iPass Reports Fourth Quarter and Year End 2013 Financial Results

iPass Reports Fourth Quarter and Year End 2013 Financial Results  REDWOOD SHORES, CA -- (Marketwired) -- 02/12/14 --   iPass Inc. (NASDAQ: IPAS), the global Wi-Fi roaming leader for enterprises and telecom service providers, today announced financial results for the fourth quarter and year ended December 31, 2013.  "Open Mobile grew 77% in 2013, and is set to drive growth in 2014 and beyond for us. The business is scaling nicely and is well positioned as a SaaS (software as a service) growth company," said Evan Kaplan, president and chief executive officer of iPass. "We had another strong quarter of new customer acquisitions. Going forward, our goals are to execute on the strategic vision, narrow the focus to our growing OM engine, and enhance shareholder value."  Q4 Highlights  Open Mobile (OM):      --  Grew Open Mobile revenue to $13.0 million in Q4 2013, an increase of     3% sequentially and 43% over the fourth quarter of 2012, and 77% full     year over full year. Open Mobile revenue represented approximately 72%     of total Mobility Service revenue in Q4 2013 compared to 68% in Q3     2013 and 43% in Q4 2012. --  Delivered the eleventh sequential quarter of growth in total Open     Mobile revenue. --  Grew Open Mobile platform active monetized users by 6% from September     2013 and by 64% from December 2012. Open Mobile platform active     monetized users represent 85% of total platform users in December     2013, compared to 80% in September 2013 and 59% in December 2012. --  Signed eighteen new large enterprise customers to OME during the     fourth quarter of 2013, including Microsoft, Zurich Insurance Group,     Linktel, Ashurst, and Bonduelle. --  Signed key OME renewals with a large global manufacturer and retailer     of furniture and a global aerospace and building system service     provider. --  Added one large and strategic carrier during the fourth quarter of     2013, continuing the company's quarterly expansion of the OMX customer     base. --  Telefonica, one of the world's largest global mobile operators     introduced "Universal" WiFi aimed at multinational and enterprise     customers. --  Grew the iPass global network by 700,000 Wi-Fi hotspots, now providing     access to 2.2 million hotspots across 130 countries and territories,     up from approximately 1.5 million in Q3 2013. Growth was primarily     driven by additions to community access hotspots from existing     suppliers and ongoing expansion of in-flight footprint. --  Released significant enhancements to the iPass Hotspot Finder,     including mobile web optimization, enhanced geo-location features, and     advanced search functionality.     iPass Unity Network Services:       --  Based on unsolicited inbound interest, iPass has separately announced     today that it has engaged an investment banker to explore     opportunities to divest its Unity business. --  Announced a strategic partnership with McGraw Communications to     enhance McGraw's existing services throughout the US. --  Signed a long-term contract with a leading provider of pet health care     services with over 600 veterinary hospitals throughout the US and     Canada. --  Signed a key long-term renewal with a Fortune 500 office supply     retailer. --  Launched an advanced cloud Wi-Fi platform targeting the retail,     restaurant, healthcare and hospitality industries in order to help     brand their guest access networks and gain insight into customer     purchasing patterns through iPass Unity Network Services.     Financial Summary      (unaudited; in millions)                                 Q4'13      Q3'13                                                           ---------  ---------  Revenue:                                                                       Mobility Services:                                   $    18.0  $    18.6      Open Mobile (1)                                         13.0       12.6      Legacy iPC (2)                                           5.0        6.0    iPass Unity Network Services(3)                            8.0        8.3                                                         ---------  ---------  Total Revenue                                          $    26.0  $    26.9  GAAP Net Loss                                          $    (4.5) $    (2.8) Adjusted EBITDA Loss(4)                                $    (2.6) $    (1.0) Cash and Cash Equivalents                              $    24.0  $    25.2  Shares of Common Stock Outstanding at Period End            64.5       64.2                                                                                  (1) Open Mobile revenue includes OM network and platform and Open Mobile         Exchange.                                                                (2) Legacy iPC revenue includes iPC network, platform, and other revenues.   (3) Formerly known as Managed Network Services ("MNS").                      (4) The definition of Adjusted EBITDA and the reconciliation of Non-GAAP to      GAAP financial measures are discussed below.                                Q1 2014 GUIDANCE  For the first quarter of 2014 ending March 31, 2014, iPass anticipates total revenue and adjusted EBITDA income (loss) to be in the following ranges:      Total Revenue                                     $     24.0 - 28.0 million Adjusted EBITDA Income / (Loss) (1)               $   (5.5) - (3.5) million                                                                             (1) A reconciliation of Adjusted EBITDA income (loss) to GAAP net loss is        provided in the attached schedules. The guidance for Adjusted EBITDA         income (loss) for the first quarter of 2014 does not include the impact      of any foreign exchange gains or losses.                                    Today's Conference Call and Webcast Information  iPass will host a live conference call today at 2:00 PM Pacific Time (5:00 PM Eastern Time).  