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Financial Press Releases
Broadband Revenues Represent 50% of Total Revenues; Broadband, Software and Service Fee Represent 76% of Total Revenues REDWOOD SHORES, Calif. — May 8, 2008 — iPass Inc. (Nasdaq: IPAS), a global provider of services that unify the management of enterprise mobility, today announced financial results for its first quarter March 31, 2008. "Our continued shift to a balanced revenue model gained greater traction, showing the strength of business, as broadband, software and service fee revenues increased 38% over the prior year quarter," said Ken Denman, Chairman and CEO of iPass. "A full 76% of our total revenues in the quarter were from these growth businesses, compared to 57% for the same period last year as we transition beyond our legacy dial business." In the first quarter iPass exceeded its cost reduction goals, reducing combined non-stock compensation network operations, R&D and SG&A operating expenses by $3.5 million. Also in the first quarter, the company launched its iPassConnect™ mobility service that allows U.S. businesspeople to purchase global Wi-Fi and 3G access combined into a single service direct from iPass. The company also added 10 new Forbes Global 2000 customers to its rolls, and now claims 427 of these highly-coveted companies as users of it services. Financial Highlights
Q1'08 Q4'07 Q1'07
(In millions, except per share amounts) ------- ------- -------
Total Revenues $ 48.1 $ 49.5* $ 46.9
Broadband Revenues $ 24.1 $ 22.1 $ 15.4
Software and Service Fee Revenues $ 12.5 $ 14.0* $ 11.1
Dial Revenues $ 11.5 $ 13.4 $ 20.3
Operating loss $ (2.2) $ (4.6) $ (3.3)
Non-GAAP Operating Income (loss) $ 0.2 $ 0.4 $ (1.0)
GAAP Net loss $ (1.4) $ (30.4) $ (0.5)
GAAP Diluted EPS (loss) $ (0.02) $ (0.49) $ (0.01)
Non-GAAP Net Income (loss) $ 1.0 $ 1.5 $ 0.3
Non-GAAP Diluted EPS (loss) $ 0.02 $ 0.02 $ 0.00
Cash and Short Term Investments $ 70 $ 75 $ 88
*Total revenues from the fourth quarter 2007 included $2.3 million of additional software and service fee revenues relating to a change in estimate for the recognition of minimum commitment billings. Key User, Footprint and Customer Metrics
Q1'08 Q4'07 Q1'07
--------- --------- ---------
iPass On-Network Users 547,000 576,000 671,000
iPass Off-Network Users 538,000 500,000 329,000
--------- --------- ---------
Total iPassConnect Software Users 1,085,000 1,076,000 1,000,000
Broadband Users 295,000 274,000 204,000
Dial Users 252,000 302,000 467,000
--------- --------- ---------
Total iPass On-Network Users 547,000 576,000 671,000
Broadband Venues 98,000 95,000 80,000
Total Forbes Global 2000 Customers 427 417 386
During the first quarter, iPass added key broadband venues in Japan, India, Argentina and Brazil to its global broadband network. iPass users now have access to broadband coverage in 84 of the world's top 100 airports, and coverage in a total of 559 airports worldwide. iPass has the world's largest multi-technology virtual network which now has more than 100,000 active broadband roaming locations (Wi-Fi hotspots and hotel Ethernet) as well as support for 3.5G, 3G and 2.5G mobile broadband in the U.S., Europe and Asia, and dial-up in more than 160 countries. "Our gross margins were 57 percent during the quarter, reflecting the decline in higher-margin dial revenues, the effects of a weaker US dollar which impact our network access charges priced in local currencies, and an increase in end-user usage on networks that are either lower margin or do not yet benefit from volume pricing. We are actively working to address each of the issues affecting gross margin," said Denman. Share Repurchase Program - The company's board of directors approved a $30 million share repurchase plan in February 2008. During the period January 1, 2008 through March 31, 2008, the company repurchased approximately $3.2 million of its common stock, representing approximately 1.1 million shares at an average cost of $2.90 per share. Company Outlook For the quarter ending June 30, 2008, iPass projects revenue 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 second quarter of 2008 which, when divided by an expected 62 million fully diluted shares outstanding, results in the $0.04 difference. Conference Call 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 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 first 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 fourth quarter of 2007 is as follows: GAAP operating income (loss) ($4,642) (a) FAS 123R stock-based compensation 671 (b) Restructuring charges 3,306 (c) Amortization of intangibles 1,051 Non-GAAP operating income (loss) $386 