iPass Reports Fourth Quarter and Fiscal 2010 Results
REDWOOD SHORES, CA -- (Marketwire) -- 02/17/11 -- iPass Inc. (NASDAQ: IPAS), a leading provider of enterprise mobility services, today announced financial results for its fourth quarter and fiscal year ended December 31, 2010.
iPass reported revenues of $38.6 million for the fourth quarter of 2010, compared to revenues of $40.5 million in the fourth quarter of 2009.
GAAP net income in the fourth quarter of 2010 was $0.8 million or $0.01 per share, compared to a $5.3 million net loss or ($0.09) per share in the fourth quarter of 2009. The fourth quarter 2010 GAAP results include a benefit of $2.1 million from the favorable settlement of certain sales tax obligations with a state taxing authority.
Non-GAAP net loss for the fourth quarter of 2010 was $0.6 million or ($0.01) per share. This compared to a non-GAAP net loss of $0.5 million or ($0.01) per share for the fourth quarter of 2009. Non-GAAP net loss excludes expenses related to stock compensation, amortization of intangible assets, restructuring charges, certain state sales and federal tax charges, and one-time discrete items.
"I'm pleased with the solid traction we're having signing Open Mobile Platform agreements with both tier-one enterprise customers and carrier partners," said Evan Kaplan, iPass President and Chief Executive Officer. "I see us making great progress in the enterprise mobility space and I'm also bullish about leveraging our unmatched global Wi-Fi network and authentication platform to help carriers manage the growing need for Wi-Fi services."
"With more than $30 million in cash, we feel well-positioned going into 2011," said Steven Gatoff, Senior Vice President and Chief Financial Officer of iPass. "We continue to invest in the development of our Open Mobile Platform as we look to drive growth and stockholder value through customer deployments and increasing usage on the new platform."
The company continued its momentum with its Open Mobile Platform and recently entered into agreements with numerous multi-national enterprise customers and carrier partners. iPass had several important Open Mobile enterprise customer wins during the fourth quarter including ExxonMobil, Credit Suisse, Hitachi, Hamilton Beach Brands, The Absolut Company, The Toro Company, Anadarko Petroleum, Hospira Worldwide and Purdue Pharma. These companies are looking to iPass to help them provide their mobile workforce with innovative and value-focused cost and compliance solutions while driving a high-satisfaction user experience.
Additionally, iPass recently signed agreements with several global telecommunications carriers including Deutsche Telekom, Colt Technologies and another leading European-based global carrier. These integrated communications providers will be leveraging the iPass Open Mobile Platform to deliver a range of new cloud-based mobility services to their enterprise customers. The company believes that carrier arrangements represent meaningful opportunities as a fundamental source of growth and distribution to global enterprise customers, as well as a future potential means to access the consumer.
iPass also recently began to engage with global carriers around leveraging the company's unique transaction and authentication technology and leading global Wi-Fi network to address the growing needs around 3G off-load, international roaming and other related network initiatives. An early example of this is a recent agreement with SK Telecom in South Korea, where the carrier will be offering its customers a new roaming service for Android users that is enabled by the iPass Open Mobile Platform and leverages the iPass global Wi-Fi network. The iPass mobile network now surpasses 263,000 Wi-Fi and wired venues in 101 countries, making it the world's largest commercial Wi-Fi network.
Additional developments around the company's unique Wi-Fi assets include the recent announcement that iPass is collaborating with Gemalto to enable them to provide mobile operators with a global Wi-Fi roaming solution that will allow international travelers to seamlessly access Wi-Fi from their smartphones.
Other Highlights During Q4 2010
-- Continued Expansion of the iPass Network Footprint: iPass expanded its
network footprint in Europe with 12,500 hotspots in France and nearly
8,000 Wi-Fi hotspots in Turkey. Additionally, iPass integrated more
than 85,000 hotspots in China, 41,000 in the Republic of Korea and
5,000 in Thailand. iPass also partnered with two new network providers
in India and the UK. The iPass Mobile Network includes coverage in 96
of the top 100 airports, 657 major airports worldwide, over 21,000
OpenAccess (free) locations, over 41,000 hotels and convention centers
and over 110,000 retail locations worldwide.
