Regulatory News:
Wavecom S.A. (Paris:AVM) (NASDAQ:WVCM) (ISIN:FR0000073066) today
announced financial results for its third quarter ending September 30,
2007.
Ron Black, Wavecom Chief Executive Officer, commented, "We are
pleased with the strong profitiblity we achieved in the third quarter,
despite sequentially lower sales. The anticipated weakness in the EMEA
region was offset by very good performance in APAC and an outstanding
quarter in the Americas region which grew 30% compared to the same
quarter in 2006, at constant currencies." He highlighted, "The
significant announcement of our StarService offer, which is built on
services and recurring revenue, marks a new business model for the
industry that should attract new players to the market and add
significant value to our customers."
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In millions of euros Under Consolidated Group Results
US GAAP
----------------------------------------------------------------------
Q3 2006 Q2 2007 Q3 2007 9 months 9 months
2006 2007
----------------------------------------------------------------------
Revenues 55.9 56.1 52.4 134.0 156.6
----------------------------------------------------------------------
Gross profit 19.9 24.4 23.7 55.3 68.7
----------------------------------------------------------------------
Operating expenses 19.3 19.6 19.6 53.4 58.2
----------------------------------------------------------------------
Operating income 0.6 4.8 4.1 1.9 10.4
----------------------------------------------------------------------
Net income 1.2 5.0 3.3 1.6 10.3
----------------------------------------------------------------------
Additional information
----------------------------------------------------------------------
Operating income 0.6 4.8 4.1 1.9 10.4
----------------------------------------------------------------------
Stock based related expenses (0.7) (0.6) (1.7) (1.4) (3.1)
----------------------------------------------------------------------
Acquired technology - - - (1.4) -
----------------------------------------------------------------------
Amortization expense related
to acquisition (1.2) (0.8) (0.8) (1.9) (2.7)
----------------------------------------------------------------------
Operating income before
stock based compensation
and amortization expense
related to acquisition 2.5 6.2 6.6 6.6 16.2
----------------------------------------------------------------------
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Third 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: Third quarter 2007 consolidated revenues were EUR 52.4
million, a decrease of 6% versus third quarter 2006, or 1.6% at
constant currencies, as the weak U.S. dollar had a negative impact of
around EUR 2.6 million compared to the same period a year ago.
Revenues in the third quarter 2007 also declined sequentially by 7%
versus the previous quarter, or 6% at constant currencies. This
decline can be partly explained by a typically slow summer period, as
well as the fact that some of our European customers, who export in US
dollars, have been adversely impacted by the weakness in this currency
and have been reluctant to place advance firm orders. For the first
nine months of 2007, consolidated revenues increased 17% to EUR 156.6
million, compared to the same period in 2006, or 22% at constant
currencies.
Services accounted for EUR 2.0 million in the quarter, of which
the main part was generated by the recognition of revenue from a
customer with whom we have an ongoing substantial development
contract.
In the third quarter, the breakdown of product revenues by region
was as follows: EMEA 40%; Americas 41%; and APAC 19%.
The customer portfolio remained balanced in the third quarter,
with the top ten customers, six of which are direct, representing 58%
of revenues as compared to 51% in the previous quarter, and no single
customer represented more than 10%.
Backlog: The 12-month backlog on September 30, 2007 of EUR 52.3
million increased slightly from the year ago period (EUR 49.2 million
at September 30, 2006) but decreased sequentially from EUR 70.9
million at June 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 third quarter 2007 gross margin amounted to
EUR 23.7 million, representing 45.3% of sales compared to 43.4% in Q2
2007. The gross margin from products increased incrementally to 46.5%
of sales compared to 46.0% the previous quarter.
Operating Expenses: Total operating expenses for the third quarter
2007 were sequentially flat compared to the second quarter 2007 at EUR
19.6 million, which were in-line with the third quarter 2006 level.
Included are stock based related expenses totaling EUR 1.7 million,
compared to EUR 0.6 million in the second quarter 2007. At September
30, 2007, headcount (salaried employees) stood at 421 increasing from
410 at June 30, 2007.
