- Reports M2M revenue of $12.1 million, a
sequential increase of approximately 45%
- Makes progress on realignment of
operational and go-to-market strategy in Mobile Computing
- Completed additional restructuring
initiatives expected to achieve approximately $10 million in
annualized cost savings
Novatel Wireless, Inc. (NASDAQ: NVTL), a leading provider of
intelligent wireless solutions, announced financial results for the
first quarter ended March 31, 2014.
Revenue in the first quarter was $48.3 million. GAAP net loss in
the quarter was $9.0 million, or $(0.26) per share. On a non-GAAP
basis, net loss for the quarter was $7.1 million, or $(0.21) per
share. Adjusted EBITDA in the first quarter was a loss of $5.2
million. A reconciliation of GAAP to non-GAAP measures is included
in the accompanying tables.
“During the first quarter, we continued to make solid progress
in our M2M business, growing sequential revenue by approximately
45%, launching with new customers, advancing major prospects by
integrating with their platforms, and building our sales pipeline,”
said Peter Leparulo, CEO of Novatel Wireless. “Our targeted
vertical approach in M2M, our investments in product innovation,
sales, and integration are beginning to produce meaningful results.
We are at the center of what we believe are high growth verticals,
have the right products and sales and service infrastructure in
place, and continue to execute on our high impact growth
initiatives.
“In mobile computing, we made progress on our strategy to
retrench this business, moving it toward a more targeted product
development approach with a more variable operating model.
Relatedly, we furthered our restructuring initiatives in the
quarter, which we expect to yield annualized cost savings of
approximately $10 million beginning in the second quarter. Mobile
computing revenue in the quarter was largely driven by sales of our
MiFi 5510, which would have been an even larger contributor but was
muted by a supply chain component shortage.”
“As we move through 2014, we have a substantial, growing
pipeline of opportunities in M2M. We will be expanding our partner
relationships as we deepen our presence in our targeted verticals.
In mobile computing, we will begin to see our targeted channel
approach play out as we focus our development investments on
products that we are confident will achieve our required returns,
while certain products currently in the channel will come to the
end or the long-tail of their planned life cycle. Beyond that, we
continue to see opportunities in mobile computing which we will
selectively evaluate with our new variable cost model. We have
launch plans for a carrier aggregation product release in the
second half of the year, as well as other opportunities we are
pursuing for 2015, all of which meet our rigid criteria for returns
on our development investments. Lastly, we will continue to
evaluate our cost structure, commensurate with our opportunities,
and remain focused on returning to profitability,” concluded
Leparulo.
Second Quarter 2014 Business Outlook
The following statements are forward-looking and actual results
may differ materially. Please see the section titled, “Cautionary
Note Regarding Forward-Looking Statements” at the end of this press
release. A more detailed description of risks related to our
business is included in the reports filed by the Company with the
Securities and Exchange Commission.
Our guidance for the second quarter of 2014 reflects current
business indicators and expectations as of the date of this
release. All figures are approximations based on management’s
beliefs and assumptions as of the date of this release.
Second Quarter 2014
Total Revenue
$37 - $43 million
Mobile Computing Revenue
$27 - $32 million
M2M Revenue
$10 - $11 million
Non-GAAP Gross Margin 21% - 23% Non-GAAP EPS $(0.22)
- $(0.15)
Conference Call Information
Novatel Wireless will host a conference call and live webcast
for analysts and investors today at 5:00 p.m. ET. To access the
conference call:
- In the United States, call
1-877-317-6789
- International parties can access the
call at 1-412-317-6789
Novatel Wireless will offer a live webcast of the conference
call, which will be accessible from the "Investors" section of the
Company's website at www.NVTL.com. A telephonic replay of the
conference call will also be available one hour after the call and
will run through May 15, 2014. To hear the replay, parties in the
United States may call 1-877-344-7529 and enter conference code 100
452 57#. International parties may call 1-412-317-0088 and enter
the same code.
ABOUT NOVATEL WIRELESS
Novatel Wireless, Inc. is a leader in the design and development
of intelligent wireless solutions based on 2G, 3G and 4G
technologies. The Company delivers specialized wireless solutions
to carriers, distributors, retailers, OEMs and vertical markets
worldwide. Product lines include MiFi® Intelligent Mobile Hotspots,
Ovation™ USB modems, Expedite® embedded modules, Mobile Tracking
Solutions, Asset Tracking Solutions, and Enabler smart M2M modules.