-- Unveiled Hotspot Finder 2.0: iPass released a new version of its
popular mobile employee tool for navigating more than 263,000 Wi-Fi
hotspots in 101 countries. The new Hotspot Finder tool is used by more
than 50,000 mobile employees a month providing richer insight into the
quality of Wi-Fi connections.
-- Special Cash Dividend: Also during the fourth quarter, the company paid
a special cash dividend of $0.07 per share, or approximately
$4.0 million. This special cash dividend is anticipated to be a return
of capital to stockholders for 2010.
Financial Highlights
Fourth Quarter 2010
(unaudited; in millions, except per
share amounts) Q4'10 Q3'10 Q4'09
------- ------- -------
Revenues:
Enterprise Mobility Services (EMS) $ 31.5 $ 31.3 $ 33.4
Network Revenue 26.0 25.6 28.2
Platform Revenue 4.2 4.3 3.6
Other Fees and Revenues 1.3 1.4 1.6
Managed Network Services (MNS) 7.1 6.8 7.1
------- ------- -------
Total Revenue $ 38.6 $ 38.1 $ 40.5
Adjusted EBITDA(3) $ 0.1 $ (0.3) $ 0.7
GAAP Net Income/(Loss) Per Diluted
Share $ 0.01(4) $ (0.03) $ (0.09)
Non-GAAP Net Loss Per Diluted
Share(3) $ (0.01) $ (0.02) $ (0.01)
Cash and Short-Term Investments $ 30.7(1) $ 34.1(2) $ 41.8(2)
Shares of Common Stock Outstanding 57.9 57.6 61.5
Fiscal 2010
(unaudited; in millions, except per share
amounts) 2010 2009
--------- ---------
Revenues:
Enterprise Mobility Services $ 128.7 $ 143.1
Network Revenue 107.0 121.4
Platform Revenue 16.0 14.8
Other Fees and Revenues 5.7 6.9
Managed Network Services 27.4 28.3
--------- ---------
Total Revenue $ 156.1 $ 171.4
Adjusted EBITDA(3) $ 0.8 $ 7.4
GAAP Net Loss Per Diluted Share $ (0.05)(4) $ (0.22)
Non-GAAP Net Income/(Loss)Per Diluted Share (3) $ (0.04) $ 0.05
(1) In the fourth quarter of 2010, the company paid a special cash dividend
of approximately $4.0 million.
(2) In the third quarter of 2010 and the fourth quarter of 2009, the
company repurchased approximately $0.9 million and $0.8 million,
respectively, of iPass common stock.
(3) The definition of Adjusted EBITDA and the reconciliation of GAAP to
Non-GAAP financial measures are discussed below.
(4) The fourth quarter and 2010 GAAP results include a benefit of
$2.1 million from the favorable settlement of certain state sales tax
obligations.
Selected Operating Metrics
iPass uses certain key metrics to evaluate the success of its business and operating performance including the following:
Q4 '10 Q3 '10 Q4 '09
--------- --------- ---------
Average Monthly Monetized Users(1) 624,000 621,000 689,000
Network 190,000 192,000 222,000
Platform 560,000 552,000 612,000
Monthly Order Value(2) $ 242,000 $ 536,000 $ 458,000
Network Gross Margin(3) 46.0% 46.4% 44.2%
(1) The number of Average Monthly Monetized Users means the average number
of users per month, during the quarter, for which a fee was billed by
iPass to a customer for such users. Note that there is some overlap of
users who pay for both Network and Platform services in a given month.
(2) Monthly Order Value represents the average amount of new contractually
committed monthly fees. It is a measure of the incremental dollar
value iPass contracted with customers in a period and is an indicator
of new customers' willingness to enter into contractual commitments and
existing customers' willingness to enter into higher-dollar contractual
commitments for the company's services.
