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Press Release Archive
Gross Margin Improves to 58% REDWOOD SHORES, Calif. — November 3, 2008 — iPass Inc. (Nasdaq: IPAS), a global provider of services that unify the management of enterprise mobility, today announced financial results for its third quarter ended September 30, 2008. "We were pleased to report improvements in both gross margins and operating profit in the third quarter. These reflect our recent efforts to contain our network access costs and operating expenses while continuing to pursue revenue growth," said Ken Denman, President and Chief Executive Officer of iPass. "With our strong and liquid balance sheet, our highly diversified and stable customer base and our value proposition of helping customers rein in their mobility costs, we believe iPass is well positioned to weather the current economic climate." Highlights for the quarter included:
Financial Highlights Q3'08 Q2'08 Q3'07
--------- --------- ---------
(In millions, except per share amounts)
Total Revenues $ 48.4 $ 48.6 $ 47.7
Broadband Revenues $ 26.3 $ 26.2 $ 19.6
Software and Service Fee Revenues $ 13.3 $ 13.0 $ 12.4
Dial Revenues $ 8.8 $ 9.4 $ 15.7
Operating loss $ (1.7) $ (2.3) $ (2.7)
Non-GAAP Operating Income (loss) $ 0.8 $ (0.1) $ (0.4)
GAAP Net loss $ (2.1) $ (1.4) $ (1.1)
GAAP Diluted EPS (loss) $ (0.03) $ (0.02) $ (0.02)
Non-GAAP Net Income (loss) $ 0.5 $ 0.7 $ 0.4
Non-GAAP Diluted EPS (loss) $ 0.01 $ 0.01 $ 0.01
Cash and Short Term Investments $ 68 $ 70 $ 74
Key User, Footprint and Customer Metrics
Q3'08 Q2'08 Q3'07
--------- --------- ---------
iPass On-Network Users 499,000 537,000 601,000
iPass Off-Network Users 628,000 585,000 443,000
--------- --------- ---------
Total iPassConnect Software Users 1,127,000 1,122,000 1,044,000
Broadband Users 311,000 323,000 252,000
Dial Users 188,000 214,000 349,000
--------- --------- ---------
Total iPass On-Network Users 499,000 537,000 601,000
Broadband Venues 105,000 104,000 81,000
Total Forbes Global 2000 Customers 439 435 408
Company Outlook For the quarter ending December 31, 2008, iPass projects revenues of approximately $47 million to $50 million, fully diluted GAAP earnings (loss) per share of approximately ($0.02) to ($0.05) 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 $0.05 is based on expected FAS 123R stock-based compensation of $1.5 million dollars, the expected amortization of intangibles of $1.1 million and an expected restructuring charge of between $400,000 and $600,000 relating to the change in Chief Executive Officers in the fourth quarter of 2008 which, when divided by an expected 62 million fully diluted shares outstanding, results in the $0.05 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 fourth quarter and full year 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 68921952. 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; 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) 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; 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:
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 third 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 second quarter of 2008 is as follows (in thousands): GAAP operating income (loss) ($2,290) (a) FAS 123R stock-based compensation 1,091 (b) Restructuring charges 26 (c) Amortization of intangibles 1,050 Non-GAAP operating income (loss) ($ 123) The reconciliation between GAAP and non-GAAP net income (loss) for the second quarter of 2008 on tax-effected basis is as follows (in thousands): GAAP net income (loss) ($1,445) (a) FAS 123R stock-based compensation 1,091 (b) Restructuring charges 26 (c) Amortization of intangibles 1,050 Non-GAAP net income (loss) $ 722 A reconciliation between GAAP and non-GAAP diluted net income (loss) per share for the second 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 $ 0.03 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. 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 Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Revenues $ 48,371 $ 47,736 $ 145,099 $ 142,221
Operating expenses (a)
Network access 20,147 17,396 61,588 50,939
Network operations 8,739 8,686 26,138 25,667
Research and development 3,845 5,589 12,288 16,484
Sales and marketing 10,724 12,316 31,403 39,610
General and administrative 5,579 5,395 16,703 16,213
