Novatel Wireless, Inc. (NASDAQ: NVTL), a leading provider of
intelligent wireless solutions, announced financial results for the
third quarter ended September 30, 2013.
Revenue in the third quarter was $92.7 million, up 2% compared
to $91.1 million in the second quarter of 2013. GAAP net loss in
the quarter was $5.1 million, or $(0.15) per share, improved from a
loss of $7.9 million, or $(0.23) per share, in the second quarter
of 2013. On a non-GAAP basis, net loss for the quarter was $1.2
million, or $(0.04) per share, improved from a loss of $6.7
million, or $(0.20) per share, in the second quarter of 2013. A
reconciliation of GAAP to non-GAAP measures is included in the
accompanying tables.
“In the third quarter, we had an improved performance in our
mobile computing business and continued to make important progress
in our M2M business,” said Peter Leparulo, CEO of Novatel Wireless.
“In our M2M business, we have several new anchor customer and
design wins in commercial and consumer telematics, particularly for
our new family of MT 3060 and SA 2100 devices. We also continue to
have a healthy pipeline of new opportunities in our M2M business.
In mobile computing, we had strong contributions from MiFi mobile
hotspots. We also launched a new product category with our MiFi
Home, and we are optimistic it will provide us with a long-term
strategic footing in the home connectivity and adjacent
markets.
“As we look to the fourth quarter, we expect to see the impact
of an increasing level of competition at a customer in the mobile
hotspot category. However, we continue to see substantial
opportunities in our mobile computing business and are
planning to address this business segment with a much leaner, more
efficient R&D cost structure, including a higher component of
variable development resources. We believe this is possible for
several reasons. We expect that going forward, network upgrade
cycles among our leading operator customers will be more staggered
than they have been, which in turn will allow us to stagger the
various stages of our product development cycles. During the
quarter we announced the restructuring of a substantial portion of
our operations, taking meaningful costs out of the model where we
saw synergies across our product portfolio. Lastly, a larger
component of our R&D investments will be platform products
which are extensible to multiple applications and markets. We are
confident these changes will optimize our cost structure and
meaningfully lower our breakeven point, as we remain focused on
target long-term profitability.”
Recent Business Highlights
- Novatel Wireless recently announced it
would be supplying DigiCore, a leading provider of advanced
machine-to-machine (M2M) communication and telematics solutions,
with various versions of its MT3060 cellular OBDII devices to be
included in DigiCore’s Ctrack® telematics solutions and
services.
- Novatel Wireless introduced MiFi Home™,
a powerful all-in-one solution that replaces wired voice and
Internet options for fast, easy phone and 4G LTE Internet
connectivity in the home, small office, and remote work station. It
has launched this product category first with Verizon with their 4G
LTE Broadband Router with Voice, which became commercially
available on September 25, 2013.
- On September 9, 2013, Novatel Wireless
announced it was implementing restructuring initiatives designed to
refine its business operations and capitalize on synergies in its
target markets with the goal of driving long-term profitability. In
connection with the restructuring plan, Novatel
Wireless made strategic organizational changes across some of
its Mobile Computing and Machine-to-Machine (M2M) business
operations to streamline its research and development resources and
consolidate several global manufacturing activities to drive
efficiencies.
- During the quarter, Novatel Wireless
and RAC Motoring Services, one of the UK's most progressive
motoring organizations, announced that they signed a long term
Supply and License Agreement. Under the agreement, Novatel Wireless
is supplying RAC with its MT 3060 device, customized for the RAC
Advance solution.
Fourth Quarter 2013 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 fourth quarter of 2013 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.
Fourth Quarter 2013 Revenue $66 - $78 million
Non-GAAP Gross Margin 21% - 23% Non-GAAP EPS $(0.14)
- $0.00
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 November 13, 2013. To hear the replay, parties in
the United States may call 1-877-344-7529 and enter conference code
100 354 73#. 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 third quarter ended September 30,
2013 and our outlook for the fourth quarter of 2013, 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 and cost containment
initiatives.
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 income and earnings per share
exclude stock-based compensation expenses, charges and benefits
related to M&A activities, acquisition-related intangible-asset
amortization, a litigation accrual, and merger integration costs.
Non-GAAP net income and earnings per share for the full year also
exclude the impact of establishing a valuation allowance related to
deferred tax assets and assume a tax rate which management believes
reflects its long-term effective tax rate.
Adjusted EBITDA and Non-GAAP net income, earnings per share,
operating expenses, and gross margin are supplemental measures of
our performance that are not required by, or presented in
accordance with, GAAP. These non-GAAP financial measures are not
intended to be used in isolation and, moreover, they should not be
considered as a substitute for net income, diluted earnings per
share, operating expenses, gross margin or any other performance
measure determined in accordance with GAAP. We present adjusted
EBITDA and non-GAAP net income, earnings per share, operating
expenses, and gross margin because we consider each to be an
important supplemental measure of our performance.
