Wavecom Announces First Quarter 2007 Financial Results
Regulatory News:
Wavecom S.A. (Paris:AVM) (NASDAQ:WVCM) (ISIN:FR0000073066), today
announced financial results for its first quarter ending March 31,
2007.
Ron Black, Wavecom Chief Executive Officer, commented, "We are
extremely pleased with our first quarter 2007 results which reflect
the momentum in our business as indicated by an impressive 70%
year-on-year revenue growth, as well as a significant 60%,
quarter-on-quarter, increase in backlog. He added: "We are
additionally encouraged to see a growing number of design wins,
especially in markets like automotive, that we expect to lead to
future higher volume growth.
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In millions of euros Group
Under US GAAP Consolidated
Results
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Q1 Q4 Q1
2006* 2006 2007
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Revenues 28.2 54.8 48.1
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Gross profit 15.0 25.0 20.5
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Operating expenses 14.4 21.2 19.0
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Operating income 0.6 3.8 1.6
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Net income 0.2 3.1 1.9
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Additional information
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Operating income 0.6 3.8 1.6
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Stock option-related expenses (0.3)(0.7)(0.7)
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Amortization expense related to acquisition - (1.1)(1.1)
======================================================================
Operating income before stock-option compensation and
amortization expense related to acquisition 0.9 5.6 3.4
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*Note: Q1 2006 results are prior to our acquisition of the M2M
business unit from Sony Ericsson acquisition that closed on April 26,
2006.
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First Quarter Highlights:
All figures are unaudited and reported in accordance with U.S.
generally accepted accounting principles (U.S. GAAP), unless otherwise
noted. Condensed and consolidated financial tables are provided at the
end of this release.
Revenues: First quarter 2007 consolidated revenues were EUR 48.1
million, an increase of 70% versus first quarter 2006. This
significant year-on-year increase is the result of strong organic
growth, as well as revenue contributed from the acquired business that
was not in Q1 2006. The bulk of the 12% quarter-on-quarter decrease
was due to the fact that there had been licensing revenues recorded in
the fourth quarter 2006 for a total of EUR 4.4 million, as well as
softening of the dollar. With previous quarter currency rate, Q1 2007
revenues would have been EUR 48.5 million.
In the first quarter, product revenues represented 99% of total
sales with a breakdown by region as follows: EMEA 54%; Americas 33%;
and APAC 13%. The remaining 1% of total sales was generated by
servicing fees. The customer portfolio remained balanced in the first
quarter, with the top ten customers representing 53% of revenues as
compared to 51% in the previous quarter. No single customer
represented more than 10%.
Backlog: As expected, our 12-month backlog on March 31, 2007,
increased significantly by 60% to EUR 82.4 million, from EUR 51.5
million as of December 31, 2006. This increase came from all regions,
with the highest growth in the Americas.
Gross Margin: For the first quarter 2007, gross margin of EUR 20.5
million represented 42.7% of sales compared to 45.6% in Q4 2006. This
decrease was due mainly to the absence of significant high-margin
licensing revenue that we saw in the fourth quarter 2006. The gross
margin from products, however, increased significantly to 45.6% in Q1
2007 compared to 41.1% in Q4 2006 as margin contributed by the
acquired business continued to improve.
Operating Expenses: Total operating expenses for the first quarter
2007 were EUR 19.0 million, a decline from the fourth quarter level of
EUR 21.2 million. This decrease was due mainly to the fact that in the
fourth quarter we recorded a sizeable accrual for employee bonuses. In
addition, we recorded no bad debt in the first quarter 2007.
Profit: Operating income for the first quarter 2007 was EUR 1.6
million, declining from EUR 3.8 million in the previous quarter,
mainly due to the recognition in the previous quarter of sizeable
licensing revenues. On a year-over-year basis, however, this result
was significantly better than the operating income of EUR 0.6 million
for the first quarter 2006, owing to stronger revenues. Net income for
the first quarter 2007 was EUR 1.9 million compared to EUR 3.1 million
in previous quarter, and EUR 0.2 million a year ago.
As shown in the above table, on a non-GAAP basis, which excludes
stock option expenses and expenses related to our acquisition, the
operating income would have been EUR 3.4 million for the first quarter
2007, compared to EUR 5.6 million for the previous quarter.
Balance sheet: Wavecom's cash position declined slightly
quarter-on-quarter from EUR 54.8 million to EUR 53.7 million at March
31, 2007. Cash generated by the good results were compensated by some
mitigating factors including the payment of performance bonuses and an
increase in working capital, as inventory increased from EUR 6.6
million at December 31, 2006 to EUR 9.0 million at March 31, 2007 as a
result of the transfer of most of the production from Mexico to our
primary sub contractor in China.
Business news:
Q1 2007 Customer announcements:
-- Wavecom technology selected by PassTime(TM) USA for its latest
payment assurance device, PassTime(TM) Elite, featuring the
Wavecom Q2687 Wireless CPU(R). The device harnesses the power
of wireless machine-to-machine technology to help
credit-troubled people own their own vehicles and mend their
credit at the same time.
