Airvana Reports Third Quarter 2009 Financial Results
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Demand for Mobile Broadband Services Drives Outlook for Growth in Fourth Quarter
CHELMSFORD, Mass.--(BUSINESS WIRE)-- Airvana, Inc. (NASDAQ: AIRV), a leading provider of mobile broadband network infrastructure products, today reported financial results for the quarter ended September 27, 2009. Airvana presents both GAAP and non-GAAP financial metrics below because management believes that the combination provides a more complete understanding of the company's operating performance.
GAAP Financial Highlights
-- Revenue:Total revenue for the third quarter of 2009 was $2.7 million,
compared with $8.2 million for the third quarter of 2008. For the first
nine months of 2009, total revenue was $16.9 million, compared with
$74.9 million for the first nine months of 2008.
-- Net Loss/Income:Net loss for the third quarter of 2009 was $16.9
million, compared with a net loss of $12.4 million for the third quarter
of 2008. For the first nine months of 2009, net loss was $38.1 million,
compared with a net loss of $3.6 million for the first nine months of
2008.
Non-GAAP Financial Highlights
-- Product and Service Billings ("Billings"):Billings for the third quarter
of 2009 were $31.2 million, compared with $43.0 million for the third
quarter of 2008. For the first nine months of 2009, Billings were $103.3
million, including $14.6 million of pre-bankruptcy filing outstanding
invoices to Nortel Networks Inc. ("Nortel") for sales to Nortel prior to
Nortel's Chapter 11 bankruptcy protection filing on January 14, 2009,
compared with $107.1 million for the comparable period of 2008.
Airvana has excluded from deferred revenue and Billings a total of $36.4 million of outstanding invoices related to royalties earned prior to Nortel's bankruptcy filing. Airvana's collection of these invoices is subject to the consummation of Telefon AB L.M. Ericsson's acquisition of Nortel's CDMA business and the assignment of the Airvana contract to Ericsson. Airvana expects the transaction to close in the fourth 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 on Billings:Operating profit on Billings for the third
quarter of 2009 was $0.8 million, compared with $14.3 million for the
third quarter of 2008. For the first nine months of 2009, Airvana's
operating profit on Billings was $15.0 million, including the $14.6
million of pre-bankruptcy filing invoices to Nortel, compared with $23.7
million for the first nine 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 EV-DO Products
"Airvana's underlying business remained strong in the third quarter as mobile broadband traffic in operator networks continued its trajectory of strong growth," said Randy Battat, Airvana's president and chief executive officer. "As we had expected, some EV-DO upgrade Billings moved out of the third quarter due to Ericsson's pending acquisition of Nortel's CDMA business."
"Looking ahead, we expect continued growth in data traffic, which is increasingly fueled by the growth of smartphones, to drive healthy demand for our EV-DO products in the fourth quarter of 2009," Battat said. "We expect to start shipping upgrades of our version 8.0 software in conjunction with the closing of the Ericsson/Nortel transaction, which we now expect to occur in November. As a result, we expect fourth quarter 2009 EV-DO Billings to be higher than the fourth quarter of 2008, and second half EV-DO shipments to be higher than the first half of this year."
Comments on Femtocell Products
"The femtocell's time has come," Battat said. "We have been awarded several commercial deployments around the world with contracts in place and purchase commitments for significant volumes in 2010 and beyond. Both our CDMA and UMTS femtocell products are in the final stages of software development and testing, with commercial production starting late this quarter and ramping in the first quarter of 2010. We expect operator launches with Airvana products, especially in North America and Asia, starting in the first half of 2010."
Business and Financial Outlook
"We expect fourth-quarter 2009 Billings to be in the range of $44 million to $46 million, compared with $39.8 million in the fourth quarter of 2008. We expect full-year shipments to be in the range of $147 million to $149 million, compared with $146.8 million in 2008," Battat said. "This outlook is based on our current expectation that the Nortel/Ericsson transaction closes in November and is exclusive of collection of pre-bankruptcy filing outstanding invoices to Nortel. We expect GAAP revenue in the range of $38 million to $40 million, compared with revenue of $63.3 million in the fourth quarter of the prior year. For full-year 2009, we expect revenue in the range of $55 million to $57 million, compared with revenue of $138.2 million in 2008.
