- Transition plan for Company on
track
- Significant Tier-1 customer wins and
growth of sales pipeline in M2M targeted vertical markets
- Ongoing realignment of operational and
go-to-market strategy in Mobile Computing
Novatel Wireless, Inc. (NASDAQ: NVTL), a leading provider of
intelligent wireless solutions, announced financial results for the
fourth quarter and fiscal year ended December 31, 2013.
Revenue in the fourth quarter was $65.3 million. GAAP net loss
in the quarter was $21.3 million, or $(0.63) per share. On a
non-GAAP basis, net loss for the quarter was $5.6 million, or
$(0.16) per share. Adjusted EBITDA in the fourth quarter was a loss
of $3.4 million.
For fiscal year 2013, revenue was $335.1 million. GAAP net loss
for the year was $43.4 million, or $(1.28) per share. On a non-GAAP
basis, net loss for the year was $20.9 million, or $(0.62) per
share. Adjusted EBITDA for fiscal 2013 was a loss of $12.5 million.
A reconciliation of GAAP to non-GAAP measures is included in the
accompanying tables.
“We closed fiscal year 2013 having made substantial progress in
transforming the business,” said Peter Leparulo, CEO of Novatel
Wireless. “We have undertaken significant restructuring
initiatives that have meaningfully lowered our cost structure while
we simultaneously reshape the company and execute on our transition
plan. Growing at 18% in 2013, our M2M business had improved
performance and is becoming an increasingly important area of our
business. In M2M, we built out our product portfolio with major new
releases aligned with our targeted vertical markets, expanded our
customer base with key partners in those verticals and advanced our
go to market strategy to directly engage enterprise customers. We
also began a significant retrenching of our mobile computing
business to a new model, focusing our development efforts on select
channels and a more variable cost structure for portions of our
development activities.
“Moving into 2014, in M2M we have substantial orders and
contracts on hand and a robust sales pipeline, and are targeting
significant growth in our M2M business. As we integrate with more
M2M customers, we are leveraging our deep domain expertise in our
targeted verticals and shortening our time to market. Ultimately we
believe our new operating and go-to-market strategy in mobile
computing will improve the performance of this business. During
this transition period, we will continue to align our expenses with
our revenue and opportunities, and believe the steps we are taking
position the Company for long-term profitability and growth,”
concluded Leparulo.
First Quarter 2014 Business 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. A more detailed description of risks related to our
business is included in the reports filed by the Company with the
Securities and Exchange Commission.
Our guidance for the first quarter of 2014 reflects current
business indicators and expectations as of the date of this
release. All figures are approximations based on management’s
beliefs and assumptions as of the date of this release.
First Quarter 2014 Total Revenue $50 - $54 million
Mobile Computing Revenue $39 - $42 million M2M Revenue $11 - $12
million Non-GAAP Gross Margin 21% - 22% Non-GAAP EPS
$(0.22) - $(0.15)
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 run through March 14, 2014. To hear the replay, parties in the
United States may call 1-877-344-7529 and enter conference code 100
405 70#. 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. (NVTLF)
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 fourth quarter and fiscal year
ended December 31, 2013, our outlook for the first quarter of 2014,
our outlook for fiscal year 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)
the outcome of pending or future litigation, including the current
class action securities litigation, (11) the continuing impact of
the recent global credit crisis on the value and liquidity of the
securities in our investment portfolio, (12) dependence on a small
number of customers, (13) the effect of changes in accounting
standards and in aspects of our critical accounting policies and
(14) the Company's plans and expectations relating to strategic
relationships, international expansion, software and hardware
developments, personnel matters cost containment initiatives, and
operating strategies.
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 income (loss) and earnings per
share exclude stock-based compensation expenses,
acquisition-related intangible-asset amortization, income tax
adjustments, contingent loss for litigation, and restructuring and
other severance charges. Non-GAAP net income and earnings per share
for the full year also exclude the impact of establishing a
valuation allowance related to deferred tax assets and assume a tax
rate which management believes reflects its long-term effective tax
rate.
