0001022652-16-000101 | 10-Q | XBRL Viewer

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Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2016	May 04, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Trading Symbol	MIFI
Entity Registrant Name	NOVATEL WIRELESS INC
Entity Central Index Key	0001022652
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		53,403,419

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 8,261	$ 12,570
Accounts receivable, net of allowance for doubtful accounts of $539 at March 31, 2016 and $601 at December 31, 2015	34,813	35,263
Short-term investments	1,100	1,267
Inventories	48,335	55,837
Prepaid expenses and other	7,141	6,039
Total current assets	99,650	110,976
Property, plant and equipment, net of accumulated depreciation of $63,556 at March 31, 2016 and $62,832 at December 31, 2015	8,543	8,812
Rental assets, net	6,318	6,155
Intangible assets, net of accumulated amortization of $18,875 at March 31, 2016 and $17,380 at December 31, 2015	43,383	43,089
Goodwill	30,947	29,520
Other assets	21	201
Total assets	188,862	198,753
Current liabilities:
Accounts payable	25,851	35,286
Accrued expenses and other current liabilities	32,462	25,613
DigiCore bank facilities	3,305	3,313
Total current liabilities	61,618	64,212
Long-term liabilities:
Convertible senior notes, net	84,573	82,461
Revolving credit facility	3,400	0
Deferred tax liabilities, net	3,563	3,475
Other long-term liabilities	13,792	18,142
Total liabilities	166,946	168,290
Commitments and Contingencies
Stockholders’ equity:
Preferred stock, par value $0.001; 2,000 shares authorized and none outstanding	0	0
Common stock, par value $0.001; 150,000 shares authorized at March 31, 2016 and December 31, 2015, respectively, 53,379 and 53,165 shares issued and outstanding at March 31, 2016 and December 31, 2015, respectively	53	53
Additional paid-in capital	503,395	502,337
Accumulated other comprehensive loss	(6,229)	(8,507)
Accumulated deficit	(475,353)	(463,451)
Total stockholders’ equity attributable to Novatel Wireless, Inc.	21,866	30,432
Noncontrolling interests	50	31
Total stockholders’ equity	21,916	30,463
Total liabilities and stockholders’ equity	$ 188,862	$ 198,753

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 539	$ 601
Accumulated depreciation, Property, plant and equipment	63,556	62,832
Accumulated amortization, Intangible assets	$ 18,875	$ 17,380
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	2,000	2,000
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	150,000	150,000
Common stock, shares issued	53,379	53,165
Common stock, shares outstanding	53,379	53,165

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Net revenues:
Hardware	$ 54,161	$ 53,011
SaaS, software and services	12,783	483
Cost of net revenues:
Hardware	40,869	40,823
SaaS, software and services	4,892	37
Gross profit	21,183	12,634
Operating costs and expenses:
Research and development	8,025	10,758
Sales and marketing	7,753	4,224
General and administrative	10,199	5,364
Amortization of purchased intangible assets	928	167
Restructuring charges	622	(164)
Total operating costs and expenses	27,527	20,349
Operating loss	(6,344)	(7,715)
Other income (expense):
Interest expense, net	(3,928)	(74)
Other expense, net	(1,296)	(17)
Loss before income taxes	(11,568)	(7,806)
Income tax provision	331	20
Net loss	(11,899)	(7,826)
Less: Net income attributable to noncontrolling interests	5	0
Net loss attributable to Novatel Wireless, Inc.	$ (11,904)	$ (7,826)
Net loss per share:
Basic and diluted ($ per share)	$ (0.22)	$ (0.17)
Weighted average shares used in computation of basic and diluted net loss per share:
Basic and diluted (in shares)	53,251	46,262

Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
Net loss	$ (11,899)	$ (7,826)
Foreign currency translation adjustment	2,278	0
Total comprehensive loss	$ (9,621)	$ (7,826)

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities:
Net loss	$ (11,899)	$ (7,826)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	3,598	1,196
Amortization of acquisition-related inventory step-up	1,829	51
Provision for bad debts, net of recoveries	(111)	(41)
Provision for excess and obsolete inventory	1,311	206
Share-based compensation expense	1,066	790
Amortization of debt discount and debt issuance costs	2,112	0
Deferred income taxes	88	0
Unrealized foreign currency transaction loss, net	1,171	0
Other	445	0
Changes in assets and liabilities, net of effects from acquisitions:
Accounts receivable	378	(6,111)
Inventories	3,649	1,449
Prepaid expenses and other assets	(922)	1,152
Accounts payable	(10,063)	(3,601)
Accrued expenses, income taxes, and other	1,010	5,602
Net cash used in operating activities	(6,338)	(7,133)
Cash flows from investing activities:
Acquisitions, net of cash acquired	0	(9,063)
Purchases of property, plant and equipment	(448)	(111)
Proceeds from the sale of property, plant and equipment	115	0
Purchases of intangible assets	(656)	(224)
Net cash used in investing activities	(989)	(9,398)
Cash flows from financing activities:
Proceeds from the exercise of warrant to purchase common stock	0	8,644
Net repayments on DigiCore bank facilities	(156)	0
Net borrowings on revolving credit facility	3,400	2,000
Payoff of acquisition-related assumed liabilities	0	(2,633)
Principal payments under capital lease obligations	(273)	0
Principal payments on mortgage bond	(54)	0
Taxes paid on vested restricted stock units, net of proceeds from stock option exercises	(9)	66
Net cash provided by financing activities	2,908	8,077
Effect of exchange rates on cash and cash equivalents	110	(29)
Net decrease in cash and cash equivalents	(4,309)	(8,483)
Cash and cash equivalents, beginning of period	12,570	17,853
Cash and cash equivalents, end of period	8,261	9,370
Cash paid during the year for:
Interest	154	36
Income taxes	$ 18	$ 2