Management uses these non-GAAP financial measures to make
operational decisions, evaluate the Company's performance, prepare
forecasts and determine compensation. Further, management believes
that both management and investors benefit from referring to these
non-GAAP financial measures in assessing the Company's performance
when planning, forecasting and analyzing future periods. The
stock-based compensation expenses are expected to vary depending on
the number of new grants issued to both current and new employees,
and changes in the Company’s stock price, stock market volatility,
expected option life and risk-free interest rates, all of which are
difficult to estimate. In calculating non-GAAP operating expenses,
net income and earnings per share, management excludes stock-based
compensation expenses and charges related to M&A activity to
facilitate comparability of the Company's operating performance on
a period-to-period basis because such expenses are not, in
management's review, related to the Company's ongoing operating
performance. Management uses this view of its operating performance
for purposes of comparison with its business plan and individual
operating budgets and allocation of resources.
We further believe that these non-GAAP financial measures are
useful to investors in providing greater transparency to the
information used by management in its operational decision making.
We believe that the use of non-GAAP operating expenses, net income
and earnings per share also facilitates a comparison of Novatel
Wireless’ underlying operating performance with that of other
companies in our industry, which use similar non-GAAP financial
measures to supplement their GAAP results.
Calculating non-GAAP operating expenses, net income and earnings
per share have limitations as an analytical tool, and you should
not consider these measures in isolation or as substitutes for GAAP
operating expenses, net income and earnings per share. In the
future, we expect to continue to incur expenses similar to the
non-GAAP adjustments described above, and exclusion of these items
in the presentation of our non-GAAP financial measures should not
be construed as an inference that these costs are unusual,
infrequent or non-recurring. Investors and potential investors are
cautioned that there are material limitations associated with the
use of non-GAAP financial measures as an analytical tool. Some of
the limitations in relying on non-GAAP operating expenses, net
income and earnings per share are:
- Other companies, including other
companies in our industry, may calculate non-GAAP operating
expenses, net income and earnings per share differently than we do,
limiting their usefulness as a comparative tool.
- The Company's income tax expense will
be ultimately based on its GAAP taxable income and actual tax rates
in effect, which may differ significantly from the effective tax
rate used in our non-GAAP financial measures.
In addition, the adjustments to our GAAP operating expenses, net
income and earnings per share reflect the exclusion of stock-based
compensation expenses that are recurring and will be reflected in
the Company's financial results for the foreseeable future. The
Company compensates for these limitations by providing specific
information regarding the GAAP amount excluded from the non-GAAP
financial measures. The Company further compensates for the
limitations of our use of non-GAAP financial measures by presenting
comparable GAAP measures more prominently. The Company evaluates
the non-GAAP financial measures together with the most directly
comparable GAAP financial measures.
Investors and potential investors are encouraged to review the
reconciliation of non-GAAP financial measures contained within this
press release with our GAAP operating expenses, net income,
earnings per share and gross margin. For more information, see the
consolidated statements of operations and the "Reconciliation of
GAAP Net Income (Loss) to Non-GAAP Net Income" contained in this
press release.
(C) 2013 Novatel Wireless. All rights reserved. MiFi, Expedite,
Enabler, Enfora, N4A, and the Novatel Wireless name and logo are
trademarks of Novatel Wireless, Inc. Other product or service names
mentioned herein are the trademarks of their respective owners.