(3) Network Gross Margin is defined as (EMS Network Revenue plus MNS
Revenue less Network Access Costs) divided by (EMS Network Revenue plus
MNS Revenue).
Company Outlook
For the first quarter of 2011, ending March 31, 2011, the company anticipates Total Revenue and Adjusted EBITDA to be in the following ranges:
Total Revenue: $34 - 36 million Adjusted EBITDA: ($3.0) - ($1.5) million GAAP net loss per share: ($0.07) - ($0.04) Non-GAAP net loss per share: ($0.07) - ($0.04)
A reconciliation of Adjusted EBITDA to net loss and projected GAAP net loss per share and the projected non-GAAP net loss per share is provided in the attached schedules.
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 number is (877) 874-1567 or (719) 325-4921 with a participant passcode of 4129183. The conference call will also be available live via webcast on the company's web site at http://investor.ipass.com.
A telephone replay of the conference call will be available until March 31, 2011. The replay number is (719) 457-0820. The passcode for the replay is 4129183. The webcast will be available for replay until iPass reports its first quarter 2011 results.
Cautionary Information About Forward-Looking Statements
The statements in this press release regarding iPass' bullishness about leveraging its unmatched global Wi-Fi network and authentication platform to help carriers manage the growing need for Wi-Fi services; Pass' feeling that it is well-positioned going into 2011; iPass' belief that new carrier arrangements represent meaningful opportunities as a fundamental source of growth and distribution to global enterprise customers, as well as a future potential means to access the consumer; iPass' projections of its first quarter fiscal 2011 financial results under the caption "Company Outlook" 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 Open Mobile Platform will not achieve market acceptance; the risk that our customers and partners may not be willing to agree to minimum purchase and resale commitments, the risk of material reductions in our customers' existing minimum commitments; the risk that our carrier and channel partners do not successfully market our services to their customers; the risk that we do not accurately predict usage for our Enterprise Flat Rate price plan which could result in our expenses exceeding revenues for these plans; the risk that we do not deliver valuable services for smart-phones, tablets and other mobile handheld devices; the risk that demand for enterprise mobility services does not grow; the risk of facing strong competition in the market for enterprise mobility services and managed network services; the risk that we fail to address market requirements, evolving standards and technological changes in the enterprise mobility services industry; the risk that our reduced cash balances may impede our ability to make acquisitions or aggressively fund growth initiatives; the risk that a meaningful portion of our business is international which subjects our business to additional risks. Detailed information about these and other risk factors that could potentially affect iPass' business, financial condition and results of operations is included in iPass' 2009 Annual Report on Form 10-K and third quarter 2010 Quarterly Report on Form 10-Q filed with the SEC on March 16, 2010 and November 5, 2010, respectively and available at the SEC's Web site at www.sec.gov. 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.
Information Regarding Non-GAAP Financial Measures
This press release contains financial measures that are not calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP). In addition to iPass' GAAP results, the company also considers non-GAAP net income (loss), Adjusted EBITDA and non-GAAP net income (loss) per share which are supplemental measures of the company's performance that are not required by, nor presented in accordance with, GAAP. Moreover, these non-GAAP financial measures should not be considered 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.
For purposes of comparability across other periods and with other companies in the company's industry, the company reports non-GAAP net income (loss) as adjusted by the amount of additional taxes or tax benefit that the company would accrue using a normalized effective tax rate applied to the non-GAAP results.
Non-GAAP net income (loss) consists of GAAP net income (loss) excluding stock compensation expenses, amortization of intangible assets, restructuring charges, certain state sales and federal tax charges, including a reduction to sales tax liability, and revenue reduction related to correction of historical billing errors which are charges, adjustments and gains which management does not consider reflective of the company's core operating business, as these items possess one or more of the following characteristics: their magnitude and timing is largely outside of the company's control; they are unrelated to the ongoing operation of the business in the ordinary course; they are unusual or infrequent and the company does not expect them to occur in the ordinary course of business; or they are non-operational, or non-cash expenses.