"We have a lot of software in the development pipeline for our EV-DO customers," Battat said. "We expect to deliver three major releases in 2010."
"We expect to ship limited quantities of femtocell pre-production units in the fourth quarter of 2009, and we expect femtocell products to represent less than 10% of Billings for the fourth quarter of 2009 and the full year," Battat said. "We expect to start volume production of femtocell products in the fourth quarter of 2009 with shipments ramping significantly in 2010."
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) 709-8155 or (201) 689-8881. 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 Billingsreflects Billings less costs related to Billings
in the period.
-- Operating Profit on Billingsreflects 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 Telefon AB L.M. Ericsson, as successor owner of Nortel's CDMA business, and the closing of Ericsson's purchase of Nortel's CDMA business, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements typically contain words such as "believes," "anticipates," "plans," "expects," "will," "continue," "outlook" and similar terms. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including without limitation Airvana's ability to secure court approval for payment of its outstanding invoices to Nortel, Airvana's ability to maintain its relationship with the successor owner of Nortel's CDMA business, 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 Nine Months Ended
September 28, September 27, September 28, September 27,
2008 2009 2008 2009
Revenue:
Product $ 5,362 $ 242 $ 65,679 $ 8,518
Service 2,885 2,484 9,225 8,351
Total revenue 8,247 2,726 74,904 16,869
Cost of revenue:
Product 426 359 1,860 1,227
Service 2,226 2,541 6,032 7,622
Total cost of revenue 2,652 2,900 7,892 8,849
Gross profit (loss) 5,595 (174 ) 67,012 8,020
Gross margin 68 % -6 % 89 % 48 %
Operating expenses:
Research and 18,859 18,443 56,209 54,202
development
Selling and marketing 3,809 4,245 11,212 12,345
General and 2,281 3,438 6,675 8,311
administrative
Total operating 24,949 26,126 74,096 74,858
expenses
Operating loss (19,354 ) (26,300 ) (7,084 ) (66,838 )
Interest income, net 1,505 426 5,882 3,092
Loss before income (17,849 ) (25,874 ) (1,202 ) (63,746 )
tax expense
Income tax (benefit) (5,404 ) (9,019 ) 2,354 (25,655 )
expense
Net loss $ (12,445 ) $ (16,855 ) $ (3,556 ) $ (38,091 )
Net loss per common
share:
Basic $ (0.19 ) $ (0.27 ) $ (0.06 ) $ (0.61 )
Diluted $ (0.19 ) $ (0.27 ) $ (0.06 ) $ (0.61 )
Weighted average
common shares
outstanding:
Basic 64,965 62,341 64,487 62,417
Diluted 64,965 62,341 64,487 62,417
Exhibit 1
Airvana, Inc.
GAAP to Non-GAAP Product and Service Billings Reconciliation
(Amounts in thousands)
(Unaudited)
Three Months Ended September 28, 2008 Three Months Ended September 27, 2009
Deferral Adjusted Deferral Adjusted Pro Forma Pro Forma
GAAP GAAP Nortel
GAAP Adjustments Results GAAP Adjustments Results Adjustments Results (1)
(1)
Revenue $ 8,247 $ 34,738 $ 42,985 $ 2,726 $ 28,522 $ 31,248 $ - $ 31,248
Cost of 2,652 1,043 3,695 2,900 1,390 4,290 - 4,290
revenue
