Novatel Wireless, Inc. (NASDAQ: NVTL), a leading provider of
Internet of Things (IoT) wireless solutions, announced financial
results for the second quarter ended June 30, 2014.
Revenue in the second quarter was $37.3 million, down 23%
compared to $48.3 million in the first quarter of 2014. GAAP net
loss in the quarter was $17.4 million, or $(0.51) per share,
compared to a loss of $9.0 million, or $(0.26) per share, in the
first quarter of 2014. The net loss for the second quarter of 2014
included approximately $5.3 million in restructuring charges,
including approximately $3.7 million related to the termination of
our former CEO. On a non-GAAP basis, net loss for the quarter was
$11.2 million, or $(0.33) per share, compared to a loss of $7.1
million, or $(0.21) per share, in the first quarter of 2014. A
reconciliation of GAAP to non-GAAP measures is included in the
accompanying tables.
"The second quarter represented a sea-change for the Company
with the Board of Directors making a decision to change senior
leadership. The quarter’s results were adversely impacted by
significant additional restructuring charges, which we now believe
are largely behind us, and increased inventory reserves. We are now
in the process of charting a new direction for the Company which is
centered around integrating our current two segments – Mobil
Computing and M2M – into one synergistic business strategy which
will revolve around a suite of products and services for IoT," said
Alex Mashinsky, interim CEO of Novatel Wireless. "We are committed
to growing our revenues, our margins and all of our operating
income metrics over time and expect that our new strategies will
help us achieve those goals."
Third Quarter 2014 Business Outlook
Based on the significant changes in our senior executive
management team, the ongoing restructuring effort and the
development of the Company’s new strategies, including the further
integration of our Mifi and M2M product lines, the Company is
suspending the providing of forward quarterly guidance until it has
better visibility of projected results.
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 be available for 90 days. To hear the replay, parties in the
United States may call 1-877-344-7529 and enter conference code
10050362#. 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. (NVTL)
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 second quarter ended June 30,
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)
dependence on a small number of customers, (11) the effect of
changes in accounting standards and in aspects of our critical
accounting policies and (12) 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 loss and loss per share exclude
stock-based compensation expenses, acquisition-related
intangible-asset amortization and restructuring 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 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 loss and loss 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 loss and loss 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. Limitations in
relying on non-GAAP operating expenses, net loss and loss per share
include, but are not limited to, the fact that 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.
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
STATEMENTS OF OPERATIONS (in thousands, except per share data)
(Unaudited)
Three Months
Ended
Six Months
Ended
June
30,
June
30,
2014 2013 2014 2013 Net revenues
$ 37,270 $ 91,124 $ 85,554 $ 177,045 Cost of net revenues
33,283 72,100 71,499
141,173 Gross profit 3,987 19,024
14,055 35,872 Operating
costs and expenses: Research and development 8,540 13,018 17,158
26,829 Sales and marketing 3,031 5,854 7,026 11,610 General and
administrative 4,423 7,755 9,499 14,081 Amortization of purchased
intangible assets 141 141 281 281 Restructuring charges
5,250 - 6,416 -
Total operating costs and expenses 21,385
26,768 40,380 52,801
Operating loss (17,398 ) (7,744 ) (26,325 ) (16,929 ) Other
income (expense): Interest income, net 20 21 35 78 Other expense,
net (13 ) (65 ) (57 ) (142 )
Loss before income taxes (17,391 ) (7,788 ) (26,347 ) (16,993 )
Income tax provision 24 104 49 21
Net loss $ (17,415 ) $ (7,892 ) $ (26,396 ) $ (17,014 )
Per share data: Net loss per share: Basic and diluted
$ (0.51 ) $ (0.23 ) $ (0.77 ) $ (0.50 ) Weighted average