The company defines Adjusted EBITDA as net income (loss) before interest, income taxes, depreciation and amortization, stock compensation expense, restructuring charges, certain state sales and federal tax charges, including a reduction to sales tax liability and one-time discrete items including revenue reduction related to the correction of historical billing errors.
Management uses Adjusted EBITDA as one of the components for measurement of incentive compensation. Management uses this financial measure to evaluate and make operating decisions and for purposes of comparison with its business plan, operating budgets and allocations of resources.
In addition, iPass believes that the presentation of these non-GAAP financial measures is useful to the investors for several reasons, including;
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) These non-GAAP financial measures facilitate comparisons to the operating results of other companies in the company's industry, which use similar financial measures to supplement their GAAP results.
About iPass Inc.
Founded in 1996, iPass (NASDAQ: IPAS) is a leading provider of enterprise mobility services with 3,500 customers, including more than 420 of the Forbes Global 2000. The company's mission is to be the enterprise's champion in the world of mobility by providing services that simply, smartly and openly facilitate access from any device on any network, while providing the visibility and control necessary to support the demands of the enterprise customer. Additional information is available at www.iPass.com or on Smarter Connections, the iPass blog.
NOTE: iPass® is a registered trademark and Open Mobile™ is a trademark of iPass Inc.
iPASS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)
December 31, December 31,
2010 2009
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 30,746 $ 37,973
Short-term investments - 3,799
Accounts receivable, net 24,034 27,023
Prepaid expenses and other current assets 6,630 7,726
------------ ------------
Total current assets 61,410 76,521
Property and equipment, net 4,264 5,044
Intangible assets, net 408 836
Other assets 7,900 7,162
------------ ------------
Total assets $ 73,982 $ 89,563
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 13,552 $ 15,179
Accrued liabilities 15,333 18,491
Deferred revenue, short-term 4,119 5,181
------------ ------------
Total current liabilities 33,004 38,851
Deferred revenue, long-term 2,435 1,764
Other long-term liabilities 721 962
------------ ------------
Total liabilities $ 36,160 $ 41,577
------------ ------------
Stockholders' equity:
Common stock 58 62
Additional paid-in capital 206,992 214,056
Accumulated deficit (169,228) (166,132)
------------ ------------
Total stockholders' equity 37,822 47,986
------------ ------------
Total liabilities and stockholders' equity $ 73,982 $ 89,563
============ ============
iPASS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share and per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- --------------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Revenues $ 38,561 $ 40,476 $ 156,080 $ 171,377
Cost of
revenues and
operating
expenses:
Network access
costs 17,893 19,687 72,497 73,937
Network
operations 6,419 6,660 27,291 29,444
Research and
development 3,584 3,526 13,794 14,362
Sales and
marketing 6,560 6,745 24,874 29,968
General and
administrative 2,985 5,934 19,809 28,337
Restructuring
charges 420 3,846 887 8,147
Amortization
of intangible
