News
NextWave Wireless Reports 143 Percent Annual Revenue Growth in 2007
SAN DIEGO-(Business Wire)-March 14, 2008 - NextWave Wireless Inc. (NASDAQ: WAVE), a global provider of mobile broadband and multimedia products and technologies, today announced that it has filed its Annual Report on Form 10K for the fiscal year which ended December 29, 2007. Reported revenue for fiscal 2007 was $59.1 million, representing a 143 percent revenue growth over reported 2006 revenue of $24.3 million.
"Our accelerated 2007 revenue growth was driven by our success in developing and delivering cutting-edge mobile broadband and multimedia products and technologies to our worldwide customers. We are very pleased that sales of all of our major products, including our industry-leading embedded software and mobile broadband network systems, experienced excellent revenue growth and topped $106.6 million in shipped revenue in 2007," said Allen Salmasi, chairman and chief executive officer of NextWave Wireless Inc. "2007 was an exceptional year for our company on many levels. We grew revenues and expanded our global customer base; completed key strategic alliances and acquisitions; added to our world class technical and managerial team; and introduced multiple breakthrough technologies and products, including the mobile TV, 4G semiconductor, mobile multimedia platforms, and WiMAX and LTE network products that we announced in the first quarter of 2008."
Selected Fiscal Year 2007 Business Highlights
— Listed on NASDAQ (WAVE);
— Raised $351.1 million of new capital;
— Launched business operations in Argentina, Brazil, China, Denmark, Japan, and Korea, to expand our global sales and marketing capabilities;
— Acquired six companies, including IPWireless, the world leader in UMTS TD-CDMA technology and a leading developer of LTE technology; GO Networks, a global leader in carrier-grade Wi-Fi systems; and WiMAX Telecom AG, one of the pioneers of WiMAX technology in Europe;
— Increased the Company's global spectrum portfolio by 142 million POPs, acquiring spectrum licenses in Austria, Argentina, Canada, Croatia, Germany, Norway, Slovakia Switzerland and the US for a total of 390 million POPs;
— Announced a family of advanced second generation WiMAX chipsets, designed for high volume commercial production in the second half of 2008 which will initially be available through early reference design sample chips scheduled for delivery in the second quarter of fiscal 2008;
— Surpassed the 600 unit milestone with deliveries of UMTS base stations to T-Mobile's 4th generation wireless broadband network in the Czech Republic;
— Completed the phase one of deliveries of the state-of-the-art wireless broadband network for public safety applications to the City of New York;
— Awarded product acceptance by the U.S. government's Rural Development agency, which is promoting and funding broadband networks in rural communities throughout the United States;
— Chosen by the State of Rio de Janeiro in Brazil to provide carrier class WiFi networks for its program to set benchmarks for wireless networks for cities throughout the state;
— Named as a founding member and was awarded the sole responsibility for the multimedia subsystem of the Android platform being implemented by the Open Handset Alliance led by Google;
— Recognized as one of the year's best technology companies by winning the prestigious American Electronics Association High Tech Award in the category of communications products and services;
— Reported that its software now powers more than 170 million multimedia mobile devices worldwide as of December 2007;
— Announced and demonstrated PVConnect(TM) product line which links the home or private networks with mobile phones for content sharing, discovery and management;
— Reorganized the Company into two highly integrated new business units - NextWave Mobile Products and NextWave Network Products - to accelerate the development and delivery of wireless broadband and multimedia products to customers around the world.
"It is clear that our investments since formation have propelled the company into a leader in mobile TV and broadband multimedia technologies. We are now delivering complete end-to-end technology platforms and products to our customers around the world, creating a new generation of personalized and advertising supported mobile multimedia over broadband devices and services," added Mr. Salmasi. "As a result of the significant investments we made during 2007, we have charged into 2008 with a broad suite of new and innovative mobile multimedia and wireless broadband products. During the first quarter of 2008, we have already made significant product, customer and partnership announcements - Orange and T-Mobile will launch a commercial pilot of our UMTS-based TDtv broadcast solution in London this summer; our MXtv broadcast solution already implemented in our WiMAX chipsets and network products, and made available through partnerships with leading network equipment suppliers Alcatel-Lucent and Huawei, offering up to 45 high quality broadcast channels on personal handsets or other handheld multimedia capable devices in every 10 MHz of spectrum; over-the-air demonstrations of first commercial quality WiMAX smartphone and Personal Media Player (PMP) reference designs delivering high quality VoIP and multimedia applications; the recently announced matchbox-sized mobile broadcast receiver that enables viewing of most of the major mobile broadcast technologies on a wide range of existing mobile devices; and a new highly advanced base station platform that provides for a migration path and/or simultaneous operations of WiMAX and LTE technologies in the same base station, thus future-proofing our customers' technology decisions and significant investments into 4G network infrastructure today."
