IPAS

iPass Inc. (IPAS)

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iPass Inc. (IPAS)

Q2 2010 Earnings Call Transcript

August 05, 2010 05:00 pm

Executives

Steven Gatoff - SVP & CFO

Evan Kaplan - President & CEO

Analysts

Neil Weiner - Foxhill Capital Partners

Justin Orlando - Dolphin Management

Presentation

Operator

Good day ladies and gentlemen and Welcome to the iPass Incorporated Q2 2010 earnings conference call. My name is Michael and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will be facilitating a question-and-answer session towards the end of today’s conference. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to the company. You may proceed.

Steven Gatoff

Thank you, operator. Good afternoon everyone. Thank you for joining us to discuss our financial and operating results for the second quarter of 2010. I’m Steven Gatoff, Chief Financial Officer of iPass and I’m here today with Even Kaplan, President and CEO.

Before I turn the call over to Evan, I’d like to bring the following to your attention. The date of this call is August 5th, 2010. Our presentation today contains forward-looking statements about events and circumstances that have not yet occurred. Statements regarding our projected financial statements for the third quarter of 2010 and the second half of 2010, statements regarding achieving growth and profitability, statements containing words such as will, expect, believe, plan, intend and should, and other statements in the future tense are forward-looking statements.

Actual outcomes and results may differ materially from these expectations contained in these statements due to a number of risks and uncertainties. The risks and uncertainties that could cause these statements not to come true are set forth in today’s press release as well as in our most recent quarterly report on Form 10-Q and annual report on Form 10-K under the section Risk Factors that are filed with the Securities and Exchange Commission. I understand from Marketwire that our press release should be on the wires momentarily.

On this call, we’ll provide and talk about our results using non-GAAP financial measures. The press release at our website includes texts and tables that explain how we define and calculate non-GAAP metrics and a reconciliation of non-GAAP results to GAAP results.

The press release and Form 8-K announcing our financial results are available on our website at www.ipass.com. This earnings call is being recorded for replay. It is being webcast and will also be available on our website for one quarter until the next quarter’s earnings call.

Please note that this webcast is a property of iPass and any copying or rebroadcast of this webcast without the expressed prior written consent of iPass is strictly prohibited.

With that, I’d like to turn the call over to Evan.

Evan Kaplan

Thanks, Steven. Hello everybody, let’s jump right into it. There are four topics that I’d like to cover with you today. the first is the state of the iPass business, the second is the progress that we’ve made with our new Open Mobile Platform, the third is our views and perspectives on the customer dynamics and the market and the fourth is our view of the business going forward.

Let me start with giving you my high level thoughts on the state of our business here at iPass. Overall I’m pleased with where we are and I am proud of what we have accomplished today. As you know from our calls and dialogues over the past few quarters, we certainly have some real challenges that we have been addressing, but it feels like we are making progress and start to see the light at the end of the tunnel.

Importantly above and beyond what we think and what we hear from our customers, we are for first time getting material agreement in place for customers to adopt our new Open Mobile Platform. While it’s clearly early in the process, this is gratifying and it affirms to me that we are on the right track.

I will talk more about this in a minute, but for now I’d like to focus a bit on what’s going on in the business today. On the platform side, we continue to steadily invest in the technology platform. We are focused on delivering a significantly enhanced serviced offering with a much broader utility to our valuable installed customer base.

We believe these investments in the Open Mobile Platform are the most important drivers in terms of building stockholder value. On the network side, our offerings are valuable for iPass and they are important for our customers, but the business is tough from a margin and growth point of view.

Specifically we are seeing more margin pressure on the 3G business than we did a year ago and the increase in free Wi-Fi in the US notably Starbucks continue to put pressure on the revenue growth going forward.

Importantly, this is not the case in Europe or Asia where our network business is growing nicely. As you see in the financial results each quarter and hear from us on these calls we continue to deal with the declining revenue in the phase of a transforming business model. While we are progressing with the new offering, we nonetheless manage the challenges in revenue declines associated with right sizing the minimum commitment customer contracts, lower usage on our legacy products and the continued decay of business.

Importantly through all of that, we remain committed to minimizing our use of cash and engineering cost out of the business. Steven will talk more about this as we’ve launched some initiatives internally this month to continue to align our cost structure with the revenue trajectory of the business

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