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 | |
EXHIBIT 99.1 |
Exhibit No. | Description | |
99.1 | Press Release dated May 4, 2016, announcing iPass Inc.’s First Quarter 2016 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 May 4, 2016, announcing iPass Inc.’s First Quarter 2016 Financial Results. |
• | Reaffirms 2016 guidance for revenue growth and Adjusted EBITDA break-even |
• | Achieved $2.1 million Annual Contract Value (ACV), highest quarter since launch of Unlimited |
• | UNLIMITED - Wi-Fi without boundaries |
◦ | Posted record new ACV of $2.1 million for the quarter, up from $0.4 million in Q1’15 and $0.7 in Q4’15. |
◦ | Closed the largest direct customer enterprise deal since launching Unlimited, with a global consulting firm for its US-based employees, adding nearly 5,000 new users. |
◦ | Generated $1.5 million of accretive annualized revenue (ACV minus annualized churn) in Q1’16, the first accretive quarter in the last five quarters. |
◦ | Continued to add capacity deals to the supply chain, with roughly 44% of the Q1’16 Network Access Costs locked in at fixed prices, compared to approximately 37% in Q4’15. |
• | EVERYWHERE - World’s largest Wi-Fi network |
◦ | Announced an agreement with Hewlett Packard to include the iPass service on devices shipped everywhere in the world, expanding the relationship that started in late 2014 for devices in the Asia Pacific region only. |
◦ | Increased iPass’ reach by expanding distribution partners to include Reliance Communications, Melita, YepINGO, campusSIMs, and Tata Communications. |
◦ | Deployed the first iPass SmartConnect SDK to embed iPass capabilities with Tata Communications. 2,000 global telcos use the Tata network, representing over 70% of the world’s mobile network operators. Tata reports that 24% of the world’s internet routes traffic through its network. |
◦ | Using Invisible technology, iPass has discovered over 65 million unique hotspots in the quarter, with newly curated hotpots representing 25% of the overall iPass user connections during the same period. |
• | INVISIBLE - Wi-Fi as easy as cellular |
◦ | Announced iPass Veri-Fi to start productizing analytics and create value-added intelligence driven off the iPass SmartConnect technology; Veri-Fi has delivered the first accurate map of global Wi-Fi hotspots. |
◦ | Versions of iPass SmartConnect were in market on all major operating systems (iOS, Android, Mac, and Windows) by the end of April 2016. |
◦ | Released a Mobile Security Report showing that 94% of organizations believe free Wi-Fi is a significant mobile security threat. With iPass SmartConnect, the iPass virtual private network (VPN) solution can make the iPass SaaS platform a critical component of the customers’ security profile. |
◦ | Announced the iPass developer program, designed to allow developers to embed iPass’ mobile connectivity into their applications; the SDK tool empowers enterprises, operators, and device manufacturers with access to the patented technology that allows smart, simple, secure, and always-on wireless connectivity in their own mobile apps and internet of things (IOT) devices. |
• | Revenue was $14.7 million, compared to $16.6 million in first quarter 2015 and $15.4 million in the fourth quarter 2015. Customer churn, including reduction of revenue commitments, was the biggest driver of the year-over-year decline. |
• | Operating expenses excluding the cost of restructuring charges were $10.1 million, decreasing $3.3 million or 25% compared to the quarter one year ago and up $0.2 million or 2% from the fourth quarter. The reduction in force announced in February will provide full quarter benefit in Q2’16 and the slight increase quarter over quarter was primarily related to higher seasonal Q1 expenses such as payroll taxes, audit fees, and reduced personal time off. |
• | Gross margin was 35.2% in Q1’16, compared to 41.9% in Q1’15 and 36.9% in Q4’15. Lower revenues, especially against a greater mix of fixed cost network access costs was the primary driver. |