Adjusted EBITDA and non-GAAP net income (loss), earnings 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 income (loss), earnings 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 income (loss) and earnings per share, management excludes
stock-based compensation expenses, acquisition-related
intangible-asset amortization, income tax adjustments, contingent
loss for litigation, and restructuring and other severance 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 income
(loss) and earnings 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 income (loss) and
earnings 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 income and earnings 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. Some of
the limitations in relying on non-GAAP operating expenses, net
income (loss) and earnings per share are:
- Other companies, including other
companies in our industry, may calculate non-GAAP operating
expenses, net income and earnings per share differently than we do,
limiting their usefulness as a comparative tool.
- The Company's income tax expense will
be ultimately based on its GAAP taxable income and actual tax rates
in effect, which may differ significantly from the effective tax
rate used in our non-GAAP financial measures.
In addition, the adjustments to our GAAP operating expenses, net
income (loss) and earnings 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 income (loss),
earnings 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. CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, December
31, 2013 2012
(Preliminary
andunaudited)
ASSETS Current assets: Cash and cash
equivalents $ 2,911 $ 16,044 Marketable securities 16,612 38,064
Restricted marketable securities 2,566 - Accounts receivable, net
39,985 42,652 Inventories 27,793 39,016 Deferred tax assets, net
100 126 Prepaid expenses and other 5,662 4,829
Total current assets 95,629 140,731 Property and
equipment, net 9,901 15,229 Marketable securities 3,443
1,201 Intangible assets, net 2,131 3,163 Deferred tax
assets, net 81 584 Other assets 280 623
Total assets $ 111,465 $ 161,531
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities: Accounts payable $ 24,538 $ 45,732 Accrued
expenses 23,271 27,800 Current portion of contingent loss for
litigation 4,326 - Short-term bridge loan facility 2,566
- Total current liabilities 54,701 73,532
Other long-term liabilities 1,848 2,552 Long-term portion of
contingent loss for litigation 10,000 -
Total liabilities 66,549 76,084
Stockholders' equity: Common stock 34 34
Additional paid-in capital 441,368 438,477 Accumulated other
comprehensive income 5 14 Accumulated deficit (371,491 )
(328,078 ) 69,916 110,447 Treasury stock at cost
(25,000 ) (25,000 ) Total stockholders' equity 44,916
85,447 Total liabilities and
stockholders' equity $ 111,465 $ 161,531
NOVATEL WIRELESS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months
Ended
Twelve Months
Ended
December
31,
December
31,
2013 2012
2013 2012
(Preliminary
andunaudited)
(Unaudited)
(Preliminary
andunaudited)
Net revenues $ 65,335 $ 70,675 $ 335,053 $ 344,288 Cost of
net revenues 53,296 57,117
266,759 271,845 Gross profit 12,039
13,558 68,294 72,443
Operating costs and expenses: Research and
development 8,979 15,440 48,246 60,422 Sales and marketing 4,159
6,246 20,898 27,501 General and administrative 4,970 6,607 24,179
22,668 Goodwill and intangible assets impairment - (300 ) - 49,521
Amortization of purchased intangible assets 140 183 562 1,074
Contingent loss for litigation 14,326 - 14,326 - Restructuring
charges 893 - 3,304
- Total operating costs and expenses 33,467
28,176 111,515 161,186
Operating loss (21,428 ) (14,618 ) (43,221 ) (88,743
) Other income (expense): Interest income, net 4 53 113 291
Other expense, net (139 ) (12 ) (222 )
(203 ) Loss before income taxes (21,563 ) (14,577 ) (43,330
) (88,655 ) Income tax provision (benefit) (257 ) 335 83 611
Net loss $ (21,306 ) $ (14,912 ) $
(43,413 ) $ (89,266 ) Per share data: Net loss per
share: Basic and diluted $ (0.63 ) $ (0.45 ) $ (1.28 ) $ (2.72 )
Weighted average shares used in
computation of net loss per share:
Basic and diluted 34,084 33,356
33,948 32,852
NOVATEL WIRELESS,
INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Three Months Ended
Twelve Months Ended December 31, December 31,
2013 2012
2013 2012
(Preliminary
andunaudited)
(Unaudited)
(Preliminary
andunaudited)
