Delaware | 000-50327 | 93-1214598 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
3800 Bridge Parkway, Redwood Shores, California | 94065 | |
(Address of principal executive offices) | (Zip Code) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 — Results of Operations and Financial Condition | |
Item 8.01 –-- Other Events | |
EXHIBIT 99.1 |
Exhibit No. | Description | |
99.1 | Press Release dated November 4, 2015, announcing iPass Inc.’s Third Quarter 2015 Financial Results. |
iPass Inc. | ||
By: | /s/ Darin R. Vickery | |
Name: | Darin R. Vickery | |
Title: | Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
Exhibit No. | Description | |
99.1 | Press Release dated November 4, 2015, announcing iPass Inc.’s Third Quarter 2015 Financial Results. |
• | Board authorizes stock repurchase plan of up to $3 million to be initiated in the fourth quarter |
• | UNLIMITED is making connectivity cost effective. |
• | Closed reseller agreements with international channel partners to sell Unlimited in places like Italy, France, Germany and India. |
• | Achieved Q3 annual contract value (ACV) of $1.6 million, which included significant upsell on an existing business development customer. |
• | Increased deferred revenue by $0.4 million to $2.5 million. |
• | EVERYWHERE is making connectivity ubiquitous and prolific. |
• | Continued development with several strategic partners, including Devicescape, Fon, and Time Warner Cable, to have 50 million available hotspots by year end; integrations are on track. |
• | Access to iPass services are currently embedded on over 4.5 million devices globally and growing. |
• | INVISIBLE is making connectivity smart. |
• | Unveiled today, iPass SmartConnect will leverage iPass’ intellectual property to create a super-secure connection through automatic virtual private network (VPN) tunneling. |
• | Setting the stage for Wi-Fi first - but not Wi-Fi only / No-excuses user connections, iPass SmartConnect will use big data analytics behind the scenes to optimize connection success, provide least cost connectivity routing and improve overall user satisfaction. |
• | Continuing to evolve the product, iPass released client versions to update iOS, Android, Windows, and Mac to improve user experience with functionality like 1-click activation, single sign-on support, and aggregated business intelligence data gathering capabilities. |
• | Operating Expenses excluding the cost of restructuring charges decreased to $10.2 million from $11.4 million in Q2’15 and $13.8 million in Q3’14. Year-to-date operating expenses excluding restructuring charges declined $10.0 million to $34.9 million, compared to the prior year period. |
• | Network Margins were 41.1%, compared to 43.4% in Q2’15 and 38.6% in Q3’14 reflecting fluctuations in geographic usage mix, impacts of foreign currency exchange rates and usage against minimum commitments with select providers. Year-to-date network margins improved to 43.3% from 40.1% for the first nine months of 2014 as the strategies to reduce Wi-Fi acquisition costs continue to create benefit. |
• | Deferred Revenue grew to $2.5 million at September 30, 2015, from $0.6 million at December 31, 2014 as billings increased on original equipment manufacturers device shipments that come with the iPass UNLIMITED service. |
• | Annual Contract Value (ACV), defined as the annualized sales value under committed contract for newly acquired or significant upsell customers, ramped for the third consecutive quarter, from $0.4 million in Q1’15 to $1.3 million in Q2’15 to $1.6 million in Q3’15. |
• | Adjusted EBITDA loss improved to $1.6 million, from $2.0 million in Q2’15 and $3.1 million in Q3’14. Year-to-date Adjusted EBITDA loss improved $5.5 million to $5.9 million, compared to $11.4 million for the same period in 2014. |
Total Revenue | $15.0 – $17.0 million |
Adjusted EBITDA Income / (Loss) (1) | ($2.0) – ($0.5) million |
(1) | A reconciliation of Adjusted EBITDA income (loss) to GAAP net loss is provided in the attached schedules. The accompanying guidance for Adjusted EBITDA income (loss) for the fourth quarter of 2015 excludes foreign exchange gain or loss estimates. |
(unaudited; in millions) | Q3'15 | Q3'14 | |||||
Revenue | $ | 15.0 | $ | 17.3 | |||
Open Mobile | 14.2 | 14.6 | |||||
Open Mobile Enterprise (OME) | 12.5 | 13.8 | |||||
