iPass Reports Second Quarter 2018 Financial Results
First iPass SmartConnect™ software license sale results in net Deferred Revenue build of
"The second quarter serves as a clear example of the manifestation of iPass that we started three years ago," said
- Revenue of
$10.5 millionin Q2'18 declined from $11.4 millionin Q1'18 largely driven by churn in the Other Pricing Plan Customers. Deferred revenue increased a net $1.8 millionover March 31, 2018, primarily attributable to the iPass SmartConnectsoftware license signed with Pareteum Corporationduring the second quarter.
- Net Annual Contract Value ("ACV"), defined as the annualized sales value under committed contract for newly acquired or significant upsell customers signed, in Q2’18 totaled
$3.5 millioncompared to $1.6 millionin Q1'18 and $1.2 millionin Q4’17. 85% of second quarter ACV related to the one software license agreement mentioned above.
- 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
$6.8 millionin Q2’18 compared to $1.5 millionin Q1’18 and $1.0 millionin Q4’17. 67% of the second quarter churn was driven by four customers; a write-down of a strategic partner account that moved from commitment to pure pay-as-you-go on a limited subset of the iPass network, termination of two EMEA enterprise customers on legacy Other Pricing Plans, and termination of one US enterprise customer on a legacy Other Pricing Plan.
- Network Access Cost ("NAC") was
$6.3 millionin Q2'18, down from $6.8 millionin Q1'18 and $9.1 millionin Q4'17, as Gross Margin declined slightly to 26.7% in Q2 compared to 28.0% in Q1 on lower revenue.
- Financing for Q2'18 included
$3.3 millionfrom the sale of equity under the common stock purchase agreement signed in November 2017, plus $10.0 millionin debt, less $1.6 millionof cash issuance costs, from a credit agreement signed in June 2018.
"While the nature of the licensing and data deals we are pursuing typically require long sales cycles characterized by extensive field trials and evaluation, we've been engaged in these trials, in some cases for several months, with a number of important potential partners. With the demand for mobile data continuing to accelerate, and the capacity to fulfill this demand constrained by the realities of capital and spectrum, the need for complementary networks - like Wi-Fi - has never been stronger. But more important than additional network capacity is having the technology and data that can automatically determine the right network at the right time, the advantages that
Selected Financial Results
|Three Months Ended|
|(unaudited; in millions)|
|Revenue Mobile Connectivity Services||10.5||11.4||13.5|
|Other Pricing Plan Customers||5.7||6.6||9.0|
|Network Access Costs||6.3||6.8||9.6|
|Gross Margin (1)||26.7||%||28.0||%||17.5||%|
|Network Operations Expense||1.4||1.4||1.5|
|R&D, S&M, and G&A expense||7.4||7.0||7.3|
|Total Operating Expenses||8.8||8.4||8.8|
|Other income (expense) and provision for income taxes||0.1||(0.2||)||(0.4||)|
|GAAP Total Net Loss||(4.5||)||(4.0||)||(5.3||)|
|Adjusted EBITDA Loss (2)||(3.7||)||(3.4||)||(4.4||)|
|Shares of Common Stock Outstanding at Period End||79.5||70.4||66.7|
|Cash and Cash Equivalents||$||8.2||$||2.8||$||10.4|
|Deferred Revenue (Short-term plus Long-term)||$||4.9||$||3.1||$||2.9|
- Gross Margin is defined as Total Revenue less Network Access Costs less Network Operations Expense divided by Total Revenue.
- See “Information Regarding Non-GAAP Financial and Operational Measures” for a definition of iPass Adjusted EBITDA.
Key Operating Metrics
The following are several key metrics iPass tracks to evaluate operating performance. Together they provide insights into our Wi-Fi network acquisition strategy, consumption of network, and active users of our network services.
|For the Quarter Ended|
|(in thousands except percentages and TB)|
|Committed purchase capacity(1)||54||%||63||%||88||%||84||%||85||%|
|Total purchased capacity (TB)(2)||75||79||90||89||88|
|Network Hours Consumed(4):|
|Unlimited and strategic partnerships||328||371||500||645||521|
|Other pricing plans||194||208||270||298||327|
|Total Network Hours Consumed||522||579||770||943||848|
|Wi-Fi Network Users(5):|
|Total Wi-Fi Network Users||135||150||165||174||173|
- Committed purchase capacity is the percentage of total quarterly NAC related to committed Wi-Fi capacity deals (versus pay-as-you-go deals).
- Total purchased capacity is the average monthly Wi-Fi network usage capacity in a given quarter, shown in terabytes.
- Capacity consumed is shown as a percentage of total purchased capacity consumed in a given quarter.
- Network Hours Consumed represents the average monthly number of hours used by our customers on our commercial footprint in a given quarter.
