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Financial Press Releases
Non-GAAP Profitability and Positive Operating Cash Flow Highlight Quarter; Enterprise Mobility Provider Expects to be Operating Cash Flow Positive for 2009 REDWOOD SHORES, Calif. — May 5, 2009 — iPass Inc. (Nasdaq: IPAS), a global provider of services that unify the management of enterprise mobility, today announced financial results for its first quarter ended March 31, 2009. "The economic downturn continued to impact our customers' business travel and adversely affected our revenues," said Evan Kaplan, President and Chief Executive Officer of iPass. "However, we achieved positive operating cash flow and returned to non-GAAP profitability as a result of our restructuring in late February, additional cost re-engineering and an increase to gross margin." During the quarter the company achieved the following milestones:
"We are committed to a path of corporate transformation, with an intent to drive renewed revenue growth and ongoing profitability," Kaplan continued. "Having seen easing in the back half of the first quarter due to the recession-driven travel downturn, we are cautiously optimistic about the remainder of 2009 and believe we can be both Non-GAAP profitable and operating cash flow positive for the full year." Financial Highlights
Q1'09 Q4'08 Q1'08
(In millions, except per share amounts) -------- ------- -------
Total Revenues $ 44.6 $ 46.3 $ 48.1
Operating loss ($ 3.0)* ($ 87.2)** ($ 2.2)
Non-GAAP Operating Income (loss) $ 1.3 ($ 1.3) $ 0.2
GAAP Net loss ($ 3.0)* ($ 87.1)** ($ 1.4)
GAAP Diluted EPS (loss) ($ 0.05)* ($ 1.42)** ($ 0.02)
Non-GAAP Net Income (loss) $ 1.3 ($ 1.1) $ 1.0
Non-GAAP Diluted EPS (loss) $ 0.02 ($ 0.02) $ 0.02
Cash and Short Term Investments $ 68 $ 68 $ 70
* Includes a restructuring charge of approximately $3.3 million.
** Includes an impairment charge for goodwill and long lived assets of
approximately $84.5 million.
The calculation of Non-GAAP financial measures is discussed below. Revenue Breakdown
Q1'09 Q4'08 Q1'08
------- ------- -------
Broadband
Wi-Fi Hotspot and Hotel Ethernet $ 15.7 $ 16.6 $ 14.4
Fixed Broadband $ 7.0 $ 6.9 $ 7.1
3G Mobile Data $ 4.0 $ 3.6 $ 2.6
------- ------- -------
Total Broadband Revenues $ 26.7 $ 27.1 $ 24.1
Software and Service Fee Revenues $ 11.9 $ 11.8 $ 12.5
Dial Revenues $ 6.0 $ 7.4 $ 11.5
------- ------- -------
Total Revenues $ 44.6 $ 46.3 $ 48.1
Key User, Footprint and Customer Metrics
Q1'09 Q4'08 Q1'08
---------- ---------- ----------
iPass On-Network Users 414,000 468,000 547,000
iPass Off-Network Users 742,000 693,000 538,000
---------- ---------- ----------
Total iPassConnect Software Users 1,156,000 1,161,000 1,085,000
Broadband Users 287,000 312,000 295,000
Dial Users 127,000 156,000 252,000
---------- ---------- ----------
Total iPass On-Network Users 414,000 468,000 547,000
3G Subscription 29,000 27,000 15,000
Broadband Venues 110,000 109,000 98,000
Quarterly Monthly Order Value* $ 395,000 $ 475,000 $ 497,000
Total Forbes Global 2000 Customers 374** 371** 355**
* Quarterly Monthly Order Value represents the amount of new committed
monthly revenue booked in the quarter. For customer re-signs, only the
portion of the new contractual commitment that exceeds the customer's
previous monthly commitment is included in this calculation.
** The Forbes Global 2000 metric has been updated for the new list issued
in April 2009 and Q4 2008 and Q1 2008 metrics have been updated to
reflect this new list.
