REDWOOD SHORES, CA — (Marketwired) — 08/10/15 — (NASDAQ: IPAS), the world–s largest commercial Wi-Fi network, today announced financial results for the second quarter 2015.
Total revenue in the second quarter of 2015 was $15.6 million compared with $16.6 million in the first quarter of 2015 and $17.8 million in the second quarter of 2014 (from continuing operations). Total revenue in the second quarter included a $1.0 million write down upon renewal of committed platform fees with one of iPass– original OM carrier channel partners.
Operating Expense (excluding restructuring charges) for the second quarter of 2015 was $11.4 million compared with $13.4 million in the first quarter of 2015 and $14.7 million in the second quarter of 2014 (from continuing operations). Operating expense for the second quarter of 2015 included non-recurring General and Administrative expense of $446,000 related to the settlement of the proxy contest.
Restructuring expense of $3.2 million in the second quarter of 2015 flattened the management structure and created a more nimble iPass as the Company commits to a new go-to-market strategy around Unlimited, Everywhere, and Invisible. Combined with other on-going cost reduction initiatives to aggressively manage discretionary spend on travel, entertainment, G&A, consulting, and capital spend, the Company is positioned to break-even at a lower revenue target.
GAAP total net loss for the second quarter of 2015 was $6.4 million (including $3.2 million of restructuring expense) compared with GAAP total net loss of $3.4 million in the first quarter of 2015 and GAAP total net income of $20.9 million in the second quarter of 2014 (including $21.6 million of net income from discontinued operations and $4.0 million of allocated tax benefit in continuing operations on the sale of Unity).
Adjusted EBITDA loss for the second quarter of 2015 was $2.0 million compared with $2.3 million loss in the first quarter of 2015 and $3.4 million loss in the second quarter of 2014.
Deferred Revenue at June 30, 2015, was $2.1 million compared with $0.6 million at December 31, 2014, an increase of 250%, the majority driven by the Hewlett-Packard Asia-Pacific sales arrangement signed during the third quarter of 2014.
“Since joining iPass five months ago, our mantra has been change,” said iPass CEO Gary Griffiths. “Change has been realized across all elements of the company, from a new board of directors, a new sales model, a new expense structure, and a new product roadmap. Moreover, we have a new and significantly smaller executive team that has done more than simply reduce expenses. Our streamlined operating structure has made us more nimble and decisive, moving closer to the culture of the startup we should and will be. We–ve strengthened and expanded our partnership with Microsoft, which has chosen iPass as the Wi-Fi partner for Windows 10. Meanwhile, HP shipments with iPass have exceeded the commitment in only half of the contract period, marked by an increase in deferred revenue from $1.5M in the first quarter to $2.1M in the second quarter of 2015.”
“Most importantly, our strategy of –Unlimited, Everywhere, and Invisible– is off to a fast start. Despite launching in late April, we–ve seen healthy quarterly ACV of $1.3M, directly attributed to our focus on UNLIMITED. The appeal of UNLIMITED has been broad, closing accounts with as few as 10 seats and as many as 10,000. The velocity of the sales has confirmed our belief that the UNLIMITED subscription model would shorten the 9-18 month average sales cycles iPass has experienced in the past. With approximately 20 UNLIMITED deals closed in only two months, we believe our intuition was correct. These sales included selling UNLIMITED into our install base, including recovery of three accounts that had previously terminated.”
“Meanwhile, our leadership in global Wi-Fi footprint has expanded dramatically, notably with the partnership with Devicescape announced today that will ultimately add 20M hotspots. Combined with other partnerships which will be announced on the earnings call, we expect the iPass global Wi-Fi network will approximate 50M hotspots by the end of 2015 with roll outs starting immediately, already exceeding our stated goal to double our footprint by the end of the year. EVERYWHERE is quickly becoming a reality, and as this network grows, we are building the foundation to become the obvious choice for providing WiFi-first connectivity, globally, for the Internet of Things.”
“The sheer mass of global hotspots is critically important in establishing a dominant global position in connectivity, but location is equally important. To that end, during this quarter, we–ve added a number of new hotspots in key locations around the world: more airports, hotels, trains and train stations, and public venues. And the product has already achieved the first milestones down the path towards being INVISIBLE. Our increasing bookings and deferred revenue are building the foundation for revenue growth as our significantly reduced operating expenses further shorten the path to profitability.”
Annual Contract Value (ACV), representing the annualized sales value under committed contract for newly acquired customers or significant upsell, was $1.3 million for the second quarter of 2015 up from $0.4 million during the first quarter of 2015, and greater than all of 2014, excluding the HP Asia Pacific partnership.
Signed two new Wi-Fi network provider partnerships (Fon and Devicescape) that will begin providing value in the third quarter and significantly expand our available footprint by year end as we complete the integrations and ramp the hotspots. With these deals alone, we expect to have 50 million available hotspots by December 31, 2015.
We continue to explore creative partnership opportunities to expand our channel and integrate innovative technologies into our platform, including new arrangements with Citrix CubeFree, MobileIron, Okta, OneLogin, and Ping Identity.
For the third quarter of 2015 ending September 30, 2015, iPass anticipates total revenue from continuing operations and adjusted EBITDA income (loss) to be in the following ranges:
iPass will host a live conference call today at 2:00 PM Pacific Time (5:00 PM Eastern Time).
