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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