Novatel Wireless Reports Third Quarter 2012 Financial Results
Third quarter revenue was
"As expected, the third quarter was a transitionary period for
Recent Business Highlights
- At the end of September,
Novatel Wireless announced its next-generation MiFi® Intelligent Mobile Hotspot, the first mobile hotspot with touchscreen display, soon being sold through AT&T as the MiFi® Liberate. This marks the first launch of the MiFi® 2 next generation product fromNovatel Wireless , which includes a new user interface based on 2.8" multi-touch interactive color display, connectivity for up to 10 devices, 11 hours of continuous use, and other capabilities beyond pure connectivity such as on-board shared storage. - Thrifty Car Rental recently announced it has selected
Novatel Wireless's Mobile Tracking Device, the MT 2500, to manage and protect its fleet of rental vehicles against theft, damage, and loss inSouth Africa . The deployment will also have the capabilities to expand beyond Thrifty's rental car fleets, providing services on new and leased vehicles as well. Novatel Wireless recently announced it is filing an additional lawsuit against ZTE Corp., a Chinese company, andZTE (USA), Inc. for infringing on one of its key patents related to the MiFi® family of mobile hotspots and wireless data modems. The Company built the recently announced MiFi® 2 product on its extensive portfolio of such MiFi® product related patents.
Fourth Quarter 2012 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
Our guidance for the fourth quarter of 2012 reflects current business indicators and expectations as of the date of this release. All figures are approximations based on management's beliefs and assumptions as of the date of this release.
The Company is in various stages of launching three major products in its MiFi product line, one of which is going through carrier certification and two of which are new product launches. The wide guidance range is attributable to the uncertainty related to forecasting the sell-through volumes for two of the new MiFi products, and the uncertain timing of the launch of the third MiFi product currently being certified.
| Fourth Quarter 2012 | ||
| Revenue | ||
| Non-GAAP Gross Margin | 22% - 24% | |
| Non-GAAP EPS | ||
Conference Call Information
- In
the United States , call 1-877-317-6789 - International parties can access the call at 1-412-317-6789
ABOUT
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 financial results for the third quarter ended
Factors that could cause actual results to differ materially from
These factors, as well as other factors described in the reports filed by the Company with the
Non-GAAP Financial Measures
Adjusted EBITDA and Non-GAAP net income, 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 adjusted EBITDA and non-GAAP net income, 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 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 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 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 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 earnings per share are:
- Other companies, including other companies in our industry, may calculate non-GAAP operating expenses, net income and 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 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, 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) 2012
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (in thousands) | ||||||||
| 2012 | 2011 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 16,341 | $ | 47,069 | ||||
| Marketable securities | 39,958 | 28,267 | ||||||
| Accounts receivable, net | 40,270 | 36,849 | ||||||
| Inventories | 36,527 | 42,279 | ||||||
| Deferred tax assets, net | 2,005 | 2,011 | ||||||
| Prepaid expenses and other | 4,782 | 3,712 | ||||||
| Total current assets | 139,883 | 160,187 | ||||||
| Property and equipment, net | 14,939 | 18,496 | ||||||
| Marketable securities | 6,174 | 13,495 | ||||||
| Intangible assets, net | 3,091 | 35,702 | ||||||
| Goodwill | - | 19,772 | ||||||
| Deferred tax assets, net | 843 | 1,023 | ||||||