Network | 10.2 | 9.8 | |||||
Platform | 2.3 | 4.0 | |||||
Open Mobile Exchange (OMX) | 1.7 | 0.8 | |||||
Legacy iPC | 0.8 | 2.7 | |||||
Network Access Costs | 7.2 | 7.6 | |||||
Network Margin (1) | 41.1 | % | 38.6 | % | |||
Network Operations, R&D, S&M, and G&A Espenses | 10.2 | 13.8 | |||||
Restructuring Charges | 0.9 | 0.7 | |||||
Other Gain (Loss) including interest, Foreign Exchange, and Other | (0.1 | ) | 0.3 | ||||
Loss from Continuing Operations (pre-tax) | $ | (3.4 | ) | $ | (4.5 | ) | |
(Provision for) Benefit from Income Tax | — | 1.4 | |||||
GAAP Net Loss from Continuing Operations | (3.4 | ) | (3.1 | ) | |||
Loss from Discontinued Operations | — | (1.3 | ) | ||||
GAAP Total Net Loss | $ | (3.4 | ) | $ | (4.4 | ) | |
Adjusted EBITDA Loss (2) | $ | (1.6 | ) | $ | (3.1 | ) | |
Cash and Cash Equivalents | $ | 24.2 | $ | 37.1 | |||
Shares of Common Stock Outstanding at End of Period | 64.5 | 64.7 |
(1) | Network Margin is defined as (Network Revenue less Network Access Costs) divided by Network Revenue. |
(2) | See "Information Regarding Non-GAAP Financial Measures" for a definition of iPass Adjusted EBITDA. |
Q3'15 | Q3'14 | ||||||
OME Wi-Fi Network Users | 76,000 | 78,000 | |||||
OMX Wi-Fi Network Users | 24,000 | 9,000 | |||||
OME Active Platform Users | 823,000 | 770,000 | |||||
September 30, 2015 | December 31, 2014 | ||||||
Deferred Revenue (Short-term plus Long-Term) | $ | 2,517,000 | $ | 552,000 |
1) | To 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) | To provide consistency and enhance investors’ ability to compare the company’s performance across financial reporting periods; and |
3) | To facilitate comparisons to the operating results of other companies in the company’s industry, which may use similar financial measures to supplement their GAAP results. |
September 30, 2015 | December 31, 2014 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 24,243 | $ | 33,814 | |||
Accounts receivable, net | 10,180 | 10,063 | |||||
Prepaid expenses and other current assets | 2,526 | 4,318 | |||||
Total current assets | 36,949 | 48,195 | |||||
Property and equipment, net | 4,582 | 6,213 | |||||
Other assets | 612 | 847 | |||||
Total assets | $ | 42,143 | $ | 55,255 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 6,994 | $ | 7,301 | |||
Accrued liabilities | 6,773 | 7,188 | |||||
Deferred revenue, short-term | 2,272 | 437 | |||||
Total current liabilities | 16,039 | 14,926 | |||||
Deferred revenue, long-term | 245 | 115 | |||||
Vendor financed property and equipment | 0 | 854 | |||||
Other long-term liabilities | 1,018 | 879 | |||||
Total liabilities | 17,302 | 16,774 | |||||
Stockholders’ equity: | |||||||
Common stock | 65 | 65 | |||||
Additional paid-in capital | 219,973 | 220,368 | |||||
Accumulated deficit | (195,197 | ) | (181,952 | ) | |||
Total stockholders’ equity | 24,841 | 38,481 | |||||
Total liabilities and stockholders’ equity | $ | 42,143 | $ | 55,255 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenue | $ | 14,985 | $ | 17,250 | $ | 47,138 | $ | 52,649 | ||||||||
Cost of revenues and operating expenses: | ||||||||||||||||
Network access costs | 7,186 | 7,584 | 20,899 | 22,462 | ||||||||||||
Network operations | 2,169 | 3,093 | 7,629 | 10,146 | ||||||||||||
Research and development | 2,456 | 2,853 | 7,948 | 9,114 | ||||||||||||
Sales and marketing | 2,506 | 3,548 | 8,072 | 12,325 | ||||||||||||
General and administrative | 3,067 | 4,286 | 11,274 | 13,287 | ||||||||||||
Restructuring charges and related adjustments | 916 | 715 | 4,179 | 745 | ||||||||||||
Total cost of revenue and operating expenses | 18,300 | 22,079 | 60,001 | 68,079 | ||||||||||||
Operating loss | (3,315 | ) | (4,829 | ) | (12,863 | ) | (15,430 | ) | ||||||||
Interest expense, net | (12 | ) | (29 | ) | (50 | ) | (95 | ) | ||||||||
Foreign exchange gain (loss), net | (72 | ) | 45 | (1 | ) | (132 | ) | |||||||||
Other gain (loss), net | — | 345 | (135 | ) | 345 | |||||||||||
Loss from continuing operations before income taxes | (3,399 | ) | (4,468 | ) | (13,049 | ) | (15,312 | ) | ||||||||
(Provision for) benefit from income taxes | (29 | ) | 1,355 | (196 | ) | 5,538 | ||||||||||
Net loss from continuing operations | (3,428 | ) | (3,113 | ) | (13,245 | ) | (9,774 | ) | ||||||||
Net income (loss) from discontinued operations | — | (1,296 | ) | — | 20,693 | |||||||||||
