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GAAP Financial Highlights
-- Revenue: Total revenue for the second quarter of 2009 was $4.9 million, compared with $59.0 million for the second quarter of 2008. For the first six months of 2009, revenue was $14.1 million, compared with $66.7 million for the first six months of 2008.
-- Net Loss/Income: Net loss for the second quarter of 2009 was $14.0 million, compared with net income of $20.6 million for the second quarter of 2008. For the first six months of 2009, net loss was $21.2 million, compared with net income of $8.9 million for the first six months of 2008.
Non-GAAP Financial Highlights
-- Product and Service Billings ("Billings"): Billings for the second quarter of 2009 were $37.9 million, compared with $26.3 million for the second quarter of 2008. For the first six months of 2009, including $14.6 million of pre-bankruptcy filing outstanding invoices to Nortel Networks Inc. ("Nortel"), Billings were $72.1 million, compared with Billings of $64.1 million for the first six months of 2008. As previously reported, Airvana recorded Billings of $34.2 million for the first quarter of 2009, which included $14.6 million in invoices for sales to Nortel prior to Nortel's Chapter 11 bankruptcy protection filing on January 14, 2009. Collection of a total of $36.4 million of pre-bankruptcy filing outstanding invoices is subject to Nortel's bankruptcy proceedings. As a result, Airvana has excluded this amount from its deferred revenue and Billings for the fourth quarter of 2008 and the first quarter of 2009. Airvana will continue to account for Nortel receivables as of the date of Nortel's bankruptcy filing on a cash basis, if and when collected.
-- Operating Profit (Loss) on Billings: Operating profit on Billings for the second quarter of 2009 was $8.0 million, compared with operating loss on Billings of $1.0 million for the second quarter of 2008. For the first six months of 2009, including the $14.6 million of pre-bankruptcy filing outstanding invoices to Nortel, Airvana's operating profit on Billings would have been $14.1 million, compared with operating profit of $9.4 million for the first six months of 2008.
A description of Airvana's revenue-recognition policy is contained in its quarterly report on Form 10-Q and annual report on Form 10-K, each filed with the Securities and Exchange Commission. A description and a reconciliation of the company's non-GAAP financial measures are included in this press release.
Comments on the Second Quarter
"Airvana's second quarter results exceeded our expectations as Billings grew 44 percent year-over-year," said President and Chief Executive Officer, Randy Battat. "Both our EV-DO and fixed-mobile convergence ("FMC") product lines continued to perform well, and the business continued to generate solid profitability and healthy levels of operating cash flow. This enabled us to repurchase an additional $3.7 million of our common stock during the quarter while adding $12.6 million in cash and investments to our balance sheet, raising our total cash and investments to $211.0 million."
"Our Billings in the second quarter reflected a significant increase in EV-DO product shipments," Battat said. "Driven in large part by the popularity of smart phones, PDAs and other devices, mobile data traffic at major operators continues to be the fastest-growing segment of the telecommunications market. This is generating strong demand for Airvana's EV-DO products as operators strengthen and expand their 3G networks. The growth in second quarter Billings reflected new coverage deployments and expansion of existing deployments - particularly in the North American market - as well as growing demand for our radio network controllers and new channel cards for second and even third EV-DO carriers as operators expand the capacity of their existing EV-DO networks."
"Airvana made significant strides in FMC product and partnership development in the second quarter," said Battat. "FMC Billings growth in the second quarter reflected shipments of prototype and trial equipment to operators with active femtocell programs worldwide, as well as engineering services to develop femtocell features requested by key operators."
Stock Buyback
Airvana repurchased approximately 662,000 shares of its common stock during the second quarter of 2009 for approximately $3.7 million, completing the initial $20 million stock repurchase plan announced in the third quarter of 2008 and initiating repurchases under the second $20 million stock repurchase plan authorized in the first quarter of 2009. As of June 28, 2009, Airvana had repurchased an aggregate of 4.3 million shares of its common stock, and had authority for $17.8 million remaining under the second repurchase plan.
Nortel Plan of Reorganization
Since Nortel's Chapter 11 bankruptcy filing, Airvana and Nortel have continued to deliver products and services to Nortel's CDMA EV-DO wireless operators under the terms of Nortel's existing agreement with Airvana. Airvana has continued to work closely with Nortel to ensure the consistent delivery of its current and planned products and services to wireless operators worldwide. In addition, Airvana has been collecting receivables from Nortel in the ordinary course of business related to products and services purchased subsequent to the bankruptcy filing. On July 24, 2009, Telefon AB L.M. Ericsson ("Ericsson"), a global wireless network infrastructure provider based in Sweden, won an auction for Nortel's CDMA business. The sale was approved by the bankruptcy courts on July 28, 2009.