Basis of Presentation	3 Months Ended
Basis of Presentation	Mar. 31, 2016
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation The information contained herein has been prepared by Novatel Wireless, Inc. (the “Company”) in accordance with the rules of the Securities and Exchange Commission (the “SEC”). The information at March 31, 2016 and the results of the Company’s operations for the three months ended March 31, 2016 and 2015 are unaudited. The condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring accruals, which are, in the opinion of management, necessary for a fair statement of the results of the interim periods presented. These condensed consolidated financial statements and notes hereto should be read in conjunction with the audited financial statements from which they were derived and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the Company’s Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for any other interim period or for the year as a whole. Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Segment Information Management has determined that the Company has one reportable segment. The Chief Executive Officer, who is also the Chief Operating Decision Maker, does not manage any part of the Company separately, and the allocation of resources and assessment of performance is based solely on the Company’s consolidated operations and operating results. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent liabilities. Actual results could differ materially from these estimates. Significant estimates include allowance for doubtful accounts receivable, provision for excess and obsolete inventory, valuation of intangible and long-lived assets, valuation of goodwill, valuation of debt obligations, royalty costs, accruals relating to litigation and restructuring, provision for warranty costs, income taxes and share-based compensation expense. New Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “FASB”), which are adopted by the Company as of the specified date. Unless otherwise discussed, management believes the impact of recently issued standards, some of which are not yet effective, will not have a material impact on its unaudited condensed consolidated financial statements upon adoption. In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting, which affects entities that issue share-based payment awards to their employees. The guidance is designed to identify areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This guidance is effective prospectively for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the impact of this guidance. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This guidance results in the Company providing a more faithful representation of the rights and obligations arising from operating and capital leases by requiring lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. This guidance is effective prospectively for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the impact of this guidance. In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the requirement for an acquirer to retrospectively adjust provisional amounts recorded in a business combination to reflect new information about the facts and circumstances that existed as of the acquisition date and that, if known, would have affected the measurement or recognition of amounts initially recognized. As an alternative, the update requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The update requires that the acquirer record, in the financial statements of the period in which adjustments to provisional amounts are determined, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The Company implemented this guidance during the first quarter of 2016. This guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements upon adoption. In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. Under this standard, if a cloud computing arrangement includes a software license, the software license element of the arrangement should be accounted for consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract. The Company implemented this guidance during the first quarter of 2016. This guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements upon adoption. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The new standard will require revenue recognized to represent the transfer of promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The standard also requires new, expanded disclosures regarding revenue recognition. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of Effective Date. The standard defers the effective date of adoption of ASU 2014-09 to interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted but not before the original effective date of December 15, 2016. There are two adoption methods available for implementation of this guidance. Under one method, the guidance is applied retrospectively to contracts for each reporting period presented, subject to allowable practical expedients. Under the other method, the guidance is applied only to the most current period presented, recognizing the cumulative effect of the change as an adjustment to the beginning balance of retained earnings, and also requires additional disclosures comparing the results to the previous guidance. The Company is currently evaluating the adoption methods and assessing the impact of this guidance.

Acquisitions and Divestitures

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Acquisitions and Divestitures

Acquisitions

DigiCore Holdings Limited (DBA Ctrack and DigiCore)

On June 18, 2015, the Company entered into a transaction implementation agreement (the “TIA”) with DigiCore Holdings, Inc. (“DigiCore”), a company specializing in the research, development, manufacturing, sales and marketing of telematics tools used for fleet and mobile asset management solutions and user-based insurance applications. Ctrack’s products and services provide enterprise fleets, international businesses and consumers with solutions for maximizing the security and efficient operation of their global assets.

Pursuant to the terms of the TIA, the Company agreed to acquire 100% of the issued and outstanding ordinary shares of DigiCore (with the exception of certain excluded shares, including treasury shares) for 4.40 South African Rand per ordinary share outstanding; provided that, the total cash consideration could not exceed 1,094,223,363.20 South African Rand (the “Maximum Consideration Amount”). The total cash purchase price was guaranteed, on behalf of the Company, by a registered South African bank. To obtain such guarantee, the Company placed the Maximum Consideration Amount, in South African Rand, into escrow with the South African bank. On October 5, 2015 the transaction closed. Upon consummation of the acquisition, Ctrack became an indirect wholly-owned subsidiary of the Company.

Upon the closing of the transaction, holders of unvested in-the-money DigiCore stock options received stock options to purchase shares of the Company’s common stock as replacement awards.

In connection with the acquisition, the Company incurred $1.7 million in total transaction costs and expenses, all of which were recognized in 2015.

Purchase Price

The total purchase price was approximately $80.0 million and included a cash payment for all of the outstanding ordinary shares of DigiCore and the purchase of in-the-money vested stock options held by Ctrack employees on the closing date of the transaction and the portion of the fair value of replacement equity awards issued to Ctrack employees that related to services performed prior to the date the transaction closed.

Set forth below is supplemental purchase consideration information related to the Ctrack acquisition (in thousands):



Cash payments	$	79,365
Fair value of replacement equity awards issued to Ctrack employees for precombination services	623
Total purchase price	$	79,988

Allocation of Fair Value

The Company accounted for the transaction using the acquisition method and, accordingly, the consideration has been allocated to the tangible and intangible assets acquired and liabilities assumed on the basis of their respective estimated fair values on the acquisition date. Goodwill resulting from this acquisition is largely attributable to the experienced workforce of Ctrack and synergies expected to arise after the integration of Ctrack’s products and operations into those of the Company. Goodwill resulting from this acquisition is not deductible for tax purposes. Identifiable intangible assets acquired as part of the acquisition included definite-lived intangible assets for developed technologies, customer relationships and trade names, which are being amortized using the straight-line method over their estimated useful lives, as well as indefinite-lived intangible assets. Liabilities assumed from DigiCore included a mortgage bond and capital lease obligations.

The fair value has been allocated based on the estimated fair values of assets acquired and liabilities assumed as follows (in thousands):



	October 5, 2015
Cash	$	2,437
Accounts receivable	15,052
Inventory	11,361
Property, plant and equipment	5,924
Rental assets	6,603
Intangible assets	28,270
Goodwill	29,273
Other assets	5,695
Bank facilities	(2,124		)
Accounts payable	(7,446		)
Accrued and other liabilities	(15,018		)
Noncontrolling interests	(39		)
Net assets acquired	$	79,988

The above fair value allocation is considered preliminary and is subject to revision during the measurement period. Management is in the process of completing its evaluation of obligations related to income tax.

Valuation of Intangible Assets Acquired

The following table sets forth the components of definite-lived intangible assets acquired in connection with the Ctrack acquisition (in thousands):



	Amount Assigned		Amortization Period (in years)
Developed technologies	$	10,170	6.0
Trade name	14,030		10.0
Customer relationships	4,070		5.0
Total intangible assets acquired	$	28,270

R.E.R. Enterprises, Inc. (DBA Feeney Wireless)

On March 27, 2015, the Company entered into an asset purchase agreement (“APA”) with R.E.R. Enterprises, Inc. (“RER”) to acquire all of the issued and outstanding shares of RER and its wholly-owned subsidiary and principal operating asset, Feeney Wireless, LLC, an Oregon limited liability company (collectively, “FW”), which develops and sells solutions for the Internet of Things that integrate wireless communications into business processes. This strategic acquisition expanded the Company’s product and solutions offerings to include private labeled cellular routers, in-house designed and assembled cellular routers, high-end wireless surveillance systems, modems, computers and software, along with associated hardware, purchased from major industry suppliers. Additionally, FW’s services portfolio includes consulting, systems integration and device management services.

In connection with the acquisition, the Company incurred $0.9 million in total costs and expenses, all of which were recognized in 2015.

Purchase Price

The total consideration was approximately $24.8 million and included a cash payment at closing of approximately $9.3 million, $1.5 million of which was placed into an escrow fund to serve as partial security for the indemnification obligations of RER and its former shareholders, the Company’s assumption of $0.5 million in certain transaction-related expenses incurred by FW, and the future issuance of shares of the Company’s common stock valued at $15.0 million, payable no later than the tenth business day after the Company files its Annual Report on Form 10-K for the year ended December 31, 2015 with the SEC.

The total consideration of $24.8 million did not include amounts, if any, payable under an earn-out arrangement pursuant to which the Company may have been required to pay up to an additional $25.0 million to the former shareholders of RER contingent upon FW’s achievement of certain financial targets for the years ending December 31, 2015, 2016, and 2017 (the “Earn-Out Arrangement”). Such payments, if any, under the Earn-Out Arrangement would have been payable in either cash or shares of the Company’s common stock at the discretion of the Company, and would have been recorded as compensation expense during the service period earned.

