Wave Trims Full Year 2013 Net Loss on Revenues of $24.4M
LEE, MA--(Marketwired - Mar 13, 2014) - Wave Systems Corp.
(NASDAQ: WAVX), an enterprise security software provider, today
reported fourth quarter (Q4 '13) and full-year results for the
periods ended December 31, 2013. Wave will host a live webcast
http://www.media-server.com/m/p/mdpsrvop and conference call
(415-226-5356 or 212-231-2907) today at 4:30 p.m. ET to review its
Q4 and full-year results.
Q4 Financial Highlights
- Q4 '13 net loss declined by $9.3 million to $3.7 million, or
($0.11) per basic share, compared to a net loss of $13.0 million,
or ($0.50) per basic share in Q4 '12, and increased by $0.8 million
as compared with a net loss of $2.9 million, or ($0.09) per share,
in Q3 '13. The Q4 '13 net loss included a one-time $1.0 million
severance accrual related to Wave's former CEO. Wave's Q4 '12 net
loss included $7.5 million of goodwill and intangible asset
impairment charges. As applicable, the prior period per share
amounts have been adjusted for the 1-for-4 reverse stock split of
July 1, 2013.
- Q4 '13 combined SG&A and R&D expenses declined by 22%
to $8.9 million versus Q4 '12 reflecting ongoing cost management
efforts. Excluding the $1.0 million severance liability noted
above, Wave's SG&A and R&D expenses would have decreased by
31% in Q4 '13 versus the year ago period.
- Q4 '13 total net revenues decreased 21% to $5.6 million versus
Q4 '12, primarily due to a $0.6 million reduction in services
revenue and a $0.4 million reduction in OEM software bundling
revenue. Q4 '13 total net revenues declined 11% over Q3 '13
revenues of $6.3 million, which included $0.4 million of services
revenue. Wave had no services revenues in Q4 '13 primarily due to
the completion of a government contract.
- Q4 '13 total billings declined 41% to $5.4 million versus Q4
'12. Total billings in Q4 '12 included a three-year maintenance
renewal of $1.7 million for a large class customer. Total billings
for Q4 '13 declined 24% versus Q3 '13 total billings of $7.1
million, which included a total of $0.4 million for additional
license purchases and the 2014 maintenance renewal for a large
customer.
Full Year 2013 Financial Highlights
- 2013 net loss declined by $13.7 million to $20.3 million, or
($0.68) per basic share, as compared to a net loss of $34.0
million, or ($1.41) per basic share, in 2012. Wave's 2013 and 2012
net losses included $4.2 million and $7.5 million, respectively, of
goodwill and intangible asset impairment charges. As applicable,
the prior period per share amounts have been adjusted for the
1-for-4 reverse stock split of July 1, 2013.
- 2013 revenue declined to $24.4 million from $28.8 million in
2012, principally due to a $3.3 million decrease in OEM software
bundling revenue.
- 2013 total operating expenses decreased 29% to $44.5 million
versus $62.6 million in 2012.
Working Capital and Fundraising
At year-end 2013 Wave's total current assets were $7.0 million,
while total current liabilities were $15.2 million, including $7.0
million in deferred revenue. Cash and cash equivalents were $2.1
million at year-end, compared to $1.8 million at September 30, 2013
and $2.1 million at December 31, 2012.
During Q4 '13 Wave raised $1.2 million from the sale of 1.0
million common shares at an average price of $1.22 per share
through its At-The-Market (ATM) share sale facility and raised an
additional $1.1 million from the sale of 1.3 million common shares
at $0.9725 per share in a registered direct offering.
To date in 2014, Wave has raised $5.4 million from the sale of
5.3 million common shares through its ATM share sale facility at an
average price of $1.02 per share.
Recent Corporate Developments:
- Wave announces comprehensive management for Kingston's KC300
Opal SSD drives
- Wave appoints Lorraine Hariton and David Côté to Board
- Wave joins the FIDO Alliance
- Wave began shipping its management software with Samsung
Electronics new Trusted Platform Module security chips for the OEM
market during Q1 2014
- Wave expanded partnership with Samsung to offer management
software for Samsung's new 840 EVO Solid-State Self-Encrypting
Drives
- Wave's encryption management software accepted for evaluation
for commercial certification by UK Government's information
security group (CESG)
- Government Security News selected Wave's
virtual smart card solution for Homeland Security
award
- Wave partnered with Intel to provide management software for
Intel's Pro 1500 Series Solid-State Self-Encrypting Drives
CEO Commentary:
"The past six months were the start of a period of critical
transition for Wave -- marked by numerous changes to our
operations, a more focused sales and marketing strategy, and
targeted headcount changes across the organization," said Wave CEO
Bill Solms. "We have established ways to improve efficiency across
every aspect of our business, especially in how we develop, market,
and sell our products.
