Wavecom Announces Fourth Quarter and Full Year 2007 Financial Results
Regulatory News:
Wavecom S.A. (Paris:AVM) (NASDAQ:WVCM) (ISIN:FR0000073066) today
announced financial results for its fourth quarter and full year 2007
ending December 31, 2007.
Ron Black, Wavecom Chief Executive Officer, commented: "During
2007 we continued to deliver on our promise of operating a very
profitable business, which is demonstrated by our 10% operating margin
on a non-GAAP basis for the full year, compared to a 6% operating
margin on a non-GAAP basis in 2006. Although we are not pleased with
our recent revenue progression, the Americas unit did record a
particularly strong 57% increase year-on-year at constant currencies.
In addition, the solid financial footing of the company, in particular
our strong cash reserves, position us to make strategic acquisitions
such as the recently announced purchase of Anyware Technologies,
moving Wavecom further up the value chain."
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In millions of euros Consolidated Group Results
(Under US GAAP)
-------------------------- -------------------------------------------
Q4 2006 Q3 2007 Q4 2007 Full year Full year
2006 2007
-------------------------- ------- ------- ------- --------- ---------
Revenues 54.8 52.4 45.7 188.8 202.3
-------------------------- ------- ------- ------- --------- ---------
Gross profit 25.0 23.7 23.2 80.3 91.9
-------------------------- ------- ------- ------- --------- ---------
Operating expenses 21.2 19.6 20.9 74.6 79.2
-------------------------- ------- ------- ------- --------- ---------
Operating income 3.8 4.1 2.3 5.6 12.7
-------------------------- ------- ------- ------- --------- ---------
Net income 3.1 3.3 7.1 4.7 17.4
-------------------------- ------- ------- ------- --------- ---------
Additional information
-------------------------- -------------------------------------------
Operating income 3.8 4.1 2.3 5.6 12.7
-------------------------- ------- ------- ------- --------- ---------
Stock based related
expenses (0.7) (1.7) (1.7) (2.1) (4.8)
-------------------------- ------- ------- ------- --------- ---------
Acquired technology - - - (1.4) -
-------------------------- ------- ------- ------- --------- ---------
Amortization expense
related to acquisition (1.1) (0.8) (0.8) (3.1) (3.5)
-------------------------- ------- ------- ------- --------- ---------
Operating income before
stock based compensation
and amortization expense
related to acquisition 5.6 6.6 4.8 12.2 21.0
-------------------------- ------- ------- ------- --------- ---------
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Fourth 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: Revenues for the full year 2007 increased 7%
year-on-year reaching EUR 202.3 million, or 12% at constant
currencies, as the weak U.S. dollar had a negative impact of
approximately EUR 9 million on 2007 sales as compared with 2006
exchange rates. In the fourth quarter 2007 revenues declined 16%
versus fourth quarter 2006, or 11% at constant currencies. Revenues in
the fourth quarter 2007 of EUR 45.7 million also declined sequentially
by 13% versus the previous quarter, or 10% at constant currencies. For
the fourth quarter 2007, revenues from services accounted for EUR 1.2
million and EUR 3.8 million for the full year 2007. These service
revenues were primarily generated by the recognition of revenue from a
customer with whom we continue to have an ongoing substantial
development contract.
The positive year-over-year revenue trend was driven by the
significant progress in the Americas region which was fueled by the
home and security market as well as vehicle remote management. In
addition, one particular customer completed delivery of a large
program in 2007. The APAC region grew by 3% (at constant currencies)
led by a positive sell-through of point of sale and automatic
metering, although the wireless local loop sector decreased by
approximate EUR 5 million year-on-year as the market contracted. The
3% year-on-year decline in revenues in the EMEA region was mainly the
result of weaker than expected sell-through of end products in
particular EMEA manufacturers´ of fixed-voice applications.
In the fourth quarter, the breakdown of product revenues by region
was as follows: EMEA 50%, Americas 30% and APAC 20%. This balance was
similar for the full-year breakdown of: EMEA 48%, Americas 35% and
APAC 17%.
For the fourth quarter, revenues from the top ten customers
represented 57% of the total and 50% for the full year. For the full
year, no customer represented more than 9% of sales where 6 were
direct customers and 4 were value-added distributors.
Backlog: The 12-month backlog on December 31, 2007 was EUR 41.7
million compared to EUR 52.3 million at September 30, 2007. It should
be noted that backlog as of any particular date may not be an accurate
indicator of sales for a given future period.