"From Airvana's perspective and for Nortel's customers, Ericsson's proposed purchase of Nortel's CDMA business marks a successful conclusion to the auction process," said Battat. "Ericsson will bring technology excellence and experience providing support for networks with more than one billion subscribers worldwide to the growing CDMA market. We look forward to working with Ericsson to satisfy operators' future CDMA infrastructure requirements and serving existing Nortel customers as well as new customers with a robust pipeline of EV-DO products and services."
Business and Financial Outlook
"Airvana's business is growing as we begin the second half of 2009," Battat said. "Consistent with our previous comments, looking ahead to the next six months, we expect Billings to increase sequentially from the first half of 2009. Operators are reporting continued growth in mobile data subscribers, devices and traffic, which we expect to fuel further growth in EV-DO shipments. We expect to release our latest major software upgrade as well as additional EV-DO software releases and products in the second half of 2009 that will provide operators with the advanced features and functionalities required to support new 3G mobile applications for consumers and businesses."
"The outlook for our FMC product line is also encouraging," said Battat. "Our proprietary femtocell technology uniquely positions us to provide operators worldwide with the customized femtocell features they need for their target markets and applications. Operators have come to recognize the potential of femtocells to solve 3G network coverage problems, lower total network capital and operating costs and, through femto zone services, generate new mobile data revenue streams. We expect to see additional femtocell trials and initial commercial shipments during the second half of 2009, and we have signed contracts and a solid pipeline for volume deployments in 2010."
The timing of the completion of Ericsson's acquisition of Nortel's CDMA business, expected in September/October 2009, may impact the timing of Airvana's Billings and GAAP revenue between the third and fourth quarters of 2009. Airvana expects Billings in the second half of 2009 to be higher than in the first half of 2009, and Billings for the full year 2009 to be higher than the full year 2008.
Conference Call Details
Airvana will host a conference call today at 8:30 a.m. (ET) to discuss its financial results, highlights of the quarter, business strategy and financial outlook. The conference call and accompanying slide presentation will be webcast live on the Internet and can be accessed on the Investor Relations section of Airvana's website (www.airvana.com). The conference call can also be accessed by dialing (877) 407-5790 or (201) 689-8328. A replay of the webcast will be archived on Airvana's website.
Non-GAAP Financial Measures
To supplement Airvana's condensed consolidated financial statements presented on a GAAP basis, Airvana uses non-GAAP Billings measures of operating results, gross profit on Billings and operating profit on Billings, which include changes in deferred revenue and deferred costs in a period. These non-GAAP financial measures are presented with the intent of providing both management and investors with a more complete understanding of Airvana's underlying operating performance and trends. Airvana believes that these non-GAAP financial measures enhance the overall understanding of its past financial performance and also its prospects for the future. These non-GAAP measures provide an indication of Airvana's financial results based upon sales activity in the period and are considered by management for the purpose of making operational decisions. In addition, these non-GAAP measures are the primary indicators that management uses as a basis for Airvana's planning and forecasting of future periods.
Management uses the following non-GAAP measures (detailed in Exhibits 1, 3 and 4) as a supplement to GAAP revenue and cash flow from operations in evaluating Airvana's performance:
-- Product and Service Billings ("Billings") reflects the amount invoiced for products and services in a period and equals GAAP revenue plus the change in deferred revenue in the period.
-- Costs Related to Billings reflects the cost directly attributable to Billings in a period and equals GAAP cost of revenue plus the change in deferred cost in the period.
-- Gross Profit on Billings reflects Billings less costs related to Billings in the period.
-- Operating Profit on Billings reflects Gross Profit on Billings less GAAP operating expenses in the period.
Management believes investors may find these measures useful for understanding Airvana's operations, but cautions that they should not be considered a substitute for disclosure in accordance with GAAP. Exhibits 1, 2, 3 and 4 reconcile all non-GAAP metrics to the corresponding financial statement items as determined in accordance with GAAP for all periods presented.
About Airvana, Inc.
Airvana helps operators transform the mobile experience for users worldwide. The company's high-performance technology and products, from comprehensive femtocell solutions to core mobile network infrastructure, enable operators to deliver compelling and consistent broadband services to mobile subscribers, wherever they are. Airvana's products are deployed in 70 commercial networks on six continents. The company is headquartered in Chelmsford, Mass., USA, with offices worldwide. For more information, please visit www.airvana.com.