assets 65 345 428 1,380
---------- ---------- ---------- ----------
Total operating
expenses 37,926 46,743 159,580 185,575
---------- ---------- ---------- ----------
Operating
income (loss) 635 (6,267) (3,500) (14,198)
Interest income 24 82 83 613
Foreign
exchange gains
(losses) and
other income
(expenses) (11) 12 129 (581)
---------- ---------- ---------- ----------
Income (loss)
before income
taxes 648 (6,173) (3,288) (14,166)
Provision for
(benefit from)
income taxes (105) (841) (192) (674)
---------- ---------- ---------- ----------
Net income
(loss) $ 753 $ (5,332) $ (3,096) $ (13,492)
========== ========== ========== ==========
Basic and
diluted net
income (loss)
per share $ 0.01 $ (0.09) $ (0.05) $ (0.22)
Weighted
average number
of common shares
outstanding -
Basic 57,752,162 61,747,476 58,693,061 62,032,897
Weighted
average number
of common
shares
outstanding -
Diluted 58,219,525 61,747,476(1) 58,693,061(1) 62,032,897(1)
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)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------ ------------------
2010 2009 2010 2009
-------- -------- -------- --------
Cash flows from operating
activities:
Net loss $ 753 (5,332) $ (3,096) (13,492)
Adjustments to reconcile net loss
to net cash provided by
(used in) operating activities:
Stock compensation expense 453 311 1,699 2,316
Amortization of intangible
assets 65 345 428 1,380
Depreciation, amortization and
accretion 811 1,038 3,347 4,562
Gain/loss on disposal of
property and equipment (1) 46 2 56
Non-cash restructuring charges -- 296 -- 296
Deferred income taxes (71) (83) (71) (83)
Provision for doubtful accounts 365 510 1,425 1,687
Change in sales tax liability
estimation (2,087) -- (2,214) --
Changes in operating assets and
Liabilities:
Accounts receivable (795) 365 1,564 5,046
Prepaid expenses and other
current assets 1,651 192 1,167 (454)
Other assets -- (1,010) 410 (729)
Accounts payable 594 2,145 (1,126) (587)
Accrued liabilities (667) 3,807 (944) 6,315
Deferred revenues 136 (189) (391) (749)
Other liabilities (174) (5) (242) 707
-------- -------- -------- --------
Net cash provided by (used in)
operating activities 1,063 2,436 1,958 6,271
-------- -------- -------- --------
Cash flows from investing
activities:
Purchases of short-term
investments -- -- -- (42,981)
Maturities of short-term
investments -- 9,438 3,778 74,135
Purchases of property and
equipment (99) (354) (3,049) (2,110)
Restricted cash pledged for
letter of credit (470) -- (1,148) --
-------- -------- -------- --------
Net cash provided by investing
activities (569) 9,084 (419) 29,044
-------- -------- -------- --------
Cash flows from financing
activities:
Proceeds from issuance of common
stock 182 80 405 198
Payment of cash dividends (4,044) (9,878) (4,044) (29,796)
Cash used in repurchase of
common stock -- (821) (5,127) (821)
-------- -------- -------- --------
Net cash provided by (used in)
financing activities (3,862) (10,619) (8,766) (30,419)
-------- -------- -------- --------
Net increase (decrease) in cash
and cash equivalents (3,368) 901 (7,227) 4,896
Cash and cash equivalents at
beginning of period 34,114 37,072 37,973 33,077
-------- -------- -------- --------
Cash and cash equivalents at end
of period $ 30,746 37,973 $ 30,746 37,973
======== ======== ======== ========
Supplemental disclosures of cash
flow information:
Net cash paid (refund) for taxes $ 116 (14) $ (790) 453
Accrued amounts for acquisition
of property and equipment 123 624 123 624
iPASS INC.