Gross Margin: For the fourth quarter 2007 gross profit amounted to
EUR 23.2 million, representing 50.7% of sales compared to 45.3% in Q3
2007. The gross margin from products also increased incrementally to
51.6% of sales compared to 46.5% the previous quarter, mainly
explained by a more favorable product and country mix. When looked at
on an annual basis, the gross margin for 2007 was 45.4% compared to
42.5% in 2006 and the gross margin from products also increased to
47.3% of sales compared to 41.4% the previous year, mainly driven by
the continuation of the improvement of the gross margin on the
business acquired in 2006.
Operating Expenses: Total operating expenses for the fourth
quarter 2007 of EUR 20.9 million were slightly higher than the third
quarter 2007 of EUR 19.6 million, and slightly lower than fourth
quarter 2006 level of EUR 21.2 million. Included are stock-based
related expenses totaling EUR 1.7 million, flat to the third quarter
2007. At December 31, 2007, headcount (salaried employees) stood at
418 decreasing slightly from 421 September 30, 2007.
Profit: Operating income for the fourth quarter 2007 was EUR 2.3
million, decreasing from EUR 4.1 million in the previous quarter,
representing 4.9% of sales. This decline is linked to the lower sales
during the quarter. On a year-over-year basis, this operating result
was lower than the EUR 3.8 million of the fourth quarter 2006 which
was positively impacted by licensing revenues amounting to EUR 4.4
million. In the fourth quarter 2007, we recognized a deferred tax
asset amounting to EUR 4.5 million, in application of generally
accepted accounting principles.
On a net basis, income for the fourth quarter 2007 was EUR 7.1
million, compared to EUR 3.3 million in previous quarter, and EUR 3.1
million for the same period the year before. For the full year, net
income increased 270% to EUR 17.4 million from EUR 4.7 million in
2006.
As shown in the above table, on a non-GAAP basis, excluding
stock-based related expenses and expenses related to our acquisition,
the operating income was EUR 4.8 million for the fourth quarter 2007,
compared to EUR 6.6 million for the previous quarter and EUR 5.6
million a year ago. On a full year comparison basis non-GAAP operating
income grew from EUR 12.2 million in 2006 to EUR 21.0 million, or 72%
for the full year 2007.
Balance sheet: Wavecom´s cash and marketable securities position
increased quarter-on-quarter from EUR 137.5 million to EUR 139.3
million at December 31, 2007. Inventory decreased incrementally to EUR
6.1 million compared with EUR 8.8 million the previous quarter; DSOs
(Days Sales Outstanding) were 58 days compared with 53 days the
previous quarter.
Outlook:
Chantal Bourgeat, Wavecom CFO, concluded: "We are encouraged by
our continued solid profitability which remains a primary objective
for Management." Ms. Bourgeat added: "We were pleased to have recently
completed a key strategic acquisition that should accelerate the
development of our services offer."
Business news:
Wavecom S.A. acquired Anyware Technologies, an industry leader in
machine-to-machine (M2M) client-server software solutions located in
Toulouse, France. Anyware Technologies is a recognized leader in
developing M2M software solutions for customers who use wireless
technology to enhance business processes. Anyware Technologies´
M2M-specific solutions perfectly compliments Wavecom´s secure and
scalable Intelligent Device Services (IDS) platform, with the
combination creating the most advanced end-to-end software solution in
the industry.
Ingenico and Wavecom signed a MOU for co-development of future
wireless payment electronics terminals. As industry demand for cost
effective and innovative payment systems grows, two leaders are
combining forces to establish a platform for a new generation of
wireless electronic payment system architecture.
Wavecom introduced its Q64 Wireless CPU(R), an enhanced version of
the GR64 that is powered by Wavecom´s Wireless Microprocessor(R)
WMP100. The new Q64 Wireless CPU(R) has increased processing power (up
to 85 MIPS available for embedded customer applications) and the Open
AT(R) RTOS (Real Time Operating System) that allows customers to
natively execute C-based applications directly on the Wireless CPU(R).
Sunlink International Holdings Limited selected Wavecom´s Wireless
CPU(R) Q24 Plus for their intelligent dispatch system for the taxi
industry called TAXI4U.
Wavecom launched its "Centers of Excellence" (CoE) program aimed
at building a worldwide network of design partners to facilitate
adoption of wireless machine-to-machine technologies. The new
partnership program emphasizes bridging the technology gaps that many
new wireless machine-to-machine projects encounter.
