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Novatel Wireless Inc. (NVTL)
Q1 2010 Earnings Call
May 6, 2010 05:00 am ET
Julie Cunningham – VP, IR
Peter Leparulo - Chairman and CEO
Ken Leddon - SVP and CFO
Jason Schmidt - Craig-Hallum
Kevin Manning - Bank of Montreal
Previous Statements by NVTL
» Novatel Wireless Q2 2009 Earnings Transcript
» Novatel Wireless, Inc. Q1 2009 Earnings Call Transcript
» Novatel Wireless, Inc. Q4 2008 Earnings Call Transcript
I would now like to turn the conference over to Julie Cunningham, Vice President of Investor Relations. Please go ahead.
Thank you and good afternoon everyone. Joining me on today's call is Peter Leparulo, Chairman and CEO and Ken Leddon, Chief Financial Officer. As a reminder, this conference call is being broadcast on Thursday May 6th, 2010 over the phone and the internet to all interested parties.
The information shared in this call is effective as of today’s day and will not be updated. During this call, non-GAAP financial measures will be discussed. Reconciliation to the most directly comparable GAAP financial measures are included in our first quarter earnings release which is available on the investor relations page of our website 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 belief. The company’s actual result may differ materially.
Please refer to your SEC filings for a detailed discussion of the potential risk. Now I’d like to introduce Peter Leparulo, Chairman and CEO of Novatel Wireless.
Thanks very much Julie. Before we recap our first quarter results, I’d like to address recent reports of battery issues related to my MiFi 2372, a model which was introduced in December 2009 and has been sold principally in Canada. Here are the current facts, we received two reports of battery over heating issues on the MiFi 2372 from our Canadian customers. This issue does not affect the CDMA based WiFi 2200 which represent approximately 90% of our shipment today. We undertake ongoing analysis of battery returns and that analysis shows that overheating is caused by user induced damage such as puncturing the battery with a sharp object or applying excessive force when removing the battery cover.
As a preventative measure we are conducting an exchange program for our Canadian customers to replace the MiFi 2372 battery and battery door to make it easier to open. In addition as a proactive measure, since the MiFi 2352 is based on a similar design we have been shipping all new MiFi 2352 devices with the new battery door. Included in our first quarter results is a warranty cost of $450,000 for estimated expenses associated with this exchange program.
In summary, we believe our program goes beyond what is required to address the current facts and this issue is being properly handled under standard warranty and customer return processes. We will continue to monitor this for any additional developments.
Now turning our attention to Q1 results. Revenues for the quarter were $72.2 million, a modest increase over last year and slightly ahead of our guidance. Gross margins were also ahead of expectations and we kept expenses generally flat leading to non-GAAP net loss of $0.70 per share. In addition our balance sheet remains strong with nearly $185 million in cash and investments or $5.92 per share.
While it was a mixed quarter, we are encouraged by our continued progress with MiFi sales increasing at $34 million or 47% of total revenues. By the end of the first quarter, we achieved cumulative sales over a $114 million on our MiFi platforms in less than one year since its introduction. During the first quarter, we launched MiFi with four operators and two MVNOs including [eight] network at DOCOMO MVNO and internet communications in Japan.
We received notice that the MiFi trademark is now registered and we intend to continue to in force our brand in marketing. As well as in our customers marketing campaigns, MiFi was also named the most innovative non-handset product at the 2010 mobile news awards in the UK last month. The continued critical acclaim for the MiFi platform points our competitive differentiation.
We believe our operator customers understand this product differentiation and the future potentials of our platform that goes well beyond internet connectivity. The MiFi platform is the perfect solution for the new wave of tablet pc’s and similar devices that are now coming to market. And we are working closely with the operators on the next generations of the MiFi family which will offer substantial differentiation over our first generation products.
We are currently in the certification process with our first MiFi open development platform. This product is based on North American HSPA and will include on board application processing and storage powered by the MiFi open operating system. In addition it will feature the MiFi dynamic random page as well as software bundle options that include both NovaDrive Cloud- Storage and (inaudible).
The additions of the apts processor and OS enables native and third party applications and services. Today we also enhance the selection of [pocket year] to host our MiFi App store which we intend to launch in the fall. We are very pleased with the level of operator interest and are excited to see open sell for platform move to commercialization. This feedback combined with the positive and consistent sell through data from our largest customers gives us confident that our MiFi open platform will gain traction as we ramp in the second half of the year.