shares used in computation of net loss per share: Basic and diluted
34,320 33,915 34,246
33,817
NOVATEL WIRELESS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
June 30, December
31, 2014 2013
(Unaudited)
ASSETS Current assets: Cash and cash
equivalents $ 8,925 $ 2,911 Marketable securities 13,503 16,612
Restricted marketable securities - 2,566 Accounts receivable, net
25,636 39,985
Inventories, net
26,022 27,793 Deferred tax assets, net 100 100 Prepaid expenses and
other 3,094 5,662 Total current assets
77,280 95,629 Property and equipment, net 7,199 9,901
Marketable securities - 3,443 Intangible assets, net 1,626 2,131
Deferred tax assets, net 81 81 Other assets 677
280 Total assets $ 86,863 $ 111,465
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Accounts payable $ 26,893 $
24,538 Accrued expenses 23,086 23,271
Current portion of litigation
settlement
4,326 4,326 Short-term margin loan facility -
2,566 Total current liabilities 54,305 54,701 Other
long-term liabilities 1,784 1,848
Non-current portion of litigation
settlement
10,000 10,000 Total liabilities
66,089 66,549
Stockholders'
equity: Common stock 34 34 Additional paid-in capital
443,621 441,368 Accumulated other comprehensive income 6 5
Accumulated deficit (397,887 ) (371,491 ) 45,774
69,916 Treasury stock at cost (25,000 ) (25,000 )
Total stockholders' equity 20,774 44,916
Total liabilities and stockholders' equity $ 86,863
$ 111,465
NOVATEL WIRELESS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
(Unaudited)
Three Months Ended Six Months Ended June 30,
June 30, 2014 2013 2014 2013
Cash flows from operating activities: Net loss $ (17,415 ) $ (7,892
) $ (26,396 ) $ (17,014 ) Adjustments to reconcile net loss
to net cash provided (used in) by operating activities:
Depreciation and amortization 1,916 2,234 4,041 4,544 Provision for
bad debts 79 226 109 382
Provision for excess and obsolete
inventory
2,853 1,758 3,033 1,823 Share-based compensation expense 762 940
1,239 1,889 Non-cash income tax benefit 6 72 - (48 ) Changes in
assets and liabilities: Accounts receivable 4,313 3,715 14,241
2,689 Inventories (3,746 ) (465 ) (1,262 ) 8,296 Prepaid expenses
and other assets (248 ) (663 ) 2,170 (608 ) Accounts payable 3,662
4,966 2,487 4,322 Accrued expenses, income taxes, and other
3,460 (273 ) 1,375 226
Net cash provided by (used in) operating activities
(4,358 ) 4,618 1,037 6,501
Cash flows from investing activities: Purchases of
property and equipment (728 ) (873 ) (1,241 ) (3,725 ) Purchases of
marketable securities (826 ) (5,907 ) (826 ) (9,661 ) Marketable
securities maturities/sales 3,381 11,357
9,945 14,516 Net cash
provided by investing activities 1,827 4,577
7,878 1,130 Cash flows
from financing activities: Proceeds from the issuance of short-term
debt, net of issuance costs - 3,000 - 10,000 Principal repayments
of short-term debt (298 ) (6,266 ) (2,566 ) (8,444 ) Restricted
cash related to short-term debt - 661 - -
Taxes paid on vested restricted stock, net
of proceeds from stock options exercised
(67 ) 43 (284 ) (261 ) Net cash
provided by (used in) financing activities (365 ) (2,562 ) (2,850 )
1,295 Effect of exchange rates on cash and cash equivalents
(6 ) (42 ) (51 ) (107 ) Net increase
(decrease) in cash and cash equivalents (2,902 ) 6,591 6,014 8,819
Cash and cash equivalents, beginning of period 11,827
18,272 2,911 16,044 Cash
and cash equivalents, end of period $ 8,925 $ 24,863
$ 8,925 $ 24,863
NOVATEL WIRELESS,
INC. Preliminary Reconciliation of GAAP Net Loss to Non-GAAP
Net Loss Three and Six Months Ended June 30, 2014 (in thousands,
except per share data) (Unaudited)
Three Months Ended
Six Months Ended
June 30,
2014
June 30,
2014
Income (Loss) Net Income Income (Loss) Per Per Share, (Loss)
Share, Diluted Net Income (Loss) Diluted GAAP net loss $
(17,415 ) (0.51 ) $ (26,396 ) $ (0.77 ) Adjustments:
Share-based compensation expense (a) 762 0.02 1,239 0.04
Acquisition related charges (b) 224 0.01
448
0.01 Restructuring charges (c) 5,250
0.15 6,416 0.19 Non-GAAP net
loss $ (11,179 ) $ (0.33 ) $
(18,293
) $ (0.53 ) (a) Adjustments reflect share-based compensation
expense recorded under ASC Topic 718. (b) Adjustments reflect
amortization of purchased intangibles. (c) Adjustments reflect
restructuring and severance charges. See "Non-GAAP Financial
Measures" for information regarding our use of Non-GAAP financial
measures.
