Novatel Wireless Second Quarter 2011 Financial Results

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Novatel Wireless Second Quarter 2011 Financial Results

Revenue Increases 90 Percent from First Quarter; 64 Percent from Prior Year

Novatel Wireless, Inc. (NASDAQ: NVTL), a leading provider of wireless broadband access solutions, today reported preliminary financial results for the second quarter ended June 30, 2011.

2Q 2011 2Q 2010 1Q 2011
Revenue $118.0M $71.8M $61.8M
GAAP Net Income (Loss) $(3.9M) $(22.0M) $(22.1M)
GAAP EPS (Loss) $(0.12) $(0.70) $(0.69)
Non-GAAP Net Income (Loss) $(0.9M) $(4.3M) $(17.8M)
Non-GAAP EPS (Loss) $(0.03) $(0.14) $(0.56)

Our second quarter benefited from strong growth in our MiFi® intelligent mobile hotspot product line, as well as initial sales of 4G Expedite® embedded solutions,” said Peter Leparulo, CEO of Novatel Wireless. “Our LTE MiFi hotspot has quickly become the category leader. Our LTE Expedite embedded modules have achieved a number of tier-one OEM design wins for future product launches in the U.S. and around the world.”

In our M2M business, we are seeing the benefits of our Enfora acquisition begin to unfold, although revenues were constrained due to shortages of certain key components caused by supply disruptions in Japan. Our recently launched Spider MT2500, MT3000 and AT3010 solutions with our N4A software gateway platform have received strong interest from global carriers and enterprise customers seeking asset tracking systems and are expected to be key products for driving our M2M business growth.

Operating Results

Second quarter revenue was $118.0 million, solidly within our guidance range of $112 to $122 million. This was achieved despite the constrained Solutions & Services revenue at our Enfora division related to component shortages.

Sales by major product category were as follows:

Revenue by Product Category 2Q 2011 2Q 2010* 1Q 2011
Mobile Broadband Devices

Embedded Solutions

Solutions & Services

$101.3M

$  11.8M

$    4.9M

$70.9M

$  7.6M

$  8.8M

$48.2M

$  6.4M

$  7.2M

Total $118.0M $87.3M $61.8M
* 2Q 2010 revenues in this chart are pro forma to include Enfora pre-merger results for this period.

Gross margin was 22.2 percent of revenue on a GAAP basis. On a non-GAAP basis, gross margin was 23.2 percent, exceeding the range of our previous guidance of 21 to 22 percent.

Non-GAAP Earnings Summary

The following adjustments are included in the second quarter non-GAAP loss per share.

GAAP Loss Per Share $(0.12)
Adjustments:
Stock-based compensation expense $ 0.04
Acquisition-related charges $ 0.05
Integration expense $ 0.00
Non-GAAP Loss Per Share $(0.03)

Segment Results

GAAP financial results by operating segment were as follows:

2Q 2011 2Q2010
Revenue
Mobile Computing Products $105.8M $71.8M
M2M Products and Solutions $  12.2M
Total $118.0M $71.8M
Operating Income (Loss)
Mobile Computing Products $   1.0M $(8.0M)
M2M Products and Solutions $(  4.1M)
Total $(  3.1M) $(8.0M)

Recent Business Highlights

  • In May, Novatel Wireless became the first provider to have an embedded LTE solution commercially available and compatible with the Verizon Wireless network. Our Expedite® embedded-module portfolio provides innovative solutions to integrate high-speed data connectivity into tablets, notebooks, and various other portable devices. Customer shipments to leading manufacturers began during the second quarter.
  • In June, Novatel Wireless extended its innovative Expedite embedded-mobile portfolio with the ultra-thin LGA (Land Grid Array) form factor targeted at tablets, mobile Internet devices, portable entertainment devices and consumer electronics devices.
  • Novatel Wireless began supplying its MiFi® 4082 Intelligent Mobile Hotspot to Comcast, supporting its nationwide rollout of Xfinity® Internet 2go. The new MiFi 4082 delivers 4G WiMAX speeds and complements Comcast’s entertainment offerings with one-touch connectivity for up to five Wi-Fi enabled devices.
  • Novatel Wireless entered the insurance telematics market with the Enfora Spider MT 3000 solution. This new platform is purpose-built for the usage-based insurance, telematics, and fleet management markets.
  • Novatel Wireless entered the electric smart-grid market in cooperation with Consert Inc and Qualcomm. The Novatel Wireless’ Expedite® E396 PCI Express Mini Card is being embedded into the Consert Virtual Peak Plant(SM) Solution, allowing utilities to effectively manage load resources in real-time.
  • Enfora expanded its collaboration with SeeControl, a company that offers a cloud-based platform for building tailored M2M applications. Our combined offerings will improve visibility, management, and operation of remote mobile and fixed assets. We will integrate software components into a complete solution making it easier than ever for customers to deploy an intelligent-asset network across their existing platforms.
  • Novatel Wireless was selected by POM Inc. to supply wireless modules and services for POM’s new Parktel™ credit card parking meter. The Parktel meter uses a tightly integrated Enfora wireless module coupled with Enfora’s N4A communications and management platform. This provides a secure wireless transaction capability together with the ability to manage the meters remotely via a simple web-based tool.
  • Best Buy announced the availability of the Novatel Wireless 3G MiFi® Mobile Hotspot and Ovation™ USB modem on Best Buy Connect(SM), its mobile-broadband service.  The devices are branded Rocketfish, a Best Buy private-label brand that represents a portfolio of connectivity solutions.

Third Quarter 2011 Business Outlook

The following statements are forward-looking and actual results may differ materially.  Please see the section titled, “Cautionary Note Regarding Forward-Looking Statements” at the end of this press release.  A more detailed description of risks related to our business is included in the reports filed by the company with the Securities and Exchange Commission.

Our guidance for the third quarter of 2011 reflects current business indicators and expectations as of the date of this release. All figures are approximations based on management’s beliefs and assumptions as of the date of this release.

Third Quarter 2011
Revenues $105 – $120 million
Non-GAAP Gross Margin 23%
Non-GAAP Loss Per Share ($0.10) – $0.00

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 providing wireless connectivity.  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, Enfora smart M2M modules, and Enfora integrated M2M solutions. These innovative products provide anywhere, anytime communications solutions for consumers and enterprises. Headquartered in San Diego, California, Novatel Wireless is listed on NASDAQ: NVTL. For more information please visit www.nvtl.com.

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