Wave Reduces Q1 Net Loss on Revenue of $5.3M
May 08 2014 - 4:02PM
Marketwired
Wave Reduces Q1 Net Loss on Revenue of $5.3M
LEE, MA--(Marketwired - May 8, 2014) - Wave Systems Corp.
(NASDAQ: WAVX), an enterprise security software provider, today
reported first quarter (Q1 '14) results for the period ended March
31, 2014. Wave will host a live webcast
http://www.media-server.com/m/p/cz93i98z and conference call
(415-226-5357 or 212-231-2930) today at 4:30 p.m. ET to review its
Q1 results and progress to date in 2014.
Q1 Financial Highlights
- Wave's Q1 '14 net loss was $3.3 million, or ($0.09) per basic
share, compared to a net loss of $10.2 million, or ($0.39) per
basic share in Q1 '13. The Q1 '14 net loss included one-time
severance expenses of $0.4 million related to Wave's former CFO
while the Q1 '13 net loss included $4.2 million in non-cash
impairment charges. The Q1 '13 net loss per basic share has been
adjusted for a 1-for-4 reverse stock split effective July 1,
2013.
- Q1 '14 combined SG&A and R&D expenses declined by 25%
to $8.3 million versus Q1 '13 as a result of management's ongoing
cost reduction initiatives. Excluding the severance expenses noted
above, Wave's Q1 '14 SG&A and R&D expenses would have
decreased by 29% as compared to Q1 '13.
- Licensing and maintenance net revenues rose 7% in Q1 '14 to
$5.3 million compared to $5.0 million in Q1 '13. The increase in
licensing and maintenance revenue was due primarily to an increase
in revenue recognized on Wave's license upgrade sales. Services
revenue decreased by $0.8 million as this amount earned during Q1
'13 was related to a contract with the United States Department of
Defense that was completed during 2013.
- Q1 '14 total billings declined 17% to $4.9 million vs. Q1 '13
total billings of $5.9 million. This was due primarily to a
decrease in services billings of $0.8 million and a decrease in OEM
billings of $0.4 million offset by an increase in licensing and
maintenance billings of $0.2 million. The decrease in OEM billings
consisted primarily of a decrease in Dell-related OEM bundling
billings due to a continued decline in total units
shipped.
Working Capital and Fundraising
- At March 31, 2014, Wave's total current assets were $8.0
million, while total current liabilities were $13.6 million,
including $6.9 million in deferred revenue. Cash and cash
equivalents rose to $4.3 million at March 31, 2014 compared to $2.1
million at December 31, 2013 and $1.8 million at March 31,
2013.
- During Q1 '14 Wave sold 5.4 million common shares at an average
price of $1.02 per share, for net proceeds of $5.3 million, through
its At-The-Market (ATM) share sale facility. Subsequent to March
31, 2014 Wave has not raised any additional capital thorough the
ATM facility but will continue to evaluate its financing
needs.
CEO Commentary: "The first quarter of 2014 saw modest but
welcome increases in software license billings and revenues over Q1
2013. Combined with significant reductions in our operating
expenses from a year ago, the execution of multiple new licensing
and marketing agreements with partners that are leading to new
revenue streams and the replacement of several key members of the
Wave management team, Wave is now showing visible signs of progress
in implementing our strategic transition plan. As I said during our
last quarterly call, our objectives won't be accomplished in a
single quarter or two -- this will be a longer-term proposition --
but I believe we are on track to achieve our goals," said Wave CEO
Bill Solms.
"One of the more significant developments came with the addition
of a new CFO, the promotion of one of our executives to head up our
APAC business and global business development, along with key
additions to the North American sales team. We also strengthened
our board with the addition of Lorraine Hariton and David Côté,
each with first-rate credentials, relevant experience and fresh new
perspective.
"I am encouraged by the progress we are making with our OEM
partners, including our development activities with Micron and our
joint efforts to develop solutions to protect IP-connected embedded
devices from malware and our expanded development partnership with
Samsung. In January we announced our support for Samsung's new line
of flash self-encrypting drives, followed by news of the first
shipments of the new Samsung Trusted Platform Module security chips
that include Wave's management software -- the culmination of
several years of development work.
"On the sales side, we're introducing a growing number of
prospects to our Virtual Smart Card solution, one that we believe
offers significant cost and implementation advantages over external
security tokens that command a significant market today. We also
received positive responses at marquee events such as the RSA
Conference in February and the Gartner Identity and Access
Management Conference held in London during March.
"There is substantial work in front of us. But we are making
progress in building a solid foundation for future quarters, and we
are working toward our objective of improving our operating results
as we progress throughout the rest of the year."
