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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company. ¨ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ |
iPass Inc. | ||
By: | /s/ Darin R. Vickery | |
Name: | Darin R. Vickery | |
Title: | Chief Financial Officer | |
(Principal Financial and Accounting Officer) |
• | Revenue of $11.4 million in Q1'18 as closing Veri-FiTM business was slower than expected on global General Data Protection Regulation ("GDPR") concerns ahead of the May 25, 2018 enactment in the European Union. |
• | Net Annual Contract Value ("ACV"), defined as the annualized sales value under committed contract for newly acquired or significant upsell customers signed, in Q1’18 totaled $1.6 million compared to $1.2 million in Q4'17 and $0.9 million in Q3’17. |
• | Customer Churn, defined as the annualized impact on revenue, based on the prior quarter run-rate, of any customer that terminates or has write-down of committed contract value, was $1.5 million in Q1’18 compared to $1.0 million in Q4’17 and $1.1 million in Q3’17. |
• | Network Access Cost ("NAC") was $6.8 million in Q1'18, down from $9.1 million in Q4'17 and $10.3 million in Q3'17, with no adverse impact on the usage capacity under contract. |
• | Capital Raise was $0.5 million in the quarter from the common stock purchase agreement signed in November 2017, leaving capacity of $8.3 million available. In April 2018, we raised an additional $0.8 million under this facility, bringing the total raised to $2.5 million since inception in November 2017. |
• | Nasdaq Delisting Extension Granted on May 7, 2018, to regain compliance with the previously received Nasdaq delisting notice. We will transfer from the Nasdaq Global Market to the Nasdaq Capital Market and continue to remediate our bid price and market capitalization deficiencies in accordance with the plan we presented to Nasdaq in April 2018. |
Three Months Ended | |||||||||||
March 31, 2018 | December 31, 2017 | March 31, 2017 | |||||||||
(unaudited; in millions) | |||||||||||
Revenue Mobile Connectivity Services | 11.4 | 13.2 | 14.3 | ||||||||
Enterprise | 9.2 | 10.4 | 11.7 | ||||||||
Unlimited Customers | 2.6 | 3.0 | 2.2 | ||||||||
Other Pricing Plan Customers | 6.6 | 7.4 | 9.5 | ||||||||
Strategic Partnerships | 2.2 | 2.8 | 2.6 | ||||||||
Network Access Costs | 6.8 | 9.1 | 9.6 | ||||||||
Gross Margin (1) | 28.0 | % | 20.9 | % | 21.2 | % | |||||
Network Operations Expense | 1.4 | 1.4 | 1.7 | ||||||||
R&D, S&M, and G&A expense | 7.0 | 7.3 | 7.2 | ||||||||
Total Operating Expenses | 8.4 | 8.7 | 8.9 | ||||||||
Other income (expense) and provision for income taxes | 0.2 | 0.3 | (0.1 | ) | |||||||
GAAP Total Net Loss | (4.0 | ) | (4.3 | ) | (4.3 | ) | |||||
Adjusted EBITDA Loss (2) | (3.4 | ) | (3.8 | ) | (3.4 | ) | |||||
As of | |||||||||||
March 31, 2018 | December 31, 2017 | March 31, 2017 | |||||||||
Shares of Common Stock Outstanding at Period End | 70.4 | 69.3 | 66.4 | ||||||||
Cash and Cash Equivalents | $ | 2.8 | $ | 5.2 | $ | 13.5 | |||||
Deferred Revenue (Short-term plus Long-term) | $ | 3.1 | $ | 3.8 | $ | 3.2 |
(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 and Operational Measures” for a definition of iPass Adjusted EBITDA. |
For the Quarter Ended | ||||||||||||||
March 31, 2018 | December 31, 2017 | September 30, 2017 | June 30, 2017 | March 31, 2017 | ||||||||||
(in thousands except percentages and TB) | ||||||||||||||
NAC: | ||||||||||||||
Committed purchase capacity(1) | 63 | % | 88 | % | 84 | % | 85 | % | 83 | % | ||||
Total purchased capacity (TB)(2) | 79 | 90 | 89 | 88 | 88 | |||||||||
Capacity consumed(3) | 35 | % | 36 | % | 40 | % | 36 | % | 33 | % | ||||
Network Hours Consumed(4): | ||||||||||||||
Unlimited and strategic partnerships | 371 | 500 | 645 | 521 | 407 | |||||||||
Other pricing plans | 208 | 270 | 298 | 327 | 363 | |||||||||
Total Network Hours Consumed | 579 | 770 | 943 | 848 | 770 | |||||||||
Wi-Fi Network Users(5): | ||||||||||||||
Enterprise | 88 | 94 | 91 | 93 | 82 | |||||||||
Strategic partnerships | 62 | 71 | 83 | 80 | 76 | |||||||||
Total Wi-Fi Network Users | 150 | 165 | 174 | 173 | 158 | |||||||||
(1) | Committed purchase capacity is the percentage of total quarterly NAC related to committed Wi-Fi capacity deals (versus pay-as-you-go deals). |
(2) | Total purchased capacity is the average monthly Wi-Fi network usage capacity in a given quarter, shown in terabytes. |
(3) | Capacity consumed is shown as a percentage of total purchased capacity consumed in a given quarter. |
(4) | Network Hours Consumed represents the average monthly number of hours used by our customers on our commercial footprint in a given quarter. |