| Other assets | 672 | 504 | ||||||
| Total assets | $ | 165,602 | $ | 249,179 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 38,948 | $ | 54,030 | ||||
| Accrued expenses | 25,188 | 25,044 | ||||||
| Total current liabilities | 64,136 | 79,074 | ||||||
| Other long-term liabilities | 3,759 | 4,080 | ||||||
| Total liabilities | 67,895 | 83,154 | ||||||
| Stockholders' equity: | ||||||||
| Common stock | 33 | 32 | ||||||
| Additional paid-in capital | 435,804 | 429,813 | ||||||
| Accumulated other comprehensive income (loss) | 36 | (8 | ) | |||||
| Accumulated deficit | (313,166 | ) | (238,812 | ) | ||||
| 122,707 | 191,025 | |||||||
| Treasury stock at cost | (25,000 | ) | (25,000 | ) | ||||
| Total stockholders' equity | 97,707 | 166,025 | ||||||
| Total liabilities and stockholders' equity | $ | 165,602 | $ | 249,179 | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | |||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||
| Net revenues | $ | 71,017 | $ | 113,263 | $ | 273,613 | $ | 293,068 | |||||||||
| Cost of net revenues | 56,371 | 86,573 | 214,728 | 234,202 | |||||||||||||
| Gross profit | 14,646 | 26,690 | 58,885 | 58,866 | |||||||||||||
| Operating costs and expenses: | |||||||||||||||||
| Research and development | 14,696 | 15,126 | 44,982 | 45,517 | |||||||||||||
| Sales and marketing | 6,267 | 7,211 | 21,255 | 22,805 | |||||||||||||
| General and administrative | 4,825 | 6,243 | 16,061 | 16,550 | |||||||||||||
| Goodwill and intangible assets impairment losses | 20,484 | 3,514 | 49,821 | 3,514 | |||||||||||||
| Amortization of purchased intangible assets | 227 | 644 | 891 | 1,699 | |||||||||||||
| Total operating costs and expenses | 46,499 | 32,738 | 133,010 | 90,085 | |||||||||||||
| Operating loss | (31,853 | ) | (6,048 | ) | (74,125 | ) | (31,219 | ) | |||||||||
| Other income (expense): | |||||||||||||||||
| Interest income, net | 72 | 60 | 238 | 303 | |||||||||||||
| Other expense, net | (45 | ) | (679 | ) | (191 | ) | (1,164 | ) | |||||||||
| Loss before income taxes | (31,826 | ) | (6,667 | ) | (74,078 | ) | (32,080 | ) | |||||||||
| Income tax (benefit) provision | 107 | (11,165 | ) | 276 | (10,592 | ) | |||||||||||
| Net income (loss) | $ | (31,933 | ) | $ | 4,498 | $ | (74,354 | ) | $ | (21,488 | ) | ||||||
| Per share data: | |||||||||||||||||
| Net income (loss) per share: | |||||||||||||||||
| Basic | $ | (0.97 | ) | $ | 0.14 | $ | (2.28 | ) | $ | (0.67 | ) | ||||||
| Diluted | $ | (0.97 | ) | $ | 0.14 | $ | (2.28 | ) | $ | (0.67 | ) | ||||||
|
Weighted average shares used in computation of net income (loss) per share: |
|||||||||||||||||
| Basic | 33,074 | 32,057 | 32,683 | 32,005 | |||||||||||||
| Diluted | 33,074 | 32,370 | 32,683 | 32,005 | |||||||||||||
| Comprehensive income (loss) | $ | (31,906 | ) | $ | 4,438 | $ | (74,310 | ) | $ | (21,542 | ) | ||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||
| (in thousands) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net income (loss) | $ | (31,933 | ) | $ | 4,498 | $ | (74,354 | ) | $ | (21,488 | ) | ||||||
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|||||||||||||||||
| Loss on sale/disposal of fixed asset | 62 | - | 90 | - | |||||||||||||
| Depreciation and amortization | 2,775 | 4,096 | 9,747 | 13,782 | |||||||||||||
| Loss on goodwill and intangible assets impairment | 20,484 | 3,514 | 49,821 | 3,514 | |||||||||||||
| Impairment loss on software license intangible assets | - | 58 | - | 133 | |||||||||||||
| Provision for bad debts | (49 | ) | (64 | ) | 39 | 59 | |||||||||||
| Net impairment loss on marketable securities | - | 192 | 39 | 346 | |||||||||||||
| Inventory provision | 1,347 | 256 | 1,663 | 576 | |||||||||||||
| Share-based compensation expense | 1,752 | 1,571 | 5,409 | 4,057 | |||||||||||||
| Non-cash income tax expense (benefit) | 97 | (10,886 | ) | 194 | (11,287 | ) | |||||||||||
| Changes in assets and liabilities: | |||||||||||||||||
| Accounts receivable | 7,811 | (12,879 | ) | (3,460 | ) | 9,046 | |||||||||||
| Inventories | 1,691 | 737 | 4,089 | (6,634 | ) | ||||||||||||
| Prepaid expenses and other assets | 1,012 | 474 | (1,238 | ) | 3,484 | ||||||||||||
