Broadband, Software and Service Fee Represent 81% of Total Revenues
REDWOOD SHORES, CA -- (Marketwire) -- 08/07/08 -- iPass Inc. (NASDAQ: IPAS), a global
provider of services that unify the management of enterprise mobility,
today announced financial results for its second quarter ended June 30,
2008.
"Our revenues continued to grow as we benefited from our large
international customer base, the recurring nature of our software and
service fee revenues and our enhanced product portfolio," said Ken Denman,
chairman and CEO of iPass. "We continue to manage operating expenses, add
new blue-chip customers despite a challenging economic environment, and
achieve double-digit increases in mobile broadband revenues. Our growth,
combined with stabilized gross margins, positions us to enhance shareholder
value in the second half of the year."
During the second quarter of 2008, broadband, software and service fee
revenues increased 7 percent sequentially, contributing to a full 81
percent of total revenues, compared to 19 percent for dial. The company
also continued to attract new global customers, signing eight new Forbes
Global 2000 companies during the quarter along with other new business,
representing over $20 million in new bookings during the quarter.
Financial Highlights Q2'08 Q1'08 Q2'07
(In millions, except per share amounts) ------- ------- -------
Total Revenues $ 48.6 $ 48.1 $ 47.6
Broadband Revenues $ 26.2 $ 24.1 $ 17.9
Software and Service Fee Revenues $ 13.0 $ 12.5 $ 11.4
Dial Revenues $ 9.4 $ 11.5 $ 18.4
Operating loss $ (2.3) $ (2.2) $ (3.7)
Non-GAAP Operating Income (loss) $ (0.1) $ 0.2 $ (1.1)
GAAP Net loss $ (1.4) $ (1.4) $ (2.3)
GAAP Diluted EPS (loss) $ (0.02) $ (0.02) $ (0.04)
Non-GAAP Net Income (loss) $ 0.7 $ 1.0 $ (0.1)
Non-GAAP Diluted EPS (loss) $ 0.01 $ 0.02 $ (0.00)
Cash and Short Term Investments $ 70 $ 70 $ 81
Key User, Footprint and Customer Metrics
Q2'08 Q1'08 Q2'07
--------- --------- ---------
iPass On-Network Users 537,000 547,000 635,000
iPass Off-Network Users 585,000 538,000 373,000
--------- --------- ---------
Total iPassConnect Software Users 1,122,000 1,085,000 1,008,000
Broadband Users 323,000 295,000 235,000
Dial Users 214,000 252,000 400,000
--------- --------- ---------
Total iPass On-Network Users 537,000 547,000 635,000
Broadband Venues 104,000 98,000 81,000
Total Forbes Global 2000 Customers 435 427 401
Share Repurchase Program -- During the period April 1, 2008 through June
30, 2008, the company repurchased approximately $500,000 of its common
stock, representing approximately 229,000 shares at an average cost of
$2.18 per share. These repurchases were made under the $30 million share
repurchase plan that the company's board of directors approved in February
2008.
Company Outlook
The following statements are based on information available to iPass today,
and iPass does not assume any duty to update these numbers at any time
during the quarter or thereafter. These statements are forward looking, and
actual results may differ materially.
For the quarter ending September 30, 2008, iPass projects revenues of
approximately $47 million to $50 million, fully diluted GAAP earnings
(loss) per share of approximately ($0.01) to ($0.04) and fully diluted
non-GAAP earnings per share of approximately $0.00 to $0.03. The difference
between the projected fully diluted GAAP loss per share and the projected
fully diluted non-GAAP earnings per share of approximately $0.04 is based
on expected FAS 123R stock-based compensation of $1.5 million dollars and
the expected amortization of intangibles of $1.1 million in the third
quarter of 2008 which, when divided by an expected 62 million fully diluted
shares outstanding, results in the $0.04 difference.
Conference Call
iPass will host a public conference call today to discuss this announcement
at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time).