Safe Harbor Statement
Any statements in this press release about future expectations, plans and prospects for Airvana, including without limitation, expectations related to its development of femtocell alliances, its shipments during future periods, its invoiced amounts, billings and revenue for future periods, its relationship with Nortel and its potential relationship with Telefon AB L.M. Ericsson as successor owner of Nortel's CDMA business, its ability to collect receivables and invoiced amounts from Nortel and the Nortel bankruptcy filing constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements typically contain the words "believes," "anticipates," "plans," "expects," "will," "continue" and similar expressions. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including without limitation Nortel's ability to reorganize successfully, Airvana's ability to secure court approval for payment of its receivables from Nortel, Airvana's ability to maintain its relationship with Nortel, the timing and rate of femtocell market acceptance and growth, operator femtocell deployment plans, the highly competitive and rapidly evolving market in which Airvana competes, Airvana's limited operating history, the fluctuation of its past operating results and its reliance on sales through Nortel for a significant portion of its revenues and product and service Billings and other factors discussed in Airvana's filings with the Securities and Exchange Commission. In addition, the forward-looking statements included in this press release represent Airvana's views as of the date of this press release. Airvana anticipates that subsequent events and developments may cause its views to change. While Airvana may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Airvana's views as of any date subsequent to the date of this press release.
Airvana, Inc.
GAAP Consolidated Statements of Operations
Comparative Financial Results
(Amounts in thousands except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 29, June 28, June 29, June 28,
2008 2009 2008 2009
Revenue:
Product $ 54,784 $ 1,717 $ 60,317 $ 8,276
Service 4,235 3,163 6,340 5,867
Total revenue 59,019 4,880 66,657 14,143
Cost of revenue:
Product 1,314 524 1,434 868
Service 2,013 2,878 3,806 5,081
Total cost of revenue 3,327 3,402 5,240 5,949
Gross profit 55,692 1,478 61,417 8,194
Gross margin 94 % 30 % 92 % 58 %
Operating expenses:
Research and development 18,091 18,092 37,350 35,759
Selling and marketing 3,825 4,324 7,403 8,100
General and administrative 2,321 2,370 4,394 4,873
Total operating expenses 24,237 24,786 49,147 48,732
Operating income (loss) 31,455 (23,308 ) 12,270 (40,538 )
Interest income, net 1,792 1,542 4,377 2,666
Income (loss) before income tax expense 33,247 (21,766 ) 16,647 (37,872 )
Income tax expense (benefit) 12,684 (7,733 ) 7,758 (16,636 )
Net income (loss) $ 20,563 $ (14,033 ) $ 8,889 $ (21,236 )
Net income (loss) per common share:
Basic $ 0.32 $ (0.23 ) $ 0.14 $ (0.34 )
Diluted $ 0.29 $ (0.23 ) $ 0.13 $ (0.34 )
Weighted average common shares outstanding:
Basic 64,601 62,230 64,248 62,455
Diluted 70,763 62,230 70,398 62,455
Exhibit 1
Airvana, Inc.
GAAP to Non-GAAP Product and Service Billings Reconciliation
(Amounts in thousands)
(Unaudited)
Three Months Ended June 29, 2008 Three Months Ended June 28, 2009
Deferral Adjusted Deferral Adjusted Pro Forma Pro Forma
GAAP GAAP
GAAP Adjustments Results GAAP Adjustments Results Adjustments (1) Results (1)
Revenue $ 59,019 $ (32,740 ) $ 26,279 $ 4,880 $ 33,061 $ 37,941 $ - $ 37,941
Cost of revenue 3,327 (297 ) 3,030 3,402 1,798 5,200 - 5,200
Gross profit 55,692 (32,443 ) 23,249 1,478 31,263 32,741 - 32,741
Gross margin 94 % 88 % 30 % 86 % 86 %
Operating expenses 24,237 - 24,237 24,786 - 24,786 - 24,786
Operating income (loss) from operations 31,455 (32,443 ) (988 ) (23,308 ) 31,263 7,955 - 7,955
Operating margin 53 % -4 % -478 % 21 % 21 %
Stock-based compensation 1,179 - 1,179 1,442 - 1,442 - 1,442
Operating income (loss) excluding stock compensation $ 32,634 $ (32,443 ) $ 191 $ (21,866 ) $ 31,263 $ 9,397 $ - $ 9,397
Operating margin excluding stock compensation 55 % 1 % -448 % 25 % 25 %
Six Months Ended June 29, 2008 Six Months Ended June 28, 2009
Deferral Adjusted Deferral Adjusted Pro Forma Pro Forma
GAAP GAAP Nortel
GAAP Adjustments Results GAAP Adjustments Results Adjustments (1) Results (1)
Revenue $ 66,657 $ (2,582 ) $ 64,075 $ 14,143 $ 43,325 $ 57,468 $ 14,624 $ 72,092