Set forth below is supplemental purchase consideration information related to the FW acquisition (in thousands):



Cash payments	$	9,268
Future issuance of common stock	15,000
Other assumed liabilities	509
Total purchase price	$	24,777

On January 5, 2016, the Company and RER amended certain payment terms of the APA. Under the amended agreement, the $1.5 million placed into escrow on the date of acquisition was released to RER and its former shareholders on January 8, 2016, and the $15.0 million that was payable in shares of the Company’s common stock in March 2016 will now be paid in five cash installments over a four-year period, beginning in March 2016. In addition, the Earn-Out Arrangement has been amended as follows: (a) any amount earned under the Earn-Out Arrangement for the achievement of financial targets for the year ended December 31, 2015 will now be paid in five cash installments over a four-year period, beginning in March 2016 and (b) in replacement of the potential earn-out contingent upon FW’s achievement of certain financial targets for the years ended December 31, 2016 and 2017 the Company will issue to the former shareholders of RER approximately 2.9 million shares of the Company’s common stock in three equal installments over a three-year period, beginning in March 2017, contingent upon the retention of certain key personnel.

The total amount earned pursuant to the Earn-Out Arrangement upon FW’s achievement of certain financial targets for the year ended December 31, 2015 was $6.1 million.

Allocation of Fair Value

The Company accounted for the transaction using the acquisition method and, accordingly, the consideration has been allocated to the tangible and intangible assets acquired and liabilities assumed on the basis of their respective estimated fair values on the acquisition date as set forth below. Goodwill resulting from this acquisition is largely attributable to the experienced workforce of FW and synergies expected to arise after the integration of FW’s products and operations into those of the Company. Goodwill resulting from this acquisition is deductible for tax purposes. Identifiable intangible assets acquired as part of the acquisition included definite-lived intangible assets for developed technologies, customer relationships, and trademarks, which are being amortized using the straight-line method over their estimated useful lives, as well as indefinite-lived intangible assets, including in-process research and development. Liabilities assumed from FW included a term loan and capital lease obligations. The term loan and certain capital lease obligations were paid in full by the Company immediately following the closing of the acquisition on March 27, 2015.

The fair value has been allocated based on the estimated fair values of assets acquired and liabilities assumed as follows (in thousands):



	March 27, 2015
Cash	$	205
Accounts receivable	3,331
Inventory	10,008
Property, plant and equipment	535
Intangible assets	18,880
Goodwill	3,949
Other assets	544
Accounts payable	(7,494		)
Accrued and other liabilities	(1,916		)
Deferred revenues	(270		)
Note payable	(2,575		)
Capital lease obligations	(420		)
Net assets acquired	$	24,777

Valuation of Intangible Assets Acquired

The following table sets forth the components of intangible assets acquired in connection with the FW acquisition (dollars in thousands):



	Amount Assigned		Amortization Period (in years)
Definite-lived intangible assets:
Developed technologies	$	3,660	6.0
Trademarks	4,700		10.0
Customer relationships	8,500		10.0
Indefinite-lived intangible assets:
In-process research and development	2,020
Total intangible assets acquired	$	18,880

Pro Forma Summary

The unaudited consolidated pro forma results for the three months ended March 31, 2016 and 2015 are set forth in the table below (in thousands). These pro forma consolidated results combine the results of operations of the Company, Ctrack and FW as though Ctrack and FW had been acquired as of January 1, 2015 and include amortization charges for the acquired intangibles for both acquisitions and interest expense related to the Company’s borrowings to finance the Ctrack acquisition. The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of 2015.



	Three Months Ended March 31,
	2016			2015
Net revenues	$	66,944		$	75,921
Net loss	$	(11,899	)	$	(11,008	)

- Definition

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

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+ Details

Balance Sheet Details

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Balance Sheet Details

Inventories

Inventories consist of the following (in thousands):



	March 31, 2016		December 31, 2015
Finished goods	$	41,506	$	47,094
Raw materials and components	6,829		8,743
Total inventories	$	48,335	$	55,837

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):



	March 31, 2016		December 31, 2015
Royalties	$	2,996	$	2,740
Payroll and related expenses	5,653		4,406
Warranty obligations	989		932
Market development funds and price protection	2,635		2,805
Professional fees	3,168		1,060
Deferred revenue	1,306		1,836
Restructuring	955		1,044
Acquisition-related liabilities	7,912		5,274
Other	6,848		5,516
Total accrued expenses and other current liabilities	$	32,462	$	25,613

Accrued Warranty Obligations

Accrued warranty obligations activity during the three months ended March 31, 2016 was as follows (in thousands):



Warranty liability at December 31, 2015	$	932
Additions charged to operations	350
Deductions from liability	(293		)
Warranty liability at March 31, 2016	$	989

Intangible Assets	3 Months Ended
Intangible Assets	Mar. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible Assets	Intangible Assets The balances in goodwill and intangible assets were primarily a result of the Company’s acquisitions of Ctrack, FW and Enfora, Inc. See Note 4, Intangible Assets, in the Company's 2015 Annual Report on Form 10-K for a discussion of the components of goodwill and additional information regarding intangible assets.

Fair Value Measurement of Assets and Liabilities

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurement of Assets and Liabilities

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). A fair value measurement reflects the assumptions market participants would use in pricing an asset or liability based on the best available information. These assumptions include the risk inherent in a particular valuation technique (such as a pricing model) and the risks inherent in the inputs to the model.

The Company classifies inputs to measure fair value using a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) and is defined as follows:


Level 1:	Pricing inputs are based on quoted market prices for identical assets or liabilities in active markets (e.g., NYSE or NASDAQ). Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2:

Pricing inputs include benchmark yields, trade data, reported trades and broker dealer quotes, two-sided markets and industry and economic events, yield to maturity, Municipal Securities Rule Making Board reported trades and vendor trading platform data. Level 2 includes those financial instruments that are valued using various pricing services and broker pricing information including Electronic Communication Networks and broker feeds.


Level 3:	Pricing inputs include significant inputs that are generally less observable from objective sources, including the Company’s own assumptions.

The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. There have been no transfers of assets or liabilities between fair value measurement classifications during the three months ended March 31, 2016.

The following table summarizes the Company’s financial instruments measured at fair value on a recurring basis in accordance with the authoritative guidance for fair value measurements as of March 31, 2016 (in thousands):



	Balance as of March 31, 2016		Level 1
Assets:
Cash equivalents
Money market funds	$	35	$	35
Total cash equivalents	35		35
Short-term investments	1,100		1,100
Total assets at fair value	$	1,135	$	1,135



	Balance as of December 31, 2015		Level 1
Assets:
Cash equivalents
Money market funds	$	35	$	35
Total cash equivalents	35		35
Short-term investments	1,267		1,267
Total assets at fair value	$	1,302	$	1,302

Other Financial Instruments

The Company’s financial assets and liabilities are carried at fair value or at amounts that, because of their short-term nature, approximate current fair value, with the exception of its $120.0 million in 5.50% convertible senior notes due on June 15, 2020 (the “Convertible Notes”) (see Note 6). The Company carries its Convertible Notes at amortized cost. The debt and equity components of the Convertible Notes were measured using Level 3 inputs and are not measured on a recurring basis. The fair value of the liability component of the Convertible Notes, which approximated its carrying value on the valuation date due to the recent issuance of such Convertible Notes, was $84.6 million as of March 31, 2016.