These innovative products provide anywhere, anytime communications
solutions for consumers and enterprises. Headquartered in San
Diego, California, Novatel Wireless is listed on NASDAQ: NVTL. For
more information please visit www.nvtl.com. (NVTLF)
Cautionary Note Regarding Forward-Looking Statements
Some of the information presented in this release constitutes
forward-looking statements based on management’s current
expectations, assumptions, estimates and projections. In this
context, forward-looking statements often address expected future
business and financial performance and often contain words such as
“may,” “estimate,” “anticipate,” “believe,” “expect,” “intend,”
“plan,” “project,” “will” and similar words and phrases indicating
future results. The information presented in this release related
to our financial results for the first quarter ended March 31,
2014, our outlook for the second quarter of 2014, our outlook for
fiscal year 2014, as well as statements regarding new product
launches, are forward-looking. Forward-looking statements involve
risks and uncertainties that could cause actual results to differ
materially from those anticipated in such forward-looking
statements. The Company therefore cannot guarantee future results,
performance or achievements. Actual results could differ materially
from the Company’s expectations.
Factors that could cause actual results to differ materially
from Novatel Wireless' expectations are set forth as risk factors
in the Company's SEC reports and filings and include (1) the future
demand for wireless broadband access to data, (2) the growth of
wireless wide-area networking, (3) changes in commercially adopted
wireless transmission standards and technologies including 3G and
4G standards, (4) continued customer and end user acceptance of the
Company's current products and market demand for the Company's
anticipated new product offerings, (5) increased competition and
pricing pressure from current or future wireless market
participants, (6) dependence on third party manufacturers in Asia
and key component suppliers worldwide, (7) unexpected liabilities
or expenses, (8) the Company’s ability to introduce new products in
a timely manner, (9) litigation, regulatory and IP developments
related to our products or component parts of our products, (10)
the outcome of pending or future litigation, including the current
class action securities litigation, (11) the continuing impact of
the recent global credit crisis on the value and liquidity of the
securities in our investment portfolio, (12) dependence on a small
number of customers, (13) the effect of changes in accounting
standards and in aspects of our critical accounting policies and
(14) the Company's plans and expectations relating to strategic
relationships, international expansion, software and hardware
developments, personnel matters, cost containment initiatives, and
operating strategies.
These factors, as well as other factors described in the reports
filed by the Company with the SEC (available at www.sec.gov), could
cause actual results to differ materially. Novatel Wireless assumes
no obligation to update publicly any forward-looking statements for
any reason, even if new information becomes available or other
events occur in the future, except as otherwise required pursuant
to applicable law and our on-going reporting obligations under the
Securities Exchange Act of 1934, as amended.
Non-GAAP Financial Measures
Novatel Wireless has provided in this release financial
information that has not been prepared in accordance with GAAP.
Non-GAAP operating expenses, net loss and loss per share exclude
stock-based compensation expenses, acquisition-related
intangible-asset amortization, and restructuring and other
severance charges.
Adjusted EBITDA and Non-GAAP net loss, loss per share, operating
expenses, and gross margin are supplemental measures of our
performance that are not required by, or presented in accordance
with, GAAP. These non-GAAP financial measures are not intended to
be used in isolation and, moreover, they should not be considered
as a substitute for net income, diluted earnings per share,
operating expenses, gross margin or any other performance measure
determined in accordance with GAAP. We present adjusted EBITDA and
non-GAAP net loss, loss per share, operating expenses, and gross
margin because we consider each to be an important supplemental
measure of our performance.
Management uses these non-GAAP financial measures to make
operational decisions, evaluate the Company's performance, prepare
forecasts and determine compensation. Further, management believes
that both management and investors benefit from referring to these
non-GAAP financial measures in assessing the Company's performance
when planning, forecasting and analyzing future periods. The
stock-based compensation expenses are expected to vary depending on
the number of new grants issued to both current and new employees,
and changes in the Company’s stock price, stock market volatility,
expected option life and risk-free interest rates, all of which are
difficult to estimate. In calculating non-GAAP operating expenses,
net loss and loss per share, management excludes stock-based
compensation expenses, acquisition-related intangible-asset
amortization, and restructuring and other severance charges to
facilitate comparability of the Company's operating performance on
a period-to-period basis because such expenses are not, in
management's review, related to the Company's ongoing operating
performance. Management uses this view of its operating performance
for purposes of comparison with its business plan and individual
operating budgets and allocation of resources.
We further believe that these non-GAAP financial measures are
useful to investors in providing greater transparency to the
information used by management in its operational decision making.
We believe that the use of non-GAAP operating expenses, net loss
and loss per share also facilitates a comparison of Novatel
Wireless’ underlying operating performance with that of other
companies in our industry, which use similar non-GAAP financial
measures to supplement their GAAP results.