Cost of revenue 5,240 304 5,544 5,949 3,279 9,228 - 9,228
Gross profit 61,417 (2,886 ) 58,531 8,194 40,046 48,240 14,624 62,864
Gross margin 92 % 91 % 58 % 84 % 87 %
Operating expenses 49,147 - 49,147 48,732 - 48,732 - 48,732
Operating income (loss) from operations 12,270 (2,886 ) 9,384 (40,538 ) 40,046 (492 ) 14,624 14,132
Operating margin 18 % 15 % -287 % -1 % 20 %
Stock-based compensation 2,264 - 2,264 2,813 - 2,813 - 2,813
Operating income (loss) excluding stock compensation $ 14,534 $ (2,886 ) $ 11,648 $ (37,725 ) $ 40,046 $ 2,321 $ 14,624 $ 16,945
Operating margin excluding stock compensation 22 % 18 % -267 % 4 % 24 %
Note (1): On January 14, 2009, Nortel filed for bankruptcy
protection. For the six months ended June 28, 2009, Airvana had
pre-bankruptcy filing outstanding invoices to Nortel of $14,624, the
collection of which is subject to Nortel's bankruptcy process. As a
result, Airvana has excluded this amount from deferred revenue and
from accounts receivable as of June 28, 2009. These amounts will be
accounted for on a cash basis if and when collected.
Airvana, Inc.
Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
December 28, June 28,
2008 2009
ASSETS
Current assets
Cash and cash equivalents $ 30,425 $ 19,310
Investments 197,941 176,310
Accounts receivable 3,354 9,493
Deferred product cost 1,913 2,618
Prepaid taxes & deferred tax assets, net 2,168 18,080
Prepaid expenses and other current assets 2,758 4,495
Total current assets 238,559 230,306
Property and equipment 14,425 17,033
Less: accumulated depreciation and amortization 9,603 11,202
Property and equipment, net 4,822 5,831
Deferred product cost, long-term 1,300 3,874
Long-term investments - 15,381
Prepaid taxes & deferred tax assets, net 956 4,042
Restricted investments 193 403
Goodwill and intangible assets, net 11,096 10,562
Other assets 410 421
Total assets $ 257,336 $ 270,820
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,455 $ 2,746
Accrued expenses and other current liabilities 14,365 12,808
Accrued income taxes 1,897 614
Deferred revenue 61,310 99,500
Total current liabilities 82,027 115,668
Deferred revenue, long-term 5,550 10,685
Other liabilities 1,174 914
Accrued income taxes 5,703 5,950
Total long-term liabilities 12,427 17,549
Stockholders' equity:
Common stock 63 62
Additional paid-in capital 186,824 182,782
Accumulated deficit (24,005 ) (45,241 )
Total stockholders' equity 162,882 137,603
Total liabilities and stockholders' equity $ 257,336 $ 270,820
Exhibit 2
Airvana, Inc.
2009 GAAP to Pro Forma Balance Sheet Reconciliation
(Amounts in thousands)
(Unaudited)
Pro Forma Pro Forma
June 28, Nortel June 28,
2009 Adjustments (1) 2009 (1)
ASSETS
Current assets
Cash and cash equivalents $ 19,310 $ - $ 19,310
Investments 176,310 - 176,310
Accounts receivable 9,493 36,442 45,935
Deferred product cost 2,618 - 2,618
Prepaid taxes & deferred tax assets, net 18,080 - 18,080
Prepaid expenses and other current assets 4,495 - 4,495
Total current assets 230,306 36,442 266,748
Property and equipment 17,033 - 17,033
Less: accumulated depreciation and amortization 11,202 - 11,202
Property and equipment, net 5,831 - 5,831
Deferred product cost, long-term 3,874 - 3,874
Long-term investments 15,381 - 15,381
Deferred tax assets 4,042 - 4,042
Restricted investments 403 - 403
Goodwill and intangible assets, net 10,562 - 10,562
Other assets 421 - 421
Total assets $ 270,820 $ 36,442 $ 307,262
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,746 $ - $ 2,746
Accrued expenses and other current liabilities 12,808 - 12,808
Accrued income taxes 614 - 614
Deferred revenue 99,500 36,332 135,832
Total current liabilities 115,668 36,332 152,000
Deferred revenue, long-term 10,685 - 10,685
Other liabilities 914 - 914
Accrued income taxes 5,950 - 5,950
Total long-term liabilities 17,549 - 17,549
Stockholders' equity:
Common stock 62 - 62
Additional paid-in capital 182,782 - 182,782
Accumulated deficit (45,241 ) 110 (45,131 )
Total stockholders' equity 137,603 110 137,713
Total liabilities and stockholders' equity $ 270,820 $ 36,442 $ 307,262
Note (1): On January 14, 2009, Nortel filed for bankruptcy
protection. As of June 28, 2009, Airvana had pre-bankruptcy filing
outstanding invoices to Nortel of $36,442, the collection of which
is subject to Nortel's bankruptcy process. As a result, Airvana has
excluded $110 from accumulated deficit, $36,332 from deferred
revenue, and $36,442 from accounts receivable as of June 28, 2009.