Debt

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Debt

Revolving Credit Facility

On October 31, 2014, the Company entered into a five-year senior secured revolving credit facility in the amount of $25.0 million (the “Revolver”) with Wells Fargo Bank, National Association, as lender. Concurrently with the acquisition of FW, the Company amended the Revolver to include FW as a borrower and Loan Party, as defined by the agreement. On November 17, 2015, the Revolver was amended to increase the maximum borrowing capacity to $48.0 million.

The amount of borrowings that may be made under the Revolver is based on a borrowing base comprised of a specified percentage of eligible receivables. If, at any time during the term of the Revolver, the amount of borrowings outstanding under the Revolver exceeds the borrowing base then in effect, the Company is required to repay such borrowings in an amount sufficient to eliminate such excess. The Revolver includes $3.0 million available for letters of credit.

The Company may borrow funds under the Revolver from time to time, with interest payable monthly at a base rate determined by using the daily three month LIBOR rate, plus an applicable margin of 3.00% to 3.50% depending on the Company’s liquidity as determined on the last day of each calendar month. The Revolver is secured by a first priority lien on substantially all of the assets of the Company and certain of its subsidiaries, subject to certain exceptions and permitted liens. The Revolver includes customary representations and warranties, as well as customary reporting and financial covenants.

There was $3.4 million outstanding on the Revolver at March 31, 2016. There was no balance outstanding on the Revolver at December 31, 2015. Based on the Company’s eligible receivables at March 31, 2016, the Company has available borrowings of approximately $12.1 million. As of March 31, 2016, the Company was in compliance with all financial covenants contained in the credit agreement.

Convertible Senior Notes

On June 10, 2015, the Company issued $120.0 million aggregate principal amount of Convertible Notes. The Company incurred issuance costs of approximately $3.9 million. The Company used a portion of the proceeds from the offering to finance its acquisition of Ctrack, to pay fees and expenses related to the acquisition, and for general corporate purposes.

The Convertible Notes are governed by the terms of an indenture, dated June 10, 2015, entered into between the Company, as issuer, and Wilmington Trust, National Association, as trustee. The Convertible Notes are senior unsecured obligations and bear interest at a rate of 5.50% per year, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2015. The Convertible Notes will mature on June 15, 2020, unless earlier repurchased or converted. The Convertible Notes will be convertible into cash, shares of the Company’s common stock, or a combination thereof, at the election of the Company, at an initial conversion price of $5.00 per share of the Company’s common stock.

The Convertible Notes consisted of the following at March 31, 2016 (in thousands):



Liability component:
Principal	$	120,000
Less: unamortized debt discount and debt issuance costs	(35,427		)
Net carrying amount	$	84,573
Equity component	$	38,305

The Company determined the expected life of the debt was equal to the five-year term of the Convertible Notes. The effective interest rate on the liability component was 17.79% for the three months ended March 31, 2016. The following table sets forth total interest expense recognized related to the Convertible Notes during the three months ended March 31, 2016 (in thousands):



Contractual interest expense	$	1,650
Amortization of debt discount	1,980
Amortization of debt issuance costs	132
Total interest expense	$	3,762

Share-based Compensation

3 Months Ended

Mar. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-based Compensation

The Company included the following amounts for share-based compensation awards in the unaudited condensed consolidated statements of operations (in thousands):



	Three Months Ended March 31,
	2016		2015
Cost of revenues	$	52	$	21
Research and development	249		215
Sales and marketing	210		40
General and administrative	555		514
Total	$	1,066	$	790

Stock Options

The following table summarizes the Company’s stock option activity (in thousands):



Outstanding — December 31, 2014	3,065
Granted	6,657
Exercised	(273	)
Canceled	(3,364	)
Outstanding — December 31, 2015	6,085
Granted	952
Exercised	(1	)
Canceled	(312	)
Outstanding — March 31, 2016	6,724
Exercisable — March 31, 2016	1,389

Restricted Stock Units

The following table summarizes the Company’s restricted stock unit (“RSU”) activity (in thousands):



Non-vested at December 31, 2014	1,629
Granted	1,043
Vested	(927	)
Forfeited	(785	)
Non-vested at December 31, 2015	960
Granted	2,914
Vested	(279	)
Forfeited	(25	)
Non-vested at March 31, 2016	3,570

Employee Stock Purchase Plan

During the three months ended March 31, 2016 and 2015, the Company recognized $0.1 million and $0.1 million, respectively, of stock-based compensation expense related to the employee stock purchase plan.

Geographic Information and Concentrations of Risk

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Geographic Information and Concentrations of Risk

Geographic Information

The following table details the Company’s concentration of net revenues by geographic region based on shipping destination:



	Three Months Ended March 31,
	2016		2015
United States and Canada	76.8	%	96.1	%
Latin America	0.2		3.2
Europe, Middle East, Africa and other	21.5		0.7
Asia and Australia	1.5		—
	100.0	%	100.0	%

Concentrations of Risk

Historically, a significant portion of the Company’s net revenues comes from a small number of customers. For the three months ended March 31, 2016 and 2015, sales to the Company’s largest customer accounted for 52.7% and 47.5%, respectively, of net revenues.

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 280
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Reference 2: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 280
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
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Reference 4: http://www.xbrl.org/2003/role/presentationRef
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Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8380-108599

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
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-Topic 280
-SubTopic 10
-Section 50
-Paragraph 26
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Reference 8: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 280
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
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-Paragraph 40
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9031-108599

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-SubTopic 10
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-Paragraph 42
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9054-108599

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
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Reference 12: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
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-Paragraph 31
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8924-108599

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 30
-URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8906-108599

+ Details

Earnings Per Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock using the treasury stock method. Potentially dilutive securities (consisting of warrants, stock options, RSUs and ESPP withholdings calculated using the treasury stock method) are excluded from the diluted EPS computation in loss periods and when the applicable exercise price is greater than the market price on the period end date as their effect would be anti-dilutive.

The calculation of basic and diluted EPS was as follows (in thousands, except per share data):



	Three Months Ended March 31,
	2016			2015
Net loss attributable to Novatel Wireless, Inc.	$	(11,904	)	$	(7,826	)
Weighted-average common shares outstanding	53,251			46,262
Basic and diluted net loss per share	$	(0.22	)	$	(0.17	)

For the three months ended March 31, 2016 and 2015, the computation of diluted EPS excluded 10,574,618 shares and 5,483,254 shares, respectively, related to warrants, stock options, RSUs and the ESPP as their effect would have been anti-dilutive.

Commitments and Contingencies	3 Months Ended
Commitments and Contingencies	Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies Legal The Company is, from time to time, party to various legal proceedings arising in the ordinary course of business. For example, the Company is currently named as a defendant or co-defendant in some patent infringement lawsuits in the U.S. and is indirectly participating in other U.S. patent infringement actions pursuant to its contractual indemnification obligations to certain customers. Based on an evaluation of these matters and discussions with the Company’s intellectual property litigation counsel, the Company currently believes that liabilities arising from or sums paid in settlement of these existing matters, if any, would not have a material adverse effect on its consolidated results of operations or financial condition. Indemnification In the normal course of business, the Company periodically enters into agreements that require the Company to indemnify and defend its customers for, among other things, claims alleging that the Company’s products infringe third-party patents or other intellectual property rights. The Company’s maximum exposure under these indemnification provisions cannot be estimated but the Company does not believe that there are any matters individually or collectively that would have a material adverse effect on its financial condition, results of operation or cash flows.