Company Outlook For the quarter ending June 30, 2009, iPass projects revenues of approximately $42 million to $45 million, fully diluted GAAP earnings (loss) per share of approximately ($0.03) to $0.00 and fully diluted non-GAAP earnings (loss) per share of approximately ($0.01) to $0.02. The difference between the projected fully diluted GAAP earnings (loss) per share and the projected fully diluted non-GAAP earnings (loss) per share of approximately $0.02 is based on expected FAS 123R stock-based compensation of $0.7 million dollars and the expected amortization of intangibles of $0.3 million in the second quarter of 2009 which, when divided by an expected 62 million fully diluted shares outstanding, results in the $0.02 difference. Conference Call 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 second quarter 2009 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 27035518. Cautionary Statements Information Regarding Non-GAAP Financial Measures 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 operating expenses 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; 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 and other 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) Impairment of goodwill and long lived assets are excluded because it is inconsistent in amount and frequency. The company analyzes and measures the company's operating results without these charges when evaluating the company's core performance. The impairment charges are not charges that typically requires or will require cash settlement by the company; e) 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 first quarter of 2009 and 2008 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 fourth quarter of 2008 is as follows (in thousands): GAAP operating income (loss) ($87,168) (a) FAS 123R stock-based compensation (127) (b) Restructuring and other charges 798 (c) Amortization of intangibles 751 (d) Impairment of goodwill and long lived assets 84,494 Non-GAAP operating income (loss) ($1,252) The reconciliation between GAAP and non-GAAP net income (loss) for the fourth quarter of 2008 on tax-effected basis is as follows (in thousands): GAAP net income (loss) ($87,052) (a) FAS 123R stock-based compensation (127) (b) Restructuring and other charges 798 (c) Amortization of intangibles 751 (d) Impairment of goodwill and long lived assets 84,494 Non-GAAP net income (loss) ($1,136) A reconciliation between GAAP and non-GAAP diluted net income (loss) per share for the fourth quarter of 2008 on a tax-effected basis is as follows: GAAP diluted net income (loss) per share ($1.42) (a) Per share effect of FAS 123R stock-based compensation, restructuring and other charges, amortization of intangibles and impairment of goodwill and long lived assets $1.40 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. NOTE: iPassŪ 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
March 31,
----------------------
2009 2008
---------- ----------
Revenues $ 44,642 $ 48,112
Operating expenses (a)
Network access 18,658 20,500
Network operations 8,292 8,674
Research and development 3,776 4,456
Sales and marketing 8,011 10,309
General and administrative 5,217 5,319
Restructuring Charges (b) 3,334 4
Amortization of intangibles (c) 345 1,050
---------- ----------
Total operating expenses 47,633 50,312
---------- ----------
Operating loss (2,991) (2,200)
Other income, net 56 589
---------- ----------
Loss before income taxes (2,935) (1,611)
Provision for (benefit from) income taxes 78 (238)
---------- ----------
Net loss $ (3,013) $ (1,373)
========== ==========
Net loss per share:
Basic $ (0.05) $ (0.02)
Diluted $ (0.05) $ (0.02)
Number of shares used in per share calculations:
Basic 61,320,464 61,615,143
Diluted 61,320,464 61,615,143
Non-GAAP Diluted Shares 61,508,595 62,367,460
(a) FAS 123(R) stock-based compensation
included in the expense line items:
Network operations $ 143 $ 273
Research and development 105 189
Sales and marketing 130 337
General and administrative 223 546
---------- ----------
Total amortization of stock-based compensation $ 601 $ 1,345
A reconciliation between operating loss on a GAAP
basis and non-GAAP
operating income (loss) is as follows:
GAAP operating loss $ (2,991) $ (2,200)
(a) Amortization of stock-based compensation 601 1,345
(b) Restructuring charges 3,334 4
(c) Amortization of intangibles 345 1,050
---------- ----------
Non-GAAP operating income (loss) $ 1,289 $ 199
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 $ (3,013) $ (1,373)
(a) Amortization of stock-based compensation 601 1,345
(b) Restructuring charges 3,334 4
(c) Amortization of intangibles 345 1,050
---------- ----------
Non-GAAP net income (loss) $ 1,267 $ 1,026
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 $ (0.05) $ (0.02)
Per share effect of FAS 123(R) stock-based
compensation, restructuring charges, and
amortization of intangibles 0.07 0.04
Non-GAAP diluted net income (loss) per share $ 0.02 $ 0.02
iPASS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December
March 31, 31,
2009 2008
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 33,776 $ 33,077
Short-term investments 34,187 35,309
Accounts receivable, net 31,670 33,756
Prepaid expenses and other current assets 7,123 7,225
Short-term deferred income tax assets 100 101
----------- -----------
Total current assets 106,856 109,468
Property and equipment, net 7,160 7,201
Other assets 6,268 6,364
Long-term deferred tax assets 80 79
Acquired intangibles, net 1,871 2,216
----------- -----------
Total assets $ 122,235 $ 125,328
----------- -----------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 15,077 $ 15,406
Accrued liabilities 11,855 12,176
Short-term deferred revenue 5,277 5,736
----------- -----------
Total current liabilities 32,209 33,318
Long-term deferred revenue 1,922 1,958
Other long-term liabilities 839 255
----------- -----------
Total liabilities $ 34,970 $ 35,531
----------- -----------
Stockholders' equity:
Common stock 61 61
Additional paid-in capital 242,762 242,160
Accumulated other comprehensive income 95 216
Accumulated deficit (155,653) (152,640)
----------- -----------
Total stockholders' equity 87,265 89,797
----------- -----------
Total liabilities and stockholders'
equity $ 122,235 $ 125,328
----------- -----------
# # #
Editorial Contacts
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