NOVATEL WIRELESS, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (in thousands)
September 30,
December 31, 2013 2012
(Preliminary
andunaudited)
ASSETS Current assets: Cash and cash
equivalents $ 18,138 $ 16,044 Marketable securities 21,991 38,064
Restricted marketable securities 2,441 - Accounts receivable, net
47,542 42,652 Inventories 27,025 39,016 Deferred tax assets, net 70
126 Prepaid expenses and other 7,342 4,829
Total current assets 124,549 140,731 Property and
equipment, net 11,895 15,229 Marketable securities 5,316
1,201 Intangible assets, net 2,383 3,163 Deferred tax
assets, net 70 584 Other assets 280 623
Total assets $ 144,493 $ 161,531
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 46,509 $ 45,732 Accrued
expenses 27,960 27,800 Short-term bridge loan facility 2,441
- Total current liabilities 76,910 73,532
Other long-term liabilities 1,932 2,552
Total liabilities 78,842 76,084
Stockholders' equity: Common stock 34
34 Additional paid-in capital 440,812 438,477 Accumulated other
comprehensive income (loss) (10 ) 14 Accumulated deficit
(350,185 ) (328,078 ) 90,651 110,447 Treasury stock at cost
(25,000 ) (25,000 ) Total stockholders' equity
65,651 85,447 Total liabilities and
stockholders' equity $ 144,493 $ 161,531
NOVATEL WIRELESS, INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except per share data)
Three Months
Ended
Nine Months
Ended
September
30,
September
30,
2013 2012
2013 2012
(Preliminary
andunaudited)
(Unaudited)
(Preliminary
andunaudited)
(Unaudited) Net revenues $ 92,673 $ 71,017 $ 269,718
$ 273,613 Cost of net revenues 72,290 56,371
213,463 214,728 Gross profit
20,383 14,646 56,255
58,885 Operating costs and expenses: Research
and development 12,438 14,696 39,267 44,982 Sales and marketing
5,129 6,267 16,739 21,255 General and administrative 5,128 4,825
19,209 16,061 Goodwill and intangible assets impairment - 20,484 -
49,821 Amortization of purchased intangible assets 141 227 422 891
Restructuring charges 2,411 -
2,411 - Total operating costs and expenses
25,247 46,499 78,048
133,010 Operating loss (4,864 ) (31,853 )
(21,793 ) (74,125 ) Other income (expense): Interest income,
net 31 72 109 238 Other income (expense), net 59
(45 ) (83 ) (191 ) Loss before income
taxes (4,774 ) (31,826 ) (21,767 ) (74,078 ) Income tax
provision 319 107 340 276 Net loss $
(5,093 ) $ (31,933 ) $ (22,107 ) $ (74,354 ) Per share data:
Net loss per share: Basic and diluted $ (0.15 ) $ (0.97 ) $
(0.65 ) $ (2.28 )
Weighted average shares used in
computation of net loss per share:
Basic and diluted 34,070 33,074
33,902 32,683
NOVATEL WIRELESS,
INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in
thousands)
Three
Months Ended Nine Months Ended September 30,
September 30, 2013 2012
2013 2012
(Preliminary
andunaudited)
(Unaudited)
(Preliminary
andunaudited)
(Unaudited) Cash flows from operating activities: Net loss $
(5,093 ) $ (31,933 ) $ (22,107 ) $ (74,354 ) Adjustments to
reconcile net loss to net cash used in operating activities: Loss
on sale/disposal of fixed asset - 62 18 90 Depreciation and
amortization 2,230 2,775 6,774 9,747 Loss on goodwill and purchased
intangible assets impairment - 20,484 - 49,821 Provision for bad
debts 623 (49 ) 1,005 39 Net impairment loss on marketable
securities - - - 39 Inventory provision 1,246 1,347 3,069 1,663
Share-based compensation expense 959 1,752 2,848 5,409 Non-cash
income tax expense 314 97 266 194 Changes in assets and
liabilities: Accounts receivable (8,584 ) 7,811 (5,895 ) (3,460 )
Inventories 626 1,691 8,922 4,089 Prepaid expenses and other assets
(1,561 ) 1,012 (2,169 ) (1,238 ) Accounts payable (1,490 ) (4,239 )
2,832 (15,108 ) Accrued expenses, income taxes, and other 47
(192 ) 255 233 Net
cash used in operating activities (10,683 ) 618
(4,182 ) (22,836 ) Cash flows from
investing activities: Purchases of property and equipment (1,323 )
(433 ) (5,048 ) (4,021 ) Purchases of marketable securities (12,577
) (14,341 ) (22,238 ) (31,871 ) Marketable securities
maturities/sales 17,215 15,447
31,731 27,506 Net cash provided by
(used in) investing activities 3,315 673
4,445 (8,386 ) Cash flows from
financing activities: Proceeds from the issuance of short-term debt
3,400 5,000 13,400 5,000 Principal repayments of short-term debt
(2,525 ) (5,000 ) (10,969 ) (5,000 ) Principal payments under
capital lease obligations - - - (46 )
Proceeds from stock option exercises and
ESPP net of taxes paid on vested restricted stock units
(254 ) (151 ) (515 ) 583 Net
cash provided by (used in) financing activities 621 (151 ) 1,916