Income Taxes	3 Months Ended
Income Taxes	Mar. 31, 2016
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes The Company’s effective income tax rate for the three months ended March 31, 2016 and 2015 was 2.9% and 0.3%, respectively, which is significantly lower than the statutory tax rate primarily due to offsetting increases in the Company’s deferred tax asset valuation allowances. During the three months ended March 31, 2016, the Company recognized an increase of $2.8 million in its valuation allowance primarily related to its U.S.-based deferred tax amounts, resulting from carryforward net operating losses generated during the three months ended March 31, 2016. Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company’s net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company is in the process of completing an IRC Section 382 analysis, and the Company expects to have this analysis completed within the next six months.

Restructuring

3 Months Ended

Mar. 31, 2016

Restructuring and Related Activities [Abstract]

Restructuring

In September 2013, the Company commenced certain restructuring initiatives including the closure of the Company’s development site in Calgary, Canada, and the consolidation of certain supply chain management activities (the “2013 Initiatives”). The 2013 Initiatives are expected to be completed when the facility leases expire in December 2016.

On August 3, 2015, the Company approved a restructuring initiative to better position the Company to operate in current market conditions and more closely align operating expenses with revenues, which included employee severance costs and facility exit related costs. In the fourth quarter of 2015, the Company commenced certain initiatives relating to the reorganization of executive level management, which included, among other actions, the replacement of the former Chief Executive Officer (collectively, the “2015 Initiatives”). The Company continued these initiatives in the first quarter of 2016 with a reduction-in-force and the completion of the closure of its facility in Richardson, TX. The 2015 Initiatives are expected to be completed when the Richardson, TX lease expires in June 2020.

The Company accounts for facility exit costs in accordance with ASC 420, Exit or Disposal Cost Obligations, which requires that a liability for such costs be recognized and measured initially at fair value on the cease-use date based on remaining lease rentals, adjusted for the effects of any prepaid or deferred items recognized, reduced by the estimated sublease rentals that could be reasonably obtained even if the Company does not intend to sublease the facilities.

The Company is required to estimate future sublease income and future net operating expenses of the facilities, among other expenses. The most significant of these estimates relate to the timing and extent of future sublease income which reduce lease obligations, and the probability that such sublease income will be realized. The Company based estimates of sublease income, in part, on information from third party real estate experts, current market conditions and rental rates, an assessment of the time period over which reasonable estimates could be made, and the location of the respective facility, among other factors. Further adjustments to the facility exit liability accrual will be required in future periods if actual exit costs or sublease income differ from current estimates. Exit costs recorded by the Company under these provisions are neither associated with, nor do they benefit, continuing activities.

The following table sets forth activity in the restructuring liability for the three months ended March 31, 2016 (in thousands):



	Balance at December 31, 2015		Costs Incurred		Payments			Non-cash		Translation Adjustment		Balance at March 31, 2016		Cumulative Costs Incurred to Date		Total Expected Restructuring Costs
2013 Initiatives
Employee Severance Costs	$	—	$	—	$	—		$	—	$	—	$	—	$	3,986	$	3,986
Facility Exit Related Costs	72		—		(19		)	—		—		53		2,625		2,630

2015 Initiatives
Employee Severance Costs	1,330		526		(865		)	—		16		1,007		4,117		4,117
Facility Exit Related Costs	328		96		(86		)	159		—		497		477		500
Total	$	1,730	$	622	$	(970	)	$	159	$	16	$	1,557	$	11,205	$	11,233

The balance of the restructuring liability at March 31, 2016 consists of approximately $1.0 million in current liabilities and $0.6 million in long-term liabilities.

Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Basis of Presentation

The information contained herein has been prepared by Novatel Wireless, Inc. (the “Company”) in accordance with the rules of the Securities and Exchange Commission (the “SEC”). The information at March 31, 2016 and the results of the Company’s operations for the three months ended March 31, 2016 and 2015 are unaudited. The condensed consolidated financial statements reflect all adjustments, consisting of only normal recurring accruals, which are, in the opinion of management, necessary for a fair statement of the results of the interim periods presented. These condensed consolidated financial statements and notes hereto should be read in conjunction with the audited financial statements from which they were derived and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in the Company’s Annual Report on Form 10-K. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for any other interim period or for the year as a whole.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Segment Information

Management has determined that the Company has one reportable segment. The Chief Executive Officer, who is also the Chief Operating Decision Maker, does not manage any part of the Company separately, and the allocation of resources and assessment of performance is based solely on the Company’s consolidated operations and operating results.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent liabilities. Actual results could differ materially from these estimates. Significant estimates include allowance for doubtful accounts receivable, provision for excess and obsolete inventory, valuation of intangible and long-lived assets, valuation of goodwill, valuation of debt obligations, royalty costs, accruals relating to litigation and restructuring, provision for warranty costs, income taxes and share-based compensation expense.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “FASB”), which are adopted by the Company as of the specified date. Unless otherwise discussed, management believes the impact of recently issued standards, some of which are not yet effective, will not have a material impact on its unaudited condensed consolidated financial statements upon adoption.

In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, Improvements to Employee Share-Based Payment Accounting, which affects entities that issue share-based payment awards to their employees. The guidance is designed to identify areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This guidance is effective prospectively for interim and annual periods beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the impact of this guidance.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This guidance results in the Company providing a more faithful representation of the rights and obligations arising from operating and capital leases by requiring lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. This guidance is effective prospectively for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the impact of this guidance.

In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the requirement for an acquirer to retrospectively adjust provisional amounts recorded in a business combination to reflect new information about the facts and circumstances that existed as of the acquisition date and that, if known, would have affected the measurement or recognition of amounts initially recognized. As an alternative, the update requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The update requires that the acquirer record, in the financial statements of the period in which adjustments to provisional amounts are determined, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The Company implemented this guidance during the first quarter of 2016. This guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements upon adoption.

In April 2015, the FASB issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. Under this standard, if a cloud computing arrangement includes a software license, the software license element of the arrangement should be accounted for consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the arrangement should be accounted for as a service contract. The Company implemented this guidance during the first quarter of 2016. This guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements upon adoption.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides guidance for revenue recognition. The new standard will require revenue recognized to represent the transfer of promised goods or services to customers in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The standard also requires new, expanded disclosures regarding revenue recognition. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of Effective Date. The standard defers the effective date of adoption of ASU 2014-09 to interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted but not before the original effective date of December 15, 2016. There are two adoption methods available for implementation of this guidance. Under one method, the guidance is applied retrospectively to contracts for each reporting period presented, subject to allowable practical expedients. Under the other method, the guidance is applied only to the most current period presented, recognizing the cumulative effect of the change as an adjustment to the beginning balance of retained earnings, and also requires additional disclosures comparing the results to the previous guidance. The Company is currently evaluating the adoption methods and assessing the impact of this guidance.

Fair Value Measurement


Level 1:	Pricing inputs are based on quoted market prices for identical assets or liabilities in active markets (e.g., NYSE or NASDAQ). Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2:


Level 3:	Pricing inputs include significant inputs that are generally less observable from objective sources, including the Company’s own assumptions.

