit) for income taxes

     5,387       1,111      21,580      (2,706 )
                              

Net income

   $ 11,118     $ 2,589    $ 38,380    $ 443  
                              

Per share data:

          

Net income per share:

          

Basic

   $ 0.34     $ 0.09    $ 1.22    $ 0.01  

Diluted

   $ 0.34     $ 0.09    $ 1.19    $ 0.01  

Weighted average shares used in computation of Net income per share:

          

Basic

     32,520       29,723      31,389      29,580  

Diluted

     33,168       30,224      32,313      30,058  


Novatel Wireless Announces Fourth Quarter and 2007 Results    Page 10 of 10

 

Reconciliation of GAAP Net Income to Non-GAAP Net Income

Three Months Ended December 31, 2007

(in thousands, except per share data)

 

     Net Income    Earnings Per
Share, Diluted

GAAP

   $ 11,118    $ 0.34

Adjustment:

     

Stock-based compensation expense, net of income taxes

     2,023      0.06
             

Non-GAAP

   $ 13,141    $ 0.40
             

Reconciliation of GAAP Net Income to Non-GAAP Net Income

Twelve Months Ended December 31, 2007

(in thousands, except per share data)

 

     Net Income    Earnings Per
Share, Diluted

GAAP

   $ 38,380    $ 1.19

Adjustment:

     

Stock-based compensation expense, net of income taxes

     6,873      0.21
             

Non-GAAP

   $ 45,253    $ 1.40