The call will be webcast on iPass' web site at http://investor.ipass.com,
and a replay of the webcast will be available on iPass' web site until
iPass reports its third quarter 2008 financial results. A taped replay will
also be available for two weeks following the date of the call. The dial-in
numbers for the taped replay are 1-888-286-8010 (U.S. and Canada) and
1-617-801-6888 (international). The ID number for the replay call is
77102199.
Cautionary Statements
iPass' projections of its third quarter 2008 financial results under the
caption "Company Outlook," and in this press release 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 rate of decline in use of narrowband/dial technology as a
means of enterprise connectivity may be faster than iPass predicts; the
risk that iPass will not be able to generate broadband revenues in the
manner expected; rapidly emerging changes in the nature of markets served
by iPass, which may not be compatible with iPass' services; increased
competition, which may cause pricing pressure on the fees iPass charges;
iPass could unexpectedly lose current integrated broadband access points if
one or more current broadband access point providers perceive iPass'
services to be competing with the provider's services in a manner that
renders the relationship with iPass detrimental to the provider; iPass may
not be able to establish additional relationships with broadband access
point providers, including providers of 2.5G/3G Mobile Data, at the level
iPass expects if it is unable to negotiate such relationships on terms
acceptable to both iPass and the providers on the timeframe iPass currently
expects for any number of reasons, including perceived competition with the
providers; if bookings or sales are greater than iPass expects, then
resulting sales commissions and/or other sales related expenses could cause
iPass' non-stock compensation expenses in the third quarter to be greater
than currently expected; and iPass may not be able to generate revenue
from new services if market acceptance of those new services is not as
iPass expects. Detailed information about potential factors that could
potentially affect iPass' business, financial condition and results of
operations is included in iPass' Quarterly Report on Form 10-Q under the
caption " Factors Affecting Operating Results" in Part I, Item 2 of that
report, filed with the Securities and Exchange Commission (the "SEC") on
May 9, 2008 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 inaccurate.
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). iPass
management evaluates and makes operating decisions using various
performance measures. In addition to iPass' GAAP results, the company also
considers non-GAAP net income (loss). iPass further considers various
components of non-GAAP net income (loss) such as non-GAAP earnings (loss)
per share and non-GAAP operating income (loss). Non-GAAP net income (loss)
is generally based on the revenues, network access expenses, network
operations, research and development, sales and marketing and general and
administrative expenses management considers in evaluating the company's
ongoing core operating performance. Non-GAAP net income (loss) consists of
net income (loss) excluding equity
plan-related compensation expenses, restructuring charges, amortization of
intangible assets, the cumulative effect of change in accounting principle,
and valuation allowance for deferred tax assets which are charges and gains
which management does not consider reflective of the company's core
operating business. Equity plan-related compensation expenses represent the
fair value of all share-based payments to employees, including grants of
employee stock options, as required under SFAS No. 123 (revised 2004),
"Share-Based Payment" (FAS 123R). Restructuring charges consist of
severance and benefits, excess facilities and asset-related charges, and
also include strategic reallocations or reductions of personnel resources.
Intangible assets consist primarily of purchased technology, trade names,
customer relationships, employment agreements and other intangible assets
issued in connection with acquisitions. Cumulative effect of change in
accounting principle consists of a one-time benefit relating to the
adoption of FAS 123R. Management does not consider these expenses to be
part of core operating performance.
For purposes of comparability across other periods and against 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) and non-GAAP operating income (loss) are
supplemental measures of our performance that are not required by, nor
presented in accordance with, GAAP. Moreover, they should not be considered
as an alternative to net income, operating 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. The
company presents non-GAAP net income (loss) and non-GAAP operating income
(loss) because the company considers them to be important supplemental
measures of the company's performance.
Management excludes from its non-GAAP net income (loss) and non-GAAP
operating income (loss) certain recurring items to facilitate its review of
the comparability of the company's core operating performance on a period
to period basis because such items are not related to the company's ongoing
core operating performance as viewed by management. Management uses
non-GAAP earnings per share as one of the components for measurement of
incentive compensation. Management uses this view of the company's
operating performance for purposes of comparison with its business plan and
individual operating budgets and allocations of resources. Additionally,
when evaluating potential acquisitions, management excludes the items
described above from its consideration of target performance and valuation.