Acquisitions and Divestitures (Tables)

3 Months Ended

Mar. 31, 2016

Business Acquisition [Line Items]

Business Acquisition, Pro Forma Information



	Three Months Ended March 31,
	2016			2015
Net revenues	$	66,944		$	75,921
Net loss	$	(11,899	)	$	(11,008	)

Feeney Wireless

Business Acquisition [Line Items]

Schedule of Business Acquisitions, by Acquisition

The fair value has been allocated based on the estimated fair values of assets acquired and liabilities assumed as follows (in thousands):



	March 27, 2015
Cash	$	205
Accounts receivable	3,331
Inventory	10,008
Property, plant and equipment	535
Intangible assets	18,880
Goodwill	3,949
Other assets	544
Accounts payable	(7,494		)
Accrued and other liabilities	(1,916		)
Deferred revenues	(270		)
Note payable	(2,575		)
Capital lease obligations	(420		)
Net assets acquired	$	24,777

Set forth below is supplemental purchase consideration information related to the FW acquisition (in thousands):



Cash payments	$	9,268
Future issuance of common stock	15,000
Other assumed liabilities	509
Total purchase price	$	24,777

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination

The following table sets forth the components of intangible assets acquired in connection with the FW acquisition (dollars in thousands):



	Amount Assigned		Amortization Period (in years)
Definite-lived intangible assets:
Developed technologies	$	3,660	6.0
Trademarks	4,700		10.0
Customer relationships	8,500		10.0
Indefinite-lived intangible assets:
In-process research and development	2,020
Total intangible assets acquired	$	18,880

DigiCore

Business Acquisition [Line Items]

Schedule of Business Acquisitions, by Acquisition

The fair value has been allocated based on the estimated fair values of assets acquired and liabilities assumed as follows (in thousands):



	October 5, 2015
Cash	$	2,437
Accounts receivable	15,052
Inventory	11,361
Property, plant and equipment	5,924
Rental assets	6,603
Intangible assets	28,270
Goodwill	29,273
Other assets	5,695
Bank facilities	(2,124		)
Accounts payable	(7,446		)
Accrued and other liabilities	(15,018		)
Noncontrolling interests	(39		)
Net assets acquired	$	79,988

Set forth below is supplemental purchase consideration information related to the Ctrack acquisition (in thousands):



Cash payments	$	79,365
Fair value of replacement equity awards issued to Ctrack employees for precombination services	623
Total purchase price	$	79,988

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination

The following table sets forth the components of definite-lived intangible assets acquired in connection with the Ctrack acquisition (in thousands):



	Amount Assigned		Amortization Period (in years)
Developed technologies	$	10,170	6.0
Trade name	14,030		10.0
Customer relationships	4,070		5.0
Total intangible assets acquired	$	28,270

Balance Sheet Details (Tables)

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Inventories

Inventories consist of the following (in thousands):



	March 31, 2016		December 31, 2015
Finished goods	$	41,506	$	47,094
Raw materials and components	6,829		8,743
Total inventories	$	48,335	$	55,837

Summary of Accrued Expenses

Accrued expenses and other current liabilities consist of the following (in thousands):



	March 31, 2016		December 31, 2015
Royalties	$	2,996	$	2,740
Payroll and related expenses	5,653		4,406
Warranty obligations	989		932
Market development funds and price protection	2,635		2,805
Professional fees	3,168		1,060
Deferred revenue	1,306		1,836
Restructuring	955		1,044
Acquisition-related liabilities	7,912		5,274
Other	6,848		5,516
Total accrued expenses and other current liabilities	$	32,462	$	25,613

Summary of Accrued Warranty Obligations

Accrued warranty obligations activity during the three months ended March 31, 2016 was as follows (in thousands):



Warranty liability at December 31, 2015	$	932
Additions charged to operations	350
Deductions from liability	(293		)
Warranty liability at March 31, 2016	$	989

Fair Value Measurement of Assets and Liabilities (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Summary of Company's Financial Instruments, Fair Value on a Recurring Basis



	Balance as of March 31, 2016		Level 1
Assets:
Cash equivalents
Money market funds	$	35	$	35
Total cash equivalents	35		35
Short-term investments	1,100		1,100
Total assets at fair value	$	1,135	$	1,135



	Balance as of December 31, 2015		Level 1
Assets:
Cash equivalents
Money market funds	$	35	$	35
Total cash equivalents	35		35
Short-term investments	1,267		1,267
Total assets at fair value	$	1,302	$	1,302

Debt (Tables)

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Convertible Debt

The Convertible Notes consisted of the following at March 31, 2016 (in thousands):



Liability component:
Principal	$	120,000
Less: unamortized debt discount and debt issuance costs	(35,427		)
Net carrying amount	$	84,573
Equity component	$	38,305

Interest Income and Interest Expense Disclosure

The following table sets forth total interest expense recognized related to the Convertible Notes during the three months ended March 31, 2016 (in thousands):



Contractual interest expense	$	1,650
Amortization of debt discount	1,980
Amortization of debt issuance costs	132
Total interest expense	$	3,762

Share-based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-based Compensation

The Company included the following amounts for share-based compensation awards in the unaudited condensed consolidated statements of operations (in thousands):



	Three Months Ended March 31,
	2016		2015
Cost of revenues	$	52	$	21
Research and development	249		215
Sales and marketing	210		40
General and administrative	555		514
Total	$	1,066	$	790

Summary of Stock Option Activity

The following table summarizes the Company’s stock option activity (in thousands):



Outstanding — December 31, 2014	3,065
Granted	6,657
Exercised	(273	)
Canceled	(3,364	)
Outstanding — December 31, 2015	6,085
Granted	952
Exercised	(1	)
Canceled	(312	)
Outstanding — March 31, 2016	6,724
Exercisable — March 31, 2016	1,389

Summary of Restricted Stock Unit Activity

The following table summarizes the Company’s restricted stock unit (“RSU”) activity (in thousands):



Non-vested at December 31, 2014	1,629
Granted	1,043
Vested	(927	)
Forfeited	(785	)
Non-vested at December 31, 2015	960
Granted	2,914
Vested	(279	)
Forfeited	(25	)
Non-vested at March 31, 2016	3,570

Geographic Information and Concentrations of Risk (Tables)

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Schedule of Geographic Concentration of Net Revenues

The following table details the Company’s concentration of net revenues by geographic region based on shipping destination:



	Three Months Ended March 31,
	2016		2015
United States and Canada	76.8	%	96.1	%
Latin America	0.2		3.2
Europe, Middle East, Africa and other	21.5		0.7
Asia and Australia	1.5		—
	100.0	%	100.0	%

Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

The calculation of basic and diluted EPS was as follows (in thousands, except per share data):



	Three Months Ended March 31,
	2016			2015
Net loss attributable to Novatel Wireless, Inc.	$	(11,904	)	$	(7,826	)
Weighted-average common shares outstanding	53,251			46,262
Basic and diluted net loss per share	$	(0.22	)	$	(0.17	)

Restructuring (Tables)

3 Months Ended

Mar. 31, 2016

Restructuring and Related Activities [Abstract]

Summary of Restructuring Liability

The following table sets forth activity in the restructuring liability for the three months ended March 31, 2016 (in thousands):