Restructuring Charges (b) 30 13 60 (139)
Amortization of intangibles
(c) 1,050 1,050 3,150 3,150
---------- ---------- ---------- ----------
Total operating expenses 50,114 50,445 151,330 151,924
---------- ---------- ---------- ----------
Operating loss (1,743) (2,709) (6,231) (9,703)
Other income (expense), net (296) 772 659 2,372
---------- ---------- ---------- ----------
Loss before income taxes (2,039) (1,937) (5,572) (7,331)
Provision for (benefit
from) income taxes 59 (856) (656) (3,479)
---------- ---------- ---------- ----------
Net loss $ (2,098) $ (1,081) $ (4,916) $ (3,852)
========== ========== ========== ==========
Net loss per share:
Basic $ (0.03) $ (0.02) $ (0.08) $ (0.06)
Diluted $ (0.03) $ (0.02) $ (0.08) $ (0.06)
Number of shares used in
per share calculations:
Basic 61,243,465 62,347,697 61,185,203 62,971,291
Diluted 61,243,465 62,347,697 61,185,203 62,971,291
Non-GAAP Diluted Shares 61,678,453 63,393,902 61,778,048 64,132,477
(a) FAS 123(R) stock-based
compensation and
amortization of deferred
stock-based compensation
included in the expense
line items:
Network operations 314 224 872 617
Research and development 203 241 432 842
Sales and marketing 325 326 486 1,095
General and administrative 643 492 2,131 1,693
---------- ---------- ---------- ----------
Total amortization of
stock-based
compensation $ 1,485 $ 1,283 $ 3,921 $ 4,247
A reconciliation between
operating loss on a GAAP
basis and non-GAAP operating
income (loss) is as follows:
GAAP operating loss $ (1,743) $ (2,709) $ (6,231) $ (9,703)
(a) Amortization of
stock-based compensation 1,485 1,283 3,921 4,247
(b) Restructuring charges 30 13 60 (139)
(c) Amortization of
intangibles 1,050 1,050 3,150 3,150
---------- ---------- ---------- ----------
Non-GAAP operating income
(loss) $ 822 $ (363) $ 900 $ (2,445)
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 $ (2,098) $ (1,081) $ (4,916) $ (3,852)
(a) Amortization of
stock-based compensation 1,485 1,283 3,921 4,247
(b) Restructuring charges 30 13 60 (139)
(c) Amortization of
intangibles 1,050 1,050 3,150 3,150
(1) Provision for income
taxes - (850) - (2,779)
---------- ---------- ---------- ----------
Non-GAAP net income (loss) $ 467 $ 415 $ 2,215 $ 627
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 $ (0.03) $ (0.02) $ (0.08) $ (0.06)
Per share effect of FAS
123(R) stock-based
compensation, restructuring
charges, amortization of
intangibles, and provision
for income taxes. 0.04 0.03 0.12 0.07
---------- ---------- ---------- ----------
Non-GAAP diluted net income
(loss) per share $ 0.01 $ 0.01 $ 0.04 $ 0.01
(1) The estimated non-GAAP effective tax rate was 0% for the three and nine
months ended September 30, 2008, due to the establishment of a full
valuation allowance on deferred tax assets. The estimated non-GAAP
effective tax rate was (44)% and (47)% for the three and nine months
ended September 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)
September 30, December 31,
2008 2007
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 47,485 70,907
Short-term investments 20,545 4,258
Accounts receivable, net 36,903 35,938
Prepaid expenses and other current assets 6,913 7,116
Short-term deferred income tax assets 575 575
------------ ------------
Total current assets 112,421 118,794
Property and equipment, net 8,951 9,272
Other assets 6,447 4,876
Acquired intangibles, net 6,354 9,504
Goodwill 79,543 79,543
------------ ------------
Total assets $ 213,716 221,989
------------ ------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 16,650 15,923
Accrued liabilities 12,277 15,788
Short-term deferred revenue 5,576 6,606
------------ ------------
Total current liabilities 34,503 38,317
Deferred tax liability-long term 575 575
Long-term deferred revenue 1,859 949
Other long-term liabilities 447 1,040
------------ ------------
Total liabilities $ 37,384 40,881
------------ ------------
Stockholders' equity:
Common stock 62 62
Additional paid-in capital 241,918 241,703
Accumulated other comprehensive income (60) 15
Accumulated deficit (65,588) (60,672)
------------ ------------
Total stockholders' equity 176,332 181,108
------------ ------------
Total liabilities and stockholders'
equity $ 213,716 221,989
------------ ------------
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Editorial Contacts
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