Full Year Selected Financial Results
Revenue
Revenues were $59.1 million for the fiscal year 2007, a $34.8 million increase over fiscal 2006. The substantial increase in annual revenue was driven by the continued growth in mobile device software royalties generated by the Company's PacketVideo subsidiary and by $20.4 million in sales of wireless broadband network equipment and subscriber devices by the Company's IPWireless,. subsidiary which was acquired in the second quarter of 2007. Additionally, the Company reported $47.5 million year-over-year growth, or a 374 percent increase, in deferred revenue which generally represents shipped product and royalties for which payment is received but is not immediately eligible for US GAAP revenue recognition due to the accounting principles associated with multi-element arrangements.
Cash
NextWave's cash, cash equivalents and marketable securities totaled $166.7 million at the end of fiscal 2007, compared to $200.7 million at the end of fiscal 2006. As of December 29, 2007, NextWave maintained an additional $75.0 million in a restricted collateral account associated with the 7% Senior Secured Notes. In March 2008, Senior Note Holders agreed to release these restricted funds for general corporate purposes in exchange for the payment of a consent fee of up to $10.5 million if the Company elects to access the entire $75.0 million.
In March 2007, the Company raised net proceeds of $351.1 million in a Series A Senior Convertible Preferred Stock offering and used $385.1 million of cash in 2007, ending with a balance of $166.7 million at December 29, 2007. The primary usage of cash in 2007 was $199.4 million for operations; $104.0 million for mergers and acquisition activities; $54.5 million for wireless spectrum purchases; $29.9 million for capital expenditures for facilities, test equipment and test labs related to expanding research and development activities; $8.8 million in net interest expense; $1.1 million of other expenses, along with an approximately $12.6 decrease in working capital.
Loss From Operations
NextWave reported that its loss from operations in 2007 was ($288.4) million, an increase of $189.9 million from the prior year. The 2007 loss from operations includes $89.1 million of non- cash expenses. These non-cash expenses include $34.8 million employee compensation expenses for share-based compensation and performance bonuses; $24.3 million intangible asset amortization expenses and $12.1 million of in-process research and development expenses related to it's M&A programs; $12.0 million of depreciation; and $5.9 million of other non-cash operating expenses.
Excluding these non-cash operating expenses of $89.1 million, the cash-based loss from operations for fiscal 2007 was ($199.4) million, an increase of $116.6 million over fiscal 2006. Of this cash-based operating loss in fiscal 2007, $54.0 million or 27 percent was attributed to the 2007 acquired operations of GO Networks and IPWireless, which serve global wireless broadband network markets, and WiMAX Telecom, a wireless operator serving wireless broadband subscribers in Austria, Slovakia and Croatia. The Company expects to realize improved contributions from these businesses in the future, as a result of increased market penetration for wireless broadband networks, the achievement of operating efficiencies, and improved margin contributions. Excluding these 2007 acquisitions, cash-based loss from operations was ($145.4) million for fiscal 2007 compared to ($82.8) million in fiscal 2006 an increase of $62.4 million.
Excluding these non-cash expenses of $89.1 million, cash loss from operations during fiscal 2007, as compared to fiscal 2006, increased primarily as a result of increased operating expenses of $151.4 million, an increase of 142 percent year-over-year. Approximately $37.1 million of this increase in operating expenses was attributable to cost of sales; $76.5 million to an increase in research and development; $14.2 million to an increase in sales and marketing, and $23.6 million attributable to an increase in general and administrative expenses. Excluding GO Networks, IPWireless, and WiMAX Telecom, overall cash-based operating expenses increased $74.4 million or 70 percent, year-over-year. Approximately, $50.5 million of this increase was related to the addition of research and development staff in NextWave's semiconductor group; activities related to the commercialization of the Company's family of WiMAX chipsets; a $4.3 million increase in sales and marketing across the multimedia and semiconductor groups; a $16.6 million increase in general and administrative expenses across all businesses units, particularly investment in R&D talent as well as systems to support revenue growth; public company expenses related to SOX compliance; international acquisition integration; overall operations; and a $3.0 million increase attributable to cost of sales.
Interest Expense and Net Loss
Net cash-based interest expense for fiscal year 2007 was $24.9 million, a $12.5 million increase over fiscal 2006. Total reported net interest expense in 2007 was $ 30.3 million. This increase in interest expense was driven primarily by interest expense related to the issuance of $351.1 million of 7% Senior Secured Notes in July 2006.