537 Effect of exchange rates on cash and cash equivalents 22
4 (85 ) (43 ) Net
increase (decrease) in cash (6,725 )
1,144 2,094 (30,728 ) Cash and cash equivalents, beginning of
period 24,863 15,197 16,044
47,069 Cash and cash equivalents, end of
period $ 18,138
$ 16,341 $ 18,138 $ 16,341
Novatel
Wireless, Inc. Preliminary Reconciliation of GAAP Net Loss to
Non-GAAP Net Loss Three and Nine Months Ended September 30, 2013
(in thousands, except per share data) (Unaudited)
Three Months Ended Nine Months
Ended
September 30,
2013
September 30,
2013
NetIncome(Loss)
Income (Loss)Per
Share,Diluted
NetIncome(Loss)
Income (Loss)Per
Share,Diluted
GAAP net loss $ (5,093 ) (0.15 ) $ (22,107 ) $ (0.65 )
Adjustments: Share-based compensation expense (a) 959 0.03
2,848 0.08 Acquisition related charges (b) 224 0.00 672 0.02
Income tax adjustments (c) 254 0.01 201 0.01
Restructuring and other severance (d) 2,411
0.07 3,074 0.09 Non-GAAP net
loss $ (1,245 ) $ (0.04 ) $ (15,312 ) $ (0.45 ) (a)
Adjustments reflect share-based compensation expense recorded under
ASC Topic 718. (b) Adjustments reflect amortization of
purchased intangibles. (c) Adjustments for certain deferred
tax valuation activity. (d) 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 September
30, 2013 (in thousands) (Unaudited)
GAAP
Share-basedcompensationexpense(a)
Purchasedintangiblesamortization(b)
Restructure(c)
Non-GAAP Cost of net revenues $ 72,290 $ (7 ) $ 83 $
- $ 72,214 Operating costs and expenses: Research and
development 12,438 329 - - 12,109 Sales and marketing 5,129 215 - -
4,914 General and administrative 5,128 422 - - 4,706 Amortization
of purchased intangibles 141 - 141 - - Restructuring charges
2,411 - - 2,411 - Total
operating costs and expenses $ 25,247 966 141
2,411 $ 21,729 Total $ 959 $ 224 $ 2,411
(a) Adjustments reflect share-based compensation
expense recorded under ASC Topic 718. (b) Adjustments
reflect amortization of purchased intangibles. (c)
Adjustments reflect restructuring 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 Nine Months Ended September
30, 2013 (in thousands) (Unaudited)
GAAP
Share-basedcompensationexpense(a)
Purchasedintangiblesamortization(b)
Restructureand
OtherSeverance(c)
Non-GAAP Cost of net revenues $ 213,463 $ 49 $ 250 $
40 $ 213,124 Operating costs and expenses: Research and
development 39,267 908 - 433 37,926 Sales and marketing 16,739 618
- 185 15,936 General and administrative 19,209 1,273 - 5 17,931
Amortization of purchased intangibles 422 - 422 - - Restructuring
charges 2,411 - - 2,411 - Total
operating costs and expenses $ 78,048 2,799 422
3,034 $ 71,793 Total $ 2,848 $ 672 $ 3,074
(a) Adjustments reflect share-based compensation expense
recorded under ASC Topic 718. (b) Adjustments reflect
amortization of purchased intangibles. (c) 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 & Nine Months Ended September 30, 2013 (in thousands)
(Unaudited)
Three Months Ended Nine Months
Ended September 30, 2013 September 30, 2013
Loss before income taxes $ (4,774 ) $ (21,767 ) Depreciation
and amortization 2,230 6,774 Share-based compensation expense 959
2,848 Restructuring and other severance charges 2,411 3,074 Other
expense (income) (90 ) (26 ) Adjusted EBITDA $ 736
$ (9,097 ) See "Non -GAAP Financial Measures"
for information regarding our use of Non-GAAP financial measures.
NOVATEL WIRELESS, INC. Segment Reporting Three &
Nine Months Ended September 30, 2013 and 2012 (in thousands)
Three Months
Ended
Nine Months
Ended
September
30,
September
30,
2013 2012
2013 2012
(Preliminary
andunaudited)
(Unaudited)
(Preliminary
andunaudited)
(Unaudited)
Net revenues by
reportable segment:
Mobile Computing Products $ 84,067 $ 65,189 $ 240,510 $ 248,620 M2M
Products and Solutions 8,606 5,828
29,208 24,993 Total $ 92,673 $
71,017 $ 269,718 $ 273,613
Operating loss by
reportable segment:
Mobile Computing Products $ (953 ) $ (7,513 ) $ (9,801 ) $ (11,701
) M2M Products and Solutions (3,911 ) (24,340 )
(11,992 ) (62,424 ) Total $ (4,864 ) $ (31,853 ) $
(21,793 ) $ (74,125 )
September
30, December 31, 2013
2012
(Preliminary
andunaudited)
Identifiable
assets by reportable segment:
Mobile Computing Products $ 128,111 $ 141,045 M2M Products and
Solutions 16,382 20,486 Total $ 144,493
$ 161,531
Investor contact:The Blueshirt Group for Novatel WirelessChris
Danne, 415-217-5865chris@blueshirtgroup.comMatthew Hunt,
415-489-2194matt@blueshirtgroup.comorMedia contact:Novatel
Wireless, Inc.Charlotte Rubin, 858-812-3431crubin@nvtl.com
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