	Balance at December 31, 2015		Costs Incurred		Payments			Non-cash		Translation Adjustment		Balance at March 31, 2016		Cumulative Costs Incurred to Date		Total Expected Restructuring Costs
2013 Initiatives
Employee Severance Costs	$	—	$	—	$	—		$	—	$	—	$	—	$	3,986	$	3,986
Facility Exit Related Costs	72		—		(19		)	—		—		53		2,625		2,630

2015 Initiatives
Employee Severance Costs	1,330		526		(865		)	—		16		1,007		4,117		4,117
Facility Exit Related Costs	328		96		(86		)	159		—		497		477		500
Total	$	1,730	$	622	$	(970	)	$	159	$	16	$	1,557	$	11,205	$	11,233

Basis of Presentation Narrative (Details)	3 Months Ended
Basis of Presentation Narrative (Details)	Mar. 31, 2016 Segments
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable segments	1

Acquisitions and Divestitures - Narrative (Details) R / shares in Units, $ in Thousands, shares in Millions					3 Months Ended	12 Months Ended
	Jan. 05, 2016 installment shares	Oct. 05, 2015 USD ($)	Jun. 18, 2015 ZAR (R) R / shares	Mar. 27, 2015 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2015 USD ($)	Apr. 11, 2016 USD ($)	Mar. 31, 2016 USD ($)
Business Acquisition [Line Items]
Acquisition-related liabilities					$ 5,274	$ 5,274		$ 7,912
DigiCore
Business Acquisition [Line Items]
Voting interests acquired			100.00%
Acquisition share price (ZAR per share) \| R / shares			R 4.40
Cash payments					79,365
Total purchase price		$ 80,000			79,988
Future issuance of common stock					623
DigiCore \| General and Administrative Expense
Business Acquisition [Line Items]
Acquisition costs						1,700
Feeney Wireless
Business Acquisition [Line Items]
Cash payments				$ 9,300		9,268
Total purchase price				24,800		24,777
Escrow amount and certain other pre-closing adjustments				1,500
Other assumed liabilities				500		509
Future issuance of common stock				15,000		15,000
Maximum contingent earn-out				$ 25,000
Acquisition-related liabilities					$ 6,100	6,100
Number of cash installment payments \| installment	5
Period for cash installments	4 years
Issued to former shareholders (shares) \| shares	2.9
Number of share installments \| installment	3
Period for share installments	3 years
Feeney Wireless \| General and Administrative Expense
Business Acquisition [Line Items]
Acquisition costs						$ 900
Subsequent Event
Business Acquisition [Line Items]
Initial purchase price, Divestiture							$ 11,000
Additional cash payment, Divestiture							$ 3,800
Scenario, Plan \| DigiCore \| Maximum
Business Acquisition [Line Items]
Cash payments \| R			R 1,094,223,363.20

Acquisitions - Consideration (Details) - USD ($) $ in Thousands			3 Months Ended	12 Months Ended
	Oct. 05, 2015	Mar. 27, 2015	Dec. 31, 2015	Dec. 31, 2015
DigiCore
Business Acquisition [Line Items]
Cash payments			$ 79,365
Future issuance of common stock			623
Total purchase price	$ 80,000		$ 79,988
Feeney Wireless
Business Acquisition [Line Items]
Cash payments		$ 9,300		$ 9,268
Future issuance of common stock		15,000		15,000
Other assumed liabilities		500		509
Total purchase price		$ 24,800		$ 24,777

Acquisitions - Allocation Table (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Oct. 05, 2015	Mar. 27, 2015
Business Acquisition [Line Items]
Goodwill	$ 30,947	$ 29,520
DigiCore
Business Acquisition [Line Items]
Cash			$ 2,437
Accounts receivable			15,052
Inventory			11,361
Property, plant and equipment			5,924
Rental assets			6,603
Intangible assets			28,270
Goodwill			29,273
Other assets			5,695
Bank facilities			(2,124)
Accounts payable			(7,446)
Accrued and other liabilities			(15,018)
Noncontrolling interests			(39)
Net assets acquired			$ 79,988
Feeney Wireless
Business Acquisition [Line Items]
Cash				$ 205
Accounts receivable				3,331
Inventory				10,008
Property, plant and equipment				535
Intangible assets				18,880
Goodwill				3,949
Other assets				544
Accounts payable				(7,494)
Accrued and other liabilities				(1,916)
Deferred revenues				(270)
Note payable				(2,575)
Capital lease obligations				(420)
Net assets acquired				$ 24,777

Acquisitions - Intangibles Table (Details) - USD ($) $ in Thousands	Oct. 05, 2015	Mar. 27, 2015
DigiCore
Acquired Finite-Lived Intangible Assets [Line Items]
Amount Assigned	$ 28,270
DigiCore \| Developed technologies
Acquired Finite-Lived Intangible Assets [Line Items]
Amount Assigned	$ 10,170
Amortization Period (in years)	6 years
DigiCore \| Trademarks and Trade names
Acquired Finite-Lived Intangible Assets [Line Items]
Amount Assigned	$ 14,030
Amortization Period (in years)	10 years
DigiCore \| Customer relationships
Acquired Finite-Lived Intangible Assets [Line Items]
Amount Assigned	$ 4,070
Amortization Period (in years)	5 years
Feeney Wireless
Acquired Finite-Lived Intangible Assets [Line Items]
Amount Assigned		$ 18,880
Feeney Wireless \| Developed technologies
Acquired Finite-Lived Intangible Assets [Line Items]
Amount Assigned		$ 3,660
Amortization Period (in years)		6 years
Feeney Wireless \| Trademarks and Trade names
Acquired Finite-Lived Intangible Assets [Line Items]
Amount Assigned		$ 4,700
Amortization Period (in years)		10 years
Feeney Wireless \| Customer relationships
Acquired Finite-Lived Intangible Assets [Line Items]
Amount Assigned		$ 8,500
Amortization Period (in years)		10 years
In-process research and development \| Feeney Wireless
Acquired Finite-Lived Intangible Assets [Line Items]
In-process research and development		$ 2,020

Acquisitions - Pro Forma Table (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]
Net revenues	$ 66,944	$ 75,921
Net loss	$ (11,899)	$ (11,008)

Balance Sheet Details - Summary of Inventories (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Finished goods	$ 41,506	$ 47,094
Raw materials and components	6,829	8,743
Total inventories	$ 48,335	$ 55,837

Balance Sheet Details - Summary of Accrued Expenses (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Royalties	$ 2,996	$ 2,740
Payroll and related expenses	5,653	4,406
Warranty obligations	989	932
Market development funds and price protection	2,635	2,805
Professional fees	3,168	1,060
Deferred revenue	1,306	1,836
Restructuring	955	1,044
Acquisition-related liabilities	7,912	5,274
Other	6,848	5,516
Total accrued expenses and other current liabilities	$ 32,462	$ 25,613

Balance Sheet Details - Summary of Accrued Warranty Obligations (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Movement in Standard Product Warranty Accrual [Roll Forward]
Warranty liability at December 31, 2015	$ 932
Additions charged to operations	350
Deductions from liability	(293)
Warranty liability at March 31, 2016	$ 989