Net loss available to common shares for fiscal 2007 was ($341.1) million, or ($3.81) per share, compared to a net loss available to common shares of ($105.0) million, or ($1.28) per share for fiscal 2006.
At the end of fiscal 2007, the Company had 1,364 full-time employees and contractors compared to 802 at the end of fiscal 2006, an increase of 70 percent. Excluding GO Networks, IPWireless, and WiMAX Telecom, companies acquired in 2007, total year ending headcount was 1,006, an increase of 25 percent.
About NextWave Wireless
NextWave Wireless Inc. (Nasdaq: WAVE) is engineering the future of mobility by providing next-generation mobile multimedia and wireless broadband technologies to the world's leading mobile handset manufacturers, consumer electronics manufacturers and wireless service providers. From mobile television and mobile broadband systems to semiconductors and device-embedded mobile multimedia software that can be found in more than 200 million handsets around the globe, NextWave is evolving the way consumers experience mobile multimedia content. NextWave Wireless is headquartered in San Diego, California, U.S.A., and has offices in over a dozen countries. Visit NextWave Wireless at www.nextwave.com.
Non- GAAP Financial Measures
This press release refers to a non-GAAP financial measure of shipped revenue. Management believes that this non-GAAP financial measure provides more meaningful supplemental information regarding our cash flow and performance that enhances management's and investor's ability to evaluate the company's equipment shipments and related trends and prospects. A reconciliation of GAAP revenue to non-GAAP shipped revenue is provided with this press release.
Note Regarding Forward-Looking Statements
This press release contains "forward-looking statements" for purposes of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. There can be no assurances that forward-looking statements will be achieved, and actual events or results could differ materially from the events or results predicted by such statements. Important factors that could cause actual events or results to differ materially are discussed in greater detail in the filings of NextWave with the Securities and Exchange Commission. All such documents are available through the SEC's website at www.sec.gov. NextWave makes no commitment to update any forward-looking statements in order to reflect subsequent changes in events or circumstances except as may be required pursuant to applicable law. -0- *T NEXTWAVE WIRELESS INC. TABLE 1 CONSOLIDATED BALANCE SHEETS (in thousands, except par value data) December 29, December 30, 2007 2006 —————— —————— ASSETS Current assets: Cash and cash equivalents $ 53,050 $ 32,980 Marketable securities 113,684 167,705 Accounts receivable, net of allowance for doubtful accounts of $1,419 and $321, respectively 14,788 5,056 Inventory 4,934 266 Deferred contract costs 27,840 2,397 Prepaid expenses and other current assets 9,444 7,571 —————— —————— Total current assets 223,740 215,975 Restricted cash 75,000 75,000 Wireless spectrum licenses, net 633,881 527,998 Goodwill 171,056 32,184 Other intangible assets, net 82,388 18,570 Property and equipment, net 44,382 17,529 Other noncurrent assets 28,291 9,823 —————— —————— Total assets $ 1,258,738 $ 897,079 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 25,885 $ 1,630 Accrued expenses 76,137 33,537 Current portion of long-term obligations 6,745 3,065 Deferred revenue 55,964 10,253 Other current liabilities and deferred credits 2,931 1,240 —————— —————— Total current liabilities 167,662 49,725 Deferred income tax liabilities 103,264 75,774 Long-term obligations, net of current portion 320,782 298,030 Accrued purchase consideration and bonuses payable 57,903 — Other long-term obligations and deferred credits 8,376 3,324 —————— —————— Total liabilities 657,987 426,853 Minority interest in subsidiary — 1,048 Commitments and contingencies Redeemable Series A Senior Convertible Preferred Stock, $0.001 par value; 355 shares authorized; 355 shares issued and outstanding, liquidation preference of $375,811 at December 29, 2007 371,986 — —————— —————— Stockholders' equity: Preferred stock, $0.001 par value; 25,000 shares authorized; 355 shares designated as Series A Senior Convertible Preferred Stock; no other shares issued or outstanding — — Common stock, $0.001 par value; 400,000 shares authorized; 92,667 and 83,716 issued and outstanding at December 29, 2007, and December 30, 2006, respectively 93 84 Additional paid-in-capital 686,918 620,423 Accumulated other comprehensive income (loss) 12,836 (357) Accumulated deficit (471,082) (150,972) —————— —————— Total