Gross profit 5,595 33,695 39,290 (174 ) 27,132 26,958 - 26,958
(loss)
Gross margin 68 % 91 % -6 % 86 % 86 %
Operating 24,949 - 24,949 26,126 - 26,126 - 26,126
expenses
Operating
(loss) (19,354 ) 33,695 14,341 (26,300 ) 27,132 832 - 832
income from
operations
Operating -235 % 33 % -965 % 3 % 3 %
margin
Stock-based 1,278 - 1,278 1,687 - 1,687 - 1,687
compensation
Operating
(loss)
income $ (18,076 ) $ 33,695 $ 15,619 $ (24,613 ) $ 27,132 $ 2,519 $ - $ 2,519
excluding
stock
compensation
Operating
margin
excluding -219 % 36 % -903 % 8 % 8 %
stock
compensation
Nine Months Ended September 28, 2008 Nine Months Ended September 27, 2009
Deferral Adjusted Deferral Adjusted Pro Forma Pro Forma
GAAP GAAP Nortel
GAAP Adjustments Results GAAP Adjustments Results Adjustments Results (1)
(1)
Revenue $ 74,904 $ 32,156 $ 107,060 $ 16,869 $ 71,847 $ 88,716 $ 14,624 $ 103,340
Cost of 7,892 1,347 9,239 8,849 4,669 13,518 - 13,518
revenue
Gross profit 67,012 30,809 97,821 8,020 67,178 75,198 14,624 89,822
Gross margin 89 % 91 % 48 % 85 % 87 %
Operating 74,096 - 74,096 74,858 - 74,858 - 74,858
expenses
Operating
(loss) (7,084 ) 30,809 23,725 (66,838 ) 67,178 340 14,624 14,964
income from
operations
Operating -9 % 22 % -396 % 0 % 14 %
margin
Stock-based 3,542 - 3,542 4,500 - 4,500 - 4,500
compensation
Operating
(loss)
income $ (3,542 ) $ 30,809 $ 27,267 $ (62,338 ) $ 67,178 $ 4,840 $ 14,624 $ 19,464
excluding
stock
compensation
Operating
margin
excluding -5 % 25 % -370 % 5 % 19 %
stock
compensation
Note (1): On January 14, 2009, Nortel filed for bankruptcy protection. For the nine months ended September 27, 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 September 27, 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, September 27,
2008 2009
ASSETS
Current assets
Cash and cash equivalents $ 30,425 $ 12,819
Investments 197,941 163,484
Restricted investments - 210
Accounts receivable 3,354 18,436
Deferred product cost 1,913 3,017
Prepaid taxes & deferred tax assets, net 2,168 28,909
Prepaid expenses and other current assets 2,758 3,861
Total current assets 238,559 230,736
Property and equipment 14,425 17,822
Less: accumulated depreciation and amortization 9,603 12,039
Property and equipment, net 4,822 5,783
Deferred product and service cost, long-term 1,300 4,865
Long-term investments - 29,023
Prepaid taxes & deferred tax assets, net 956 3,758
Restricted investments 193 193
Goodwill and intangible assets, net 11,096 10,295
Other assets 410 877
Total assets $ 257,336 $ 285,530
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,455 $ 3,159
Accrued expenses and other current liabilities 14,365 12,074
Accrued income taxes 1,897 954
Deferred revenue 61,310 124,260
Total current liabilities 82,027 140,447
Deferred revenue, long-term 5,550 14,447
Other liabilities 1,174 783
Accrued income taxes 5,703 6,025
Total long-term liabilities 12,427 21,255
Stockholders' equity:
Common stock 63 63
Additional paid-in capital 186,824 185,861
Accumulated deficit (24,005 ) (62,096 )
Total stockholders' equity 162,882 123,828
Total liabilities and stockholders' equity $ 257,336 $ 285,530
Exhibit 2
Airvana, Inc.