NOVATEL WIRELESS, INC.
Reconciliation of GAAP Operating Costs and
Expenses to Non-GAAP Operating Costs and Expenses
(in thousands) (Unaudited)
Three Months
Ended June 30, 2014
Share-based Purchased compensation
intangibles expense amortization
Restructuring GAAP (a) (b) charges
(c) Non-GAAP Cost of net revenues $ 33,283 $ 11 $
83 $ - $ 33,189 Operating costs and expenses: Research and
development 8,540 210 - - 8,330 Sales and marketing 3,031 143 - -
2,888 General and administrative 4,423 398 - - 4,025 Amortization
of purchased intangibles assets 141 - 141 - - Restructuring charges
5,250 - - 5,250 - Total
operating costs and expenses $ 21,385 751 141
5,250 $ 15,243 Total $ 762 $ 224 $ 5,250
Six Months Ended
June 30, 2014
Share-based Purchased
compensation intangibles expense
amortization Restructuring GAAP (a)
(b) charges (c) Non-GAAP Cost of net
revenues $ 71,499 $
(19
) $
167
$ - $ 71,351 Operating costs and expenses: Research and
development 17,158 257 - - 16,901 Sales and marketing 7,026 222 - -
6,804 General and administrative 9,499
779
- -
8,720
Amortization of purchased intangibles assets 281 - 281 - -
Restructuring charges 6,416 - -
6,416 - Total operating costs and expenses $ 40,380
1,258
281 6,416 $
32,425
Total $ 1,239 $
448
$ 6,416 (a) Adjustments reflect share-based compensation
expense recorded under ASC Topic 718. (b) Adjustments reflect
amortization of purchased intangibles. (c) Adjustments reflect
restructuring and severance charges. See "Non-GAAP Financial
Measures" for information regarding our use of Non-GAAP financial
measures.
NOVATEL WIRELESS, INC.
Reconciliation of GAAP Loss before Income
Taxes to Adjusted EBITDA
Three and Six Months Ended June 30, 2014 (in thousands)
(Unaudited)
Three Months Ended
Six Months Ended June 30, 2014 June 30,
2014 Loss before income taxes $ (17,391 ) $ (26,347 )
Depreciation and amortization 1,916 4,041 Share-based compensation
expense 762 1,239 Restructuring charges 5,250 6,416 Other expense
(income) (7 ) 22 Adjusted EBITDA $ (9,470 ) $
(14,629 ) See "Non-GAAP Financial Measures" for information
regarding our use of Non-GAAP financial measures.
NOVATEL WIRELESS, INC. Segment Reporting Three and Six
Months Ended June 30, 2014 and 2013 (in thousands)
(Unaudited)
Three Months
Ended
Six Months
Ended
June
30,
June
30,
2014 2013 2014
2013
Net revenues by
reportable segment:
Mobile Computing Products $ 27,497 $ 80,823 $ 63,695 $ 156,443 M2M
Products and Solutions 9,773 10,301
21,859 20,602 Total $ 37,270 $
91,124 $ 85,554 $ 177,045
Operating loss by
reportable segment:
Mobile Computing Products $
(12,246
) $ (3,348 ) $
(18,372
) $ (8,848 ) M2M Products and Solutions
(5,152
) (4,396 )
(7,953
) (8,081 ) Total $ (17,398 ) $ (7,744 ) $ (26,325 ) $
(16,929 )
June 30, December 31,
2014 2013
Identifiable
assets by reportable segment:
Mobile Computing Products $ 73,853 $ 96,516 M2M Products and
Solutions 13,010 14,949 Total $ 86,863
$ 111,465
The Blueshirt GroupDave Niederman,
415-489-2189david@blueshirtgroup.comorNovatel Wireless, Inc.Tom
Allen, 858-431-3771Interim CFOtallen@nvtl.com
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