Profit: Operating income for the third quarter 2007 was EUR 4.1
million, decreasing from EUR 4.8 million in the previous quarter,
remaining flat at 8% of sales. On a year-over-year basis, this
operating result was significantly better than that of the third
quarter 2006, which was of EUR 0.6 million. Net income for the third
quarter 2007 was EUR 3.3 million, compared to EUR 5.0 million in
previous quarter, and EUR 1.2 million a year ago. For the first nine
months of 2007, net income was EUR 10.3 million, compared to EUR 1.6
million in the same period 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 6.6 million for the third quarter 2007,
compared to EUR 6.2 million for the previous quarter and EUR 2.5
million a year ago. On a 9-month comparison basis non-GAAP operating
income grew from EUR 6.6 million in 2006 to EUR 16.2 million.
Balance sheet: Wavecom's cash position increased
quarter-on-quarter from EUR 56.7 million to EUR 137.5 million at
September 30, 2007. Most of the cash increase is due to the
convertible bond issue completed in early July 2007, which added a net
amount of EUR 78.0 million to our cash reserves in the third quarter
2007 while a liability associated with the long-term portion of the
loan was also accounted for in the third quarter of 2007. A total of
EUR 7.5 million was used this quarter to buy back Wavecom stock.
Inventory decreased incrementally to EUR 8.8 million compared with EUR
9.2 million the previous quarter; DSOs (Days Sales Outstanding) were
at 53 days compared with 55 days the previous quarter.
Business news:
StarService Launch:
Emmanuel Walckenaer, V.P. of Intelligent Devices Services,
commented on the Wavecom's announcement of StarService, "The launch of
this exciting new offer sets the stage for a whole new business model
in the industrial and automotive wireless markets. With StarService we
are eliminating the upfront investment by offering our newest Wireless
Microprocessor 50 free of charge with a subscription to our service
contract. Market reaction to the offer has been extremely positive."
He continued, "We were particularly pleased that two wireless
operators, Jasper and Numerex, both of whom specialize in M2M
communication, are enthusiastic to work along with us in expanding the
market for wireless machine to machine communication."
-- Wavecom S.A. announced the launch of StarService, a new
product and service offer, which includes a Wireless
Microprocessor(R) and a subscription to Wavecom's secure
Intelligent Device Service (IDS). The first StarService offer
comes with a new Wavecom Wireless Microprocessor(R), WMP50,
which is included free of charge as part of the package. This
new ARM9-based device has been specifically designed for
high-volume industrial M2M and automotive applications. It
runs the Open AT(R) Software Suite, which enables customers to
develop embedded applications, and is expandable with a rich
set of plug-ins. Samples of the WMP50 are available now.
-- Jasper Wireless and Wavecom announced the initial step in
building a global partnership for the first all-in-one
wireless machine to machine (M2M) infrastructure. By combining
the new Wavecom StarService with the Jasper Wireless global
service platform, customers get everything they need to
connect and manage their machines wirelessly from day one.
This connectivity service will be possible using the new
Wavecom Wireless Microprocessor(R) 50 with inSIM(TM) (embedded
SIM), the secure Wavecom Intelligent Device Services, and
immediate access to the Jasper Wireless service platform for
connecting and managing machines around the world.
-- Wavecom and Numerex Corp. announced that Numerex will provide
the revolutionary new Wavecom StarService for customers in
North America. The Wavecom StarService will be delivered over
Numerex's wireless network allowing users to remotely manage
their wireless devices securely over-the-air (OTA). Easily
integrated into customers' existing back-end applications, the
service will enable users to remotely upgrade firmware and
application software, configure devices, and implement remote
diagnostics.
Other recent announcements:
-- Wavecom and Bouygues Telecom announced certification of
Wavecom's newest families of Wireless CPU(R)s on the Bouygues
Telecom wireless network, thus further opening the market for
wireless machine-to-machine communication in France. The
announcement reinforces Bouygues Telecom's commitment to
development of the market for communicating machines.
-- Airbiquity, Inc. and Wavecom S.A., announced a partnership in
which Airbiquity provides Wavecom SA with their GSM and CDMA
in-band modem software technology. As a result of this global
licensing agreement, the two companies will be able to offer
complete end-to-end data communication solutions that reduce
overall development time for customers.