2009 GAAP to Pro Forma Balance Sheet Reconciliation
(Amounts in thousands)
(Unaudited)
Pro Forma Pro Forma
September 27, Nortel September 27,
2009 Adjustments (1) 2009 (1)
ASSETS
Current assets
Cash and cash equivalents $ 12,819 $ - $ 12,819
Investments 163,484 - 163,484
Restricted investments 210 - 210
Accounts receivable 18,436 36,442 54,878
Deferred product cost 3,017 - 3,017
Prepaid taxes & deferred tax 28,909 - 28,909
assets, net
Prepaid expenses and other 3,861 - 3,861
current assets
Total current assets 230,736 36,442 267,178
Property and equipment 17,822 - 17,822
Less: accumulated depreciation 12,039 - 12,039
and amortization
Property and equipment, net 5,783 - 5,783
Deferred product cost, long-term 4,865 - 4,865
Long-term investments 29,023 - 29,023
Deferred tax assets 3,758 - 3,758
Restricted investments 193 - 193
Goodwill and intangible assets, 10,295 - 10,295
net
Other assets 877 - 877
Total assets $ 285,530 $ 36,442 $ 321,972
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Accounts payable $ 3,159 $ - $ 3,159
Accrued expenses and other 12,074 - 12,074
current liabilities
Accrued income taxes 954 - 954
Deferred revenue 124,260 36,332 160,592
Total current liabilities 140,447 36,332 176,779
Deferred revenue, long-term 14,447 - 14,447
Other liabilities 783 - 783
Accrued income taxes 6,025 - 6,025
Total long-term liabilities 21,255 - 21,255
Stockholders' equity:
Common stock 63 - 63
Additional paid-in capital 185,861 - 185,861
Accumulated deficit (62,096 ) 110 (61,986 )
Total stockholders' equity 123,828 110 123,938
Total liabilities and $ 285,530 $ 36,442 $ 321,972
stockholders' equity
Note (1): On January 14, 2009, Nortel filed for bankruptcy protection. As of September 27, 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 September 27, 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 Nine Months Ended
September 28, September 27, September 28, September 27,
2008 2009 2008 2009
Operating activities
Net loss $ (12,445 ) $ (16,855 ) $ (3,556 ) $ (38,091 )
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation 814 832 2,435 2,410
Amortization of 267 267 801 801
intangible assets
Stock-based 1,278 1,687 3,542 4,500
compensation
Deferred tax (5,404 ) (14,823 ) 2,354 (14,365 )
(expense) benefit
Excess tax benefit
related to exercise (481 ) (892 ) (1,978 ) (1,792 )
of stock options
Amortization of (971 ) 477 (3,381 ) 5
investments
Unrealized gain on
forward foreign - 513 - (188 )
currency exchange
contracts
Amortization of (130 ) (131 ) (391 ) (391 )
leasehold incentive
Changes in operating
assets and
liabilities:
Accounts receivable (152 ) (8,943 ) 6,078 (15,082 )
Deferred cost (1,043 ) (1,390 ) (1,347 ) (4,669 )
Prepaid taxes (8,877 ) 5,170 (8,762 ) (13,386 )
Prepaid expenses and (960 ) 121 (177 ) (915 )
other current assets
Accounts payable 1,027 413 (1,187 ) (1,296 )
Accrued expenses and
other current 4,535 (734 ) 2,624 (2,286 )
liabilities
Accrued income taxes (125 ) 415 (15,901 ) (621 )
Deferred revenue 34,738 28,522 32,156 71,847
Net cash provided by
(used in) operating 12,071 (5,351 ) 13,310 (13,519 )
activities
Investing activities
Purchases of property (534 ) (784 ) (1,567 ) (3,371 )
and equipment
Purchase of (72,834 ) (53,793 ) (248,627 ) (192,861 )
investments
Maturities of 83,490 52,500 231,299 198,290
investments
Restricted - - - (210 )
investments
Investments sold - - 16,631 -
Other assets 32 (456 ) 51 (467 )
Net cash provided by
(used in) investing 10,154 (2,533 ) (2,213 ) 1,381
activities
Financing activities
Payments on long-term (7 ) - (119 ) -
debt
Payments of cash (21 ) - (71 ) (5 )
dividend
Purchase and
retirement of (3,547 ) (369 ) (3,547 ) (9,291 )
treasury stock
Excess tax benefit
related to exercise 481 892 1,978 1,792
of stock options
Proceeds from
exercise of stock 733 870 2,219 2,036
options
Net cash provided by
(used in) financing (2,361 ) 1,393 460 (5,468 )
activities
Effect of exchange
rates on cash and 144 - 216 -
cash equivalents
Net increase
(decrease) in cash 20,008 (6,491 ) 11,773 (17,606 )
and cash equivalents
Cash and cash
equivalents at 35,312 19,310 43,547 30,425
beginning of period
Cash and cash
equivalents at end of $ 55,320 $ 12,819 $ 55,320 $ 12,819
period
Exhibit 3
Airvana, Inc.
