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Press Release Archive
Fourth Quarter Broadband Revenues Increase 13% over Third Quarter; Full Year 2007 Broadband Revenues Increase 89% over 2006; Board Approves $30 Million Stock Repurchase REDWOOD SHORES, Calif. — February 13, 2008 — iPass Inc. (Nasdaq: IPAS), a global provider of services that unify the management of enterprise mobility, today announced financial results for its fourth quarter and full year ended December 31, 2007. "Strong bookings throughout 2007 allowed iPass to achieve quarterly revenue growth not just in the fourth quarter, but in every quarter in 2007," said Ken Denman, Chairman and CEO of iPass. "Our growth in broadband, software and service fee revenues outpaced the decline in our dial revenues, and we are steadily improving our operating margins and increasing our operating leverage to position iPass for profitable growth in 2008 and beyond." Share Repurchase Program - On February 12, 2008, the Company's Board of Directors approved a share repurchase program authorizing the repurchase of up to $30 million of the company's common stock over a two year period. "Our Board's decision to approve a stock repurchase plan reflects the confidence that iPass will continue to generate cash flow from operations throughout 2008," added Denman. "We generated approximately $1 million in the fourth quarter, despite $2 million in cash outflow associated with our fourth quarter restructuring." Financial Highlights
(In millions, except per share amounts)
Q4'07 Q3'07 Q4'06
----- ----- -----
Total Revenues $50.0 $47.7 $45.2
Broadband Revenues $22.1 $19.6 $13.0
Software and Service Fee
Revenues $14.5* $12.4 $9.8
Dial Revenues $13.4 $15.7 $22.4
Operating loss ($4.6) ($2.7) ($7.2)
Non-GAAP Operating Income (loss) $0.4 ($0.4) ($1.6)
GAAP Net loss ($30.8)** ($1.1) ($3.8)
GAAP Diluted EPS (loss) ($0.49)** ($0.02) ($0.06)
Non-GAAP Net Income (loss) $1.1 $0.4 ($0.3)
Non-GAAP Diluted EPS (loss) $0.02 $0.01 ($0.00)
Cash and Short Term
Investments $75 $74 $99
*Software and service fee revenues in the fourth quarter include $2.8 million of additional revenues relating to a change in estimate for the recognition of minimum commitment billings. Prior to the fourth quarter iPass recognized minimum commitment billings on a cash basis. **iPass reported a fourth quarter GAAP net loss of $30.8 million ($0.49 per fully diluted share) compared to a net loss of $1.1 million ($0.02 per fully diluted share) during Q3 2007. "The fourth quarter 2007 GAAP loss includes a non-cash charge of $26.9 million for establishing a valuation allowance for our deferred tax assets and a $3.3 million restructuring charge relating to our November 2007 reorganization," said Frank Verdecanna, Chief Financial Officer of iPass. "The deferred tax asset impairment charge does not have an adverse impact on iPass' liquidity or upon management's view of our business or its prospects." Business and Operational Highlights
Q4'07 Q3'07 Q4'06
----- ----- -----
iPassConnect Software Users 1,076,000 1,044,000 994,000
iPass On-Network Users 576,000 601,000 710,000
iPass Off-Network Users 500,000 443,000 284,000
Broadband Users 274,000 252,000 169,000
Dial Users 302,000 349,000 541,000
Broadband Venues 95,000 81,000 77,000
Total Forbes Global 2000 Customers 417 408 377
Company Outlook For the quarter ended March 31, 2008, iPass projects revenue of approximately $47.5 million to $50.5 million, fully diluted GAAP earnings (loss) per share of approximately ($0.01) to $0.02 and fully diluted non-GAAP earnings per share of approximately $0.02 to $0.05. The difference between the projected fully diluted GAAP loss per share and the projected fully diluted non-GAAP earnings per share of approximately $0.03 is based on expected FAS 123R stock-based compensation of $1.2 million and the expected amortization of intangibles of $1.1 million in the first quarter of 2008 which, when divided by an expected 64 million fully diluted shares outstanding, results in the $0.03 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 first 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 41815397. 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 fourth quarter of 2007 and 2006 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 third quarter of 2007 is as follows: GAAP operating income (loss) ($2,709) (a) FAS 123R stock-based compensation 1,283 (b) Restructuring charges 13 (c) Amortization of intangibles 1,050 Non-GAAP operating income (loss) ($363) The reconciliation between GAAP and non-GAAP net income (loss) for the third quarter of 2007 on a tax-effected basis is as follows: GAAP net income (loss) ($1,081) (a) FAS 123R stock-based compensation 1,283 (b) Restructuring charges 13 (c) Amortization of intangibles 1,050 (d) Provision for income taxes (850) Non-GAAP net income (loss) ($415) A reconciliation between GAAP and non-GAAP diluted net income (loss) per share for the third quarter of 2007 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, amortization of intangibles and provision for income taxes $0.03 Non-GAAP diluted net income (loss) per share $0.01 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 Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
Revenues $ 50,007 $ 45,157 $ 192,228 $ 182,711