More specifically, management adjusts for the following excluded items:
a) stock-based compensation expense;
b) restructuring charges;
c) amortization charges for purchased technology and other intangible
assets resulting from the company's acquisition transactions;
d) cumulative effect on change in accounting principle;
e) valuation allowance for deferred tax assets.
Management adjusts for the excluded items because management believes that,
in general, 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 and the company does not
expect them to occur in the ordinary course of business; or they are
non-operational, or non-cash expenses involving stock option grants.
iPass believes that the presentation of these non-GAAP financial measures
is warranted for several reasons:
1) Such non-GAAP financial measures 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) Since the company has historically reported non-GAAP results to the
investment community, the company believes the inclusion of non-GAAP
numbers provides consistency and enhances investors' ability to compare the
company's performance across financial reporting periods;
3) These non-GAAP financial measures are employed by the company's
management in its own evaluation of performance and are utilized in
financial and operational decision making processes, such as budget
planning and forecasting;
4) 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, thus enhancing
the perspective of investors who wish to utilize such comparisons in their
analysis of the company's performance.
Set forth below are additional reasons why specific items are excluded from
the company's non-GAAP financial measures:
a) While stock-based compensation calculated in accordance with FAS 123R
constitutes an ongoing and recurring expense of the company, it is not an
expense that typically requires or will require cash settlement by the
company. The company therefore excludes these charges for purposes of
evaluating core performance as well as with respect to evaluating any
potential acquisition.
b) Restructuring charges are primarily related to severance costs and/or
the disposition of excess facilities driven by modifications of business
strategy. These costs are excluded because they are inherently variable in
size, and are not specifically included in the company's annual operating
plan and related budget due to the rapidly changing facts and circumstances
typically associated with such modifications of business strategy;
c) Amortization charges for purchased technology and other intangible
assets are excluded because they are inconsistent in amount and frequency
and are significantly impacted by the timing and magnitude of the company's
acquisition transactions. The company analyzes and measures the company's
operating results without these charges when evaluating the company's core
performance. Generally, the impact of these charges to the company's net
income (loss) tends to diminish over time following an acquisition;
d) Cumulative effect on change in accounting principle is excluded because
it is inconsistent in amount and frequency. iPass analyzes and measures
operating results without this charge when evaluating core performance;
e) Valuation allowance for deferred tax assets is excluded because it is
inconsistent in amount and frequency. iPass analyzes and measures operating
results without this charge when evaluating core performance. The charge is
not an expense that typically requires or will require cash settlement by
the company;
f) Income tax expense (benefit) is adjusted in the non-GAAP tax-effected
numbers by the amount of additional expense or benefit that the company
would accrue if non-GAAP results were used instead of GAAP results in the
calculation of tax liability, taking into consideration the company's
long-term tax structure.
In the future, the company expects to continue reporting non-GAAP financial
measures on a tax-effected basis excluding items described above and the
company expects to continue to incur expenses similar to the non-GAAP
adjustments described above. Accordingly, exclusion of these and other
similar items in the company's non-GAAP presentation should not be
construed as an inference that these costs are unusual, infrequent or
non-recurring.
As stated above, the company presents non-GAAP financial measures because
it considers them to be important supplemental measures of performance.
However, non-GAAP financial measures have limitations as an analytical tool
and should not be considered in isolation or as a substitute for the
company's GAAP results. In the future, the company expects to incur
expenses similar to the non-GAAP adjustments described above and expects to
continue reporting non-GAAP financial measures excluding such items. Some
of the limitations in relying on non-GAAP financial measures are:
-- The company's stock option and stock purchase plans are important
components of incentive compensation arrangements and will be reflected as
expenses in the company's GAAP results for the foreseeable future under FAS
123R.
-- Amortization of intangibles, though not directly affecting iPass'
current cash position, represents the loss in value as the technology in
the company's industry evolves, is advanced or is replaced over time. The
expense associated with this loss in value is not included in the non-GAAP
net income (loss) presentation and therefore does not reflect the full
economic effect of the ongoing cost of maintaining the company's current
technological position in the company's competitive industry which is
addressed through the company's research and development program.