RECONCILIATION OF GAAP TO NON-GAAP KEY FINANCIAL METRICS
Three Months Ended
------------------------------------------
December 31, September 30, December 31,
2010 2010 2009
---------- ---------- ----------
(Unaudited, in thousands, except share and per
share amounts)
I. Reconciliation between net income (loss) on a GAAP basis and non-GAAP
net income (loss):
GAAP net income (loss) $ 753 $ (1,906) $ (5,332)
(a) Stock compensation
expense 453 389 311
(b) Amortization of
intangible assets 65 76 345
(c) Restructuring charges 420 179 3,846
(d) Certain state sales and
federal tax items (2,300) 92 (820)
(e) Revenue adjustment for
correction of historical
billing error - - 1,153
---------- ---------- ----------
Non-GAAP net income (loss) $ (609) $ (1,170) $ (497)
II. Reconciliation between net (loss) per diluted share on a GAAP basis
and non-GAAP net income (loss) per diluted share:
GAAP diluted net income
(loss) per share $ 0.01 $ (0.03) $ (0.09)
Per share effect of stock
compensation,
restructuring charges,
amortization of
intangibles, sales tax and
related charges and
revenue adjustment for
correction of historical
billing error (0.02) 0.01 0.08
Non-GAAP diluted net income
(loss) per share $ (0.01) $ (0.02) $ (0.01)
Non-GAAP diluted shares 57,752,162 (1) 57,615,067 (1) 61,747,476 (1)
III. Reconciliation of GAAP
net income (loss) to
adjusted EBITDA:
GAAP net income (loss) $ 753 $ (1,906) $ (5,332)
(a) Interest income (24) (22) (82)
(b) Provision for (benefit
from) income taxes (105) 96 (841)
(c) Depreciation of
property and equipment 811 764 986
(d) Stock compensation
expense 454 389 311
(e) Amortization of
intangible assets 65 76 345
(f) Restructuring charges 420 179 3,846
(g) Certain state sales and
federal tax items (2,300) 92 280
(h) Revenue adjustment for
correction of historical
billing error - - 1,153
---------- ---------- ----------
Adjusted EBITDA $ 74 $ (332) $ 666
Twelve Months Ended
--------------------------
December 31,
2010 2009
---------- ----------
(Unaudited, in thousands,
except share and per share
amounts)
I. Reconciliation between net income (loss) on a GAAP basis and non-GAAP
net income (loss):
GAAP net income (loss) $ (3,096) $ (13,492)
(a) Stock compensation
expense 1,699 2,316
(b) Amortization of
intangible assets 428 1,380
© Restructuring charges 887 8,147
(d) Certain state sales and
federal tax items (2,158) 3,930
(e) Revenue adjustment for
correction of historical
billing error - 887
---------- ----------
Non-GAAP net income (loss) $ (2,240) $ 3,168
II. Reconciliation between net (loss) per diluted share on a GAAP basis
and non-GAAP net income (loss) per diluted share:
GAAP diluted net income
(loss) per share $ (0.05) $ (0.22)
Per share effect of stock
compensation,
restructuring charges,
amortization of
intangibles, sales tax and
related charges and
revenue adjustment for
correction of historical
billing error 0.01 0.27
Non-GAAP diluted net income
(loss) per share $ (0.04) $ 0.05
Non-GAAP diluted shares 58,693,061 (1) 62,309,796
III. Reconciliation of GAAP net income (loss) to adjusted EBITDA:
GAAP net income (loss) $ (3,096) $ (13,492)
(a) Interest income (83) (613)
(b) Provision for (benefit
from) income taxes (192) (674)
(c) Depreciation of
property and equipment 3,326 4,425
(d) Stock compensation
expense 1,699 2,316
(e) Amortization of
intangible assets 428 1,380
(f) Restructuring charges 887 8,147
(g) Certain state sales and
federal tax items (2,158) 5,030
(h) Revenue adjustment for
correction of historical
billing error - 887
---------- ----------
Adjusted EBITDA $ 811 $ 7,406
(1) Given the Non-GAAP 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.
COMPANY OUTLOOK RECONCILIATION
I. Reconciliation between GAAP net loss per share and non-GAAP net loss per
share:
Three Months Ended
------------------------
March 31, 2011
------------------------
GAAP net loss per share * $ (0.07) - $ (0.04)
(a) Stock compensation expense 0.01
(b) Amortization of intangible assets -
(c) Certain state sales and federal tax items (0.01)
------------------------
Non-GAAP net income per share * $ (0.07) - $ (0.04)
* Shares used in per share calculation 57.9 million
II. Reconciliation of GAAP net loss to adjusted EBITDA:
GAAP net loss $ (3.9) - $ (2.4)
(a) Provision for (benefit from) income taxes 0.1
(b) Depreciation of property and equipment 0.6
(c) Stock compensation expense 0.4
(d) Amortization of intangible assets 0.1
(e) Certain state sales and federal tax items (0.3)
------------------------
Adjusted EBITDA $ (3.0) - $ (1.5)
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CONTACT:
iPass Investor Relations
ir@ipass.com
650-232-4100