-- Wavecom SA and PEIKER Acustic GmBH announced that the BMW
Group will integrate embedded hands-free telephone capability
into future lines of passenger cars using a Peiker telephone
kit with Wavecom wireless technology.
-- Wavecom S.A. announced that its development teams have been
evaluated CMMI level 2 (Capability Maturity Model Integration)
by an independent appraiser for software development
processes.
-- Avnet Memec announced the extension of its distribution
agreement with Wavecom SA. The strategic partnership will be
extended to Germany, France, Austria and Switzerland. This
expanded agreement reinforces the already strong position of
Avnet Memec as Wavecom distributor in Italy, Greece and
Turkey.
-- Wavecom S.A. integrated in Sunlink's KENJI KJ-8800 tracking
terminal. The KENJI KJ 8800 watercraft tracking terminal has
integrated the Wavecom Q2686 Wireless CPU(R) with C-GPS
companion software protocol stack and GPS chips making it a
complete GSM/GPRS/GPS solution. The C-GPS chipset receives
location data, performs the preliminary data processing and
forwards it to the Wavecom Wireless CPU(R) for transmission
via cellular networks.
Chantal Bourgeat, Wavecom CFO, concluded: "We are feeling positive
about the business as many projects we have been working on for a long
time are beginning to come together." Ms Bourgeat added, "We continue
to pursue strategic acquisitions that could further build our customer
base and enhance our technology offerings."
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 third quarter 2007. To access this call, please use
the following numbers (access code: 4203387): +33 (0) 1 70 99 42 95 in
France, +44 (0) 20 7806 1967 in the U.K. and +1 718 354 1391 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 Q4 and Full year 2007 results on
February 7, 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 third 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
September 30, June 30, September 30,
2006 2007 2007
------------- ----------- --------------
Euro Euro Euro
Revenues :
Product sales 54,992 55,776 50,405
Services revenue 408 334 1,958
Licensing revenue 485 - -
------------- ----------- --------------
55,885 56,110 52,363
Cost of revenues :
Cost of goods sold 35,206 30,139 26,956
Cost of services 802 1,600 1,666
------------- ----------- --------------
36,008 31,739 28,622
------------- ----------- --------------
Gross profit 19,877 24,371 23,741
Operating expenses :
Research and development 8,467 8,179 8,493
Sales and marketing 4,464 5,740 5,689
General and administrative 6,325 5,700 5,461
------------- ----------- --------------
Total operating expenses 19,256 19,619 19,643
------------- ----------- --------------
Operating income 621 4,752 4,098
------------- ----------- --------------
Interest income and other
financial income, net 264 419 127
Foreign exchange loss, net. 354 (50) (832)
------------- ----------- --------------
Total financial income (loss) 618 369 (705)
------------- ----------- --------------
Income before minority
interests and income taxes 1,239 5,121 3,393
Minority interests - - -
------------- ----------- --------------
Income before income taxes 1,239 5,121 3,393
Income tax expense 20 91 49
------------- ----------- --------------
Net income 1,219 5,030 3,344
============= =========== ==============
Basic net income per share 0.08 0.33 0.22
============= =========== ==============
Diluted net income per share 0.08 0.30 0.20
============= =========== ==============
Number of shares used for
computing :
- basic 15,385,077 15,447,796 15,199,624
- diluted 15,905,833 16,645,446 16,339,024
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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.