-- Wavecom announced that PSA Peugeot Citroen, a global leader in
advanced automobiles, has selected Wavecom wireless technology
for integration in its future generations of intelligent cars.
-- Wavecom announced the integration of its technology into the
next generation of Yulon Nissan's telematics system called
TOBE. This next generation of TOBE is an operator-serviced
navigation, system integrating Wavecom's Wireless CPU(R). This
marks the first contract for Wavecom with an Asian automotive
conglomerate for global automotive telematics solutions.
-- Arcom, Inc. and Wavecom, Inc. announced the selection of the
Wavecom GR64 Wireless CPU(R) as the wireless technology for
the Arcom ZyWAN asset tracking system. This robust, rugged
tracking device offers comprehensive mobile asset tracking
functionality, including vehicle location and mobile computing
using global cellular connectivity.
Q1 2007 Product announcements:
-- Wavecom introduced the new Fastrack Supreme Wireless CPU(R).
This Plug & Play family product evolution keeps the same
versatile form factor as the previous Fastrack product packed
with a host of new features that will carry customer
applications well into the future.
-- Wavecom announced an innovative embedded SIM solution that
takes a major step in removing obstacles and stimulating
wireless M2M and automotive market where traditional SIM cards
are sometimes a point of failure risk. Wavecom was the first
to demonstrate this technology, which fully embeds the SIM
function into selected GSM Wireless CPU(R) models, and can be
activated over-the-air.
-- Wavecom announced commercial availability of the Wavecom CM52
Wireless CPU(R). Designed specifically for automotive
applications, the CM52 operates within an extended temperature
range and has a rugged build for extreme vibrations.
Q1 2007 Management announcement:
-- Wavecom announced the arrival of Emmanuel Walckenaer, a
seasoned expert in the field of wireless service delivery and
support to head-up its newest activity - RDMS, Remote Device
Management Services.
Further commenting on the state of the business, Chantal Bourgeat,
Wavecom CFO added, "Less than one-year post acquisition, we have
re-established the strong product gross margin we had built in the
historical Wavecom business. Our sales teams continue to win new
business, our financial footing is solid and we are beginning to
realize significant revenue momentum as evidenced by the strong
quarter-on-quarter backlog growth."
Conference Call:
Today at 3:00 p.m. Paris time, Wavecom management will host a
conference call in English reserved for financial professionals
commenting on its first quarter 2007. To access this call, please use
the following numbers: +33 (0)1 70 99 42 87 in France, +44 (0)20 7365
1851 in the U.K. and +1 718 354 1152 in the U.S. Visit the Wavecom
corporate website: www.wavecom.com investors section to listen to the
conference call commentary webcast (in English).
Wavecom will announce its Q2 2007 results on July 25, 2007 at 7:00
a.m. Paris time.
About Wavecom
Wavecom is a worldwide leader in embedded industrial wireless
communication solutions for automotive, machine-to-machine and mobile
professional applications. Wavecom's solutions include the Open AT(R)
software platform encompassing the Wavecom Open AT(R) Operating
System, a wide range of Plug-Ins, the Open AT(R) Integrated
Development Environment (IDE) along with a market-leading range of
Wireless CPUs (Central Processing Units), and an expanding portfolio
of services. These complete embedded solutions enable makers of all
types of machines to develop a new breed of intelligent wireless
applications, without the need of external processors and other ASICs
(Application Specific Integrated Circuits) and components.
Founded in 1993 and headquartered in Paris, Wavecom has
subsidiaries in Hong Kong (PRC), Research Triangle Park, NC (USA), and
Camberley (UK). Wavecom is publicly traded on Euronext Paris
(Eurolist) in France and on the NASDAQ (WVCM) exchange in the U.S.
This press release contains forward-looking statements that relate
to the company's future business performance, operating expenses and
financial results and objectives. Such forward-looking statements are
based on the current expectations and assumptions of the company's
management only and involve risk and uncertainties. Potential risks
and uncertainties include, without limitation, whether the company
will be commercially successful in implementing its strategic
reorientation, whether there will be continued growth in the vertical
markets and demand for the company's products, an unanticipated
decrease in orders from one of the company's principal customers or
customer cancellation or scale-down of a major project, the company's
reliance on a single contract manufacturer in China for all production
requirements, dependence on first parties, changes in foreign currency
exchange rates, new products or technological developments introduced
by competitors, customer and supplier concerns regarding the company's
overall financial position, and risks associated with managing growth.
Unfavorable developments in connection with these and other risks and
uncertainties described in the Company's reports on file with the
Securities and Exchange Commission could cause the company to not
achieve the anticipated or targeted performance or results. As a
consequence, the Company's actual performance and results may be
materially different from those expressed by the forward-looking
statements above.
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WAVECOM S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for share and per share data)
Prepared in accordance with U.S. generally accepted accounting
principles.