"There have been several recent changes to our operations that
are all focused on my three goals of clarity, efficiency and
accountability within Wave. These changes covered the spectrum from
travel policy to personnel reviews to a formalized process for
deciding which concepts become projects and which projects become
products. We drastically revised our sales and marketing plans to
focus our sales efforts on higher margin Wave solutions and
products, and to target sales efforts toward larger customers with
the Wave security message. We are looking for new use cases for our
existing products that we hope will drive new customers to our
solutions and in some cases present new market opportunities as
well. Wave's Virtual Smart Card solution is a good example of this
strategy, where we are competing against external security tokens
such as RSA tokens and Active Identity dongles and are also
pursuing opportunities in the EMV (Europay, MasterCard, Visa)
market for authenticating credit and debit card transactions. Both
are made possible by our current TPM security chip management
technology.
"Finally, in an effort to improve our offerings to larger
customers, we have recently added three new sales reps with the
background and skills to help us address these sophisticated sales
opportunities. We have also reduced sales reps in other areas in
order to remain headcount neutral and control costs.
"These changes have involved growing pains, however they leave
us better positioned to execute strategies designed to put us on
the path towards sustained growth and profitability. This is not a
short-term proposition, and it will likely take a few quarters
before the financial benefits become clear. However, there are
already signs that our initiatives are resonating both inside and
outside our company, making me confident that the work we're doing
today is setting us up for a promising future."
About Wave Systems Wave Systems Corp. reduces the complexity,
cost and uncertainty of data protection by starting inside the
device. Unlike other vendors who try to secure information by
adding layers of software for security, Wave leverages the security
capabilities built directly into endpoint computing platforms
themselves. Wave is a leading expert in this growing trend and is
leading the way with first-to-market solutions and helped shape
standards through its board seat on the Trusted Computing
Group.
Safe Harbor for Forward-Looking Statements This press
release may contain forward-looking information within the meaning
of the Private Securities Litigation Reform Act of 1995 and Section
21E of the Securities Exchange Act of 1934, as amended (the
Exchange Act), including all statements that are not statements of
historical fact regarding the intent, belief or current
expectations of the company, its directors or its officers with
respect to, among other things: (i) the company's financing plans;
(ii) trends affecting the company's financial condition or results
of operations; (iii) the company's growth strategy and operating
strategy; and (iv) the declaration and payment of dividends. The
words "may," "would," "will," "expect," "estimate," "anticipate,"
"believe," "intend" and similar expressions and variations thereof
are intended to identify forward-looking statements. Investors are
cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and
uncertainties, many of which are beyond the company's ability to
control, and that actual results may differ materially from those
projected in the forward-looking statements as a result of various
factors. Wave assumes no duty to and does not undertake to update
forward-looking statements.
All brands are the property of their respective owners.
|
|
WAVE SYSTEMS CORP. AND SUBSIDIARIES |
|
Consolidated Statements of Operations |
|
(Unaudited) |
|
|
|
|
|
Three Months Ended December 31, |
|
|
Twelve months ended December 31, |
|
|
|
2013 |
|
|
2012 (1) |
|
|
2013 (2) |
|
|
2012 (1) |
|
Net revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensing and maintenance |
|
$ |
5,613,559 |
|
|
$ |
6,530,639 |
|
|
$ |
22,591,914 |
|
|
$ |
27,480,732 |
|
|
Services |
|
|
- |
|
|
|
600,000 |
|
|
|
1,808,938 |
|
|
|
1,363,781 |
|
Total net revenues |
|
|
5,613,559 |
|
|
|
7,130,639 |
|
|
|
24,400,852 |
|
|
|
28,844,513 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensing and maintenance - cost of net revenues |
|
|
313,310 |
|
|
|
4,510,166 |
|
|
|
3,419,271 |
|
|
|
6,722,221 |
|
|
Services - cost of net revenues |
|
|
- |
|
|
|
- |
|
|
|
277,665 |
|
|
|
144,111 |
|
|
Selling, general and administrative |
|
|
6,786,112 |
|
|
|
7,280,890 |
|