Calculating non-GAAP operating expenses, net income and earnings
per share have limitations as an analytical tool, and you should
not consider these measures in isolation or as substitutes for GAAP
operating expenses, net income and earnings per share. In the
future, we expect to continue to incur expenses similar to the
non-GAAP adjustments described above, and exclusion of these items
in the presentation of our non-GAAP financial measures should not
be construed as an inference that these costs are unusual,
infrequent or non-recurring. Investors and potential investors are
cautioned that there are material limitations associated with the
use of non-GAAP financial measures as an analytical tool. Some of
the limitations in relying on non-GAAP operating expenses, net loss
and loss per share are:
- Other companies, including other
companies in our industry, may calculate non-GAAP operating
expenses, net loss and loss per share differently than we do,
limiting their usefulness as a comparative tool.
- The Company's income tax expense will
be ultimately based on its GAAP taxable income and actual tax rates
in effect, which may differ significantly from the effective tax
rate used in our non-GAAP financial measures.
In addition, the adjustments to our GAAP operating expenses, net
loss and loss per share reflect the exclusion of stock-based
compensation expenses that are recurring and will be reflected in
the Company's financial results for the foreseeable future. The
Company compensates for these limitations by providing specific
information regarding the GAAP amount excluded from the non-GAAP
financial measures. The Company further compensates for the
limitations of our use of non-GAAP financial measures by presenting
comparable GAAP measures more prominently. The Company evaluates
the non-GAAP financial measures together with the most directly
comparable GAAP financial measures.
Investors and potential investors are encouraged to review the
reconciliation of non-GAAP financial measures contained within this
press release with our GAAP operating expenses, net loss, loss per
share and gross margin. For more information, see the consolidated
statements of operations and the "Reconciliation of GAAP Net Loss
to Non-GAAP Net Loss" contained in this press release.
(C) 2014 Novatel Wireless, Inc. All rights reserved. The Novatel
Wireless name and logo are trademarks of Novatel Wireless, Inc.
NOVATEL WIRELESS, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (in thousands)
March 31, December 31, 2014
2013
(Preliminary and
unaudited)
ASSETS Current assets: Cash and cash
equivalents $ 11,827 $ 2,911 Marketable securities 15,040 16,612
Restricted marketable securities 298 2,566 Accounts receivable, net
30,028 39,985 Inventories 25,129 27,793 Deferred tax assets, net
100 100 Prepaid expenses and other 2,792 5,662
Total current assets 85,214 95,629 Property and
equipment, net 8,246 9,901 Marketable securities 720 3,443
Intangible assets, net 1,879 2,131 Deferred tax
assets, net 81 81 Other assets 731 280
Total assets $ 96,871 $ 111,465
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 23,187 $ 24,538 Accrued
expenses 21,141 23,271 Current portion of contingent loss for
litigation 4,326 4,326 Short-term margin loan facility 298
2,566
Total current liabilities
48,952 54,701 Other long-term liabilities 1,723 1,848
Long-term portion of contingent loss for litigation 10,000
10,000 Total liabilities 60,675
66,549
Stockholders' equity:
Common stock 34 34 Additional paid-in capital 441,628
441,368 Accumulated other comprehensive income 6 5 Accumulated
deficit (380,472 ) (371,491 ) 61,196 69,916 Treasury
stock at cost (25,000 ) (25,000 ) Total stockholders'
equity 36,196 44,916 Total
liabilities and stockholders' equity $ 96,871 $ 111,465
NOVATEL
WIRELESS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months
Ended
March
31,
2014 2013
(Preliminary and
unaudited)
(Unaudited) Net revenues $ 48,284 $ 85,921 Cost of
net revenues 38,216 69,073 Gross profit
10,068 16,848 Operating costs
and expenses: Research and development 8,618 13,811 Sales and
marketing 3,995 5,756 General and administrative 5,076 6,326
Amortization of purchased intangible assets 140 140 Restructuring
charges 1,166 - Total operating costs
and expenses 18,995 26,033
Operating loss (8,927 ) (9,185 ) Other income (expense):
Interest income, net 15 57 Other expense, net (44 )
(77 ) Loss before income taxes (8,956 ) (9,205 )
Income tax provision (benefit) 25 (83 ) Net loss $
(8,981 ) $ (9,122 ) Per share data: Net loss per
share: Basic and diluted $ (0.26 ) $ (0.27 ) Weighted
average shares used in computation of net loss per share:
Basic and diluted 34,172 33,717
NOVATEL WIRELESS,
INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in
thousands)
Three Months Ended March 31,
2014 2013