The conference call will be accessible by telephone, toll-free at 888-359-3627 or direct dial at 719-457-2727 with a participant confirmation code of 3679590. The conference call will also be available live via webcast on the company's web site at http://investor.ipass.com. The webcast will be available for replay until iPass reports its first quarter 2014 results.  The dial-in number for a telephone replay of the conference call is 888-203-1112 and 719-457-0820 and will be available until February 21, 2014. The confirmation code for the replay is 3679590.  Cautionary Information About Forward-Looking Statements  The statements in this press release regarding iPass being set to drive growth in 2014 and beyond, iPass'confidence in the continued growth of Open Mobile and iPass' projections of its first quarter 2014 financial results under the caption "Q1 2014 Guidance," are forward-looking statements. Actual results may differ materially from the expectations contained in these statements due to a number of risks and uncertainties, including the following: the risk that the "End of Life" of iPass' legacy Mobile Office product may negatively impact customer retention and mobility revenues more than iPass expects; the risk that the Open Mobile platform and Open Mobile Exchange will not achieve the market acceptance iPass expects; the risk that iPass customers and partners may not be willing to agree to minimum purchase and resale commitments at the rate iPass expects; the risk of material reductions in iPass customers' existing minimum commitments more than iPass currently expects; the risk that iPass carrier and channel partners do not successfully market iPass services to their customers; the risk that iPass does not accurately predict usage for its Enterprise Flat Rate price plan which could result in iPass expenses exceeding revenues for these plans; the risk that iPass customers do not widely deploy iPass Open Mobile on smartphones, tablets and other mobile handheld devices at the rate iPass expects; the risk that demand for Mobility Services does not grow as iPass expects; the risk that strong competition in the market for Mobility Services and iPass Unity Network Services could reduce demand for iPass' services; the risk that iPass fails to address market requirements, evolving standards and technological changes in the mobility services industry, which could reduce demand for iPass' services; and the risk that a meaningful portion of iPass business is international, which subjects iPass to additional risks such as currency fluctuations. Detailed information about these and other risk factors that could potentially affect iPass' business, financial condition and results of operations are included in iPass' Annual Report on Form 10-K filed with the SEC on March 15, 2013, and available at the SEC's Web site at www.sec.gov and the company's website at http://investor.ipass.com. iPass undertakes no responsibility to update the information in this press release if any forward-looking statement later turns out to be an inaccurate prediction of the actual results.  In addition, investors and others should note that iPass announces material financial information to its investors using its investor relations website, SEC filings, press releases, public conference calls and webcasts. iPass also uses social media to communicate with its customers and the public about iPass, its products and services and other matters relating to its business and market. It is possible that the information iPass posts on social media could be deemed to be material information. Therefore, iPass encourages investors, the media, and others interested in iPass to review the information it posts on U.S. social media channels including the iPass Twitter Feed, the iPass LinkedIn Feed, the iPass Google+ Feed, the iPass Facebook Page, the iPass Blog, the iPass Instagram, the iPass Pinterest and Evan Kaplan's Twitter Feed. These social media channels may be updated from time to time.  Information Regarding Non-GAAP Financial Measures  This press release also contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). iPass considers Adjusted EBITDA as a supplemental measure of the company's performance that is not required by, nor presented in accordance with GAAP.  The company defines Adjusted EBITDA as net income (loss) before interest, income taxes, depreciation and amortization, stock-based compensation expense, restructuring charges, and certain state sales and federal tax charges. The company believes Adjusted EBITDA provides a meaningful comparison between its core operating results, on a consistent basis, over different periods of time. Accordingly, management uses this financial measure for evaluating and making operating decisions and for purposes of comparison with its strategic plan, operating budgets and allocation of resources.  Furthermore, iPass believes the use of Adjusted EBITDA is useful to investors:  1) To provide an additional analytical tool for understanding the company's financial performance by excluding the impact of items which may obscure trends in the core operating performance of the business;  2) To provide consistency and enhance investors' ability to compare the company's performance across financial reporting periods; and  3) To facilitate comparisons to the operating results of other companies in the company's industry, which may use similar financial measures to supplement their GAAP results.  Adjusted EBITDA should not be considered in isolation, or construed as an alternative to net income, or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of the company's liquidity.  About iPass Inc.  iPass helps enterprises and telecom service providers ensure their employees and subscribers stay well connected. Founded in 1996, iPass (NASDAQ: IPAS) is the world's largest commercial Wi-Fi network and trusted connectivity platform, with 2.2 million hotspots across 130 countries and territories. iPass also delivers access to millions of community hotspots around the globe. iPass gives its customers easy connectivity for smartphones, tablets and laptops around the world -- simply, securely and cost effectively. For more information, please visit: www.ipass.com and the iPass blog, Smarter Connections.  