stockholders' equity 228,765 469,178 —————— —————— Total liabilities and stockholders' equity $ 1,258,738 $ 897,079 ============ ============ *T -0- *T NEXTWAVE WIRELESS INC. TABLE 2 CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Years Ended ————————————— December 29, December 30, 2007 2006 —————— —————— Revenues: Technology licensing and service $ 38,246 $ 24,284 Hardware 20,861 — —————— —————— Total revenues 59,107 24,284 —————— —————— Operating expenses: Cost of technology licensing and service revenues 22,080 12,054 Cost of hardware revenues 41,017 — Engineering, research and development 149,645 54,304 Sales and marketing 29,727 9,992 General and administrative 92,992 50,043 Purchased in-process research and development costs 12,060 3,538 Business realignment costs (credits) — (7,121) —————— —————— Total operating expenses 347,521 122,810 —————— —————— Loss from operations (288,414) (98,526) —————— —————— Other income (expense): Interest income 16,076 12,533 Interest expense (46,408) (20,647) Other expense, net (1,777) (23) —————— —————— Total other expense, net (32,109) (8,137) —————— —————— Loss before provision for income taxes and minority interest (320,523) (106,663) Income tax benefit (provision) (635) 35 Minority interest 1,048 1,608 —————— —————— Net loss (320,110) (105,020) Less: Preferred stock dividends (20,810) — Accretion of issuance costs on preferred stock (210) — —————— —————— Net loss applicable to common shares $ (341,130) $ (105,020) ============ ============ Net loss per common share - basic and diluted $ (3.81) $ (1.28) Weighted average shares used in per share calculation 89,441 81,841 *T -0- *T NEXTWAVE WIRELESS INC. TABLE 3 CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended ————————————- December 29, December 30, 2007 2006 —————— —————— OPERATING ACTIVITIES Net loss $ (320,110) $ (105,020) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 11,957 6,081 Amortization of intangible assets 24,320 5,831 Non-cash share-based compensation 18,419 5,156 In-process research and development 12,060 3,538 Accretion of interest expense 21,201 9,503 Minority interest (1,048) (1,537) Non-cash business realignment costs (credits) — (7,121) Losses incurred on strategic investment 1,359 1,494 Other non-cash adjustments 6,234 848 Changes in operating assets and liabilities: Accounts receivable 4,317 (1,513) Inventory 1,124 (266) Deferred contract costs (24,024) (1,499) Prepaid expenses and other current assets (2,118) (2,197) Other assets 1,376 (724) Accounts payable and accrued liabilities 13,557 22,819 Deferred revenue 34,063 8,599 Other current liabilities and deferred credits 988 (329) —————— —————— Net cash used in operating activities (196,325) (56,337) —————— —————— INVESTING ACTIVITIES Proceeds from maturities of marketable securities 45,005 457,985 Proceeds from sales of marketable securities 1,101,201 1,091,844 Purchases of marketable securities (1,091,837) (1,351,477) Cash paid for business combinations, net of cash acquired (99,198) (8,446) Payments for wireless spectrum licenses (54,464) (400,337) Purchase of property and equipment (29,922) (13,036) Cash paid for investment in software development company — — Other, net (551) (1,909) —————— —————— Net cash used in investing activities (129,766) (225,376) —————— —————— FINANCING ACTIVITIES Proceeds from the sale of Series A Senior Convertible Preferred Stock, net of costs to issue 351,146 — Proceeds from long-term obligations, net of costs to issue — 295,018 Payment to restricted cash account securing long-term obligations — (75,000) Payments on long-term obligations (4,777) (2,502) Proceeds from the sale of common shares and membership equity interests 2,178 2,390 Proceeds from investment by joint venture partner — 2,585 Cash distributions paid to members (2,034) (1,447) —————— —————— Net cash provided by financing activities 346,513 221,044 Effect of foreign currency exchange rate changes on cash (352) — —————— —————— Net increase (decrease) in cash and cash equivalents 20,070 (60,669) Cash and cash equivalents, beginning of period 32,980 93,649 —————— —————— Cash and cash equivalents, end of period $ 53,050 $ 32,980 ============ ============ *T -0- *T NEXTWAVE WIRELESS INC. TABLE 4 RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (unaudited) (in thousands) Year Ended December 29, 2007 —————— GAAP Revenue $ 59,107 Adjustments to reconcile GAAP Revenue to Non-GAAP Shipped Revenue: Add: Deferred revenue as of December 29, 2007 60,214 Deduct: Deferred revenue as of December 30, 2006 (12,702) —————— Total Adjustments 47,512 —————— Shipped Revenue $ 106,619 ============ *T
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