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): October 24, 2006
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, Suite 205
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:
| ¨ | 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)) |
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| 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 another filing under the Exchange Act or the Securities Act of 1933 only if such subsequent filing specifically references this Form 8-K.
On October 24, 2006, Novatel Wireless, Inc. announced its financial results for the third quarter ended September 30, 2006 in a press release dated October 24, 2006. The press release is attached as Exhibit 99.1 to this filing.
| Item 9.01. | Financial Statements and Exhibits |
(d) Exhibits.
The following exhibit is furnished with this report:
| 99.1 | Press release dated October 24, 2006 containing financial results for Novatel Wireless, Inc. for the quarter ended September 30, 2006. |
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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: October 24, 2006 |
By: |
/s/ Dan L. Halvorson | ||||||
| Dan L. Halvorson | ||||||||
| Chief Financial Officer and Treasurer, | ||||||||
| (Principal Financial and Accounting Officer) | ||||||||
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| EXHIBIT NO. | DESCRIPTION | |
| 99.1 | Press Release, dated October 24, 2006 containing financial information for Novatel Wireless, Inc. for the quarter ended September 30, 2006. | |
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Exhibit 99.1
| For more information, contact: | ||
| Novatel Wireless | The Blueshirt Group, Investor Relations | |
| Julie Cunningham | Chris Danne, Rakesh Mehta | |
| Investor Relations | (415) 217-7722 | |
| (858) 320-8837 | chris@blueshirtgroup.com | |
| ir@nvtl.com | rakesh@blueshirtgroup.com |
NOVATEL WIRELESS REPORTS THIRD QUARTER 2006 RESULTS
Company Achieves Its Highest Quarterly Revenues And Record Product Introductions
SAN DIEGO, CA — October 24, 2006 — Novatel Wireless, Inc. (Nasdaq: NVTL), a leading provider of wireless broadband access solutions, today reported financial results for the third quarter ended September 30, 2006.
Revenues for the third quarter increased 32% to $55.6 million compared to revenues of $42.1 million reported in the same period last year. Third quarter GAAP net loss was $856,000 or $0.03 per diluted share, compared to GAAP net income of $5.5 million, or $0.18 per diluted share (including $0.08 per diluted share related to certain deferred tax assets) in the prior year period. Our 2006 third quarter GAAP results reflect the fiscal year 2006 adoption of Statement of Financial Accounting Standards No.123R resulting in the expensing of $2.7 million of non-cash share-based compensation, or $1.9 million, net of related taxes. Excluding the effect of these charges, non-GAAP net income was $1.1 million or $0.04 per diluted share.
“Third quarter sales reached the highest level in Company history, driven by record order flow on new product introductions which accounted for approximately 50% of revenues,” said Peter Leparulo, executive chairman of Novatel Wireless. “Importantly, Novatel Wireless recognized significant revenue from 11 different products and from each prong of our diversification strategy, with embedded products and fixed mobile convergence solutions contributing over 20% of revenues combined. This positive momentum gives us confidence that our diversification strategy is working and will set the stage for continued growth in 2007.”
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“Our third quarter results yielded healthy revenue growth of 32% year-over-year and 22% over the second quarter of 2006. Additionally, we showed sequential improvement across all the major metrics on our income statement and balance sheet, pointing to the future operating leverage in our business model. Gross margins improved incrementally in the third quarter and operating expenses decreased as a percentage of sales despite a tight component market and the costs of new product introductions. We expect these general trends to continue in Q4 but the ramp in demand on our new products has been above forecast and manufacturing lead times remain exceptionally tight so that we will not recognize the full efficiencies of volume production on these new products until the early part of 2007,” said Dan Halvorson, chief financial officer of Novatel Wireless.