NOTE: iPass(R) is a registered trademark of iPass Inc. Open Mobile, OME, Open Mobile Express, Open Mobile Exchange and OMX are trademarks of iPass Inc. Wi-Fi(R) is a registered trademark of the Wi-Fi Alliance. Other company names, logos and product or service names mentioned herein are the trademarks owned by their respective owners.  Selected Financial Results and Key User Metrics  Q4 2013      (unaudited; in millions)                      Q4'13      Q3'13      Q4'12                                                ---------  ---------  ---------  Revenue:                                                                       Mobility Services:                        $    18.0  $    18.6  $    21.2      Open Mobile Enterprise:                      12.2       12.0        8.8        Wi-Fi Network                               7.1        6.7        4.0        Other Network(1)                            1.2        1.2        1.1        Platform                                    3.6        3.9        3.5        Other                                       0.3        0.2        0.2      Open Mobile Exchange(2)                       0.8        0.6        0.3      Legacy iPC:                                   5.0        6.0       12.1        Wi-Fi Network                               2.0        2.4        5.2        Other Network(1)                            1.9        2.1        4.1        Platform                                    0.6        0.8        1.8        Other                                       0.5        0.7        1.0    iPass Unity Network Services(3)                 8.0        8.3        8.5                                              ---------  ---------  ---------  Total Revenue                               $    26.0  $    26.9  $    29.7  GAAP Net Loss                               $    (4.5) $    (2.8) $    (1.5) Adjusted EBITDA Income (Loss)(4)            $    (2.6) $    (1.0) $    (0.1) Cash and Cash Equivalents                   $    24.0  $    25.2  $    26.8  Shares of Common Stock Outstanding at                                         Period End                                      64.5       64.2       61.5     2013      (unaudited; in millions)                                  2013       2012                                                           ---------  ---------  Revenue:                                                                       Mobility Services:                                   $    77.9  $    92.7      Open Mobile Enterprise:                                 45.7       26.3        Wi-Fi Network                                         25.2       11.2        Other Network(1)                                       4.6        2.8        Platform                                              15.0       11.6        Other                                                  0.9        0.7      Open Mobile Exchange(2)                                  2.4        0.8      Legacy iPC:                                             29.8       65.6        Wi-Fi Network                                         12.2       31.3         Other Network(1)                                      10.1       21.9        Platform                                               4.0        9.8        Other                                                  3.5        2.6  iPass Unity Network Services(3)                             33.2       33.4                                                         ---------  ---------  Total Revenue                                          $   111.1  $   126.1  GAAP Net Loss                                          $   (12.3) $    (4.4) Adjusted EBITDA Income/(Loss)(4)                       $    (5.1) $     1.0                                                                               (1) Other Network for OM includes commit shortfall revenue. Other Network        for Legacy iPC includes commit shortfall, dial and 3G revenue.           (2) iPass OMX revenue includes both network and platform revenue.            (3) Formerly Managed Network Services ("MNS")                                (4) The definition of Adjusted EBITDA is discussed above and the                 reconciliation of Non-GAAP to GAAP financial measures is presented           below.                                                                      AVERAGE MONTHLY MONETIZED USERS: (1)                                                    Q4'13      Q3'13      Q4'12                                                ---------  ---------  ---------  Open Mobile Users:                                                             Wi-Fi Network Users(2)                       67,000     59,000     35,000    Platform Users:                                                                Active (3)                                622,000    574,000    355,000      Gross (4)                               1,017,000  1,019,000    822,000  Legacy Users:                                                                  Wi-Fi Network Users                          18,000     21,000     46,000    Other Network Users(5)                       19,000     20,000     28,000    Platform Users                              125,000    151,000    286,000  Total Users:                                  777,000    754,000    671,000    Total Network Users                         104,000    100,000    109,000    Total Platform Users                        747,000    725,000    641,000  NETWORK GROSS MARGIN (6)                         40.4%      43.0%      45.5%                                                                              (1) Average Monthly Monetized Users (AMMU) metric is based on the number of      active users of iPass' network and platform services across both iPass'      Open Mobile Enterprise offering and legacy iPC offerings. Network users      are billed for their use of iPass' Wi-Fi, Dial-up or 3G network              services. Platform users are billed for their use of iPass' legacy iPC       client or iPass' Open Mobile client. AMMU is defined as the average          number of users per month, during a given quarter, for which a fee was       billed by iPass to a customer for such users.                            (2) Wi-Fi Network Users represent unique users of Wi-Fi network. Starting        from the first quarter of 2013, OM Wi-Fi Network Users include In-Flight     Wi-Fi users.                                                             (3) Represents the average number of Open Mobile Enterprise ("OME") users in     the periods presented who were billed platform fees and who have used or     deployed Open Mobile.                                                    (4) Represents the average number of Open Mobile Enterprise users in the         periods presented for which Open Mobile platform fees were billed for        the period. The difference between Gross and Active Open Mobile platform     users is represented by Paying, Undeployed users for which Open Mobile       platform fees were billed for the period but that have not yet used Open     Mobile or deployed.                                                      (5) Other Network Users represents unique users of Dial-up and 3G network.   (6) Network Gross Margin is defined as (Mobility Network Revenue plus iPass      Unity Revenue less Network Access Costs) divided by (Mobility Network        Revenue plus iPass Unity Revenue).                                                                                                                                                                                                                                                                                                               iPASS INC.                                                     CONDENSED CONSOLIDATED BALANCE SHEETS                                              (Unaudited, in thousands)                                                                                                                                                         December 31,  December 31,                                                       2013          2012                                                       ------------  ------------  Assets                                                                       Current assets:                                                                Cash and cash equivalents                      $     24,017  $     26,822    Accounts receivable, net of allowance for                                     doubtful accounts of $1,010 and $1,173,                                      respectively                                        15,297        17,260    Prepaid expenses and other current assets             4,329         5,058                                                   ------------  ------------  Total current assets                                   43,643        49,140    Property an d equipment, net                           8,442         6,549    Other assets                                          2,831         4,435                                                   ------------  ------------  Total assets                                     $     54,916  $     60,124                                                   ============  ============  Liabilities and Stockholders' Equity                                         Current liabilities:                                                           Accounts payable                               $      9,334  $      7,496    Accrued liabilities                                   9,100         8,631    Deferred revenue, short-term                          3,212         3,787                                                   ------------  ------------  Total current liabilities                              21,646        19,914    Deferred revenue, long-term                           2,191         2,834    Vendor financed property and equipment                1,586             -    Other long-term liabilities                             251           475                                                   ------------  ------------  Total liabilities                                $     25,674  $     23,223                                                   ------------  ------------  Stockholders' equity:                                                          Common stock                                   $         65  $         61    Additional paid-in capital                          218,103       213,454    Accumulated deficit                                (188,926)     (176,614)                                                  ------------  ------------  Total stockholders' equity                             29,242        36,901                                                   ------------  ------------  Total liabilities and stockholders' equity       $     54,916  $     60,124                                                   ============  ============                                                                                                                                                                                                                                                                          iPASS INC.                                                      CONDENSED CONSOLIDATED STATEMENTS OF                                                  COMPREHENSIVE LOSS                                       (Unaudited, in thousands, except share and per share data)                                                                                                                   Three Months Ended        Twelve Months Ended                                   December 31,              December 31,                                 ------------------------  ------------------------                               2013         2012         2013         2012                              -----------  -----------  -----------  -----------  Revenue                  $    25,952  $    29,722  $   111,115  $   126,078  Cost of revenues and                                                          operating expenses:                                                           Network access costs        12,288       12,590       49,490       53,640    Network operations           4,916        4,874       19,200       20,806    Research and                                                                  