Nine months ended
Sept 30, Sept 30,
2006 2007
---------- ----------
Euro Euro
Revenues :
Product sales 131,640 153,967
Services revenue 895 2,623
Licensing revenue 1,453 -
---------- ----------
133,988 156,590
Cost of revenues :
Cost of goods sold 77,034 83,107
Cost of services 1,675 4,825
---------- ----------
78,709 87,932
---------- ----------
Gross profit 55,279 68,658
Operating expenses :
Research and development 22,487 24,430
Sales and marketing 11,755 16,844
General and administrative 17,741 16,944
Acquired in process technology 1,400 -
---------- ----------
Total operating expenses 53,383 58,218
---------- ----------
Operating income 1,896 10,440
---------- ----------
Interest income and other financial income, net 762 963
Foreign exchange loss, net (975) (930)
---------- ----------
Total financial income (loss) (213) 33
---------- ----------
Income before minority interests and income
taxes 1,683 10,473
Minority interests - -
---------- ----------
Income before income taxes 1,683 10,473
Income tax expense 92 151
---------- ----------
Net income 1,591 10,322
========== ==========
Basic net income per share 0.10 0.68
========== ==========
Diluted net income per share 0.10 0.64
========== ==========
Number of shares used for computing :
- basic 15,381,572 15,092,060
- diluted 15,770,654 16,186,995
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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, At Sept 30,
2006 2007
--------------- ------------
Euro Euro
ASSETS
Current assets :
Cash and cash equivalents 54,776 35,381
Marketable securities - 102,140
Accounts receivable, net 28,727 30,419
Inventory 6,631 8,774
Value added tax recoverable 602 901
Prepaid expenses and other current
assets 2,361 3,930
--------------- ------------
Total current assets 93,097 181,545
Other assets :
Long-term investments 3,639 3,694
Other assets 3,166 2,496
Research tax credit 1,771 1,973
Income tax recoverable 9,617 9,617
Intangible and tangible assets, net 19,770 17,406
Goodwill 8,117 8,117
--------------- ------------
Total assets 139,177 224,848
=============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities :
Accounts payable 36,254 36,972
Accrued compensation 9,367 7,306
Current portion of other accrued
expenses 3,713 3,876
Current portion of convertible bonds - 870
Current portion of capitalized lease
obligations 233 206
Deferred revenue and advances received
from customers 98 379
Other liabilities 653 636
--------------- ------------
Total current liabilities 50,318 50,245
Long-term liabilities :
Long-term portion of other accrued
expenses 15,957 16,278
Long-term portion of convertible bonds - 77,554
Long-term portion of capitalized lease
obligations 385 368
Other long-term liabilities 858 676
--------------- ------------
Total long-term liabilities 17,200 94,876
Commitments and contingencies
- -
Shareholders' equity :
Shares, euro 1 nominal value, 15,765,111
shares authorized, issued and
outstanding at September 30, 2007
(15,554,153 at December 31, 2006) 15,554 15,765
Additional paid-in capital 139,393 144,098
Treasury stock at cost (544,322 shares at
September 30, 2007 and 156,345 shares at
December 31, 2006) (1,312) (8,823)
Accumated deficit (79,947) (69,624)
Accumulated other comprehensive income
(loss) (2,029) (1,689)
--------------- ------------
Total shareholders' equity 71,659 79,727
--------------- ------------
Total liabilities and shareholders'
equity 139,177 224,848
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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.
Nine months ended September 30,
2006 2007
--------------- --------------
Euro Euro
Cash flows from operating activities :
Net income 1,591 10,322
Adjustments to reconcile net income to
net cash provided from operating
activities:
Amortization and impairment of
intangible and tangible assets 6,427 6,254
Share-based compensation 1,414 3,073
Loss on sales and retirement of
tangible assets 6 13
Acquisition of marketable securities - (102,140)
Net increase (decrease) in cash from
working capital items 14,347 (4,581)
--------------- --------------
Net cash provided by
operating activities 23,785 (87,059)
--------------- --------------
Cash flows from investing activities :
Acquisition of long-term
investments (22) (55)
Purchases of intangible and
tangible assets (3,243) (3,873)
Acquisition of certain assets,
net of cash acquired (32,529) -
Proceeds from sale of intangible
and tangible assets 155 -
Purchase of interets in
associates - (7)
--------------- --------------
Net cash used by investing
activities (35,639) (3,935)
--------------- --------------
Cash flows from financing activities :
Proceeds from convertible bonds - 77,998
Principal payments on capital lease
obligations (278) (207)
Purchases of treasury stock - (7,510)
Proceeds from exercise of stock
options and founders' warrants 80 1,843
--------------- --------------
Net cash provided (used) by
financing activities (198) 72,124
Effect of exchange rate changes on cash
and cash equivalents (186) (525)
--------------- --------------
Net increase (decrease) in cash and
cash equivalents (12,238) (19,395)
Cash and cash equivalents, beginning of
period 60,663 54,776
--------------- --------------
Cash and cash equivalents, end of
period 48,425 35,381
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