Fourth Quarter 2006 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 our 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 our financial guidance for the period ending December 31, 2006. These estimates are based on our current business outlook as of the date of this press release.
| Revenues | $61-$63 million | |
| GAAP Earnings Per Share, Diluted | $0.02 - $0.04 | |
| Non-GAAP Earnings Per Share, Diluted | $0.06 - $0.07 | |
Third Quarter and Subsequent Highlights:
| • | Launched the first EV-DO Rev. A-capable Mobile Broadband PC Card with Sprint to support its nationwide network footprint covering an expected 200 million people by the end of 2006. |
| • | Shipped our industry-leading EV-DO Rev. A embedded module to leading OEM customers. |
| • | Announced the commercial availability of the industry’s first EV-DO ExpressCard with Verizon Wireless and the industry’s first HSDPA ExpressCard with leading operators in Europe and Asia. |
| • | Announced that our MobiLink™ communications software suite is being pre-installed in over 30 laptop platforms of tier-1 laptop manufacturers through June 2007. The Vista-ready connection manager provides key features such as intelligent power management, local customization, over-the-air provisioning and SMS. |
| • | Launched the MCD3000 EV-DO USB product, the latest generation of our fixed mobile convergence Ovation line of products, with a major North American carrier. The MCD3000 features downlink data speeds of up to 3.1 Mbps, wireless assisted global positioning capabilities and incorporates an advanced dual-band antenna system. |
| • | Announced next generation design wins for both HSDPA and EV-DO Rev. A with one of our leading laptop customers, ensuring that we will be designed into laptops shipping in the first quarter of 2007. |
| • | Panasonic and Cingular introduced Panasonic® Toughbook® CF-29 notebooks with built-in 3G-based Broadband Connect service using our HSDPA embedded modules. |
Conference Call Information
We will host a conference call for analysts and investors to discuss our quarterly results today at 4:30 p.m. ET. A live webcast of the conference call will also be accessible from the “Investor Relations” section of our website at www.novatelwireless.com. Following the live webcast, an archived version will be available on our website.
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’ Merlin™ PC Cards and ExpressCards, Expedite® Embedded Modules, MobiLink™Communications Software Suite, Ovation™ Fixed Mobile Convergence Products and Conversa™ Software Suite enable high-speed wireless 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, visit www.novatelwireless.com. (NVTLG)
Cautionary Note Regarding Forward-Looking Statements
The financial results for 2006 are preliminary and are unaudited. 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 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, future demand for access to wireless data and factors affecting that demand; the future growth of wireless wide area networking and factors affecting that growth; changes in commercially adopted wireless transmission standards and technologies; growth in 3G infrastructure spending; the sufficiency of our capital resources; the effect of changes in accounting standards and in aspects of our critical accounting policies; the utilization of our net operating loss carryforwards; and our general business and strategy, including plans and expectations relating to technology, product development, strategic relationships, customers, manufacturing, service activities and international expansion.
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 our on-going reporting obligations under the Securities Exchange Act of 1934, as amended.
©2006 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.
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NOVATEL WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
| As of | ||||||||
| September 30, 2006 |
December 31, 2005 |
|||||||
| ASSETS |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 33,712 | $ | 36,653 | ||||
| Marketable securities |
45,231 | 47,075 | ||||||
| Accounts receivable, net |