These amounts will be accounted for on a cash basis if and when
collected.
Airvana, Inc.
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 29, June 28, June 29, June 28,
2008 2009 2008 2009
Operating activities
Net income (loss) $ 20,563 $ (14,033 ) $ 8,889 $ (21,236 )
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 814 806 1,621 1,578
Amortization of intangible assets 267 267 534 534
Stock-based compensation 1,179 1,442 2,264 2,813
Deferred tax (expense) benefit 12,684 (417 ) 7,758 458
Excess tax benefit related to exercise of stock options (1,497 ) (504 ) (1,497 ) (900 )
Amortization of investments (1,149 ) 49 (2,410 ) (472 )
Amortization of leasehold incentive (131 ) (130 ) (261 ) (260 )
Changes in operating assets and liabilities:
Accounts receivable 3,098 3,612 6,230 (6,139 )
Deferred cost 297 (1,798 ) (304 ) (3,279 )
Prepaid taxes 618 (7,936 ) 115 (18,556 )
Prepaid expenses and other current assets 379 (1,795 ) 783 (1,737 )
Accounts payable (1,647 ) 511 (2,214 ) (1,709 )
Accrued expenses and other current liabilities 1,651 2,736 (1,911 ) (1,552 )
Accrued income taxes (701 ) 296 (15,776 ) (1,036 )
Deferred revenue (32,740 ) 33,061 (2,582 ) 43,325
Net cash provided by (used in) operating activities 3,685 16,167 1,239 (8,168 )
Investing activities
Purchases of property and equipment (455 ) (811 ) (1,033 ) (2,587 )
Purchase of investments (68,803 ) (77,163 ) (175,793 ) (139,068 )
Maturities of investments 74,504 68,065 147,809 145,790
Restricted investments - - - (210 )
Investments sold - - 16,631 -
Other assets 16 (5 ) 19 (11 )
Net cash provided by (used in) investing activities 5,262 (9,914 ) (12,367 ) 3,914
Financing activities
Payments on long-term debt (94 ) - (112 ) -
Payments of cash dividend (5 ) - (50 ) (5 )
Purchase and retirement of treasury stock - (3,740 ) - (8,922 )
Excess tax benefit related to exercise of stock options 1,497 504 1,497 900
Proceeds from exercise of stock options 670 541 1,486 1,166
Net cash provided by (used in) financing activities 2,068 (2,695 ) 2,821 (6,861 )
Effect of exchange rates on cash and cash equivalents 59 - 72 -
Net increase (decrease) in cash and cash equivalents 11,074 3,558 (8,235 ) (11,115 )
Cash and cash equivalents at beginning of period 24,238 15,752 43,547 30,425
Cash and cash equivalents at end of period $ 35,312 $ 19,310 $ 35,312 $ 19,310
Exhibit 3
Airvana, Inc.