Select Quarterly Financial Data - GAAP & non-GAAP Metrics
(Amounts in thousands)
(Unaudited)
Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma Pro Forma
Nortel Nortel Nortel Nortel
Mar 30, Jun 29, Sep 28, Dec 28, Mar 29, Jun 28, Sep 27, Adjustments Dec 28, Adjustments Mar 29, Adjustments Jun 28, Adjustments Sep 27,
2008 2008 2008 2008 2009 2009 2009 Dec 28, 2008 (1) Mar 29, 2009 (2) Jun 28, 2009 (3) Sep 27, 2009 (4)
2008 (1) 2009 (2) 2009 (3) 2009 (4)
GAAP Financial
Metrics
Total revenue $ 7,638 $ 59,019 $ 8,247 $ 63,269 $ 9,263 $ 4,880 $ 2,726 $ 55 $ 63,324 $ 55 $ 9,318 $ - $ 4,880 $ - $ 2,726
Cost of 1,913 3,327 2,652 3,570 2,547 3,402 2,900 3,570 2,547 3,402 2,900
revenue
Gross profit 5,725 55,692 5,595 59,699 6,716 1,478 (174 ) 55 59,754 55 6,771 - 1,478 - (174 )
Operating 24,910 24,237 24,949 24,639 23,946 24,786 26,126 24,639 23,946 24,786 26,126
expenses
Operating $ (19,185 ) $ 31,455 $ (19,354 ) $ 35,060 $ (17,230 ) $ (23,308 ) $ (26,300 ) $ 55 $ 35,115 $ 55 $ (17,175 ) $ - $ (23,308 ) $ - $ (26,300 )
(loss) profit
Net cash (used
in) provided (2,446 ) 3,685 12,071 (741 ) (24,335 ) 16,167 (5,351 ) - (741 ) - (24,335 ) - 16,167 - -
by operating
activities
Cash, cash
equivalents 220,969 227,491 237,814 228,366 198,394 211,001 205,326 - 228,366 - 198,394 - 211,001 - -
and
investments
Accounts 11,039 7,941 8,093 3,354 13,105 9,493 18,436 21,818 25,172 36,442 49,547 36,442 45,935 36,442 54,878
receivable
Days sales 27 28 17 17 61 23 54 - 57 - 132 - 110 - 160
outstanding(a)
Deferred
revenue - end 110,136 77,396 112,134 66,860 77,124 110,185 138,707 21,763 88,623 36,332 113,456 36,332 146,517 36,332 175,039
of period
Deferred
product cost - 1,651 1,354 2,397 3,213 4,694 6,492 7,882 - 3,213 - 4,694 - 6,492 - 7,882
end of period
Reconciliation
of GAAP and
non-GAAP
Metrics
Revenue (GAAP) $ 7,638 $ 59,019 $ 8,247 $ 63,269 $ 9,263 $ 4,880 $ 2,726 $ 55 $ 63,324 $ 55 $ 9,318 $ - $ 4,880 $ - $ 2,726
Less: deferred
revenue from - - - - - - - - - - - - - - -
acquisition
Deferred
revenue at end 110,136 77,396 112,134 66,860 77,124 110,185 138,707 21,763 88,623 36,332 113,456 36,332 146,517 36,332 175,039
of period
Less: deferred
revenue at (79,978 ) (110,136 ) (77,396 ) (112,134 ) (66,860 ) (77,124 ) (110,185 ) - (112,134 ) (21,763 ) (88,623 ) (36,332 ) (113,456 ) (36,332 ) (146,517 )
beginning of
period
Product and
service
billings, 37,796 26,279 42,985 17,995 19,527 37,941 31,248 21,818 39,813 14,624 34,151 - 37,941 - 31,248
"Billings"
(non-GAAP)
Cost of 1,913 3,327 2,652 3,570 2,547 3,402 2,900 - 3,570 - 2,547 - 3,402 - 2,900
revenue (GAAP)
Deferred
product cost 1,651 1,354 2,397 3,213 4,694 6,492 7,882 - 3,213 - 4,694 - 6,492 - 7,882
at end of
period
Less: deferred
product cost (1,050 ) (1,651 ) (1,354 ) (2,397 ) (3,213 ) (4,694 ) (6,492 ) - (2,397 ) - (3,213 ) - (4,694 ) - (6,492 )
at beginning
of period
Cost related
to Billings 2,514 3,030 3,695 4,386 4,028 5,200 4,290 - 4,386 - 4,028 - 5,200 - 4,290
(non-GAAP)
Gross profit
