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Novatel Wireless Reports Second Quarter 2006 Results; 14% Sequential Revenue Increase Driven by Customer Adoption of Novatel's HSDPA and Embedded Solutions
July 26, 2006
SAN DIEGO, Jul 26, 2006 (BUSINESS WIRE) -- Novatel Wireless, Inc. (Nasdaq:NVTL), a leading provider of wireless broadband access solutions, today reported financial results for the second quarter ended June 30, 2006.
Revenues for the second quarter increased 18% to $45.7 million compared to revenues of $38.6 million reported in the same period last year. Second quarter GAAP net income was $95,000, or $0.00 per diluted share, compared to $2.9 million, or $0.10 per diluted share, in the prior year period. Our 2006 second quarter GAAP results reflect the fiscal year 2006 adoption of Statement of Financial Accounting Standards No.123R resulting in the expensing of $2.4 million of non-cash share-based compensation, or $542,000, net of related taxes. Excluding the effect of these charges, non-GAAP net income was $637,000 or $0.02 per share. Previous guidance was for a net loss in the range of $0.02 to $0.04 per share on a non-GAAP basis.
"The success of our diversification strategy produced second quarter results that were ahead of expectations, with significant top- and bottom-line growth compared to the first quarter of 2006," said Peter Leparulo, chief executive officer of Novatel Wireless. "Our stronger than expected performance was driven by broad demand across a number of key growth categories. Sequentially, HSDPA revenue increased 78%, EV-DO revenue increased 13%, and EMEA revenue increased by 19%. Embedded solutions accounted for almost 10% of revenues in our first quarter of volume shipments to our first OEM partner. With the ramp of more new configurations and additional new OEM partners in the third quarter, we expect to see increased embedded sales throughout the second half of the year."
"Over the next three months, we plan to introduce best-of-breed products in each of the three prongs of our growth strategy: embedded solutions, wireless PC cards and fixed-mobile convergence," continued Mr. Leparulo. "This will require strong operational execution but should lead to even greater diversity of our revenue stream and a stronger base of business. We enter the third quarter with a record sales pipeline and will continue to work diligently to increase our positive momentum."
"The shift toward our next generation products provided higher-than-anticipated revenues and enabled sequential gross margin expansion," added Dan Halvorson, chief financial officer of Novatel Wireless. "Additionally, we were able to closely control expenses while continuing to invest heavily in product development, resulting in significant improvement to our bottom line ahead of schedule. Net income also benefited from foreign currency exchange gains of $964,000. Our balance sheet improved in all major categories. During the quarter, our cash balance increased by $10.2 million, even while paying down $5.0 million under our revolving credit facility, and we ended the quarter with $76.8 million in cash and investments or $2.59 in cash per share."
Third Quarter 2006 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 for a description of risks. Please see our quarterly and annual reports on file with the Securities and Exchange Commission (SEC) for a more detailed description of risk factors.
The following table summarizes our financial guidance for the period ending September 30, 2006. These estimates are based on our current business outlook as of the date of this press release.
Revenues $51 million - $53 million GAAP Earnings Per Share, Diluted $0.00 - $0.01 Non-GAAP Earnings Per Share, Diluted $0.02 - $0.04
Second Quarter Highlights:
-- Delivered commercial EV-DO ExpressCards to leading customers in North America.
-- Delivered samples of HSDPA ExpressCards. Also announced that HSDPA PC Cards and Express Mini Cards Gained Global Certification Forum (GCF) compliance.
-- Introduced the Novatel Wireless HSDPA ExpressCard/34 for North American and European markets and next generation 3.6 Mbps HSDPA ExpressCards with worldwide roaming. In addition, we announced the PCMCIA approval of the industry's first wireless broadband PCI ExpressCard using EV-DO technology.
-- Participated with Dell in joint media coverage announcing EV-DO ExpressCard availability.
-- Announced an agreement to integrate and embed Novatel Wireless HSDPA modules in Panasonic Toughbook notebook computers. In addition, we collaborated with Panasonic on the first joint UMTS/HSDPA certification on Cingular's wireless network.
-- Strengthened our management team with the promotion of Brad Weinert to chief operating officer and the addition of Peter Balchin as general manager for Europe and Julie Cunningham as investor relations officer.
-- Added two new broadband data access patents to Novatel Wireless' growing intellectual property portfolio, bringing the total patents awarded to date to 30.
Conference Call Information
We will host a conference call for analysts and investors to discuss our quarterly results today at 4:30 p.m. ET. A live webcast of the conference call will also be accessible from the "Investor Relations" section of our website at www.novatelwireless.com. Following the live webcast, an archived version will be available on our website.
About Novatel Wireless, Inc.
Novatel Wireless, Inc. is revolutionizing wireless communications. The company is a leader in the design and development of innovative wireless broadband access solutions based on 3G W CDMA (HSDPA & UMTS), CDMA and GSM technologies. Novatel Wireless' Merlin(TM) PC Cards, Expedite(R) Embedded Modules, MobiLink(TM) Communications Software Suite, Ovation(TM) 3G Multimedia Application Consoles and Conversa(TM) Software Suite enable high-speed wireless access. The company delivers innovative 3G solutions to operators, distributors and vertical markets worldwide. Headquartered in San Diego, California, Novatel Wireless is listed on NASDAQ: NVTL. For more information visit www.novatelwireless.com. (NVTLG)
(C) 2006 Novatel Wireless. All rights reserved. Novatel Wireless, the Novatel Wireless logo, Merlin, Expedite, MobiLink, Ovation and Conversa are trademarks of Novatel Wireless, Inc. Other product or service names mentioned herein are the trademarks of their respective owners.