Select Quarterly Financial Data - GAAP & non-GAAP Metrics
(Amounts in thousands)
(Unaudited)
Three Months Ended
Pro Forma Nortel Pro Forma Pro Forma Nortel Pro Forma Pro Forma Nortel Pro Forma
Mar 30, Jun 29, Sep 28, Dec 28, Mar 29, Jun 28, Adjustments Dec 28, Adjustments Mar 29, Adjustments Jun 28,
2008 2008 2008 2008 2009 2009 Dec 28, 2008 (1) 2008 (1) Mar 29, 2009 (2) 2009 (2) Jun 28, 2009 (3) 2009 (3)
GAAP Financial Metrics
Total revenue $ 7,638 $ 59,019 $ 8,247 $ 63,269 $ 9,263 $ 4,880 $ 55 $ 63,324 $ 55 $ 9,318 $ - $ 4,880
Cost of revenue 1,913 3,327 2,652 3,570 2,547 3,402 3,570 2,547 3,402
Gross profit 5,725 55,692 5,595 59,699 6,716 1,478 55 59,754 55 6,771 - 1,478
Operating expenses 24,910 24,237 24,949 24,639 23,946 24,786 24,639 23,946 24,786
Operating (loss) profit $ (19,185 ) $ 31,455 $ (19,354 ) $ 35,060 $ (17,230 ) $ (23,308 ) $ 55 $ 35,115 $ 55 $ (17,175 ) $ - $ (23,308 )
Net cash (used in) provided by operating activities (2,446 ) 3,685 12,071 (741 ) (24,335 ) 16,167 - (741 ) - (24,335 ) - 16,167
Cash, cash equivalents and investments 220,969 227,491 237,814 228,366 198,394 211,001 - 228,366 - 198,394 - 211,001
Accounts receivable 11,039 7,941 8,093 3,354 13,105 9,493 21,818 25,172 36,442 49,547 36,442 45,935
Days sales outstanding (a) 27 28 17 17 61 23 - 57 - 132 - 110
Deferred revenue - end of period 110,136 77,396 112,134 66,860 77,124 110,185 21,763 88,623 36,332 113,456 36,332 146,517
Deferred product cost - end of period 1,651 1,354 2,397 3,213 4,694 6,492 - 3,213 - 4,694 - 6,492
Reconciliation of GAAP and
non-GAAP Metrics
Revenue (GAAP) $ 7,638 $ 59,019 $ 8,247 $ 63,269 $ 9,263 $ 4,880 $ 55 $ 63,324 $ 55 $ 9,318 $ - $ 4,880
Less: deferred revenue from acquisition - - - - - - - - - - - -
Deferred revenue at end of period 110,136 77,396 112,134 66,860 77,124 110,185 21,763 88,623 36,332 113,456 36,332 146,517
Less: deferred revenue at beginning of period (79,978 ) (110,136 ) (77,396 ) (112,134 ) (66,860 ) (77,124 ) - (112,134 ) (21,763 ) (88,623 ) (36,332 ) (113,456 )
Product and service billings, "Billings" (non-GAAP) 37,796 26,279 42,985 17,995 19,527 37,941 21,818 39,813 14,624 34,151 - 37,941
Cost of revenue (GAAP) 1,913 3,327 2,652 3,570 2,547 3,402 - 3,570 - 2,547 - 3,402
Deferred product cost at end of period 1,651 1,354 2,397 3,213 4,694 6,492 - 3,213 - 4,694 - 6,492
Less: deferred product cost at beginning of period (1,050 ) (1,651 ) (1,354 ) (2,397 ) (3,213 ) (4,694 ) - (2,397 ) - (3,213 ) - (4,694 )
Cost related to Billings (non-GAAP) 2,514 3,030 3,695 4,386 4,028 5,200 - 4,386 - 4,028 - 5,200
Gross profit on Billings (non-GAAP) (b) 35,282 23,249 39,290 13,609 15,499 32,741 21,818 35,427 14,624 30,123 - 32,741
Gross margin on Billings (non-GAAP) (c) 93 % 88 % 91 % 76 % 79 % 86 % 89 % 88 % 86 %
Total operating expenses (GAAP) 24,910 24,237 24,949 24,639 23,946 24,786 - 24,639 - 23,946 - 24,786
Operating profit (loss) on Billings (non-GAAP) (d) $ 10,372 $ (988 ) $ 14,341 $ (11,030 ) $ (8,447 ) $ 7,955 $ 21,818 $ 10,788 $ 14,624 $ 6,177 $ - $ 7,955
% operating profit (loss) on Billings (non-GAAP) 27 % -4 % 33 % -61 % -43 % 21 % 27 % 18 % 21 %
Total interest & other income, net (GAAP) 2,585 1,792 1,505 1,358 1,124 1,542 1,358 1,124 1542
Profit (loss) before tax on Billings (non-GAAP) (e) $ 12,957 $ 804 $ 15,846 $ (9,672 ) $ (7,323 ) $ 9,497 $ 21,818 $ 12,146 $ 14,624 $ 7,301 $ - $ 9,497
% profit (loss) before tax on Billings (non-GAAP) 34 % 3 % 37 % -54 % -38 % 25 % 31 % 21 % 25 %
Stock-based compensation included in operating expense $ 1,085 $ 1,179 $ 1,278 $ 1,302 $ 1,371 $ 1,442 $ - $ 1,302 $ - $ 1,371 $ - $ 1,442
Acquisition costs included in operating expense - - - - - - - - - - - -
Profit (loss) before tax on Billings excluding stock-based $ 14,042 $ 1,983 $ 17,124 $ (8,370 ) $ (5,952 ) $ 10,939 $ 13,448 $ 14,624 $ 8,672 $ - $ 10,939
compensation (non-GAAP) (e)
% profit (loss) before tax on Billings excluding stock-based 37 % 8 % 40 % -47 % -30 % 29 % 34 % 25 % 29 %
compensation (non-GAAP) (e)
Note (1): On January 14, 2009, Nortel filed for bankruptcy
protection. As of December 28, 2008, Airvana had pre-bankruptcy
filing outstanding invoices to Nortel of $21,818, the collection of
which is subject to Nortel's bankruptcy process. As a result,
Airvana has excluded $55 from revenue, $21,763 from deferred
revenue, and $21,818 from accounts receivable as of December 28,
2008. These amounts will be accounted for on a cash basis if and
when collected.