|
|
26,829,636 |
|
|
|
32,632,237 |
|
|
Research and development |
|
|
2,125,794 |
|
|
|
4,194,337 |
|
|
|
11,380,258 |
|
|
|
19,055,894 |
|
|
Impairment of goodwill and intangible assets |
|
|
- |
|
|
|
4,054,732 |
|
|
|
2,590,000 |
|
|
|
4,054,732 |
|
Total operating expenses |
|
|
9,225,216 |
|
|
|
20,040,125 |
|
|
|
44,496,830 |
|
|
|
62,609,195 |
|
Operating loss |
|
|
(3,611,657 |
) |
|
|
(12,909,486 |
) |
|
|
(20,095,978 |
) |
|
|
(33,764,682 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
currency transaction gain (loss) |
|
|
(4,862 |
) |
|
|
403 |
|
|
|
(17,220 |
) |
|
|
12,156 |
|
|
Net
interest expense |
|
|
(49,260 |
) |
|
|
(98,695 |
) |
|
|
(200,456 |
) |
|
|
(197,989 |
) |
Total other income (expense) |
|
|
(54,122 |
) |
|
|
(98,292 |
) |
|
|
(217,676 |
) |
|
|
(185,833 |
) |
Loss before income taxes |
|
|
(3,665,779 |
) |
|
|
(13,007,778 |
) |
|
|
(20,313,654 |
) |
|
|
(33,950,515 |
) |
Income tax expense |
|
|
10,610 |
|
|
|
12,033 |
|
|
|
10,610 |
|
|
|
12,033 |
|
Net loss |
|
|
(3,676,389 |
) |
|
|
(13,019,811 |
) |
|
|
(20,324,264 |
) |
|
|
(33,962,548 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share - basic and diluted (3) |
|
$ |
(0.11 |
) |
|
$ |
(0.50 |
) |
|
$ |
(0.68 |
) |
|
$ |
(1.41 |
) |
Weighted average number of common shares outstanding
during the period (3) |
|
|
33,436,124 |
|
|
|
26,000,981 |
|
|
|
29,825,854 |
|
|
|
24,051,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Year-ago Q4 and full year periods reflect non-cash impairment
charges totaling $7.5M for the write down of goodwill and
intangible assets attributed to Wave's Safend subsidiary, of which
$3.4M is included in licensing and maintenance -- cost of net
revenues and $4.1M is reflected as an impairment of goodwill and
intangible assets. |
|
|
|
(2) |
|
Full
year 2013 reflects non-cash impairment charges totaling $4.2M for
the write down of goodwill and intangible assets attributed to
Wave's Safend subsidiary, of which $1.6M is included in licensing
and maintenance -- cost of net revenues and $2.6M is reflected as
an impairment of goodwill and intangible assets. |
|
|
|
(3) |
|
All
shares and per share data presented in these consolidated financial
statements have been retroactively adjusted to reflect the 1-for-4
reverse stock split. |
|
|
|
|
|
|
|
|
|
WAVE SYSTEMS CORP. AND SUBSIDIARIES |
|
Consolidated Supplemental Schedule |
|
(Unaudited) |
|
|
|
|
|
Three Months Ended December 31, |
|
|
Twelve months ended December 31, |
|
|
|
2013 |
|
|
2012 |
|
|
2013 |
|
|
2012 |
|
Total
net revenues |
|
$ |
5,613,559 |
|
|
$ |
7,130,639 |
|
|
$ |
24,400,852 |
|
|
$ |
28,844,513 |
|
Increase (decrease) in deferred revenue |
|
|
(190,072 |
) |
|
|
2,127,204 |
|
|
|
(76,791 |
) |
|
|
84,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
billings (Non-GAAP) |
|
$ |
5,423,487 |
|
|
$ |
9,257,843 |
|
|
$ |
24,324,061 |
|
|
$ |
28,929,417 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss as reported |
|
$ |
(3,676,389 |
) |
|
$ |
(13,019,811 |
) |
|
$ |
(20,324,264 |
) |
|
$ |
(33,962,548 |
) |
Net
interest expense |
|
|
49,260 |
|
|
|
98,695 |
|
|
|
200,456 |
|
|
|
197,989 |
|
Income tax expense |
|
|
10,610 |
|
|
|
12,033 |
|
|
|
10,610 |
|
|
|
12,033 |
|
Depreciation and amortization |
|
|
246,036 |
|
|
|
525,309 |
|
|
|
1,009,876 |
|
|
|
2,136,830 |
|
Stock-based compensation expense |
|
|
75,727 |
|
|
|
843,243 |
|
|
|
1,694,842 |
|
|
|
4,830,831 |
|
Impairment of goodwill and intangible assets |
|
|
- |
|
|
|
7,477,832 |
|
|
|
4,205,000 |
|
|
|
7,477,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDAS (Non-GAAP) |
|
$ |
(3,294,756 |
) |
|
$ |
(4,062,699 |
) |
|
$ |
(13,203,480 |
) |
|
$ |
(19,307,033 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures: As supplemental
information, we provide the non-GAAP performance measures that we
refer to as total billings and EBITDAS. Total billings are
provided in addition to, but not as a substitute for, GAAP total
net revenues. Total billings means the sum of total net
revenues determined in accordance with GAAP, plus the increase or
minus the decrease in deferred revenue. We consider total
billings an important measure of our financial performance, as we
believe it best represents the continued increase in our software
license upgrades. Total billings are not a measure of
financial performance under GAAP and, as calculated by us, may not
be consistent with computations of total billings by other
companies. For the three months ended September 30, 2013,
total billings were $7,069,180 and consisted of total net revenues
of $6,251,325 adjusted for an increase in deferred revenue of
$817,855.