-- Other companies, including other companies in iPass' industry, may
calculate non-GAAP financial measures differently than the company,
limiting their usefulness as a comparative measure.
Pursuant to the requirements of SEC Regulation G, a detailed reconciliation
between the company's GAAP and non-GAAP financial results is provided in
this press release. Investors are advised to carefully review and consider
this information strictly as a supplement to the GAAP results that are
contained in this press release and in the company's SEC filings.
The reconciliation of non-GAAP financial measures set forth in this press
release for the second quarter of 2008 and 2007 is set forth in the
financial statements at the end of this press release.
The reconciliation between GAAP and non-GAAP operating income (loss) for
the first quarter of 2008 is as follows (in thousands):
GAAP operating income (loss) ($2,200)
(a) FAS 123R stock-based compensation 1,345
(b) Restructuring charges 4
(c) Amortization of intangibles 1,050
Non-GAAP operating income (loss) $199
The reconciliation between GAAP and non-GAAP net income (loss) for the
first quarter of 2008 on a tax-effected basis is as follows (in thousands):
GAAP net income (loss) ($1,373)
(a) FAS 123R stock-based compensation 1,345
(b) Restructuring charges 4
(c) Amortization of intangibles 1,050
Non-GAAP net income (loss) $1,026
A reconciliation between GAAP and non-GAAP diluted net income (loss) per
share for the first quarter of 2008 on a tax-effected basis is as follows:
GAAP diluted net income (loss) per share ($0.02)
(a) Per share effect of FAS 123R stock-based
compensation, restructuring charges
and amortization of intangibles $0.04
Non-GAAP diluted net income (loss) per share $0.02
Other non-GAAP financial measures set forth in the financial statements are
reconciled following those statements.
About iPass Inc.
iPass helps enterprises unify the management of remote and mobile
connectivity and devices. With iPass software and services, customers can
create easy-to-use broadband solutions for their mobile workers, home
offices and branch and retail locations, complete with device management,
security validation and unified billing. iPass offerings are powered by its
leading global virtual network, on-demand management platform, and
award-winning client software. The iPass global virtual network unifies
hundreds of wireless, broadband and dial-up providers in over 160
countries. Hundreds of Global 2000 companies rely on iPass services,
including General Motors, Nokia, and Reuters. Founded in 1996, iPass is
headquartered in Redwood Shores, Calif., with offices throughout North
America, Europe and Asia. For more information, visit www.ipass.com.
NOTE: iPass® is a registered trademark of iPass Inc.
iPASS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except share and per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Revenues $ 48,616 $ 47,597 $ 96,728 $ 94,485
Operating expenses (a)
Network access 20,941 17,273 41,441 33,543
Network operations 8,725 8,783 17,399 16,981
Research and development 3,988 5,438 8,443 10,895
Sales and marketing 10,371 13,868 20,680 27,294
General and administrative 5,805 5,059 11,124 10,818
Restructuring Charges (b) 26 (169) 30 (152)
Amortization of
intangibles (c) 1,050 1,050 2,100 2,100
---------- ---------- ---------- ----------
Total operating expenses 50,906 51,302 101,217 101,479
---------- ---------- ---------- ----------
Operating loss (2,290) (3,705) (4,489) (6,994)
Other income, net 367 851 956 1,600
---------- ---------- ---------- ----------
Loss before income taxes (1,923) (2,854) (3,533) (5,394)
Benefit from income taxes (478) (541) (715) (2,623)
---------- ---------- ---------- ----------
Net loss $ (1,445) $ (2,313) $ (2,818) $ (2,771)
========== ========== ========== ==========
Net loss per share:
Basic $ (0.02) $ (0.04) $ (0.05) $ (0.04)