- 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).
iPass will host a live conference call today at
The telephone replay dial-in numbers are 1-844-512-2921 and 1-412-317-6671 and will be available until
The statements in this press release including statements under the caption "Financial Outlook" contain forward-looking statements. Actual results may differ materially from the expectations contained in these statements due to a number of risks and uncertainties. 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
In addition, investors and others should note that iPass announces material financial information to its investors using its investor relations website,
Information Regarding Non-GAAP Financial and Operational Measures
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 iPass' performance that is not required by, nor presented in accordance with GAAP.
iPass defines Adjusted EBITDA as net income (loss) before interest, income taxes, depreciation, stock-based compensation, and nonrecurring legal and financing costs. iPass 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:
- To provide an additional analytical tool for understanding iPass’ financial performance by excluding the impact of items which may obscure trends in the core operating performance of the business;
- To provide consistency and enhance investors’ ability to compare iPass' performance across financial reporting periods; and
- To facilitate comparisons to the operating results of other companies in iPass' 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 defines a key operating metric, ACV, or Annual Contract Value, as the annualized sales value committed under contract for newly acquired customers or significant upsell. ACV is not an alternative measure for GAAP revenue but only an operational metric we believe to be a leading indicator of future revenue. ACV has not met all five steps to recognize revenue. For example, while we may have identified a contract with a customer, performance obligations may not yet have been satisfied. When a previously reported ACV customer fails to perform under the contract, such remaining calculated ACV will be reversed in the current period.
iPass (NASDAQ: IPAS) is a leading provider of global mobile connectivity, offering simple, secure, always-on Wi-Fi access on any mobile device. Built on a software-as-a-service (SaaS) platform, the iPass cloud-based service keeps its customers connected by providing unlimited Wi-Fi connectivity on unlimited devices. iPass is the world’s largest Wi-Fi network, with more than 65 million hotspots globally, at airports, hotels, train stations, convention centers, outdoor venues, inflight, and more. Using patented technology, the iPass SmartConnect™ platform takes the guesswork out of Wi-Fi, automatically connecting customers to the best hotspot for their needs. Customers simply download the iPass app to experience unlimited, everywhere, and invisible Wi-Fi.
iPass® is a registered trademark of
IR Contact: Please call us at 650-232-4205 or email us at email@example.com.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; in thousands)
|Cash and cash equivalents||$||8,165||$||5,159|
|Accounts receivable, net||8,181||8,717|
|Other current assets||521||712|
|Total current assets||18,321||16,229|
|Property and equipment, net||1,000||1,334|
|Liabilities and Stockholders’ Equity (Deficit)|
|Deferred revenue, short-term||4,827||3,723|
|Total current liabilities||14,517||16,501|
|Deferred revenue, long-term||26||102|
|Other long-term liabilities||1,033||1,009|
|Stockholders’ equity (deficit):|
|Additional paid-in capital||231,830||226,490|
|Total stockholders’ equity (deficit)||(2,220||)||791|
|Total liabilities and stockholders’ equity (deficit)||$||20,200||$||18,403|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(Unaudited; in thousands, except share and per share data)
|Three Months Ended
|Six Months Ended
|Cost of revenue and operating expenses:|
|Network access costs||6,339||9,598||13,183||19,157|
|Research and development||1,967||2,137||3,920||4,111|
|Sales and marketing||2,439||2,615||4,908||5,069|
|General and administrative||2,980||2,546||5,569||5,318|
|Total cost of revenue and operating expenses||15,104||18,410||30,343||36,861|
|Interest income (expense), net||(43||)||14||(36||)||28|
|Foreign exchange gain (loss)||150||(129||)||7||(179||)|
|Loss before provision for income taxes||(4,462||)||(5,051||)||(8,410||)||(9,252||)|
|Provision for income taxes||61||217||126||332|
|Net loss per share - basic and diluted||$||(0.06||)||$||(0.08||)||$||(0.12||)||$||(0.15||)|
|Weighted average shares outstanding - basic and diluted||74,226,596||65,667,559||72,045,226||65,616,234|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in thousands)
|Six months ended June 30,|
|Cash flows from operating activities:|
|Adjustments to reconcile net loss to net cash used in operating activities:|
|Stock-based compensation expense||655||693|
|Depreciation and amortization||346||796|
|Provision for doubtful accounts||73||110|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other current assets||533||(258||)|
|Net cash used in operating activities||(9,430||)||(5,530||)|
|Cash flows from investing activities:|
|Purchases of property and equipment||(21||)||(437||)|
|Net cash used in investing activities||(21||)||(437||)|
|Cash flows from financing activities:|
|Proceeds from debt financing||10,000||—|
|Issuance cost of debt financing||(1,396||)||—|
|Net proceeds from issuance of common stock||—||263|
|Proceeds from common stock purchase agreement||3,891||—|
|Issuance cost of common stock purchase agreement||(38||)||—|
|Net cash provided by financing activities||12,457||263|
|Net increase (decrease) in cash and cash equivalents||3,006||(5,704||)|
|Cash and cash equivalents at beginning of period||5,159||16,072|
|Cash and cash equivalents at end of period||$||8,165||$||10,368|
|Supplemental disclosures of cash flow information:|
|Net cash paid for taxes||$||36||$||116|
|Accrued amounts for acquisition of property and equipment||$||—||$||151|
|Accrued issuance costs from debt financing||$||232||$||—|
|Fair value of warrants issued in connection with debt financing||$||843||$||—|
|Fair value of derivative liability in connection with debt financing||$||685||$||—|
RECONCILIATION OF NON-GAAP TO GAAP METRICS
(Unaudited, in thousands)
|Three Months Ended|
|GAAP Net loss||$||(4,523||)||$||(4,013||)||$||(5,268||)|
|Interest (income) expense||43||(7||)||(14||)|
|Income tax expense||61||65||217|
|Depreciation of property and equipment||148||198||342|
|Stock-based compensation expense||311||344||343|
|Nonrecurring legal and financing costs||236||—||20|
|Adjusted EBITDA loss||$||(3,724||)||$||(3,413||)||$||(4,360||)|