The conference call will be accessible by telephone, toll-free at 888-428-9473 or direct dial at 719-457-1035 with a participant confirmation code of 8106953. The conference call will also be live via webcast on the company–s web site at . The webcast will be available for replay until iPass reports its third quarter 2015 results.
The dial-in number for a telephone replay of the conference call is 888-203-1112 and 719-457-0820 and will be available until August 19, 2015. The confirmation code for the replay is 8106953.
The statements in this press release that iPass– global Wi-Fi footprint should ramp to 50 million hotspots by year end, that iPass– EVERYWHERE is becoming a reality, that significantly reduced operating expenses should shorten the path to profitability, that Wi-Fi network provider partnerships with Fon and Devicescape should significantly expand iPass– available footprint, the UNLIMITED subscription model would shorten the 9-18 month average sales cycle, our increasing bookings and deferred revenue are building the foundation for revenue growth, and iPass– projections of its third quarter 2015 financial results under the caption “Third Quarter 2015 Guidance,” are forward-looking statements. Actual results may differ materially from the expectations contained in these statements due to a number of risks and uncertainties, including the following: the risk that consumers and customers will not perceive the benefits of iPass UNLIMITED, iPass EVERYWHERE and iPass INVISIBLE to be as iPass expects; the risk that iPass will not be able to achieve the cost savings that iPass currently expects; the risk that the “End of Life” of iPass– legacy Mobile Office product may negatively impact customer retention and mobility revenues more than iPass expects; the risk that the Open Mobile platform and Open Mobile Exchange will not continue to achieve the market acceptance iPass expects; the risk of material reductions in iPass customers– existing minimum commitments more than iPass currently expects; the risk that iPass does not accurately predict usage for its Enterprise Flat Rate price plan which could result in iPass expenses exceeding revenues for these plans; the risk that iPass customers do not widely deploy iPass Open Mobile on smartphones, tablets and other mobile handheld devices at the rate iPass expects; the risk that demand for Mobility Services does not grow as iPass expects; the risk that strong competition in the market for Mobility Services could reduce demand for iPass– services; and the risk that a meaningful portion of iPass business is international, which subjects iPass to additional risks such as currency fluctuations. Detailed information about these and other risk factors that could potentially affect iPass– business, financial condition and results of operations are included in iPass– Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2015, and available at its Web site at and the company–s website at . iPass undertakes no responsibility to update the information in this press release if any forward-looking statement later turns out to be an inaccurate prediction of the actual results.
In addition, investors and others should note that iPass announces material financial information to its investors using its investor relations website, SEC filings, press releases, public conference calls and webcasts. iPass also uses social media to communicate with its customers and the public about iPass, its products and services and other matters relating to its business and market. It is possible that the information iPass posts on social media could be deemed to be material information. Therefore, iPass encourages investors, the media, and others interested in iPass to review the information it posts on U.S. social media channels including the iPass Twitter Feed, the iPass LinkedIn Feed, the iPass Google+ Feed, the iPass Facebook Page, the iPass Blog, the iPass Instagram account, and the iPass Pinterest account. These social media channels may be updated from time to time.
This press release also contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (GAAP). iPass considers Adjusted EBITDA as a supplemental measure of the company–s performance that is not required by, nor presented in accordance with GAAP.
The company defines Adjusted EBITDA as net income (loss) before interest, income taxes, depreciation and amortization, stock-based compensation, restructuring charges, net income (loss) from discontinued operations, CEO exit costs — severance, proxy contest costs and nonrecurring legal costs. The company believes Adjusted EBITDA provides a meaningful comparison between its core operating results, on a consistent basis, over different periods of time. Accordingly, management uses this financial measure for evaluating and making operating decisions and for purposes of comparison with its strategic plan, operating budgets and allocation of resources.
Furthermore, iPass believes the use of Adjusted EBITDA is useful to investors:
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.
Adjusted EBITDA should not be considered in isolation, or construed as an alternative to net income, or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of the company–s liquidity. In addition, other companies may calculate Adjusted EBITDA differently than iPass does, which would limit its usefulness in comparing iPass– financial results with those of such other companies.
iPass delivers global, mobile connectivity as a hosted cloud service, connecting its customers with the people and information that matter the most on all of the devices they choose to carry: smartphones, tablets and laptops. Founded in 1996, iPass (NASDAQ: IPAS) is the world–s largest commercial Wi-Fi network. As of June 30, 2015, iPass has over 20 million hotspots in airports, hotels, airplanes and public areas in more than 120 countries and territories across the globe. In the rapidly changing technology of Internet connectivity, iPass is the industry pioneer in ensuring businesses have unlimited access to unlimited content. For almost two decades, the name iPass has been synonymous with the internet and keeping customers connected.
NOTE: iPass® is a registered trademark of iPass Inc. Open Mobile, OME, Open Mobile Express, Open Mobile Exchange and OMX are trademarks of iPass Inc. Wi-Fi® is a registered trademark of the Wi-Fi Alliance. Other company names, logos and product or service names mentioned herein are the trademarks owned by their respective owners.
iPass tracks three key metrics including (i) the number of active Open Mobile Platform users, (ii) the number of Open Mobile Wi-Fi Network users, and starting this year (iii) total deferred revenue. Each user metric below is calculated as Average Monthly Monetized Users (AMMU), defined as the average number of active users per month, during a given quarter, for which a fee was billed by iPass for either Wi-Fi or Platform services. Deferred Revenue reflects both short-term and long-term deferred revenue as reported on our GAAP balance sheet.
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