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Novatel Wireless, Inc. (NVTL)

Q4 2008 Earnings Call Transcript

February 26, 2009 5:00 pm ET

Executives

Julie Cunningham – VP, IR & Communications

Peter Leparulo – Chairman & CEO

Ken Leddon – SVP & CFO

Analysts

Mathew Hoffman – Cowen and Company

Mike Walkley – Piper Jaffray

Paul Coster – JPMorgan

Doug Ireland – JMP Securities

Bryan Blair [ph] – Ledge Partners [ph]

Presentation

Operator

Good afternoon, ladies and gentlemen, welcome to the Novatel Wireless fourth quarter and full fiscal year earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator instructions)

Now I'd like to turn the conference over to Ms. Julie Cunningham, Vice President of Investor Relations. Please go ahead.

Julie Cunningham

Good afternoon, everyone, and thanks for joining us. The agenda for today's call is as follows

Peter Leparulo, Chairman and CEO will provide an overview of the quarter and the full year 2008 and Ken Leddon, Chief Financial Officer will review the financial results.

As a reminder this conference call is being broadcast on Thursday, February 26, 2009 over the phone and the internet to all interested parties. The information shared in this call is effective as of today's date and will not be updated.

During this call, non-GAAP financial measures will be discussed. Reconciliations to the most recently comparable GAAP financial measures are included in our fourth quarter earnings release, which is available on the Investor Relations page of our Web site at www.novatelwireless.com. The audio replay of this call will also be archived there.

Today's discussion may contain forward-looking statements. These forward-looking statements are not historical facts but rather are based on the Company's current expectations and beliefs. The Company's actual results may differ materially. Please refer to our SEC filings for a detailed discussion of potential risks.

Now I would like to introduce Peter Leparulo, Chairman and Chief Executive Officer of Novatel Wireless.

Peter Leparulo

Thanks to all of you for joining us today. Preliminary results for the fourth quarter of 2008 were $65.1 million of revenues, slightly above the mid-point of our guidance with net loss of $0.06 per diluted share on a non-GAAP basis and a net loss of $0.10 per diluted share on a GAAP basis.

For the full year we reported revenue of $321 million. GAAP net loss of $1.2 million or $0.04 per diluted share and non-GAAP net income excluding FAS 123 our stock-based compensation expenses of 3.8 million or $0.12 per diluted share.

Our results were significantly impacted by the current economic environment. We are seeing decreased customer demand along with tighter inventory control by our carrier partners. Additionally, and as expected, we are seeing our competitors to be aggressive in the marketplace especially in Europe.

Market and competitive issues impacted gross margins in the quarter, but we expect them to substantially improve in the first quarter of 2009. In this environment, we are focused on controlling cost and ensuring that we maintain a very strong balance sheet.

With over $143 million in cash in investments which was essentially flat from the prior quarter, we are well positioned even with the decrease in year-over-year revenues in 2008.

I would like to talk about our strategic direction, the principle initiatives that we will undertake throughout 2009 and beyond and the progress that we have made with them. Our long-term strategic direction is to provide end-to-end mobile broadband solutions. This means bringing to market new devices with mobile broadband enabled applications running over the carrier network often on hostage server.

As the operators' offer more content and services to broadband users, we believe we can support them by offering a variety of solutions that can scale to meet their needs and provide new models for extending their business. Near-term, we are focused on four key objectives that revolve around building the company's competitive position in new markets, while at the same time navigating this unprecedented economic environment.

First is our focus on our core business where we are rolling out new products that we believe lead technology transitions for both the coming technology upgrade cycles and for platform cost reductions. We will continue to differentiate our new products as much as possible with new form factors, value added software and design. We will also leverage our newly developed expertise in mobile internet devices traditional platforms.

Under this initiative, we announced four new products this past month. Two new high performance embedded modules, a high speed HSUPA modem and our first HSPA+ product. Optimized for Europe, the Ovation MC995D USB modem features and extremely streamlined form factor. Taking our design one step further, last week of Mobile World Congress we announced the Ovation MC9960 USB modem which incorporates HSPA+ technology. HSPA+ is the next evolution of HSPA technology with greater capacity for data throughput compared to current 3G networks. PCA [ph] radical data speed using HSPA+ are nearly three times faster than HSUPA and the technology is designed to provide connectivity virtually anywhere in the world. We have been at the forefront of this development of HSPA+ technology which we believe will play a pivotal role in the transition from HSPA to LTE networks.

Earlier this month, we rolled out the E970D and E960D, two new pattern pending embedded modules. These modules provide enhanced upgrade rates of up to 5.7 Mbps which is a substantial increase over the existing Novatel Wireless embedded products. While we do not expect to see growth in the legacy embedded market due to higher lighter laptop sales and the adoption of Gobi overtime, we are getting traction from our content delivery devices.

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