39,566 | 28,121 | ||||||
| Inventories |
16,850 | 23,132 | ||||||
| Deferred tax assets, net |
9,618 | 5,253 | ||||||
| Other current assets |
4,501 | 9,821 | ||||||
| Total current assets |
149,478 | 150,055 | ||||||
| Property and equipment, net |
15,419 | 13,865 | ||||||
| Marketable securities |
1,174 | 6,611 | ||||||
| Intangible assets, net |
2,748 | 3,459 | ||||||
| Deferred tax assets, net |
1,849 | 1,849 | ||||||
| Other assets |
231 | 225 | ||||||
| $ | 170,899 | $ | 176,064 | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 28,329 | $ | 34,226 | ||||
| Accrued expenses |
13,688 | 11,888 | ||||||
| Line of credit |
— | 5,000 | ||||||
| Capital lease obligation |
— | 3,891 | ||||||
| Total current liabilities |
42,017 | 55,005 | ||||||
| Stockholders’ equity: |
||||||||
| Common stock |
30 | 29 | ||||||
| Additional paid-in capital |
353,346 | 343,738 | ||||||
| Accumulated other comprehensive income |
(43 | ) | (364 | ) | ||||
| Accumulated deficit |
(224,451 | ) | (222,344 | ) | ||||
| Total stockholders’ equity |
128,882 | 121,059 | ||||||
| $ | 170,899 | $ | 176,064 | |||||
NOVATEL WIRELESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
| Revenue |
$ | 55,551 | $ | 42,129 | $ | 141,364 | $ | 113,053 | ||||||||
| Cost of revenue |
41,095 | 28,991 | 106,481 | 77,431 | ||||||||||||
| Gross margin |
14,456 | 13,138 | 34,883 | 35,622 | ||||||||||||
| Operating costs and expenses: |
||||||||||||||||
| Research and development |
8,714 | 5,200 | 22,549 | 13,163 | ||||||||||||
| Sales and marketing |
3,724 | 1,912 | 9,919 | 5,197 | ||||||||||||
| General and administrative |
3,685 | 1,913 | 11,415 | 5,557 | ||||||||||||
| Total operating expenses |
16,123 | 9,025 | 43,883 | 23,917 | ||||||||||||
| Operating income (loss) |
(1,667 | ) | 4,113 | (9,000 | ) | 11,705 | ||||||||||
| Other income (expense): |
||||||||||||||||
| Interest income and expense, net |
751 | 632 | 1,917 | 1,652 | ||||||||||||
| Other, net |
(302 | ) | (207 | ) | 1,229 | (288 | ) | |||||||||
| Income (loss) before income taxes |
(1,218 | ) | 4,538 | (5,854 | ) | 13,069 | ||||||||||
| Income tax expense (benefit) |
(362 | ) | (912 | ) | (3,747 | ) | 2,074 | |||||||||
| Net income (loss) |
$ | (856 | ) | $ | 5,450 | $ | (2,107 | ) | $ | 10,995 | ||||||
| Per share data: |
||||||||||||||||
| Net income (loss) per common share: |
||||||||||||||||
| Basic |
$ | (0.03 | ) | $ | 0.19 | $ | (0.07 | ) | $ | 0.38 | ||||||
| Diluted |
$ | (0.03 | ) | $ | 0.18 | $ | (0.07 | ) | $ | 0.36 | ||||||
| Weighted average shares used in computation of per share calculation: |
||||||||||||||||
| Basic |
29,672 | 29,186 | 29,532 | 29,076 | ||||||||||||
| Diluted |
29,672 | 30,333 | 29,532 | 30,275 | ||||||||||||
Reconciliation of GAAP Net Income to Non-GAAP Net Income
Three Months Ended September 30, 2006
| GAAP | Adjustments (a) | Non-GAAP | ||||||||||
| Revenue |
$ | 55,551 | $ | 55,551 | ||||||||
| Cost of revenue |
41,095 | $ | (149 | ) | 40,946 | |||||||
| Gross margin |
14,456 | 149 | 14,605 | |||||||||
| Operating costs and expenses: |
||||||||||||
| Research and development |
8,714 | (598 | ) | 8,116 | ||||||||
| Sales and marketing |
3,724 | (531 | ) | 3,193 | ||||||||
| General and administrative |
3,685 | (1,468 | ) | 2,217 | ||||||||
| Total operating expenses |
16,123 | (2,597 | ) | 13,526 | ||||||||
| Operating income (loss) |
(1,667 | ) | 2,746 | 1,079 | ||||||||
| Other income (expense): |
||||||||||||
| Interest income and expense, net |
751 | 751 | ||||||||||
| Other, net |
(302 | ) | (302 | ) | ||||||||
| Income (loss) before income taxes |
(1,218 | ) | 2,746 | 1,528 | ||||||||
| Income tax expense (benefit) |
(362 | ) | 818 | 456 | ||||||||
| Net income |
$ | (856 | ) | $ | 1,928 | $ | 1,072 | |||||
| Per share data: |
||||||||||||
| Net income per common share: |
||||||||||||
| Basic |
$ | (0.03 | ) | $ | 0.04 | |||||||
| Diluted |
$ | (0.03 | ) | $ | 0.04 | |||||||
| Weighted average shares used in computation of per share calculation: |
||||||||||||
| Basic |
29,672 | 29,672 | ||||||||||
| Diluted |
29,672 | 29,954 | ||||||||||
| (a) | Adjustments reflect stock-based compensation expense recorded under SFAS 123R, and its effect on taxes. |