Diluted $ (0.02) $ (0.04) $ (0.05) $ (0.04)
Number of shares used in per
share calculations:
Basic 61,539,722 63,097,688 61,305,563 63,333,332
Diluted 61,539,722 63,097,688 61,305,563 63,333,332
Non-GAAP Diluted Shares 62,064,195 63,097,688 61,949,167 64,555,418
(a) FAS 123(R) stock-based
compensation and
amortization of deferred
stock-based compensation
included in the expense
line items:
Network operations 285 258 558 393
Research and development 41 327 230 601
Sales and marketing (176) 527 161 769
General and administrative 941 655 1,487 1,201
---------- ---------- ---------- ----------
Total amortization of
stock-based
compensation $ 1,091 $ 1,767 $ 2,436 $ 2,964
A reconciliation between
operating loss on a GAAP
basis and non-GAAP
operating income (loss) is
as follows:
GAAP operating loss $ (2,290) $ (3,705) $ (4,489) $ (6,994)
(a) Amortization of stock-
based compensation 1,091 1,767 2,436 2,964
(b) Restructuring charges 26 (169) 30 (152)
(c) Amortization of
intangibles 1,050 1,050 2,100 2,100
---------- ---------- ---------- ----------
Non-GAAP operating income
(loss) $ (123) $ (1,057) $ 77 $ (2,082)
A reconciliation between
net loss on a GAAP basis
and non-GAAP net income
(loss), net of tax effect,
is as follows:
GAAP net loss $ (1,445) $ (2,313) $ (2,818) $ (2,771)
(a) Amortization of stock-
based compensation 1,091 1,767 2,436 2,964
(b) Restructuring charges 26 (169) 30 (152)
(c) Amortization of
intangibles 1,050 1,050 2,100 2,100
(1) Provision for income
taxes - (391) - (1,913)
---------- ---------- ---------- ----------
Non-GAAP net income (loss) $ 722 $ (56) $ 1,748 $ 228
A reconciliation between
diluted net loss per share
on a GAAP basis and non-GAAP
diluted net income (loss)
per share, net of tax
effect, is as follows:
GAAP diluted net loss per
share $ (0.02) $ (0.04) $ (0.05) $ (0.04)
Per share effect of FAS 123(R)
stock-based compensation,
restructuring charges,
amortization of intangibles,
and provision for income
taxes. 0.03 0.04 0.08 0.04
---------- ---------- ---------- ----------
Non-GAAP diluted net income
(loss) per share $ 0.01 $ (0.00) $ 0.03 $ 0.00
(1) The estimated non-GAAP effective tax rate was 0% for the three and six
months ended June 30, 2008, due to the establishment of a full valuation
allowance on deferred tax assets. The estimated non-GAAP effective tax rate
was (19)% and (49)% for the three and six months ended June 30, 2007,
respectively and has been used to adjust the benefit from income taxes for
non-GAAP purposes.
iPASS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, December 31,
2008 2007
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 52,130 70,907
Short-term investments 17,564 4,258
Accounts receivable, net 37,911 35,938
Prepaid expenses and other current assets 6,888 7,116
Short-term deferred income tax assets 575 575
----------- -----------
Total current assets 115,068 118,794
Property and equipment, net 9,739 9,272
Other assets 6,305 4,876
Acquired intangibles, net 7,404 9,504
Goodwill 79,543 79,543
----------- -----------
Total assets $ 218,059 221,989
----------- -----------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 19,152 15,923
Accrued liabilities 13,235 15,788
Short-term deferred revenue 5,749 6,606
----------- -----------
Total current liabilities 38,136 38,317
Deferred tax liability-long term 575 575
Long-term deferred revenue 1,723 949
Other long-term liabilities 644 1,040
----------- -----------
Total liabilities $ 41,078 40,881
----------- -----------
Stockholders' equity:
Common stock 63 62
Additional paid-in capital 240,422 241,703
Accumulated other comprehensive income (14) 15
Accumulated deficit (63,490) (60,672)
----------- -----------
Total stockholders' equity 176,981 181,108
----------- -----------
Total liabilities and stockholders'
equity $ 218,059 221,989
----------- -----------
CONTACT:
Investor Relations
Email Contact
650-232-4113