Cash flows from operating activities: Net loss $ (21,306 ) $
(14,912 ) $ (43,413 ) $ (89,266 ) Adjustments to reconcile net loss
to net cash used in operating activities: Depreciation and
amortization 2,175 2,590 8,949 12,337 Loss on goodwill and
purchased intangible assets impairment - (300 ) - 49,521 Impairment
loss on equipment, leasehold improvements and software license
intangible assets 400 10 418 100 Provision for bad debts 931 400
1,936 439 Net impairment loss on marketable securities - - - 39
Inventory provision 1,275 1,180 4,344 2,843 Share-based
compensation expense 595 2,091 3,443 7,500 Contingent loss for
litigation
14,326
-
14,326 - Non-cash income tax expense (benefit) (46 ) 268 220 462
Changes in assets and liabilities: Accounts receivable 6,625 (2,782
) 730 (6,242 ) Inventories (2,043 ) (3,669 ) 6,879 420 Prepaid
expenses and other assets 1,680 1 (489 ) (1,237 ) Accounts payable
(21,926 ) 4,675 (19,237 ) (10,433 ) Accrued expenses, income taxes,
and other (4,988 ) 3,405 (4,733 )
3,638 Net cash used in operating activities
(22,302 ) (7,043 ) (26,627 ) (29,879 )
Cash flows from investing activities: Purchases of property
and equipment (106 ) (558 ) (5,011 ) (4,579 ) Purchases of
intangible assets - (104 ) - (104 ) Purchases of marketable
securities (2,024 ) (12,345 ) (24,262 ) (44,216 ) Marketable
securities maturities/sales 9,166 19,190
40,897 46,696 Net cash
provided by (used in) investing activities 7,036
6,183 11,624 (2,203 ) Cash flows
from financing activities: Proceeds from the issuance of short-term
debt, net of issuance costs 6,900 9,000 20,300 14,000 Principal
repayments of short-term debt (6,765 ) (9,000 ) (17,734 ) (14,000 )
Principal payments under capital lease obligations - - - (46 )
Proceeds from stock option exercises and
ESPP net of taxes paid on vested restricted stock units
(37 ) 583 (552 ) 1,166
Net cash provided by financing activities 98 583 2,014 1,120 Effect
of exchange rates on cash and cash equivalents (59 )
(20 ) (144 ) (63 ) Net decrease in cash
(15,227 )
(297 ) (13,133 ) (31,025 ) Cash and cash equivalents, beginning of
period 18,138 16,341 16,044
47,069 Cash and cash equivalents, end of
period $ 2,911
$ 16,044 $ 2,911 $ 16,044
Novatel
Wireless, Inc. Preliminary Reconciliation of GAAP Net Loss to
Non-GAAP Net Loss Three and Twelve Months Ended December 31, 2013
(in thousands, except per share data) (Unaudited)
Three Months Ended Twelve Months
Ended
December 31,
2013
December 31,
2013
NetIncome(Loss)
Income (Loss)Per
Share,Diluted
NetIncome(Loss)
Income (Loss)Per
Share,Diluted
GAAP net loss $ (21,306 ) (0.63 ) $ (43,413 ) $ (1.28 )
Adjustments: Share-based compensation expense (a) 595 0.02
3,443 $ 0.10 Acquisition related charges (b) 224 0.01 896 $
0.03 Income tax adjustments (c) (325 ) (0.01 ) (124 ) $
(0.01 ) Contingent loss for litigation (d) 14,326 0.42
14,326 $ 0.42 Restructuring and other severance (e)
893 0.03 3,967 $ 0.12
Non-GAAP net loss $ (5,593 ) $ (0.16 ) $ (20,905 ) $ (0.62 )
(a) Adjustments reflect share-based compensation expense recorded
under ASC Topic 718. (b) Adjustments reflect amortization of
purchased intangibles. (c) Adjustments for certain deferred
tax valuation activity.
(d) Adjustments reflect contingent loss
for litigation
(e) Adjustments reflect restructuring and other reduction in
force charges. See "Non -GAAP Financial Measures" for
information regarding our use of Non-GAAP financial measures. .
Novatel Wireless, Inc. Preliminary Reconciliation of GAAP
Operating Costs and Expenses to Non-GAAP Operating Costs and
Expenses Three Months Ended December 31, 2013 (in thousands)
(Unaudited)
GAAP
Share-basedcompensationexpense(a)
Purchasedintangiblesamortization(b)
ContingentLossLitigation(c)
Restructuringcharges (d)
Non-GAAP Cost of net revenues $ 53,296 $ 35 $ 84 $ -
$ - $ 53,177 Operating costs and expenses: Research and
development 8,979 206 - - - 8,773 Sales and marketing 4,159 51 - -
- 4,108 General and administrative 4,970 303 - - - 4,667
Amortization of purchased intangibles assets 140 - 140 - - -
Contingent loss for litigation 14,326 - - 14,326 - - Restructuring
charges 893 - - - 893 -
Total operating costs and expenses $ 33,467 560 140
14,326 893 $ 17,548 Total $ 595 $ 224 $ 14,326
$ 893 (a) Adjustments reflect share-based
compensation expense recorded under ASC Topic 718. (b)
Adjustments reflect amortization of purchased intangibles.