Note (2): On January 14, 2009, Nortel filed for bankruptcy
protection. As of March 29, 2009, Airvana had pre-bankruptcy filing
outstanding invoices to Nortel of $36,442, the collection of which
is subject to Nortel's bankruptcy process. As a result, Airvana has
excluded $55 from revenue, $36,332 from deferred revenue, and
$36,442 from accounts receivable as of March 29, 2009. These amounts
will be accounted for on a cash basis if and when collected.
Note (3): On January 14, 2009, Nortel filed for bankruptcy
protection. As of June 28, 2009, Airvana had pre-bankruptcy filing
outstanding invoices to Nortel of $36,442, the collection of which
is subject to Nortel's bankruptcy process. As a result, Airvana
has excluded $36,332 from deferred revenue and $36,442 from
accounts receivable as of June 28, 2009. These amounts will be
accounted for on a cash basis if and when collected.
(a) Days sales outstanding (DSO) equals the accounts receivable
divided by Billings (non-GAAP) multiplied by 91 (days in the
period).
(b) Gross profit on Billings equals the excess of Billings over
cost related to Billings.
(c) Gross margin on Billings equals the excess of Billings over
cost related to Billings divided by Billings.
(d) Operating profit on Billings equals Billings less cost related
to Billings, less total operating expenses.
(e) Profit (loss) before tax on Billings equals Billings less cost
related to Billings, less total operating expenses plus interest
income, net, plus cumulative change in accounting principle.
Exhibit 4
Airvana, Inc.
Select Annual Financial Data - GAAP & non-GAAP Metrics
(Amounts in thousands)
Fiscal Year Ended
Pro Forma Nortel Pro
Adjustments Forma
2002 2003 2004 2005 2006 2007 2008 2008 (1) 2008 (1)
(unaudited) (unaudited)
GAAP Financial Metrics
Total revenue $ 4,567 $ 6,978 $ 3,617 $ 2,347 $ 170,270 $ 305,786 $ 138,173 $ 55 $ 138,228
Cost of revenue 2,764 5,537 4,453 6,533 45,295 41,904 11,462 11,462
Gross (loss) profit 1,803 1,441 (836 ) (4,186 ) 124,975 263,882 126,711 55 126,766
Operating expenses -
Research & development 17,408 10,089 22,040 42,922 55,073 76,638 74,826 74,826
Sales & marketing 4,005 3,582 4,665 5,237 7,729 12,055 14,933 14,933
General & administrative 1,484 1,201 2,068 3,253 5,068 7,453 8,976 8,976
In-process R&D - - - - - 2,340 - -
Total operating expenses 22,897 14,872 28,773 51,412 67,870 98,486 98,735 98,735
Operating (loss) profit $ (21,094 ) $ (13,431 ) $ (29,609 ) $ (55,598 ) $ 57,105 $ 165,396 $ 27,976 $ 55 $ 28,031
Net cash provided by (used in) operating activities (18,600 ) (1,687 ) 43,028 67,390 25,138 91,771 12,569 - 12,569
Cash, cash equivalents and investments 27,000 33,745 72,321 135,470 160,123 221,963 228,366 - 228,366
Deferred revenue - end of period 5,837 15,519 118,051 273,124 243,418 79,978 66,860 21,763 88,623
Deferred product cost - end of period 2,183 3,949 28,196 66,966 34,214 1,050 3,213 - 3,213
Reconciliation of GAAP and
non-GAAP Metrics
Revenue (GAAP) $ 4,567 $ 6,978 $ 3,617 $ 2,347 $ 170,270 $ 305,786 $ 138,173 $ 55 $ 138,228
Less: deferred revenue from acquisition - - - - - (171 ) - - -
Deferred revenue at end of period 5,837 15,519 118,051 273,124 243,418 79,978 66,860 21,763 88,623
Less: deferred revenue at beginning of period - (5,837 ) (15,519 ) (118,051 ) (273,124 ) (243,418 ) (79,978 ) - (79,978 )
Product and service billings, "Billings" (non-GAAP) 10,404 16,660 106,149 157,420 140,564 142,175 125,055 21,818 146,873