development                 3,118        3,286       13,317       13,733    Sales and marketing          4,657        4,549       18,315       19,530    General and                                                                   administrative              5,017        5,506       21,340       21,653    Restructuring charges                                                         and related                                                                  adjustments                    14           10          653           26    Amortization of                                                               intangible assets               -            -            -          169                           -----------  -----------  -----------  -----------      Total cost of                                                                 revenue and                                                                  operating expenses       30,010       30,815      122,315      129,557                           -----------  -----------  -----------  -----------  Operating loss                (4,058)      (1,093)     (11,200)      (3,479)   Interest income                                                               (expense), net                (27)           8          (18)          19    Foreign exchange loss         (164)        (151)        (507)        (288)   Other income                                                                  (expense), net                (18)           4          (18)          12                           -----------  -----------  -----------  -----------  Loss before income taxes      (4,267)      (1,232)     (11,743)      (3,736)   Provision for income                                                          taxes                         242          220          569          642                           -----------  -----------  -----------  -----------  Net loss                 $    (4,509) $    (1,452) $   (12,312) $    (4,378)                          ===========  ===========  ===========  ===========  Comprehensive loss       $    (4,509) $    (1,452) $   (12,312) $    (4,378)                          ===========  ===========  ===========  ===========  Basic and diluted net                                                         loss per share          $     (0.07) $     (0.02) $     (0.19) $     (0.07) Weighted average number                                                       of common shares                                                             outstanding                                                                 - Basic                   64,341,837   61,380,329   63,411,162   60,711,317  - Diluted (1)             64,341,837   61,380,329   63,411,162   60,711,317                                                                               (1) Given the net loss for the period, none of the potentially dilutive          securities were included in the calculation of diluted earnings per          share since their effect would have been anti-dilutive.                                                                                                                                                                                                                                                                                          iPASS INC.                                                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                         (Unaudited, in thousands)                                                                                                                                                             Twelve Months Ended                                                             December 31,                                                          --------------------------                                                       2013          2012                                                       ------------  ------------  Cash flows from operating activities:                                        Net loss                                         $    (12,312) $     (4,378) Adjustments to reconcile net loss to net cash                                 provided by (used in) operating activities:                                   Stock-based compensation                              3,163         2,418    Amortization of intangible assets                         -           169    Depreciation and amortization                         2,776         2,110    Loss on disposal of property and equipment               22             3    Deferred income taxes                                   203           117    Provision for (recovery of) doubtful accounts           134           (66) Changes in operating assets and liabilities:                                   Accounts receivable                                   1,828         4,113    Prepaid expenses and other current assets               625           878    Other assets                                            785           718    Accounts payable                                      2,063        (1,138)   Accrued liabilities                                    (277)         (821)   Deferred revenue                                     (1,218)         (365)   Other liabilities                                      (224)         (295)                                                  ------------  ------------  Net cash provided by (used in) operating                                      activities                                             (2,432)        3,463                                                   ------------  ------------  Cash flows from investing activities:                                          Purchases of property and equipment                  (2,318)       (4,465)   Change in restricted cash pledged for letter                                  of credit                                              720           971                                                   ------------  ------------  Net cash used in investing activities                  (1,598)       (3,494)                                                  ------------  ------------  Cash flows from financing activities:                                          Proceeds from issuance of common stock                1,490         1,572    Principal payments for vendor financed                                        property and equipment                                (265)            -    Stock repurchase                                          -          (158)                                                  ------------  ------------  Net cash provided by financing activities               1,225         1,414                                                   ------------  ------------  Net increase (decrease) in cash and cash                                      equivalents                                           (2,805)        1,383  Cash and cash equivalents at beginning of period       26,822        25,439                                                   ------------  ------------  Cash and cash equivalents at end of period       $     24,017  $     26,822                                                   ============  ============  Supplemental disclosures of cash flow                                         information:                                                                Net cash paid for taxes                          $        305  $        375  Accrued amounts for acquisition of property and                               equipment                                       $         98  $        321  Vendor financing of property and equipment       $      2,597             -                                                                                                                                                                                                                                                                          iPASS INC.                                                   RECONCILIATION OF NON-GAAP TO GAAP METRICS                                           (Unaudited, in thousands)                                                                                                                                                                    Twelve Months                                    Three Months Ended              Ended                                  -----------------------------  ------------------                            December  September  December  December  December                            31, 2013   30, 2013  31, 2012  31, 2013  31, 2012                            --------  ---------  --------  --------  --------  I  Reconciliation of                                                             Adjusted EBITDA Income                                                       (Loss) to GAAP Net                                                           Loss:                                                                       Adjusted EBITDA Income                                                        (Loss)                $ (2,626) $    (991) $   (143) $ (5,143) $    960       (a) Interest income                                                           (expenses)               (27)         2         8       (18)       19       (b) Income tax                                                                expense                 (242)      (341)     (220)     (569)     (642)      (c) Depreciation of                                                           property and                                                                 equipment               (909)      (612)     (450)   (2,776)   (2,110)      (d) Amortization of                                                           intangible assets          -          -         -         -      (169)      (e) Stock-based                                                               compensation            (691)      (887)     (637)   (3,163)   (2,418)      (f) Restructuring                                                             charges and related                                                          adjustments              (14)       (13)      (10)     (653)      (26)      (g) Certain state                                                             sales and federal                                                            tax items and other                                                          discrete items             -          -         -        10         8                            --------  ---------  --------  --------  --------     GAAP Net Loss          $ (4,509) $  (2,842) $ (1,452) $(12,312) $ (4,378)                           --------  ---------  --------  --------  --------                                                                                  Q1 2014 Guidance                                                          II Reconciliation of Q1                                                          2014 Adjusted EBITDA                                                         Loss to GAAP Net Loss:           (Unaudited, in millions)                   Adjusted EBITDA Loss                                                          (1)                             $    (5.5)           $   (3.5)                (a) Income tax                                                                expense                                      (0.1)                          (b) Depreciation of                                                           property and                                                                 equipment                                    (0.8)                          (c) Stock-based                                                               compensation                                 (0.9)                                                         ---------  --------  --------               GAAP Net Loss                    $    (7.3)           $   (5.3)                                                                                        (1) The Q1 2014 Guidance for Adjusted EBITDA loss does not include the           impact of any foreign exchange gains or losses or restructuring charges.     INVESTOR RELATIONS CONTACT: Mike Bishop The Blueshirt Group Tel. +1 415 217 4968 Email: mike@blueshirtgroup.com