Three months ended
March 31, December March 31,
31,
2006 2006 2007
----------- ----------- -----------
Euro Euro Euro
Revenues :
Product sales 27,462 48,753 47,785
Services revenue 270 1,647 332
Licensing revenue 484 4,369 -
----------- ----------- -----------
28,216 54,769 48,117
Cost of revenues :
Cost of goods sold 13,066 28,741 26,012
Cost of services 176 1,048 1,559
----------- ----------- -----------
13,242 29,789 27,571
----------- ----------- -----------
Gross profit 14,974 24,980 20,546
Operating expenses :
Research and development 5,901 8,634 7,758
Sales and marketing 2,886 5,098 5,413
General and administrative 5,568 7,448 5,784
Acquired in process technology - 50 -
----------- ----------- -----------
Total operating expenses 14,355 21,230 18,955
----------- ----------- -----------
Operating income 619 3,750 1,591
----------- ----------- -----------
Interest income and other
financial income, net 321 360 417
Foreign exchange loss, net (682) (964) (48)
----------- ----------- -----------
Total financial income (loss) (361) (604) 369
----------- ----------- -----------
Income before minority interests
and income taxes 258 3,146 1,960
Minority interests - - -
----------- ----------- -----------
Income before income taxes 258 3,146 1,960
Income tax expense 54 34 12
----------- ----------- -----------
Net income 204 3,112 1,948
=========== =========== ===========
Basic net income per share 0.01 0.20 0.13
=========== =========== ===========
Diluted net income per share 0.01 0.19 0.12
=========== =========== ===========
Number of shares used for
computing :
- basic 15,375,468 15,390,765 15,401,390
- diluted 15,782,195 16,008,840 16,230,460
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WAVECOM S.A.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
Prepared in accordance with U.S. generally accepted accounting
principles.
At At
December March
31, 31,
2006 2007
-------- --------
Euro Euro
ASSETS
Current assets :
Cash and cash equivalents 54,776 53,728
Accounts receivable, net 28,727 32,259
Inventory 6,631 8,994
Value added tax recoverable 602 618
Prepaid expenses and other current assets 2,361 3,561
-------- --------
Total current assets 93,097 99,160
Other assets :
Long-term investments 3,639 3,621
Other assets 3,166 2,938
Research tax credit 1,771 1,841
Income tax recoverable 9,617 9,617
Intangible and tangible assets, net 19,770 18,477
Goodwill 8,117 8,117
-------- --------
Total assets 139,177 143,771
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities :
Accounts payable 36,254 37,578
Accrued compensation 9,367 8,262
Current portion of other accrued expenses 3,713 4,310
Current portion of capitalized lease obligations 233 206
Deferred revenue and advances received from
customers 98 829
Other liabilities 653 717
-------- --------
Total current liabilities 50,318 51,902
Long-term liabilities :
Long-term portion of other accrued expenses 15,957 15,986
Long-term portion of capitalized lease
obligations 385 383
Other long-term liabilities 858 798
-------- --------
Total long-term liabilities 17,200 17,167
Commitments and contingencies
- -
Shareholders' equity :
Shares, euro 1 nominal value, 15,581,397 shares
authorized, issued and outstanding at
March 31, 2007 (15,554,153 at December 31, 2006) 15,554 15,581
Additional paid-in capital 139,393 140,342
Treasury stock at cost (156,345 shares at March 31,
2007 and December 31, 2006) (1,312) (1,312)
Accumated deficit (79,947) (77,998)
Accumulated other comprehensive income (loss) (2,029) (1,911)
-------- --------
Total shareholders' equity 71,659 74,702
-------- --------
Total liabilities and shareholders' equity 139,177 143,771
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WAVECOM S.A.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Prepared in accordance with U.S. generally accepted accounting
principles.
Three months
ended March
31,
2006 2007
------- -------
Euro Euro
Cash flows from operating activities :
Net income 204 1,948
Adjustments to reconcile net income to net cash
provided from
operating activities:
Amortization and impairment of intangible and
tangible assets 875 2,254
Share-based compensation 264 692
Loss (gain) on sales and retirement of tangible
assets (67) 4
Net decrease in cash from working capital items (2,329) (5,127)
------- -------
Net cash used by operating activities (1,053) (229)
------- -------
Cash flows from investing activities :
Disposal (acquisition) of long-term investments (22) 18
Purchases of intangible and tangible assets (529) (924)
Proceeds from sale of intangible and tangible
assets 121 -
------- -------
Net cash used by investing activities (430) (906)
------- -------
Cash flows from financing activities :
Principal payments on capital lease obligations (88) (90)
Proceeds from exercise of stock options and
founders' warrants 49 284
------- -------
Net cash provided (used) by financing
activities (39) 194
Effect of exchange rate changes on cash and cash
equivalents (175) (107)
------- -------
Net decrease in cash and cash equivalents (1,697) (1,048)
Cash and cash equivalents, beginning of period 60,663 54,776
------- -------
Cash and cash equivalents, end of period 58,966 53,728
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