• | Deferred revenue was $2.3 million, compared to $1.5 million and $2.6 million, at March 31, 2015 and December 31, 2015, respectively. As iPass extends certain contracts with existing relationships, deferred revenue is expected to fluctuate based on revenue recognition requirements. |
• | ACV defined as the annualized sales value under committed contract for newly acquired or significant upsell customers, increased to $2.1 million, compared to $0.4 million in Q1’15 and $0.7 million in Q4’15. |
• | Adjusted EBITDA loss was $2.0 million, compared to $2.3 million for Q1’15 and $1.4 million in Q4’15. The decline of revenue was the biggest driver quarter over quarter. |
• | Cash and cash equivalents was $17.2 million, compared to $20.3 million at December 31, 2015, a decline of $3.1 million. Cash burn included operating cash flow, $0.6 million of restructuring payments, $0.3 million of share buyback, and $0.3 million of vendor financed capital expenditures. |
Total Revenue | $63.0 - $68.0 million |
Adjusted EBITDA Income / (Loss) (1) | ($1.0) - $1.0 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) excludes foreign exchange gain or loss estimates. |
Three Months Ended | |||||||||||
March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||
(unaudited; in millions) | |||||||||||
Revenue Mobile Connectivity Services | $ | 14.7 | $ | 15.4 | $ | 16.6 | |||||
Enterprise | 12.2 | 12.7 | 14.2 | ||||||||
Strategic Partnerships | 1.9 | 2.0 | 1.1 | ||||||||
Legacy iPC | 0.6 | 0.7 | 1.3 | ||||||||
Network Access Costs | 7.4 | 7.6 | 6.7 | ||||||||
Gross Margin (1) | 35.2 | % | 36.9 | % | 41.9 | % | |||||
Network Operations Expense | 2.1 | 2.2 | 3.0 | ||||||||
R&D S&M and G&A Expense | 8.0 | 7.7 | 10.4 | ||||||||
Total Operating Expenses (excl. Restructuring) | 10.1 | 9.9 | 13.4 | ||||||||
Restructuring Expense | 0.7 | — | — | ||||||||
Other (Expense) Benefit | (0.2 | ) | (0.1 | ) | 0.1 | ||||||
GAAP Total Net Loss | (3.7 | ) | (2.2 | ) | (3.4 | ) | |||||
Adjusted EBITDA Loss (2) | (2.0 | ) | (1.4 | ) | (2.3 | ) | |||||
As of | |||||||||||
March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||
Shares of Common Stock Outstanding at Period End | 64.5 | 64.6 | 65.5 | ||||||||
Cash and Cash Equivalents | 17.2 | 20.3 | 28.6 | ||||||||
Deferred Revenue (Short-term plus Long-term) | 2.3 | $ | 2.6 | 1.5 |
(1) | Gross Margin is defined as Total Revenue less Network Access Costs less Network Operations expense divided by Total Revenue. |
(2) | See “Information Regarding Non-GAAP Financial Measures” for a definition of iPass Adjusted EBITDA. |
For the Quarter Ended | |||||||||||||||||||
(in thousands) | March 31, 2016 | December 31, 2015 | September 30, 2015 | June 30, 2015 | March 31, 2015 | ||||||||||||||
Wi-Fi Network Users: | |||||||||||||||||||
Enterprise (formerly OME) | 77 | 79 | 78 | 84 | 87 | ||||||||||||||
Strategic Partnerships (formerly OMX) | 24 | 21 | 23 | 11 | 9 | ||||||||||||||
Total Wi-Fi Network Users | 101 | 100 | 101 | 95 | 96 | ||||||||||||||
Active Platform Users | 807 | 830 | 839 | 849 | 855 | ||||||||||||||
Annual Contract Value | $ | 2,116 | $ | 724 | $ | 1,558 | $ | 1,257 | $ | 373 |
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. |
March 31, 2016 | December 31, 2015 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 17,168 | $ | 20,294 | |||
Accounts receivable, net | 10,117 | 9,746 | |||||
Prepaid expenses | 2,376 | 2,762 | |||||
Other current assets | 340 | 342 | |||||
Total current assets | 30,001 | 33,144 | |||||
Property and equipment, net | 3,356 | 4,009 | |||||
Other assets | 705 | 690 | |||||
Total assets | $ | 34,062 | $ | 37,843 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 6,956 | $ | 6,291 | |||
Accrued liabilities | 4,790 | 5,356 | |||||
Deferred revenue, short-term | 2,202 | 2,321 | |||||
Total current liabilities | 13,948 | 13,968 | |||||
Deferred revenue, long-term | 146 | 231 | |||||
Other long-term liabilities | 1,067 | 1,043 | |||||
Total liabilities | 15,161 | 15,242 | |||||
Stockholders’ equity: | |||||||
Common stock | 65 | 65 | |||||
Additional paid-in capital | 220,011 | 219,981 | |||||
Accumulated deficit | (201,175 | ) | (197,445 | ) | |||
Total stockholders’ equity | 18,901 | 22,601 | |||||