Fair Value Measurement of Assets and Liabilities - Summary of Company's Financial Instruments, Fair Value on a Recurring Basis (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015	Jun. 10, 2015
Convertible Debt
Cash equivalents
Principal	$ 120,000		$ 120,000
Stated interest rate of debt issued			5.50%
Fair Value, Measurements, Recurring
Cash equivalents
Cash equivalents	35	$ 35
Assets, Fair Value Disclosure, Recurring	1,135	1,302
Fair Value, Measurements, Recurring \| Money market funds
Cash equivalents
Cash equivalents	35	35
Fair Value, Measurements, Recurring \| Short-term investments
Cash equivalents
Short-term investments	1,100	1,267
Fair Value, Measurements, Recurring \| Level 1
Cash equivalents
Cash equivalents	35	35
Assets, Fair Value Disclosure, Recurring	1,135	1,302
Fair Value, Measurements, Recurring \| Level 1 \| Money market funds
Cash equivalents
Cash equivalents	35	35
Fair Value, Measurements, Recurring \| Level 1 \| Short-term investments
Cash equivalents
Short-term investments	1,100	$ 1,267
Fair Value, Measurements, Nonrecurring
Cash equivalents
Fair value of debt	$ 84,600

Debt - Narrative (Details) - USD ($)			3 Months Ended
Debt - Narrative (Details) - USD ($)	Jun. 10, 2015	Oct. 31, 2014	Mar. 31, 2016	Nov. 17, 2015
Debt Instrument [Line Items]
Conversion price ($ per share)	$ 5.00
Convertible Debt
Debt Instrument [Line Items]
Term of debt instrument	5 years
Principal	$ 120,000,000		$ 120,000,000
Debt issuance costs	$ 3,900,000
Stated interest rate of debt issued	5.50%
Long-term debt			$ 84,573,000
Effective interest rate			17.79%
Revolving Credit Facility
Debt Instrument [Line Items]
Term of debt instrument		5 years
Maximum amount of credit facility		$ 25,000,000		$ 48,000,000
Outstanding borrowings under the credit facility			$ 3,400,000
Available borrowings			$ 12,100,000
Revolving Credit Facility \| Minimum
Debt Instrument [Line Items]
Margin on LIBOR rate			3.00%
Revolving Credit Facility \| Maximum
Debt Instrument [Line Items]
Margin on LIBOR rate			3.50%
Letter of Credit
Debt Instrument [Line Items]
Maximum amount of credit facility		$ 3,000,000

Debt - Components (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Jun. 10, 2015
Debt Instrument [Line Items]
Equity component	$ 38,305
Convertible Debt
Debt Instrument [Line Items]
Principal	120,000	$ 120,000
Less: unamortized debt discount and debt issuance costs	(35,427)
Net carrying amount	$ 84,573

Debt - Interest Expense (Details) - Convertible Debt $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Debt Instrument [Line Items]
Contractual interest expense	$ 1,650
Amortization of debt discount	1,980
Amortization of debt issuance costs	132
Total interest expense	$ 3,762

Share-based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended
Share-based Compensation (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Mar. 31, 2015
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	$ 1,066	$ 790
Cost of net revenues
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	52	21
Research and development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	249	215
Sales and marketing
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	210	40
General and administrative
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation expense	555	514
Employee Stock Purchase Plans
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Share-based compensation attributable to the ESPP	$ 100	$ 100

Share-based Compensation - Tables (Details) - shares shares in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding — beginning balance	6,085	3,065
Granted	952	6,657
Exercised	(1)	(273)
Canceled	(312)	(3,364)
Outstanding — ending balance	6,724	6,085
Exercisable — March 31, 2016	1,389
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Non-vested — beginning balance	960	1,629
Granted	2,914	1,043
Vested	(279)	(927)
Forfeited	(25)	(785)
Non-vested — ending balance	3,570	960

Geographic Information and Concentrations of Risk - Schedule of Geographic Concentration of Net Revenues (Detail) - Net Revenues - Geographic Concentration	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenues from External Customers and Long-Lived Assets [Line Items]
Concentration percentage	100.00%	100.00%
United States and Canada
Revenues from External Customers and Long-Lived Assets [Line Items]
Concentration percentage	76.80%	96.10%
Latin America
Revenues from External Customers and Long-Lived Assets [Line Items]
Concentration percentage	0.20%	3.20%
Europe, Middle East, Africa and other
Revenues from External Customers and Long-Lived Assets [Line Items]
Concentration percentage	21.50%	0.70%
Asia and Australia
Revenues from External Customers and Long-Lived Assets [Line Items]
Concentration percentage	1.50%	0.00%

Geographic Information and Concentrations of Risk - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Net Revenues \| Customer Concentration \| Customer One
Segment Reporting Information [Line Items]
Concentration percentage	52.70%	47.50%

Earnings Per Share - Narrative (Detail) - shares	3 Months Ended
Earnings Per Share - Narrative (Detail) - shares	Mar. 31, 2016	Mar. 31, 2015
Earnings Per Share [Abstract]
Anti-dilutive shares	10,574,618	5,483,254

Earnings Per Share - Earnings Per Basic and Diluted Share Table (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Numerator
Net loss attributable to Novatel Wireless, Inc.	$ (11,904)	$ (7,826)
Denominator
Weighted-average common shares outstanding (in shares)	53,251	46,262
Basic and diluted net loss per share (dollars per share)	$ (0.22)	$ (0.17)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income Tax Disclosure [Abstract]
Effective tax rate	2.90%	0.30%
Change in valuation allowance	$ 2.8

Restructuring - Additional Information (Detail) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Restructuring and Related Activities [Abstract]
Restructuring reserve, current	$ 955	$ 1,044
Restructuring reserve, noncurrent	$ 600

Restructuring - Summary of Restructuring Liability (Detail) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)
Restructuring Reserve [Roll Forward]
Balance at December 31, 2015	$ 1,730
Costs Incurred	622
Payments	(970)
Non-cash	159
Translation Adjustment	16
Balance at March 31, 2016	1,557
Cumulative Costs Incurred to Date	11,205
Total Expected Restructuring Costs	11,233
2013 Initiatives \| Employee Severance Costs
Restructuring Reserve [Roll Forward]
Balance at December 31, 2015	0
Costs Incurred	0
Payments	0
Non-cash	0
Translation Adjustment	0
Balance at March 31, 2016	0
Cumulative Costs Incurred to Date	3,986
Total Expected Restructuring Costs	3,986
2013 Initiatives \| Facility Exit Related Costs
Restructuring Reserve [Roll Forward]
Balance at December 31, 2015	72
Costs Incurred	0
Payments	(19)
Non-cash	0
Translation Adjustment	0
Balance at March 31, 2016	53
Cumulative Costs Incurred to Date	2,625
Total Expected Restructuring Costs	2,630
2015 Initiatives \| Employee Severance Costs
Restructuring Reserve [Roll Forward]
Balance at December 31, 2015	1,330
Costs Incurred	526
Payments	(865)
Non-cash	0
Translation Adjustment	16
Balance at March 31, 2016	1,007
Cumulative Costs Incurred to Date	4,117
Total Expected Restructuring Costs	4,117
2015 Initiatives \| Facility Exit Related Costs
Restructuring Reserve [Roll Forward]
Balance at December 31, 2015	328
Costs Incurred	96
Payments	(86)
Non-cash	159
Translation Adjustment	0
Balance at March 31, 2016	497
Cumulative Costs Incurred to Date	477
Total Expected Restructuring Costs	$ 500