EBITDAS is defined as net income (loss) before interest income
(expense), income taxes, depreciation, amortization and stock-based
compensation. EBITDAS should not be construed as a substitute
for net income (loss) or net cash provided by (used in) operating
activities (all as determined in accordance with GAAP) for the
purpose of analyzing our operating performance, financial position
and cash flows, as EBITDAS is not defined by GAAP. However, we
regard EBITDAS as a complement to net income (loss) and other GAAP
financial performance measures, including an indirect measure of
operating cash flow. For the three months ended September 30,
2013, negative EBITDAS was $(2,171,517) and consisted of net loss
as reported of $(2,943,823) adjusted for net interest expense of
$43,166, depreciation and amortization of $216,571 and stock-based
compensation expense of $512,569.
|
|
WAVE SYSTEMS CORP. AND SUBSIDIARIES |
|
Consolidated Balance Sheets |
|
(Unaudited) |
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2013 |
|
|
2012 |
|
Assets |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,120,102 |
|
|
$ |
2,112,769 |
|
|
Accounts receivable, net of allowance for doubtful
accounts of $-0- at December 31, 2013 and 2012, respectively |
|
|
2,730,077 |
|
|
|
5,034,422 |
|
|
Pledged receivables |
|
|
1,683,188 |
|
|
|
1,801,683 |
|
|
Prepaid expenses |
|
|
488,656 |
|
|
|
421,769 |
|
|
Total current assets |
|
|
7,022,023 |
|
|
|
9,370,643 |
|
|
Property and equipment, net |
|
|
596,820 |
|
|
|
871,568 |
|
|
Amortizable intangible assets, net |
|
|
2,590,920 |
|
|
|
4,028,333 |
|
|
Goodwill |
|
|
1,448,000 |
|
|
|
4,038,000 |
|
|
Other assets |
|
|
167,146 |
|
|
|
324,614 |
|
Total Assets |
|
|
11,824,909 |
|
|
|
18,633,158 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Deficit |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
Secured borrowings |
|
|
1,430,710 |
|
|
|
1,537,710 |
|
|
Accounts payable and accrued expenses |
|
|
6,789,274 |
|
|
|
7,570,723 |
|
|
Current portion of capital lease payable |
|
|
- |
|
|
|
44,658 |
|
|
Deferred revenue |
|
|
6,996,239 |
|
|
|
5,949,087 |
|
|
Total current liabilities |
|
|
15,216,223 |
|
|
|
15,102,178 |
|
|
Other long-term liabilities |
|
|
78,618 |
|
|
|
97,996 |
|
|
Royalty liability |
|
|
4,509,629 |
|
|
|
4,486,129 |
|
|
Long-term deferred revenue |
|
|
1,003,614 |
|
|
|
1,812,312 |
|
|
|
Total
Liabilities |
|
|
20,808,084 |
|
|
|
21,498,615 |
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit: |
|
|
|
|
|
|
|
|
Common stock, $.01 par value. Authorized 150,000,000
shares as Class A; 35,019,740 shares issued and outstanding in
2013 and 26,251,968 in 2012 |
|
|
350,197 |
|
|
|
262,520 |
|
Common stock, $.01 par value. Authorized 13,000,000
shares as Class B; 8,885 shares issued and outstanding in 2013 and
2012 |
|
|
89 |
|
|
|
89 |
|
Capital in excess of par value |
|
|
407,907,019 |
|
|
|
393,788,150 |
|
Accumulated deficit |
|
|
(417,240,480 |
) |
|
|
(396,916,216 |
) |
|
|
Total
Stockholders' Deficit |
|
|
(8,983,175 |
) |
|
|
(2,865,457 |
) |
Total Liabilities and Stockholders' Deficit |
|
$ |
11,824,909 |
|
|
$ |
18,633,158 |
|
|
|
|
|
|
|
|
|
|
All shares and per share data presented in these consolidated
financial statements have been retroactively adjusted to reflect
the 1-for-4 reverse stock split.
Wave Systems Corp. Gerard T. Feeney CFO 413-243-1600
investors@wave.com Investor Relations David Collins, Eric Lentini
212-924-9800 wavx@catalyst-ir.com