on Billings 35,282 23,249 39,290 13,609 15,499 32,741 26,958 21,818 35,427 14,624 30,123 - 32,741 - 26,958
(non-GAAP) (b)
Gross margin
on Billings 93 % 88 % 91 % 76 % 79 % 86 % 86 % 89 % 88 % 86 % 86 %
(non-GAAP) (c)
Total
operating 24,910 24,237 24,949 24,639 23,946 24,786 26,126 - 24,639 - 23,946 - 24,786 - 26,126
expenses
(GAAP)
Operating
profit (loss) $ 10,372 $ (988 ) $ 14,341 $ (11,030 ) $ (8,447 ) $ 7,955 $ 832 $ 21,818 $ 10,788 $ 14,624 $ 6,177 $ - $ 7,955 $ - $ 832
on Billings
(non-GAAP) (d)
% operating
profit (loss) 27 % -4 % 33 % -61 % -43 % 21 % 3 % 27 % 18 % 21 % 3 %
on Billings
(non-GAAP)
Total interest
& other 2,585 1,792 1,505 1,358 1,124 1,542 426 1,358 1,124 1,542 426
income, net
(GAAP)
Profit (loss)
before tax on $ 12,957 $ 804 $ 15,846 $ (9,672 ) $ (7,323 ) $ 9,497 $ 1,258 $ 21,818 $ 12,146 $ 14,624 $ 7,301 $ - $ 9,497 $ - $ 1,258
Billings
(non-GAAP) (e)
% profit
(loss) before
tax on 34 % 3 % 37 % -54 % -38 % 25 % 4 % 31 % 21 % 25 % 4 %
Billings
(non-GAAP)
Stock-based
compensation
included in $ 1,085 $ 1,179 $ 1,278 $ 1,302 $ 1,371 $ 1,442 $ 1,687 $ - $ 1,302 $ - $ 1,371 $ - $ 1,442 $ - $ 1,687
operating
expense
Acquisition
costs included - - - - - - - - - - - - - - -
in operating
expense
Profit (loss)
before tax on
Billings
excluding $ 14,042 $ 1,983 $ 17,124 $ (8,370 ) $ (5,952 ) $ 10,939 $ 2,945 $ 13,448 $ 14,624 $ 8,672 $ - $ 10,939 $ - $ 2,945
stock-based
compensation
(non-GAAP) (e)
% profit
(loss) before
tax on
Billings 37 % 8 % 40 % -47 % -30 % 29 % 9 % 34 % 25 % 29 % 9 %
excluding
stock-based
compensation
(non-GAAP) (e)
Note (1): On January 14, 2009, Nortel filed for bankruptcy protection. As of December 28, 2008, Airvana had 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.
Note (4): On January 14, 2009, Nortel filed for bankruptcy protection. As of September 27, 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 September 27, 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 Pro
Nortel
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 2,764 5,537 4,453 6,533 45,295 41,904 11,462 11,462
revenue
Gross (loss) 1,803 1,441 (836 ) (4,186 ) 124,975 263,882 126,711 55 126,766
profit
Operating -
expenses
Research & 17,408 10,089 22,040 42,922 55,073 76,638 74,826 74,826
development
Sales & 4,005 3,582 4,665 5,237 7,729 12,055 14,933 14,933
marketing
General & 1,484 1,201 2,068 3,253 5,068 7,453 8,976 8,976
administrative
In-process R&D - - - - - 2,340 - -
Total
operating 22,897 14,872 28,773 51,412 67,870 98,486 98,735 98,735
expenses
Operating $ (21,094 ) $ (13,431 ) $ (29,609 ) $ (55,598 ) $ 57,105 $ 165,396 $ 27,976 $ 55 $ 28,031
(loss) profit
Net cash
provided by
(used in) (18,600 ) (1,687 ) 43,028 67,390 25,138 91,771 12,569 - 12,569
operating
activities
Cash, cash
equivalents 27,000 33,745 72,321 135,470 160,123 221,963 228,366 - 228,366
and
investments
Deferred
revenue - end 5,837 15,519 118,051 273,124 243,418 79,978 66,860 21,763 88,623
of period
Deferred
product cost - 2,183 3,949 28,196 66,966 34,214 1,050 3,213 - 3,213
end of period