| Accounts payable | (4,239 | ) | (2,976 | ) | (15,108 | ) | (23,941 | ) | |||||||||
| Accrued expenses, income taxes, and other | (192 | ) | 2,226 | 233 | 1,651 | ||||||||||||
| Net cash provided by (used in) operating activities | 618 | (9,183 | ) | (22,836 | ) | (26,702 | ) | ||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Purchases of property and equipment | (433 | ) | (1,093 | ) | (4,021 | ) | (4,928 | ) | |||||||||
| Purchases of intangible assets | - | (119 | ) | - | (219 | ) | |||||||||||
| Purchases of marketable securities | (14,341 | ) | (10,407 | ) | (31,871 | ) | (21,366 | ) | |||||||||
| 15,447 | 10,865 | 27,506 | 58,539 | ||||||||||||||
| Net cash provided by (used in) investing activities | 673 | (754 | ) | (8,386 | ) | 32,026 | |||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Proceeds from the issuance of short-term debt, net of issuance costs | 5,000 | 12,000 | 5,000 | 12,000 | |||||||||||||
| Principal repayments of short-term debt | (5,000 | ) | (12,000 | ) | (5,000 | ) | (12,000 | ) | |||||||||
| Principal payments under capital lease obligations | - | (26 | ) | (46 | ) | (81 | ) | ||||||||||
|
Proceeds from ESPP, stock option exercises, net of taxes paid on vested restricted stock units |
(151 | ) | 5 | 583 |
(617 |
) |
|||||||||||
|
Net cash provided by (used in) financing activities |
(151 | ) | (21 | ) | 537 | (698 | ) | ||||||||||
| Effect of exchange rates on cash and cash equivalents | 4 | (128 | ) | (43 | ) | (74 | ) | ||||||||||
| Net increase (decrease) in cash | 1,144 |
|
(10,086 | ) | (30,728 | ) | 4,552 | ||||||||||
| Cash and cash equivalents, beginning of period | 15,197 | 32,013 | 47,069 | 17,375 | |||||||||||||
| Cash and cash equivalents, end of period | $ | 16,341 |
|
$ | 21,927 | $ | 16,341 | $ | 21,927 | ||||||||
|
|
|||||||||||||||||
| Reconciliation of GAAP Net Income (Loss) to Non-GAAP Net Income (Loss) | |||||||||||||||||
| Three Months and Nine Months Ended |
|||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended |
|
Nine Months Ended |
|||||||||||||||
|
|
|
|
|||||||||||||||
|
Net |
Income (Loss) |
Net |
Income (Loss) |
||||||||||||||
| GAAP net loss | $ | (31,933 | ) | $ | (0.97 | ) | $ | (74,354 | ) | $ | (2.28 | ) | |||||
| Adjustments: | |||||||||||||||||
| Share-based compensation expense (a) | 1,752 | 0.05 | 5,409 | 0.17 | |||||||||||||
| Acquisition related charges (b) | 516 | 0.02 | 2,430 | 0.08 | |||||||||||||
| Goodwill & Intangibles impairment (c) | 20,484 | 0.62 | 49,821 | 1.52 | |||||||||||||
| Income tax adjustments (d) | 94 | 0.01 | 132 | 0.00 | |||||||||||||
| Severance (e) | - | - | 890 | 0.03 | |||||||||||||
| Non-GAAP net loss | $ | (9,087 | ) | $ | (0.27 | ) | $ | (15,672 | ) | $ | (0.48 | ) | |||||
| (a) Adjustments reflect share-based compensation expense recorded under ASC Topic 718. |
| (b) Adjustments reflect amortization of purchased intangibles. |
| (c) Adjustments reflect goodwill and purchased intangibles impairments resulting from interim impairment analyses conducted during the 1st and 3rd quarters of 2012. |
| (d) Adjustments for certain deferred tax valuation activity and an income tax effect of Q1 2012 goodwill impairment. |
| (e) Adjustments reflect the cost of a reduction in force. |
| See "Non -GAAP Financial Measures" for information regarding our use of Non-GAAP financial measures. |
|
|
|||||||||||||||
| Reconciliation of GAAP Operating Costs and Expenses to Non-GAAP Operating Costs and Expenses | |||||||||||||||
| Three Months Ended |
|||||||||||||||
| (in thousands) | |||||||||||||||
| (Unaudited) | |||||||||||||||
| GAAP |
Share-based |
Purchased |
Goodwill and |
Non-GAAP | |||||||||||
| Cost of net revenues | $ | 56,371 | $ | 167 | $ | 289 | $ | - | $ | 55,915 | |||||
| Operating costs and expenses: | |||||||||||||||
| Research and development | 14,696 | 645 | - | - | 14,051 | ||||||||||
| Sales and marketing | 6,267 | 334 | - | - | 5,933 | ||||||||||
| General and administrative | 4,825 | 606 | - | - | 4,219 | ||||||||||
| Goodwill and intangible assets impairment losses | 20,484 |
- |
- |
20,484 | - | ||||||||||
| Amortization of purchased intangibles | 227 |
- |