Total liabilities and stockholders’ equity | $ | 34,062 | $ | 37,843 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Revenue | $ | 14,731 | $ | 16,558 | |||
Cost of revenues and operating expenses: | |||||||
Network access costs | 7,442 | 6,675 | |||||
Network operations | 2,098 | 2,950 | |||||
Research and development | 2,140 | 2,998 | |||||
Sales and marketing | 2,837 | 3,182 | |||||
General and administrative | 2,990 | 4,236 | |||||
Restructuring charges and related adjustments | 758 | 21 | |||||
Total cost of revenue and operating expenses | 18,265 | 20,062 | |||||
Operating loss | (3,534 | ) | (3,504 | ) | |||
Interest expense, net | 5 | (21 | ) | ||||
Foreign exchange gain (loss), net | (110 | ) | 189 | ||||
Other loss, net | — | (4 | ) | ||||
Loss from continuing operations before income taxes | (3,639 | ) | (3,340 | ) | |||
Provision for income taxes | (91 | ) | (100 | ) | |||
Total net loss | $ | (3,730 | ) | $ | (3,440 | ) | |
Total comprehensive net loss | $ | (3,730 | ) | $ | (3,440 | ) | |
Total net loss per share - basic and diluted | |||||||
Total net loss per share | $ | (0.06 | ) | $ | (0.05 | ) | |
Weighted average shares outstanding - basic and diluted | 63,146,622 | 62,846,194 |
Three Months Ended March 31, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (3,730 | ) | $ | (3,440 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Stock-based compensation (benefit) expense | 188 | (362 | ) | ||||
Depreciation and amortization | 706 | 746 | |||||
Deferred income taxes | 1 | (2 | ) | ||||
Loss on disposal of property and equipment | — | 4 | |||||
Provision for (Recovery of) doubtful accounts | 61 | (63 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (432 | ) | (1,024 | ) | |||
Prepaid expenses and other current assets | 388 | 254 | |||||
Other assets | (16 | ) | 3 | ||||
Accounts payable | 613 | (1,152 | ) | ||||
Accrued liabilities | (284 | ) | (669 | ) | |||
Deferred revenue | (204 | ) | 930 | ||||
Other liabilities | 24 | 11 | |||||
Net cash used in operating activities | (2,685 | ) | (4,764 | ) | |||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (1 | ) | (175 | ) | |||
Net cash used in investing activities | (1 | ) | (175 | ) | |||
Cash flows from financing activities: | |||||||
Net proceeds from issuance of common stock | 113 | 0 | |||||
Principal payments for vendor financed property and equipment | (282 | ) | (275 | ) | |||
Stock Repurchase | (271 | ) | — | ||||
Net cash used in financing activities | (440 | ) | (275 | ) | |||
Net decrease in cash and cash equivalents | (3,126 | ) | (5,214 | ) | |||
Cash and cash equivalents at beginning of period | 20,294 | 33,814 | |||||
Cash and cash equivalents at end of period | $ | 17,168 | $ | 28,600 | |||
Supplemental disclosures of cash flow information: | |||||||
Net cash paid for taxes | $ | 45 | $ | 50 | |||
Accrued amounts for acquisition of property and equipment | $ | 61 | $ | 239 |
Three Months Ended | |||||||||||||
March 31, 2016 | December 31, 2015 | March 31, 2015 | |||||||||||
Adjusted EBITDA Loss | $ | (1,992 | ) | $ | (1,405 | ) | $ | (2,293 | ) | ||||
Interest income (expense) | 5 | (4 | ) | (21 | ) | ||||||||
Income tax expense | (91 | ) | (111 | ) | (100 | ) | |||||||
Depreciation of property and equipment | (706 | ) | (731 | ) | (746 | ) | |||||||
Stock-based compensation benefit (expense) | (188 | ) | 56 | 362 | |||||||||
Restructuring charges and related adjustments | (758 | ) | (53 | ) | (21 | ) | |||||||
CEO exit costs | — | — | (621 | ) | |||||||||
GAAP Total Net Loss | $ | (3,730 | ) | $ | (2,248 | ) | $ | (3,440 | ) |
Reconciliation of Adjusted EBITDA Loss to Total GAAP Net Loss | ||||||||||||||||
Full Year 2016 | (Unaudited; in millions) | |||||||||||||||
Adjusted EBITDA Loss (1) | $ | (1.0 | ) | $ | 1.0 | |||||||||||
(a) Income tax expense | (0.5 | ) | ||||||||||||||
(b) Depreciation of property and equipment | (2.9 | ) | ||||||||||||||
(c) Stock-based compensation | (0.9 | ) | ||||||||||||||
(d) Restructuring | (0.8 | ) | ||||||||||||||
GAAP Total Net Loss | $ | (6.1 | ) | $ | (4.1 | ) |
(1) | The guidance for Adjusted EBITDA loss excluded foreign exchange gain or loss estimates. |