Cost of revenue (GAAP) 2,764 5,537 4,453 6,533 45,295 41,904 11,462 - 11,462
Deferred product cost at end of period 2,183 3,949 28,196 66,966 34,214 1,050 3,213 - 3,213
Less: deferred product cost at beginning of period - (2,183 ) (3,949 ) (28,196 ) (66,966 ) (34,214 ) (1,050 ) - (1,050 )
Cost related to Billings (non-GAAP) 4,947 7,303 28,700 45,303 12,543 8,740 13,625 - 13,625
Gross profit on Billings (non-GAAP) (b) 5,457 9,357 77,449 112,117 128,021 133,435 111,430 21,818 133,248
Gross margin on Billings (non-GAAP) (c) 52 % 56 % 73 % 71 % 91 % 94 % 89 % 91 %
Operating expenses (GAAP):
Research & development 17,408 10,089 22,040 42,922 55,073 76,638 74,826 - 74,826
% research & development expense on billings 167 % 61 % 21 % 27 % 39 % 54 % 60 % 51 %
Sales & marketing 4,005 3,582 4,665 5,237 7,729 12,055 14,933 - 14,933
% sales & marketing expense on billings 38 % 22 % 4 % 3 % 5 % 8 % 12 % 10 %
General & administrative 1,484 1,201 2,068 3,253 5,068 7,453 8,976 - 8,976
% general & administrative expense on billings 14 % 7 % 2 % 2 % 4 % 5 % 7 % 6 %
In-process R&D - - - - - 2,340 - - -
% in-process R&D expense on billings 0 % 0 % 0 % 0 % 0 % 2 % 0 % 0 %
Total operating expenses (GAAP) 22,897 14,872 28,773 51,412 67,870 98,486 98,735 - 98,735
% total operating expenses (GAAP) 220 % 89 % 27 % 33 % 48 % 69 % 79 % 67 %
Operating profit (loss) on Billings (non-GAAP) (d) $ (17,440 ) $ (5,515 ) $ 48,676 $ 60,705 $ 60,151 $ 34,949 $ 12,695 $ 21,818 $ 34,513
% operating profit (loss) on Billings (non-GAAP) -168 % -33 % 46 % 39 % 43 % 25 % 10 % 23 %
Total interest & other income, net (GAAP) 101 (93 ) 485 3,459 6,602 9,845 7,240 - 7,240
Cumulative effect of change in accounting principle(GAAP) - - - - (330 ) - - -
Profit (loss) before tax on Billings (non-GAAP) (e) $ (17,339 ) $ (5,608 ) $ 49,161 $ 64,164 $ 66,423 $ 44,794 $ 19,935 $ 21,818 $ 41,753
% profit (loss) before tax on Billings (non-GAAP) -167 % -34 % 46 % 41 % 47 % 32 % 16 % 28 %
Stock-based compensation included in operating expense $ - $ - $ - $ - $ 800 $ 2,996 $ 4,844 $ - $ 4,844
Acquisition costs included in operating expense - - - - - $ 2,340 - $ -
Note (1): On January 14, 2009, Nortel filed for bankruptcy
protection. As of December 28, 2008, Airvana had pre-bankruptcy
filing outstanding invoices to Nortel of $21,818, the collection of
which is subject to Nortel's bankruptcy process. As a result,
Airvana has excluded $55 from revenue, $21,763 from deferred
revenue, and $21,818 from accounts receivable as of December 28,
2008. These amounts will be accounted for on a cash basis if and
when collected.
(a) Days sales outstanding (DSO) equals accounts receivable divided
by Billings (non-GAAP) multiplied by 91 (days in the period).
(b) Gross profit on Billings equals the excess of Billings over cost
related to Billings.
(c) Gross margin on Billings equals the excess of Billings over cost
related to Billings divided by Billings.
(d) Operating profit on Billings equals Billings less cost related
to Billings, less total operating expenses.
(e) Profit (loss) before tax on Billings equals Billings less cost
related to Billings, less total operating expenses plus interest
income, net, plus cumulative change in accounting principle.
SOURCE: Airvana, Inc.
Sharon Merrill Associates David Reichman, 617-542-5300 AIRV@InvestorRelations.com
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