The Company made available its Open AT(R) Lua Plug-In specifically
targeting developers of smart, connected devices who chose to use an
interpreted programming environment. Wavecom now offers developers
access to Lua - one of the fastest scripting language to develop with
- free of charge, including source code delivery under the terms of
the MIT (Massachusetts Institute of Technology) open-source license.
Wavecom launched a new partnership program by signing agreements
with two engineering schools: Ngee Ann Polytechnic, Singapore, and the
University of Technology of Ho Chi Minh City, Vietnam.
The Company gained membership in the MOV´EO competitiveness hub.
MOV´EO groups together a number of French businesses in the transport
and automotive sectors for promoting economic and industrial
development.
Silicon Controls selected Wavecom´s Wireless CPU(R) - Q24Plus for
their remote tank monitoring system. The GASLOG(R) telemetry system,
which integrates a Wavecom Wireless CPU(R) with GSM/GPRS capability,
permits the continuous logging of tank levels, gas usage and other
status information from a remote location via cellular communication
networks.
Wavecom launched Fastrack Extreme an HSDPA (or 3.5G) version of
its Plug-and-Play Wireless CPU(R). The new product offers high speed
with Open AT(R) and upgrade functionality via Wavecom´s Intelligent
Device Service for investment protection.
Conference Call and presentation:
Today at 2:30 p.m. (Paris time) Wavecom management will host a
conference call in English reserved for financial professionals
commenting on its fourth quarter 2007. To access this call, please use
the following numbers: +33 (0) 1 70 99 43 01 in France, +44 (0) 20
7806 1968 in the U.K. and +1 718 354 1387 in the U.S. Visit the
Wavecom corporate website: www.wavecom.com investors section to listen
to the conference call commentary webcast (in English).
This call will be followed by a presentation to the financial
community in Paris by Wavecom management at 4:00 pm.
Wavecom will announce its first quarter 2008 results on April 23,
2008 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
Farnborough (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 strategies,
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, changes in foreign currency exchange
rates, the company´s reliance on a single contract manufacturer in
China for all production requirements, dependence on Fourth parties,
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
December September December
31, 30, 31,
2006 2007 2007
---------- ---------- ----------
Euro Euro Euro
Revenues :
Product sales 48,753 50,405 44,543
Services revenue 1,647 1,958 1,205
Licensing revenue 4,369 - -
---------- ---------- ----------
54,769 52,363 45,748
Cost of revenues :
Cost of goods sold 28,741 26,956 21,543
Cost of services 1,048 1,666 1,009
---------- ---------- ----------
29,789 28,622 22,552
---------- ---------- ----------
Gross profit 24,980 23,741 23,196
Operating expenses :
Research and development 8,634 8,493 9,132
Sales and marketing 5,098 5,689 5,896
General and administrative 7,448 5,461 5,911
Acquired in process technology 50 - -
---------- ---------- ----------
Total operating expenses 21,230 19,643 20,939
---------- ---------- ----------
Operating income 3,750 4,098 2,257
---------- ---------- ----------
Interest income and other financial
income, net 360 127 871
Foreign exchange loss, net (964) (832) (512)
---------- ---------- ----------
Total financial income (loss) (604) (705) 359
---------- ---------- ----------
Income before income taxes 3,146 3,393 2,616
Income tax expense (benefit) 34 49 (4,461)
---------- ---------- ----------
Net income 3,112 3,344 7,077
========== ========== ==========
Basic net income per share 0.20 0.22 0.46
========== ========== ==========
Diluted net income per share 0.19 0.20 0.44
========== ========== ==========
Number of shares used for computing :
- basic 15,390,765 15,199,624 15,221,619
- diluted 16,008,840 16,339,024 16,164,879
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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.