(Preliminary and
unaudited)
(Unaudited) Cash flows from operating activities: Net loss $
(8,981 ) $ (9,122 ) Adjustments to reconcile net loss to net
cash provided by operating activities: Depreciation and
amortization 2,125 2,310 Provision for bad debts 30 156 Inventory
provision 180 65 Share-based compensation expense 477 949 Non-cash
income tax benefit (6 ) (120 ) Changes in assets and liabilities:
Accounts receivable 9,928 (1,026 ) Inventories 2,484 8,761 Prepaid
expenses and other assets 2,418 55 Accounts payable (1,175 ) (644 )
Accrued expenses, income taxes, and other (2,085 )
499 Net cash provided by operating activities
5,395 1,883 Cash flows from investing
activities: Purchases of property and equipment (513 ) (2,852 )
Purchases of marketable securities - (3,754 ) Marketable securities
maturities/sales 6,564 3,159 Net
cash provided by (used in) investing activities 6,051
(3,447 ) Cash flows from financing activities: Proceeds from
the issuance of short-term debt, net of issuance costs - 7,000
Principal repayments of short-term debt (2,268 ) (2,178 )
Restricted cash related to short-term debt - (661 ) Proceeds from
stock option exercises and ESPP net of taxes paid on vested
restricted stock units (217 ) (304 ) Net cash
provided by (used in) financing activities (2,485 ) 3,857 Effect of
exchange rates on cash and cash equivalents (45 ) (65
) Net increase in cash and cash equivalents 8,916
2,228 Cash and cash equivalents, beginning of period 2,911
16,044 Cash and cash equivalents, end of
period $ 11,827
$ 18,272
Novatel Wireless, Inc. Preliminary Reconciliation of
GAAP Net Loss to Non-GAAP Net Loss Three Months Ended March 31,
2014 (in thousands, except per share data) (Unaudited)
Three Months Ended
March 31,
2014
Net
Income
(Loss)
Income (Loss)
Per Share,
Diluted
GAAP net loss $ (8,981 ) (0.26 ) Adjustments:
Share-based compensation expense (a) 477 0.01 Acquisition
related charges (b) 224 0.01 Restructuring and other
severance charges (c) 1,166 0.03
Non-GAAP net loss $ (7,114 ) $ (0.21 ) (a) Adjustments
reflect share-based compensation expense recorded under ASC Topic
718. (b) Adjustments reflect amortization of purchased
intangibles. (c) Adjustments reflect restructuring and other
reduction in force charges. See "Non-GAAP Financial
Measures" for information regarding our use of Non-GAAP financial
measures.
Novatel Wireless, Inc.
Preliminary Reconciliation of GAAP Operating Costs and Expenses to
Non-GAAP Operating Costs and Expenses Three Months Ended March 31,
2014 (in thousands) (Unaudited)
GAAP
Share-based
compensation
expense
(a)
Purchased
intangibles
amortization
(b)
Restructuring
charges (c)
Non-GAAP Cost of net revenues $ 38,216 $ (30 )
$ 84 $ - $ 38,162 Operating costs and expenses: Research and
development 8,618 47 - - 8,571 Sales and marketing 3,995 79 - -
3,916 General and administrative 5,076 381 - - 4,695 Amortization
of purchased intangibles assets 140 - 140 - - Restructuring and
other severance charges 1,166 - -
1,166 - Total operating costs and expenses $ 18,995
507 140 1,166 $ 17,182 Total $
477 $ 224 $ 1,166 (a) Adjustments reflect
share-based compensation expense recorded under ASC Topic 718.
(b) Adjustments reflect amortization of purchased
intangibles. (c) Adjustments reflect restructuring and other
reduction in force charges. See "Non-GAAP Financial
Measures" for information regarding our use of Non-GAAP financial
measures.
Novatel Wireless, Inc.
Preliminary Reconciliation of GAAP Loss before Income Taxes to
Adjusted EBITDA Three Months Ended March 31, 2014 (in thousands)
(Unaudited)
Three Months Ended March 31, 2014
Loss before income taxes $ (8,956 ) Depreciation and
amortization 2,125 Share-based compensation expense 477
Restructuring and other severance charges 1,166 Other expense
29 Adjusted EBITDA $ (5,159 ) See "Non
-GAAP Financial Measures" for information regarding our use of
Non-GAAP financial measures.
NOVATEL WIRELESS, INC. Segment Reporting Three Months
Ended March 31, 2014 and 2013 (in thousands)
Three Months
Ended
March
31,
2014 2013
(Preliminary and
unaudited)
(Unaudited)
Net revenues by
reportable segment:
Mobile Computing Products $ 36,198 $ 75,620 M2M Products and
Solutions 12,086 10,301 Total $ 48,284
$ 85,921
Operating loss by
reportable segment:
Mobile Computing Products $ (6,126 ) $ (5,500 ) M2M Products and
Solutions (2,801 ) (3,685 ) Total $ (8,927 ) $ (9,185
)
March 31,
December 31, 2014 2013
(Preliminary and
unaudited)
Identifiable
assets by reportable segment:
Mobile Computing Products $ 80,235 $ 96,516 M2M Products and
Solutions 16,636 14,949 Total $ 96,871
$ 111,465
Investor contact:The Blueshirt Group for Novatel WirelessChris
Danne, 415-217-5865chris@blueshirtgroup.comorMatthew Hunt,
415-489-2194matt@blueshirtgroup.com
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