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 - - - - - (171 ) - - -
acquisition
Deferred
revenue at end 5,837 15,519 118,051 273,124 243,418 79,978 66,860 21,763 88,623
of period
Less: deferred
revenue at - (5,837 ) (15,519 ) (118,051 ) (273,124 ) (243,418 ) (79,978 ) - (79,978 )
beginning of
period
Product and
service
billings, 10,404 16,660 106,149 157,420 140,564 142,175 125,055 21,818 146,873
"Billings"
(non-GAAP)
Cost of 2,764 5,537 4,453 6,533 45,295 41,904 11,462 - 11,462
revenue (GAAP)
Deferred
product cost 2,183 3,949 28,196 66,966 34,214 1,050 3,213 - 3,213
at end of
period
Less: deferred
product cost - (2,183 ) (3,949 ) (28,196 ) (66,966 ) (34,214 ) (1,050 ) - (1,050 )
at beginning
of period
Cost related
to Billings 4,947 7,303 28,700 45,303 12,543 8,740 13,625 - 13,625
(non-GAAP)
Gross profit
on Billings 5,457 9,357 77,449 112,117 128,021 133,435 111,430 21,818 133,248
(non-GAAP) (a)
Gross margin
on Billings 52 % 56 % 73 % 71 % 91 % 94 % 89 % 91 %
(non-GAAP) (b)
Operating
expenses
(GAAP):
Research & 17,408 10,089 22,040 42,922 55,073 76,638 74,826 - 74,826
development
% research &
development 167 % 61 % 21 % 27 % 39 % 54 % 60 % 51 %
expense on
Billings
Sales & 4,005 3,582 4,665 5,237 7,729 12,055 14,933 - 14,933
marketing
% sales &
marketing 38 % 22 % 4 % 3 % 5 % 8 % 12 % 10 %
expense on
Billings
General & 1,484 1,201 2,068 3,253 5,068 7,453 8,976 - 8,976
administrative
% general &
administrative 14 % 7 % 2 % 2 % 4 % 5 % 7 % 6 %
expense on
Billings
In-process R&D - - - - - 2,340 - - -
% in-process
R&D expense on 0 % 0 % 0 % 0 % 0 % 2 % 0 % 0 %
Billings
Total
operating 22,897 14,872 28,773 51,412 67,870 98,486 98,735 - 98,735
expenses
(GAAP)
% total
operating 220 % 89 % 27 % 33 % 48 % 69 % 79 % 67 %
expenses
(GAAP)
Operating
profit (loss) $ (17,440 ) $ (5,515 ) $ 48,676 $ 60,705 $ 60,151 $ 34,949 $ 12,695 $ 21,818 $ 34,513
on Billings
(non-GAAP) (c)
% operating
profit (loss) -168 % -33 % 46 % 39 % 43 % 25 % 10 % 23 %
on Billings
(non-GAAP)
Total interest
& other 101 (93 ) 485 3,459 6,602 9,845 7,240 - 7,240
income, net
(GAAP)
Cumulative
effect of
change in - - - - (330 ) - - -
accounting
principle
(GAAP)
Profit (loss)
before tax on $ (17,339 ) $ (5,608 ) $ 49,161 $ 64,164 $ 66,423 $ 44,794 $ 19,935 $ 21,818 $ 41,753
Billings
(non-GAAP) (d)
% profit
(loss) before
tax on -167 % -34 % 46 % 41 % 47 % 32 % 16 % 28 %
Billings
(non-GAAP)
Stock-based
compensation
included in $ - $ - $ - $ - $ 800 $ 2,996 $ 4,844 $ - $ 4,844
operating
expense
Acquisition
costs included - - - - - $ 2,340 - $ -
in operating
expense
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) Gross profit on Billings equals the excess of Billings over cost related to Billings.
(b) Gross margin on Billings equals the excess of Billings over cost related to Billings divided by Billings.
(c) Operating profit on Billings equals Billings less cost related to Billings, less total operating expenses.
(d) 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.
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