Total net income (loss) | $ | (3,428 | ) | $ | (4,409 | ) | $ | (13,245 | ) | $ | 10,919 | |||||
Total comprehensive net income (loss) | $ | (3,428 | ) | $ | (4,409 | ) | $ | (13,245 | ) | $ | 10,919 | |||||
Total net income (loss) per share - basic and diluted | ||||||||||||||||
Continuing operations | $ | (0.05 | ) | $ | (0.05 | ) | $ | (0.21 | ) | $ | (0.16 | ) | ||||
Discontinued operations | — | (0.02 | ) | — | 0.33 | |||||||||||
Total net income (loss) per share | $ | (0.05 | ) | $ | (0.07 | ) | $ | (0.21 | ) | $ | 0.17 | |||||
Weighted average shares outstanding - basic and diluted | 62,979,830 | 62,696,930 | 62,862,144 | 62,507,683 |
Nine Months Ended September 30, | |||||||
2015 | 2014 | ||||||
Cash flows from operating activities: | |||||||
Net income (loss) | $ | (13,245 | ) | $ | 10,919 | ||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||
Gain on sale of discontinued operations | — | (25,014 | ) | ||||
Stock-based compensation (benefit) expense | (522 | ) | 1,107 | ||||
Depreciation and amortization | 2,214 | 2,539 | |||||
Deferred income taxes | 7 | (2 | ) | ||||
Loss on disposal of property and equipment | 4 | 36 | |||||
Recovery of doubtful accounts | (32 | ) | (108 | ) | |||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (86 | ) | 519 | ||||
Prepaid expenses and other current assets | 235 | 847 | |||||
Other assets | 235 | 10 | |||||
Accounts payable | (251 | ) | (903 | ) | |||
Accrued liabilities | (437 | ) | (2,399 | ) | |||
Deferred revenue | 1,965 | (548 | ) | ||||
Other liabilities | 139 | 763 | |||||
Net cash used in operating activities | (9,774 | ) | (12,234 | ) | |||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (642 | ) | (1,112 | ) | |||
Proceeds from sale of discontinued operations | — | 26,750 | |||||
Release of cash held in escrow and change in restricted cash | 1,550 | 100 | |||||
Net cash provided by investing activities | 908 | 25,738 | |||||
Cash flows from financing activities: | |||||||
Net proceeds from issuance of common stock | 127 | 184 | |||||
Principal payments for vendor financed property and equipment | (832 | ) | (590 | ) | |||
Used in financing activities | (705 | ) | (406 | ) | |||
Net increase (decrease) in cash and cash equivalents | (9,571 | ) | 13,098 | ||||
Cash and cash equivalents at beginning of period | 33,814 | 24,017 | |||||
Cash and cash equivalents at end of period | $ | 24,243 | $ | 37,115 | |||
Supplemental disclosures of cash flow information: | |||||||
Net cash paid for taxes | $ | 51 | $ | 220 | |||
Accrued amounts for acquisition of property and equipment | $ | 56 | $ | 20 | |||
Vendor financing of property and equipment | $ | — | $ | 501 |
Three Months Ended | |||||||||||||
September 30, 2015 | June 30, 2015 | September 30, 2014 | |||||||||||
(Unaudited; in thousands) | |||||||||||||
I | Reconciliation of Adjusted EBITDA Loss to GAAP Total Net Loss: | ||||||||||||
Adjusted EBITDA | $ | (1,623 | ) | $ | (2,014 | ) | $ | (3,128 | ) | ||||
(a) Interest expenses | (12 | ) | (17 | ) | (29 | ) | |||||||
(b) Income tax (expense) benefit | (29 | ) | (67 | ) | 1,355 | ||||||||
(c) Depreciation of property and equipment | (737 | ) | (731 | ) | (812 | ) | |||||||
(d) Stock-based compensation benefit (expense) | (111 | ) | 271 | (129 | ) | ||||||||
(e) Restructuring charges and related adjustments | (916 | ) | (3,242 | ) | (715 | ) | |||||||
(f) Proxy contest costs | — | (446 | ) | — | |||||||||
(g) Nonrecurring legal costs | — | (129 | ) | — | |||||||||
(h) Collections of previously written off bad debt expense from bankruptcy proceeding | — | — | 345 | ||||||||||
(i) Net income (loss) from discontinued operations | — | — | (1,296 | ) | |||||||||
GAAP Total Net Loss | $ | (3,428 | ) | $ | (6,375 | ) | $ | (4,409 | ) |
Q4 2015 Guidance | ||||||||||||||
II | Reconciliation of Q4 2015 Adjusted EBITDA Loss to Total GAAP Net Loss: | (Unaudited; in millions) | ||||||||||||
Adjusted EBITDA Loss (1) | $ | (2.3 | ) | $ | (0.5 | ) | ||||||||
(a) Income tax expense | (0.1 | ) | ||||||||||||
(b) Depreciation of property and equipment | (0.7 | ) | ||||||||||||
(c) Stock-based compensation | (0.3 | ) | ||||||||||||
GAAP Total Net Loss | $ | (3.1 | ) | $ | (1.6 | ) |
(1) | The guidance for Adjusted EBITDA income (loss) for the fourth quarter of 2015 excludes foreign exchange gain or loss estimates. |