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Novatel Wireless, Inc. (NASDAQ:MIFI), a leading provider of solutions for the Internet of Things (IoT) and inventors of MiFi technology, announced financial results for the third quarter ended September 30, 2015.
“The acquisitions of Feeney Wireless and DigiCore have truly changed the game for Novatel Wireless. We anticipate that half of the Company’s revenues in the fourth quarter will relate to the Internet of Things, with an increasing mix of higher-margin SaaS and services revenues to combine with our stable and strong MiFi device business.
The addition of DigiCore’s fleet and vehicle SaaS telematics offerings, with DigiCore’s installed base of approximately 155,000 fleet subscribers for the Ctrack⢠telematics platform, plus another 190,000 Ctrack subscribers for consumer and commercial vehicle tracking, is expected to cause our non-GAAP gross margins from IoT products to leap from 30% in the third quarter to more than 45% in the fourth quarter,” said Sue Swenson, Chair and CEO of Novatel Wireless. “Over the past few months, we delivered on our cost rationalization targets and completed our acquisition activities, setting the stage for a return to positive adjusted EBITDA in the fourth quarter and beyond. We are now squarely focused on strategy execution, integration and operational excellence.”
Third Quarter 2015 Financial Highlights
The Company announced the following U.S. GAAP financial results for the third quarter of 2015:
– Revenue increased by 23.1% to $54.6 million in the third quarter of 2015, compared to $44.3 million in the third quarter of 2014. Revenue from machine-to-machine products and services was $17.4 million in the third quarter of 2015, increasing by 82.7% from $9.5 million in the third quarter of 2014, due to the Company’s focus on growing IoT revenues as well as the acquisition of Feeney Wireless earlier this year. Revenue from mobile computing products was $37.1 million in the third quarter of 2015, increasing by 6.8% from $34.8 million in the third quarter of 2014, primarily driven by ongoing sales of the Company’s MiFi 6620L offering.
– Net loss per share was ($0.38) in the third quarter of 2015, with a net loss of ($20.8 million), compared to net loss per share of ($0.23), with a net loss of ($8.8 million), in the third quarter of 2014. The net loss for the third quarter of 2015 included a $10.5 million charge for a non-cash change in an acquisition-related escrow account for the purchase of DigiCore Holdings Ltd. (“DigiCore”), a $2.1 million charge for amortization of the debt discount and debt issuance costs associated with the Company’s convertible notes issued in June 2015, $2.8 million of charges related to estimated contingent earn-out payments related to the acquisition of FW and adjustments to the inventory valuation for FW based on the fair value of finished goods, $1.0 million of restructuring charges related to the Company’s cost containment initiatives, and $0.7 million of professional fees and transactional expenses related to the acquisition of DigiCore.
– As of September 30, 2015, the Company had cash and cash equivalents of $10.2 million, with no amounts drawn down on its $25 million revolving credit facility with Wells Fargo Bank.
The Company also announced the following non-GAAP financial results for the third quarter of 2015. A reconciliation of these non-GAAP financial measures to the Company’s GAAP financial results is included in the tables accompanying this news release:
– Non-GAAP gross profit increased by 41.8% to $15.0 million in the third quarter of 2015, from $10.6 million in the third quarter of 2014, driven by a combination of increased revenue and increased gross margins across all product sets. Non-GAAP gross margin increased to 27.5% in the third quarter of 2015, compared to 23.9% in the third quarter of 2014, as the Company transitions toward an improved mix of higher margin products, and with M2M revenue comprising approximately 32% of the Company’s total revenue in the third quarter of 2015. Non-GAAP gross margin on M2M products and solutions increased to 30.2% in the third quarter of 2015, compared to 26.6% in the third quarter of 2014, and non-GAAP gross margin on mobile computing products increased to 26.2% in the third quarter of 2015, compared to 23.1% in the third quarter of 2014.
– Non-GAAP operating expenses decreased by 15.8% to $16.3 million in the third quarter of 2015, compared to $19.3 million in the second quarter of 2015, due to the success of the Company’s restructuring activities initiated in the third quarter which reduced annualized operating costs and expenses by $10 million. The cost containment activities included reducing the Company’s headcount by 34, or approximately 9% of the total workforce, and eliminating 21 outsourced or contractor positions, and was complemented by additional strategies to reduce costs. On a year-over-year basis, non-GAAP operating expenses increased by 26.8% compared to $12.8 million in the third quarter of 2014, due to recently-acquired FW’s operating structure and costs being included within the Company’s operating expenses for the third quarter of 2015.
– Adjusted EBITDA improved by 47.0% to ($0.3 million) in the third quarter of 2015, compared to ($0.6 million) in the third quarter of 2014. This improvement was driven by a combination of increased revenue and higher gross margins from a better product mix.
– Non-GAAP net loss for the third quarter of 2015 improved by 18.4% to ($1.9 million), or ($0.04) per share, compared to a net loss of ($2.4 million), or ($0.06) per share, in the third quarter of 2014. Non-GAAP net loss improved during the third quarter of 2015 due to the Company’s revenue growth and increased gross margins.