227 | - | - | ||||||||||
| Total operating costs and expenses | $ | 46,499 |
$ |
1,585 |
$ |
227 |
$ |
20,484 | $ | 24,203 | |||||
| Total | $ | 1,752 | $ | 516 | $ | 20,484 | |||||||||
| (a) Adjustments reflect share-based compensation expense recorded under ASC Topic 718. |
| (b) Adjustments reflect amortization of purchased intangibles. |
| (c) Includes impairment charges for goodwill and purchased intangibles |
| See "Non -GAAP Financial Measures" for information regarding our use of Non-GAAP financial measures. |
|
|
||||||||||||||||||
| Reconciliation of GAAP Operating Costs and Expenses to Non-GAAP Operating Costs and Expenses | ||||||||||||||||||
| Nine Months Ended |
||||||||||||||||||
| (in thousands) | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| GAAP |
Share-based |
Purchased |
Goodwill and |
Severance |
Non-GAAP | |||||||||||||
| Cost of net revenues | $ | 214,728 | $ | 543 | $ | 1,539 | $ | - | $ | 53 | $ | 212,593 | ||||||
| Operating costs and expenses: | ||||||||||||||||||
| Research and development | 44,982 | 2,033 | - | - | 555 | 42,394 | ||||||||||||
| Sales and marketing | 21,255 | 1,067 | - | - | 85 | 20,103 | ||||||||||||
| General and administrative | 16,061 | 1,766 | - | - | 197 | 14,098 | ||||||||||||
| Goodwill and intangible assets impairment losses | 49,821 | - | - | 49,821 | - | - | ||||||||||||
| Amortization of purchased intangibles | 891 | - | 891 | - | - | - | ||||||||||||
| Total operating costs and expenses | $ | 133,010 |
$ |
4,866 |
$ |
891 |
$ |
49,821 |
$ |
837 | $ | 76,595 | ||||||
|
|
||||||||||||||||||
| Total | $ | 5,409 | $ | 2,430 | $ | 49,821 | $ | 890 | ||||||||||
| (a) Adjustments reflect share-based compensation expense recorded under ASC Topic 718. |
| (b) Adjustments reflect amortization of purchased intangibles. |
| (c) Adjustments reflect goodwill and purchased intangibles impairment resulting from interim impairment analyses conducted during the 1st and 3rd quarters of 2012. |
| (d) Includes charges for a reduction in force. |
| See "Non -GAAP Financial Measures" for information regarding our use of Non-GAAP financial measures. |
|
|
||||||||
| Reconciliation of GAAP Loss before Income Taxes to Adjusted EBITDA | ||||||||
| Three and Nine Months Ended |
||||||||
| (in thousands) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended | Nine Months Ended | |||||||
| Loss before income taxes | $ | (31,826 | ) | $ | (74,078 | ) | ||
| Depreciation and amortization charges | 2,775 | 9,747 | ||||||
| Goodwill & purchased intangibles impairments | 20,484 | 49,821 | ||||||
| Share-based compensation expense | 1,752 | 5,409 | ||||||
| Severance | - | 890 | ||||||
| Other expense (income) | (27 | ) | (47 | ) | ||||
| Adjusted EBITDA | $ | (6,842 | ) | $ | (8,258 | ) | ||
| See "Non -GAAP Financial Measures" for information regarding our use of Non-GAAP financial measures. |
| Segment Reporting | |||||||||||||||||
| Three and Nine Months Ended |
|||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
|
|
|||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||||||||
|
Net revenues by reportable segment: |
|||||||||||||||||
| Mobile Computing Products | $ | 65,189 | $ | 102,691 | $ | 248,620 | $ | 258,268 | |||||||||
| M2M Products and Solutions | 5,828 | 10,572 | 24,993 | 34,800 | |||||||||||||
| Total | $ | 71,017 | $ | 113,263 | $ | 273,613 | $ | 293,068 | |||||||||
|
Operating income (loss): |
|||||||||||||||||
| Mobile Computing Products | $ | (7,513 | ) | $ | 1,311 | $ | (11,701 | ) | $ | (14,359 | ) | ||||||
| M2M Products and Solutions | (24,340 | ) | (7,359 | ) | (62,424 | ) | (16,860 | ) | |||||||||
| Total | $ | (31,853 | ) | $ | (6,048 | ) | $ | (74,125 | ) | $ | (31,219 | ) | |||||
| 2012 | 2011 | ||||||||||||||||
|
Identifiable assets by reportable segment: |
|||||||||||||||||
| Mobile Computing Products | $ | 148,855 | $ | 181,180 | |||||||||||||
| M2M Products and Solutions | 16,747 | 67,999 | |||||||||||||||
| Total | $ | 165,602 | $ | 249,179 | |||||||||||||
Investor contact:
chris@blueshirtgroup.com
matt@blueshirtgroup.com
or
Media contact:
crubin@nvtl.com
Source:
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