Mixed Bag for Novatel Wireless - Analyst Blog

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Novatel Wireless Inc. ( NVTL ) reported mixed results in the first quarter of 2012 as the bottom line missed the Zacks Consensus Estimate while the top line beat our expectation.

On a GAAP basis, net loss in the reported quarter was $37.9 million or $1.17 per share, deteriorating considerably from the year-ago net loss of $22.1 million or 69 cents per share. However, adjusted loss per share of20 cents in the first quarter of 2012 was worse than the Zacks Consensus Estimate of a loss of 12 cents per share.

Total revenue in the reported quarter stood at $100.2 million, up 62.1% year over year and also ahead of the Zacks Consensus Estimate of $92 million. The year-over-year revenue growth was mainly attributable to improved performance in the Mobile Broadband Device segment.


Revenue by Product Category

Revenue from Mobile Broadband Devices (Mobile Computing Products) was $90.9 million, up 82.5% year over year. Embedded Solutions (M2M Products and Solutions) revenue was $9.3 million, down 22.5% year over year.

Operational Highlights

Gross margin was 21% in the quarter compared with 9.7% in the year-ago quarter. Operating expenses (excluding amortization and Goodwill impairment charges) in the reported quarter were $29 million compared with $27.6 million in the prior-year quarter.

During the reported quarter, Novatel generated negative cash flow of $18.2 million from operations compared with $36.5 million in the year-ago quarter. Free cash flow was negative $19.4 million compared with $37.9 million in the previous quarter. At the end of the first quarter of 2012, Novatel had approximately $52.6 million in cash & marketable securities on its balance sheet compared with $75.4 million at the end of fiscal 2011. The balance sheet of Novatel remains debt free.

Financial outlook

Management provided revenue guidance for the second quarter of 2012 in the range of $92 million-$104 million. Non-GAAP gross margin is expected to be between 22% and 23%. Non-GAAP EPS is anticipated in the band of a loss of 17 cents per share to profit of 7 cents per share.

Recommendation

We believe that the continuous launch of innovative products like 4G LTE-capable MiFi Intelligent Mobile Hotspot technology and the world's thinnest 4G LTE-enabled USB modem called Ovatio MC679 to large carriers like Verizon Communication Inc. ( VZ ) and TELUS Corporation ( TU ) will create future growth prospect for the company. Moreover, Novatel's diversification into machine-to-machine (M2M) intelligent asset management solutions and newly developed insurance telematics and fleet management products will further boost its top-line growth going forward. We, thus maintain our long-term Neutral recommendation on Novatel.

Currently, Novatel has a Zacks #3 Rank, implying a short-term Hold rating on the stock.


 
NOVATEL WIRELES (NVTL): Free Stock Analysis Report
 
TELUS CORP (TU): Free Stock Analysis Report
 
VERIZON COMM (VZ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: NVTL , TU , VZ

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