Cautionary Note Regarding Forward-Looking Statements
The financial results for the second quarter of 2006 are preliminary and are unaudited. Some of the information presented in this release constitutes forward-looking statements based on management's current estimates and expectations. In this context, forward-looking statements often address expected future business and financial performance and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks" and "will," for example. Forward-looking statements by their nature address matters that are, to varying degrees, uncertain and therefore involve risks and assumptions. The Company therefore cannot guarantee future results, performance or achievements.
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, without limitation, the future demand for wireless broadband access to data, the future growth of wireless wide area networking, changes in commercially adopted wireless transmission standards and technologies, continued acceptance of the Company's current product offerings and market demand for and acceptance of the Company's anticipated new product offerings in 2006 and thereafter, increased competition and pricing pressure from wireless market participants, dependence on third party manufacturers and component suppliers, management of inventory, dependence on intellectual property rights, litigation or regulatory developments, dependence on a small number of customers, and the Company's general business and strategy, including plans and expectations relating to technology, research and product development, strategic relationships, customers, manufacturing, international expansion, sales initiatives, gross margin and cost containment initiatives. These factors, as well as other factors detailed from time to time in the Company's SEC reports and filings (available at www.sec.gov), could cause actual results to differ materially. Unless required by applicable law, Novatel Wireless assumes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.
NOVATEL WIRELESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three months ended Six months ended
June 30, June 30,
2006 2005 2006 2005
-------- --------- -------- --------
Revenue $45,654 $ 38,597 $85,813 $70,924
Cost of revenue 34,107 26,769 65,386 48,440
-------- --------- -------- --------
Gross margin 11,547 11,828 20,427 22,484
-------- --------- -------- --------
Operating costs and expenses:
Research and development 7,108 4,438 13,835 7,963
Sales and marketing 3,466 1,589 6,195 3,285
General and administrative 3,989 1,704 7,730 3,644
-------- --------- -------- --------
Total operating expenses 14,563 7,731 27,760 14,892
Operating income (loss) (3,016) 4,097 (7,333) 7,592
Other income (expense):
Interest income and expense, net 547 498 1,166 1,020
Other, net 964 (144) 1,531 (81)
-------- --------- -------- --------
Income (loss) before income taxes (1,505) 4,451 (4,636) 8,531
Income tax expense (benefit) (1,600) 1,558 (3,385) 2,986
-------- --------- -------- --------
Net income (loss) $ 95 $ 2,893 $(1,251) $ 5,545
======== ========= ======== ========
Per share data:
Net income (loss) per common share:
Basic $ 0.00 $ 0.10 $ (0.04) $ 0.19
Diluted $ 0.00 $ 0.10 $ (0.04) $ 0.18
Weighted average shares used in
computation of per share
calculation:
Basic 29,547 29,048 29,461 29,020
Diluted 30,233 30,212 29,461 30,247
Reconciliation of GAAP Net-Income to Non-GAAP Net Income
Three Months Ended June 30, 2006
GAAP Adjustments(a) Non-GAAP
-------- --------------- --------
Revenue $45,654 $45,654
Cost of revenue 34,107 (112) 33,995
-------- --------------- --------
Gross margin 11,547 112 11,659
-------- --------------- --------
Operating costs and expenses:
Research and development 7,108 (585) 6,523
Sales and marketing 3,466 (514) 2,952
General and administrative 3,989 (1,231) 2,758
-------- --------------- --------
Total operating expenses 14,563 (2,330) 12,233
Operating income (loss) (3,016) 2,442 (574)
Other income (expense):
Interest income and expense, net 547 547
Other, net 964 964
-------- --------------- --------
Income (loss) before income taxes (1,505) 2,442 937
Income tax expense (benefit) (1,600) 1,900 300
-------- --------------- --------
Net income $ 95 $ 542 $ 637
======== =============== ========
Per share data:
Net income per common share:
Basic $ 0.00 $ 0.02
Diluted $ 0.00 $ 0.02
Weighted average shares used in
computation of per share
calculation:
Basic 29,547 29,547
Diluted 30,233 30,233
(a) Adjustments reflect stock-based compensation expense recorded
under SFAS 123R, and its effect on taxes.
NOVATEL WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
As of
June 30, December 31,
2006 2005
---------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 30,763 $ 36,653
Marketable securities 42,120 47,075
Accounts receivable, net 35,131 28,121
Inventories 17,417 23,132
Deferred tax assets, net 9,255 5,253
Other current assets 4,119 9,821
---------- ------------
Total current assets 138,805 150,055
Property and equipment, net 14,315 13,865
Marketable securities 3,959 6,611
Intangible assets, net 2,656 3,459
Deferred tax assets, net 1,849 1,849
Other assets 231 225
---------- ------------
$ 161,815 $ 176,064
========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,471 $ 34,226
Accrued expenses 12,990 11,888
Line of credit - 5,000
Capital lease obligation - 3,891
---------- ------------
Total current liabilities 35,461 55,005
Stockholders' equity:
Common stock 30 29
Additional paid-in capital 350,121 343,738
Accumulated other comprehensive income (202) (364)
Accumulated deficit (223,595) (222,344)
---------- ------------
Total stockholders' equity 126,354 121,059
---------- ------------
$ 161,815 $ 176,064
========== ============
SOURCE: Novatel Wireless, Inc.
Novatel Wireless Julie Cunningham, 858-320-8837 [email protected] or The Blueshirt Group, Investor Relations Chris Danne, 415-217-7722 [email protected] Rakesh Mehta, 415-217-7722 [email protected]
Copyright Business Wire 2006
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