(5) | Wi-Fi Network Users, categorized by our go-to-market revenue streams, is the unique count of users each month in each quarter that connected to the iPass network. Starting this quarter, the iPass network includes both commercial footprint and open access footprint, curated via iPass SmartConnnect (restated for all prior quarters). |
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, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 2,766 | $ | 5,159 | |||
Accounts receivable, net | 6,910 | 8,717 | |||||
Prepaid expenses | 2,110 | 1,641 | |||||
Other current assets | 587 | 712 | |||||
Total current assets | 12,373 | 16,229 | |||||
Property and equipment, net | 1,128 | 1,334 | |||||
Other assets | 1,295 | 840 | |||||
Total assets | $ | 14,796 | $ | 18,403 | |||
Liabilities and Stockholders’ Equity (Deficit) | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 9,734 | $ | 9,044 | |||
Accrued liabilities | 3,841 | 3,734 | |||||
Deferred revenue, short-term | 3,022 | 3,723 | |||||
Total current liabilities | 16,597 | 16,501 | |||||
Deferred revenue, long-term | 40 | 102 | |||||
Other long-term liabilities | 362 | 1,009 | |||||
Total liabilities | 16,999 | 17,612 | |||||
Stockholders’ equity (deficit): | |||||||
Common stock | 73 | 71 | |||||
Additional paid-in capital | 227,333 | 226,490 | |||||
Accumulated deficit | (229,609 | ) | (225,770 | ) | |||
Total stockholders’ equity (deficit) | (2,203 | ) | 791 | ||||
Total liabilities and stockholders’ equity (deficit) | $ | 14,796 | $ | 18,403 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Revenue | $ | 11,427 | $ | 14,286 | |||
Cost of revenue and operating expenses: | |||||||
Network access costs | 6,844 | 9,559 | |||||
Network operations | 1,384 | 1,692 | |||||
Research and development | 1,953 | 1,974 | |||||
Sales and marketing | 2,469 | 2,454 | |||||
General and administrative | 2,589 | 2,772 | |||||
Total cost of revenue and operating expenses | 15,239 | 18,451 | |||||
Operating loss | (3,812 | ) | (4,165 | ) | |||
Interest income, net | 7 | 14 | |||||
Foreign exchange loss, net | (143 | ) | (49 | ) | |||
Loss before income taxes | (3,948 | ) | (4,200 | ) | |||
Provision for income taxes | 65 | 115 | |||||
Net loss | $ | (4,013 | ) | $ | (4,315 | ) | |
Comprehensive loss | $ | (4,013 | ) | $ | (4,315 | ) | |
Net loss per share - basic and diluted | $ | (0.06 | ) | $ | (0.07 | ) | |
Weighted average shares outstanding - basic and diluted | 69,853,058 | 65,567,707 |
Three months ended March 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (4,013 | ) | $ | (4,315 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Stock-based compensation expense | 344 | 350 | |||||
Depreciation and amortization | 198 | 454 | |||||
Provision for (recovery of) doubtful accounts | (67 | ) | 39 | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 1,874 | 1,388 | |||||
Prepaid expenses and other current assets | (189 | ) | (232 | ) | |||
Other assets | (344 | ) | (21 | ) | |||
Accounts payable | 690 | (435 | ) | ||||
Accrued liabilities | 69 | (265 | ) | ||||
Deferred revenue | (842 | ) | 738 | ||||
Other liabilities | (647 | ) | (89 | ) | |||
Net cash used in operating activities | (2,927 | ) | (2,388 | ) | |||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (5 | ) | (222 | ) | |||
Net cash used in investing activities | (5 | ) | (222 | ) | |||
Cash flows from financing activities: | |||||||
Net proceeds from issuance of common stock | — | 10 | |||||
Proceeds from common stock purchase agreement | 539 | — | |||||
Net cash provided by financing activities | 539 | 10 | |||||
Net decrease in cash and cash equivalents | (2,393 | ) | (2,600 | ) | |||
Cash and cash equivalents at beginning of period | 5,159 | 16,072 | |||||
Cash and cash equivalents at end of period | $ | 2,766 | $ | 13,472 | |||
Supplemental disclosures of cash flow information: | |||||||
Net cash paid for taxes | $ | 47 | $ | 46 | |||
Accrued amounts for acquisition of property and equipment | $ | — | $ | 73 | |||
Accrued issuance cost of common stock purchase agreement | $ | 38 | $ | — |
Three Months Ended | |||||||||||
March 31, 2018 | December 31, 2017 | March 31, 2017 | |||||||||
GAAP Net loss | $ | (4,013 | ) | $ | (4,313 | ) | $ | (4,315 | ) | ||
Interest income | (7 | ) | (31 | ) | (14 | ) | |||||
Income tax expense | 65 | (196 | ) | 115 | |||||||
Depreciation of property and equipment | 198 | 446 | 454 | ||||||||
Stock-based compensation expense | 344 | 314 | 350 | ||||||||
Prior period adjustment to revenue | — | 1 | — | ||||||||
Nonrecurring legal costs | — | (11 | ) | — | |||||||
Adjusted EBITDA loss | $ | (3,413 | ) | $ | (3,790 | ) | $ | (3,410 | ) |