Novatel Wireless Reports Second Quarter 2014 Financial Results

  Novatel Wireless Reports Second Quarter 2014 Financial Results

Business Wire

SAN DIEGO -- August 6, 2014

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 inSan Diego,
California,Novatel Wirelessis listed on NASDAQ: NVTL. For more information
please visitwww.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          33,283        72,100       71,499        141,173 
revenues
Gross profit         3,987         19,024       14,055        35,872  
                                                                   
Operating costs
and expenses:
Research and          8,540           13,018         17,158          26,829
development
Sales and             3,031           5,854          7,026           11,610
marketing
General and           4,423           7,755          9,499           14,081
administrative
Amortization of
purchased             141             141            281             281
intangible
assets
Restructuring        5,250         -            6,416         -       
charges
Total operating
costs and            21,385        26,768       40,380        52,801  
expenses
                                                                   
Operating loss        (17,398 )       (7,744 )       (26,325 )       (16,929 )
                                                                   
Other income
(expense):
Interest              20              21             35              78
income, net
Other expense,       (13     )      (65    )      (57     )      (142    )
net
                                                                   
Loss before           (17,391 )       (7,788 )       (26,347 )       (16,993 )
income taxes
                                                                   
Income tax            24              104            49              21
provision
                                                                
Net loss            $ (17,415 )     $ (7,892 )     $ (26,396 )     $ (17,014 )
                                                                   
Per share data:
                                                                   
Net loss per
share:
Basic and           $ (0.51   )     $ (0.23  )     $ (0.77   )     $ (0.50   )
diluted
                                                                   
Weighted
average shares
used in
computation of
net loss per
share:
Basic and            34,320        33,915       34,246        33,817  
diluted
                                                                             


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               10,000           10,000   
settlement
                                                                  
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'            $ 86,863          $ 111,465  
equity
                                                                             


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       1,916           2,234          4,041           4,544
amortization
Provision for          79              226            109             382
bad debts
Provision for
excess and             2,853           1,758          3,033           1,823
obsolete
inventory
Share-based
compensation           762             940            1,239           1,889
expense
Non-cash income        6               72             -               (48     )
tax benefit
Changes in
assets and
liabilities:
Accounts               4,313           3,715          14,241          2,689
receivable
Inventories            (3,746  )       (465   )       (1,262  )       8,296
Prepaid expenses       (248    )       (663   )       2,170           (608    )
and other assets
Accounts payable       3,662           4,966          2,487           4,322
Accrued
expenses, income      3,460         (273   )      1,375         226     
taxes, and other
                                                                    
Net cash
provided by
(used in)             (4,358  )      4,618        1,037         6,501   
operating
activities
                                                                    
Cash flows from
investing
activities:
Purchases of
property and           (728    )       (873   )       (1,241  )       (3,725  )
equipment
Purchases of
marketable             (826    )       (5,907 )       (826    )       (9,661  )
securities
Marketable
securities            3,381         11,357       9,945         14,516  
maturities/sales
                                                                    
Net cash
provided by           1,827         4,577        7,878         1,130   
investing
activities
                                                                    
Cash flows from
financing
activities:
Proceeds from
the issuance of
short-term debt,       -               3,000          -               10,000
net of issuance
costs
Principal
repayments of          (298    )       (6,266 )       (2,566  )       (8,444  )
short-term debt
Restricted cash
related to             -               661            -               -
short-term debt
Taxes paid on
vested
restricted
stock, net of         (67     )      43           (284    )      (261    )
proceeds from
stock options
exercised
Net cash
provided by
(used in)              (365    )       (2,562 )       (2,850  )       1,295
financing
activities
Effect of
exchange rates        (6      )      (42    )      (51     )      (107    )
on cash and cash
equivalents
                                                                    
Net increase
(decrease) in          (2,902  )       6,591          6,014           8,819
cash and cash
equivalents
Cash and cash
equivalents,          11,827        18,272       2,911         16,044  
beginning of
period
Cash and cash
equivalents, end     $ 8,925        $ 24,863      $ 8,925        $ 24,863  
of period
                                                                              


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                            Per
                                   (Loss) Per                        Share,
                   (Loss)          Share,           Net Income       Diluted
                                   Diluted          (Loss)
                                                                     
GAAP net loss      $ (17,415 )        (0.51  )      $  (26,396 )     $ (0.77 )
                                                                     
Adjustments:
Share-based
compensation         762              0.02             1,239           0.04
expense (a)
                                                                     
Acquisition
related              224              0.01             448             0.01
charges (b)
                                                                     
Restructuring       5,250          0.15           6,416         0.19  
charges (c)
Non-GAAP net       $ (11,179 )     $  (0.33  )      $  (18,293 )     $ (0.53 )
loss

(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        $ 33,283     $     11         $     83         $    -            $ 33,189
revenues
                                                                                    
Operating
costs and
expenses:
Research and         8,540            210              -               -              8,330
development
Sales and            3,031            143              -               -              2,888
marketing
General and          4,423            398              -               -              4,025
administrative
Amortization
of purchased         141              -                141             -              -
intangibles
assets
Restructuring       5,250           -               -              5,250         -
charges
Total
operating          $ 21,385          751             141            5,250        $ 15,243
costs and
expenses
                                                                                    
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        $ 71,499     $   (19    )     $     167        $    -            $ 71,351
revenues
                                                                                    
Operating
costs and
expenses:
Research and         17,158         257                -               -              16,901
development
Sales and            7,026          222                -               -              6,804
marketing
General and          9,499          779                -               -              8,720
administrative
Amortization
of purchased         281            -                  281             -              -
intangibles
assets
Restructuring       6,416         -                -              6,416         -
charges
Total
operating          $ 40,380        1,258            281            6,416        $ 32,425
costs and
expenses
                                                                                    
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               $    (17,391    )            $   (26,347   )
taxes
Depreciation and                      1,916                       4,041
amortization
Share-based                           762                         1,239
compensation expense
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           $ 27,497        $ 80,823       $ 63,695        $ 156,443
Products
M2M Products         9,773         10,301       21,859        20,602  
and Solutions
Total               $ 37,270       $ 91,124      $ 85,554       $ 177,045 
                                                                   
Operating loss
by reportable
segment:
Mobile
Computing           $ (12,246 )     $ (3,348  )    $ (18,372 )     $ (8,848  )
Products
M2M Products         (5,152  )      (4,396  )     (7,953  )      (8,081  )
and Solutions
Total               $ (17,398 )     $ (7,744  )    $ (26,325 )     $ (16,929 )
                                                                   
                                                                   
                                                                   
                    June 30,        December 31,
                    2014            2013
Identifiable
assets by
reportable
segment:
Mobile
Computing           $ 73,853        $ 96,516
Products
M2M Products         13,010        14,949  
and Solutions
Total               $ 86,863       $ 111,465 

Contact:

The Blueshirt Group
Dave Niederman, 415-489-2189
david@blueshirtgroup.com
or
Novatel Wireless, Inc.
Tom Allen, 858-431-3771
Interim CFO
tallen@nvtl.com
 
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