Recent Corporate Developments:
- Micron Technology and Wave collaborate to secure connected
devices against emerging threats
- Wave launches comprehensive management for Kingston's KC300
Opal Solid State Drives
- Wave appoints Silicon Valley executives Lorraine Hariton and
David Côté to Board
- Wave begins shipping its management software bundled with
Samsung TPM security chips
- Wave introduces software to manage Samsung's solid-state
self-encrypting drives
- Wave encryption management software accepted for evaluation by
UK Government's CESG
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 March 31, |
|
|
|
2014 |
|
|
2013 (1) |
|
Net revenues: |
|
|
|
|
|
|
|
|
|
Licensing and maintenance |
|
$ |
5,332,539 |
|
|
$ |
4,993,726 |
|
|
Services |
|
|
- |
|
|
|
800,000 |
|
Total net revenues |
|
|
5,332,539 |
|
|
|
5,793,726 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
Licensing and maintenance - cost of net revenues |
|
|
312,828 |
|
|
|
2,225,599 |
|
|
Services - cost of net revenues |
|
|
- |
|
|
|
107,361 |
|
|
Selling, general and administrative |
|
|
5,201,968 |
|
|
|
7,179,003 |
|
|
Research and development |
|
|
3,064,673 |
|
|
|
3,848,982 |
|
|
Impairment of goodwill and intangible assets |
|
|
- |
|
|
|
2,590,000 |
|
Total operating expenses |
|
|
8,579,469 |
|
|
|
15,950,945 |
|
Operating loss |
|
|
(3,246,930 |
) |
|
|
(10,157,219 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
Net
currency transaction (loss) gain |
|
|
(1,711 |
) |
|
|
1,631 |
|
|
Net
interest expense |
|
|
(44,864 |
) |
|
|
(58,167 |
) |
Total other income (expense), net |
|
|
(46,575 |
) |
|
|
(56,536 |
) |
Net loss |
|
$ |
(3,293,505 |
) |
|
$ |
(10,213,755 |
) |
|
|
|
|
|
|
|
|
|
Loss per common share - basic and diluted (2) |
|
$ |
(0.09 |
) |
|
$ |
(0.39 |
) |
Weighted average number of common shares outstanding
(2) |
|
|
38,486,897 |
|
|
|
26,347,688 |
|
|
|
|
|
|
|
|
|
|
(1) |
|
Year-ago Q1 period 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. |
|
|
|
(2) |
|
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 March 31, |
|
|
|
2014 |
|
|
2013 |
|
Total
net revenues |
|
$ |
5,332,539 |
|
|
$ |
5,793,726 |
|
Increase (decrease) in deferred revenue |
|
|
(426,699 |
) |
|
|
97,388 |
|
|
|
|
|
|
|
|
|
|
Total
billings (Non-GAAP) |
|
$ |
4,905,840 |
|
|
$ |
5,891,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss as reported |
|
$ |
(3,293,505 |
) |
|
$ |
(10,213,755 |
) |
Net
interest expense |
|
|
44,864 |
|
|
|
58,167 |
|
Income tax expense |
|
|
- |
|
|
|
- |
|
Depreciation and amortization |
|
|
236,648 |
|
|
|
315,909 |
|
Stock-based compensation expense |
|
|
414,283 |
|
|
|
437,706 |
|
Impairment of goodwill and intangible assets |
|
|
- |
|
|
|
4,205,000 |
|
|
|
|
|
|
|
|
|
|
EBITDAS (Non-GAAP) |
|
$ |
(2,597,710 |
) |
|
$ |
(5,196,973 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
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.
|
WAVE SYSTEMS CORP. AND SUBSIDIARIES |
Consolidated Balance Sheets |
(Unaudited) |
|
|
|
March 31, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
Assets |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
4,343,604 |
|
|
$ |
2,120,102 |
|
|
Accounts receivable, net of allowance for doubtful
accounts of $-0- at March 31, 2014 and December 31, 2013,
respectively |
|
|
2,586,640 |
|
|
|
2,730,077 |
|
|
Pledged receivables |
|
|
526,765 |
|
|
|
1,683,188 |
|
|
Prepaid expenses |
|
|
482,451 |
|
|
|
488,656 |
|
|
Total current assets |
|
|
7,939,460 |
|
|
|
7,022,023 |
|
|
Property and equipment, net |
|
|
530,603 |
|
|
|
596,820 |
|
|
Amortizable intangible assets, net |
|
|
2,445,246 |
|
|
|
2,590,920 |
|
|
Goodwill |
|
|
1,448,000 |
|
|
|
1,448,000 |
|
|
Other assets |
|
|
168,281 |
|
|
|
167,146 |
|
Total Assets |
|
|
12,531,590 |
|
|
|
11,824,909 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Deficit |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
Secured borrowings |
|
|
447,750 |
|
|
|
1,430,710 |
|
|
Accounts payable and accrued expenses |
|
|
6,195,125 |
|
|
|
6,789,274 |
|
|
Deferred revenue |
|
|
6,944,706 |
|
|
|
6,996,239 |
|
|
Total current liabilities |
|
|
13,587,581 |
|
|
|
15,216,223 |
|
|
Other long-term liabilities |
|
|
66,838 |
|
|
|
78,618 |
|
|
Royalty liability |
|
|
4,434,043 |
|
|
|
4,509,629 |
|
|
Long-term deferred revenue |
|
|
981,808 |
|
|
|
1,003,614 |
|
|
|
Total
Liabilities |
|
|
19,070,270 |
|
|
|
20,808,084 |
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit: |
|
|
|
|
|
|
|
|
Common stock, $.01 par value. Authorized 150,000,000
shares as Class A; 40,385,524 shares issued and outstanding at
March 31, 2014 and 35,019,740 at December 31, 2013 |
|
|
403,855 |
|
|
|
350,197 |
|
Common stock, $.01 par value. Authorized 13,000,000
shares as Class B; 8,885 shares issued and outstanding at March 31,
2014 and December 31, 2013 |
|
|
89 |
|
|
|
89 |
|
Capital in excess of par value |
|
|
413,591,361 |
|
|
|
407,907,019 |
|
Accumulated deficit |
|
|
(420,533,985 |
) |
|
|
(417,240,480 |
) |
|
|
Total
Stockholders' Deficit |
|
|
(6,538,680 |
) |
|
|
(8,983,175 |
) |
Total Liabilities and Stockholders' Deficit |
|
$ |
12,531,590 |
|
|
$ |
11,824,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. Walter A. Shephard CFO (413) 243-1600
investors@wave.com Investor Relations David Collins Eric Lentini
(212) 924-9800 wavx@catalyst-ir.com