Operating expenses (a)
Network access 18,591 15,545 69,530 56,929
Network operations 8,591 7,968 34,258 32,013
Research and development 4,657 5,402 21,141 22,557
Sales and marketing 13,199 13,883 52,809 58,620
General and administrative 5,179 5,350 21,392 23,178
Restructuring Charges (b) 3,306 3,157 3,167 4,733
Amortization of intangibles (c) 1,050 1,050 4,200 3,971
---------- ---------- ---------- ----------
Total operating expenses 54,573 52,355 206,497 202,001
---------- ---------- ---------- ----------
Operating loss (4,566) (7,198) (14,269) (19,290)
Other income, net 898 844 3,270 3,659
---------- ---------- ---------- ----------
Loss before income taxes (3,668) (6,354) (10,999) (15,631)
Provision for (benefit
from) income taxes (e) 27,136 (2,593) 23,657 (7,195)
---------- ---------- ---------- ----------
Net loss before cumulative
effect of change in
accounting principle $ (30,804) $ (3,761) $ (34,656) $ (8,436)
========== ========== ========== ==========
Cumulative effect of
change in accounting
principle (d) $ - $ - $ - $ (347)
---------- ---------- ---------- ----------
Net loss $ (30,804) $ (3,761) $ (34,656) $ (8,089)
========== ========== ========== ==========
Net loss per share:
Basic $ (0.49) $ (0.06) $ (0.55) $ (0.13)
Diluted $ (0.49) $ (0.06) $ (0.55) $ (0.13)
Number of shares used in
per share calculations:
Basic 62,567,108 64,225,707 63,211,888 64,572,603
Diluted 62,567,108 64,225,707 63,211,888 64,572,603
Non-GAAP Diluted Shares 63,539,488 64,225,707 64,309,139 66,439,893
(a) FAS 123(R) stock-based
compensation and
amortization of deferred
stock-based compensation
included in the expense
line items:
Network operations $ 182 $ 239 $ 799 $ 1,031
Research and development 117 286 959 1,235
Sales and marketing 151 463 1,246 2,206
General and administrative 221 378 1,914 1,706
---------- ---------- ---------- ----------
Total amortization of
stock-based
compensation $ 671 $ 1,366 $ 4,918 $ 6,178
A reconciliation between
operating loss on a GAAP
basis and non-GAAP
operating income (loss) is
as follows:
GAAP operating loss $ (4,566) $ (7,198) $ (14,269) $ (19,290)
(a) Amortization of
stock-based compensation 671 1,366 4,918 6,178
(b) Restructuring charges 3,306 3,157 3,167 4,733
(c) Amortization of
intangibles 1,050 1,050 4,200 3,971
---------- ---------- ---------- ----------
Non-GAAP operating income
(loss) $ 461 $ (1,625) $ (1,984) $ (4,408)
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 $ (30,804) $ (3,761) $ (34,656) $ (8,089)
(a) Amortization of
stock-based compensation 671 1,366 4,918 6,178
(b) Restructuring charges 3,306 3,157 3,167 4,733
(c) Amortization of
intangibles 1,050 1,050 4,200 3,971
(d) Cumulative effect of
change in accounting
principle - - - (347)
(e) Valuation allowance for
deferred tax assets 26,878 - 26,878 -
(1) Provision for income
taxes - (2,090) (2,779) (5,912)
Non-GAAP net income (loss) $ 1,101 $ (278) $ 1,728 $ 534
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 $ (0.49) $ (0.06) $ (0.55) $ (0.13)
Per share effect of FAS
123(R) stock-based
compensation, amortization
of deferred stock-based
compensation, restructuring
charges, amortization of
intangibles, cumulative
effect of change in
accounting principle, and
valuation allowance for
deferred tax assets 0.51 0.06 0.58 0.14
Non-GAAP diluted net income
(loss) per share $ 0.02 $ (0.00) $ 0.03 $ 0.01
(1) The estimated non-GAAP effective tax rate was 0% for the three months
ended December 31, 2007, due to the establishment of a full valuation
allowance on our deferred tax assets. The estimated non-GAAP tax effect for
the twelve months ended December 31, 2007 includes the tax effect of the
Non-GAAP adjustments through the first nine months of 2007. The estimated
non-GAAP effective tax rate was (41)% and (46)% for the three and twelve
months ended December 31, 2006, respectively.
iPASS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2007 2006
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 70,907 15,492
Short-term investments 4,258 83,708
Accounts receivable, net 36,388 28,579
Prepaid expenses and other current assets 7,474 6,341
Short-term deferred income tax assets 0 8,070
------------- -------------
Total current assets 119,027 142,190
Property and equipment, net 9,272 10,519
Other assets 4,876 3,344
Long-term deferred income tax assets 0 14,952
Acquired intangibles, net 9,504 13,705
Goodwill 78,892 78,892
------------- -------------
Total assets $ 221,571 263,602
------------- -------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 15,923 14,830
Accrued liabilities 16,393 18,537
Short-term deferred revenue 6,606 5,411
------------- -------------
Total current liabilities 38,922 38,778
Long-term deferred revenue 949 1,468
Other long-term liabilities 1,040 1,969
------------- -------------
Total liabilities $ 40,911 42,215
------------- -------------
Stockholders' equity:
Common stock 63 63
Additional paid-in capital 241,702 247,880
Accumulated other comprehensive
income (loss) 9 (98)
Accumulated deficit (61,114) (26,458)
------------- -------------
Total stockholders' equity 180,660 221,387
------------- -------------
Total liabilities and stockholders'
equity $ 221,571 263,602
------------- -------------
# # #
Editorial Contacts
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