Years ended December
31,
2006 2007
---------- ----------
Euro Euro
Revenues :
Product sales 180,393 198,510
Services revenue 2,542 3,827
Licensing revenue 5,823 -
---------- ----------
188,758 202,337
Cost of revenues :
Cost of goods sold 105,775 104,650
Cost of services 2,723 5,833
---------- ----------
108,498 110,483
---------- ----------
Gross profit 80,260 91,854
Operating expenses :
Research and development 31,123 33,562
Sales and marketing 16,853 22,740
General and administrative 25,187 22,855
Acquired in process technology 1,450 -
---------- ----------
Total operating expenses 74,613 79,157
---------- ----------
Operating income 5,647 12,697
---------- ----------
Interest income and other financial income, net 1,120 1,834
Foreign exchange loss, net (1,939) (1,442)
---------- ----------
Total financial income (loss) (819) 392
---------- ----------
Income before income taxes 4,828 13,089
Income tax expense (benefit) 125 (4,310)
---------- ----------
Net income 4,703 17,399
========== ==========
Basic net income per share 0.31 1.15
========== ==========
Diluted net income per share 0.30 1.08
========== ==========
Number of shares used for computing :
- basic 15,383,883 15,129,600
- diluted 15,942,182 16,180,995
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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 December 31,
2006 2007
-------- --------
Euro Euro
ASSETS
Current assets :
Cash and cash equivalents 54,776 4,677
Marketable securities - 134,610
Accounts receivable, net 28,727 29,467
Inventory 6,631 6,130
Value added tax recoverable 602 1,124
Prepaid expenses and other current assets 2,361 3,141
Deferred tax assets - 4,514
-------- --------
Total current assets 93,097 183,663
Other assets :
Long-term investments 3,639 3,731
Other assets 3,166 4,502
Interests in associates - 15
Research tax credit 1,771 2,049
Income tax recoverable 9,617 13,083
Intangible and tangible assets, net 19,770 16,336
Goodwill 8,117 8,117
-------- --------
Total assets 139,177 231,496
======== ========
LIABILITIES AND SHAREHOLDERS´ EQUITY
Current liabilities :
Accounts payable 36,254 27,612
Accrued compensation 9,367 8,584
Current portion of other accrued expenses 3,713 3,670
Current portion of convertible bonds - 664
Current portion of capitalized lease obligations 233 207
Deferred revenue and advances received from
customers 98 307
Other liabilities 653 3,652
-------- --------
Total current liabilities 50,318 44,696
Long-term liabilities :
Long-term portion of other accrued expenses 15,957 16,636
Long-term portion of convertible bonds - 80,500
Long-term portion of capitalized lease
obligations 385 340
Other long-term liabilities 858 616
-------- --------
Total long-term liabilities 17,200 98,092
Commitments and contingencies
- -
Shareholders´ equity :
Shares, euro 1 nominal value, 15,796,591 shares
authorized, issued and outstanding at
December 31, 2007 (15,554,153 at December 31,
2006) 15,554 15,797
Additional paid-in capital 139,393 146,052
Treasury stock at cost (544,322 shares at December
31, 2007 and 156,345 shares at (1,312) (8,823)
December 31, 2006)
Accumated deficit (79,947) (62,548)
Accumulated other comprehensive income (loss) (2,029) (1,770)
-------- --------
Total shareholders´ equity 71,659 88,708
-------- --------
Total liabilities and shareholders´ equity 139,177 231,496
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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.
Years ended
December 31,
2006 2007
-------- ---------
Euro Euro
Cash flows from operating activities :
Net income 4,703 17,399
Adjustments to reconcile net income to net cash
provided from
operating activities:
Amortization and impairment of intangible and
tangible assets 8,699 8,409
Share-based compensation 2,090 4,810
Gain (loss) on sales and retirement of tangible
assets (9) 39
Acquisition of marketable securities, net - (134,610)
Deferred tax assets - (4,514)
Net increase (decrease) in cash from working
capital items 14,525 (10,570)
-------- ---------
Net cash provided (used) by operating
activities 30,008 (119,037)
-------- ---------
Cash flows from investing activities :
Acquisition of long-term investments (53) (93)
Purchases of intangible and tangible assets (5,504) (5,025)
Acquisition of certain assets, net of cash
acquired (29,755) -
Proceeds from sale of intangible and tangible
assets 206 2
Purchase of interest in associates - (15)
-------- ---------
Net cash used by investing activities (35,106) (5,131)
-------- ---------
Cash flows from financing activities :
Proceeds from convertible bonds - 80,500
Principal payments on capital lease obligations (378) (261)
Purchases of treasury stock - (7,510)
Proceeds from exercise of stock options and
founders´ warrants 145 2,091
-------- ---------
Net cash provided (used) by financing
activities (233) 74,820
Effect of exchange rate changes on cash and cash
equivalents (556) (751)
-------- ---------
Net decrease in cash and cash equivalents (5,887) (50,099)
Cash and cash equivalents, beginning of period 60,663 54,776
-------- ---------
Cash and cash equivalents, end of period 54,776 4,677
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