(c) Adjustments reflect contingent loss for litigation (d)
Adjustments reflect restructuring charges. See "Non -GAAP Financial
Measures" for information regarding our use of Non-GAAP financial
measures.
Novatel Wireless, Inc. Preliminary
Reconciliation of GAAP Operating Costs and Expenses to Non-GAAP
Operating Costs and Expenses
Twelve Months Ended December 31, 2013
(in thousands) (Unaudited)
GAAP
Share-basedcompensationexpense(a)
Purchasedintangiblesamortization(b)
ContingentLossLitigation(c)
Restructureand
OtherSeverance(d)
Non-GAAP Cost of net revenues $ 266,759 $ 84 $ 334 $
- $ 40 $ 266,301 Operating costs and expenses: Research and
development 48,246 1,114 - - 433 46,699 Sales and marketing 20,898
669 - - 185 20,044 General and administrative 24,179 1,576 - - 5
22,598 Amortization of purchased intangibles assets 562 - 562 - - -
Contingent loss for litigation 14,326 - - 14,326 - - Restructuring
charges 3,304 - - - 3,304
- Total operating costs and expenses $ 111,515 3,359
562 14,326 3,927 $ 89,341 Total $ 3,443 $ 896
$ 14,326 $ 3,967 (a) Adjustments reflect share-based
compensation expense recorded under ASC Topic 718. (b)
Adjustments reflect amortization of purchased intangibles.
(c) Contingent loss for litigation
(d) Restructuring and other reduction in force charges.
See "Non -GAAP Financial Measures" for information regarding
our use of Non-GAAP financial measures.
Novatel Wireless,
Inc. Preliminary Reconciliation of GAAP Loss before Income
Taxes to Adjusted EBITDA Three and Twelve Months Ended December 31,
2013 (in thousands) (Unaudited)
Three Months
Ended Twelve Months Ended December 31, 2013
December 31, 2013 Loss before income taxes $ (21,563
) $ (43,330 ) Depreciation and amortization 2,175 8,949 Share-based
compensation expense 595 3,443 Contingent loss for litigation
14,326 14,326 Restructuring and other severance charges 893 3,967
Other expense 135 109 Adjusted EBITDA $
(3,439 ) $ (12,536 ) See "Non -GAAP Financial Measures" for
information regarding our use of Non-GAAP financial measures.
NOVATEL WIRELESS, INC. Segment Reporting Three and
Twelve Months Ended December 31, 2013 and 2012 (in thousands)
Three Months
Ended
Twelve Months
Ended
December
31,
December
31,
2013 2012
2013 2012
(Preliminary
andunaudited)
(Unaudited)
(Preliminary
andunaudited)
Net revenues by
reportable segment:
Mobile Computing Products $ 56,989 $ 63,888 $ 297,499 $ 312,508 M2M
Products and Solutions 8,346 6,787
37,554 31,780 Total $ 65,335 $
70,675 $ 335,053 $ 344,288
Operating loss by
reportable segment:
Mobile Computing Products $ (18,138 ) $ (11,223 ) $ (27,939 ) $
(22,924 ) M2M Products and Solutions (3,290 ) (3,395
) (15,282 ) (65,819 ) Total $ (21,428 ) $ (14,618 ) $
(43,221 ) $ (88,743 )
December 31, December
31, 2013 2012
(Preliminary
andunaudited)
Identifiable
assets by reportable segment:
Mobile Computing Products $ 96,516 $ 141,045 M2M Products and
Solutions 14,949 20,486 Total $ 111,465
$ 161,531
Investor contact:The Blueshirt Group for Novatel WirelessChris
Danne, 415-217-5865chris@blueshirtgroup.comMatthew Hunt,
415-489-2194matt@blueshirtgroup.com
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