The reconciliation between GAAP and non-GAAP net income (loss) for the fourth quarter of 2007 on a tax-effected basis is as follows: GAAP net income (loss) ($30,362) (a) FAS 123R stock-based compensation 671 (b) Restructuring charges 3,306 (c) Amortization of intangibles 1,051 (d) Provision for income taxes 0 Non-GAAP net income (loss) $1,544A reconciliation between GAAP and non-GAAP diluted net income (loss) per share for the fourth quarter of 2007 on a tax-effected basis is as follows: GAAP diluted net income (loss) per share ($0.49) (a) Per share effect of FAS 123R stock-based compensation, restructuring charges, amortization of intangibles and valuation allowance for deferred tax assets $0.51 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,
----------------------
2008 2007
---------- ----------
Revenues $ 48,112 $ 46,888
Operating expenses (a)
Network access 20,500 16,270
Network operations 8,674 8,198
Research and development 4,456 5,456
Sales and marketing 10,309 13,426
General and administrative 5,319 5,776
Restructuring Charges (b) 4 -
Amortization of intangibles (c) 1,050 1,050
---------- ----------
Total operating expenses 50,312 50,176
---------- ----------
Operating loss (2,200) (3,288)
Other income, net 589 739
---------- ----------
Loss before income taxes (1,611) (2,549)
Provision for (benefit from) income taxes (238) (2,081)
---------- ----------
Net loss $ (1,373) $ (468)
========== ==========
Net loss per share:
Basic $ (0.02) $ (0.01)
Diluted $ (0.02) $ (0.01)
Number of shares used in per share calculations:
Basic 61,615,143 62,932,111
Diluted 61,615,143 62,932,111
Non-GAAP Diluted Shares 62,367,460 64,146,285
(a) FAS 123(R) stock-based compensation and
amortization of deferred stock-based compensation
included in the expense line items:
Network operations $ 273 $ 135
Research and development 189 274
Sales and marketing 337 242
General and administrative 546 546
---------- ----------
Total amortization of stock-based compensation $ 1,345 $ 1,197
A reconciliation between operating loss on a GAAP
basis and non-GAAP operating income
(loss) is as follows:
GAAP operating loss $ (2,200) $ (3,288)
(a) Amortization of stock-based compensation 1,345 1,197
(b) Restructuring charges 4 -
(c) Amortization of intangibles 1,050 1,050
---------- ----------
Non-GAAP operating income (loss) $ 199 $ (1,041)
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 $ (1,373) $ (468)
(a) Amortization of stock-based compensation 1,345 1,197
(b) Restructuring charges 4 -
(c) Amortization of intangibles 1,050 1,050
(1) Provision for income taxes - (1,512)
Non-GAAP net income (loss) $ 1,026 $ 267
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) $ (0.01)
Per share effect of FAS 123(R) stock-based
compensation, amortization of deferred
stock-based compensation, restructuring charges,
and amortization of intangibles 0.04 0.01
Non-GAAP diluted net income (loss) per share $ 0.02 $ 0.00
(1) The estimated non-GAAP effective tax rate was 0% for the three months
ended March 31, 2008, due to the establishment of a full valuation
allowance on our deferred tax assets. The estimated non-GAAP tax effect
for the three months ended March 31, 2007 was (82%) 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)
March 31, December 31,
2008 2007
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 67,416 70,907
Short-term investments 2,537 4,258
Accounts receivable, net 36,562 35,938
Prepaid expenses and other current assets 6,720 7,116
Short-term deferred income tax assets 575 575
------------ ------------
Total current assets 113,810 118,794
Property and equipment, net 10,424 9,272
Other assets 5,741 4,876
Acquired intangibles, net 8,454 9,504
Goodwill 79,543 79,543
------------ ------------
Total assets $ 217,972 221,989
------------ ------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 17,470 15,923
Accrued liabilities 13,972 15,788
Short-term deferred revenue 5,415 6,606
------------ ------------
Total current liabilities 36,857 38,317
Deferred tax liability-long term 575 575
Long-term deferred revenue 1,722 949
Other long-term liabilities 845 1,040
------------ ------------
Total liabilities $ 39,999 40,881
------------ ------------
Stockholders' equity:
Common stock 61 62
Additional paid-in capital 239,952 241,703
Accumulated other comprehensive income 5 15
Accumulated deficit (62,045) (60,672)
------------ ------------
Total stockholders' equity 177,973 181,108
------------ ------------
Total liabilities and stockholders'
equity $ 217,972 221,989
------------ ------------
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Editorial Contacts
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