LEE, MA -- 11/09/09 --
Wave Systems Corp. (NASDAQ: WAVX) (www.wave.com)
today reported results for the third quarter (Q3) and nine months ended
September 30, 2009 and reviewed recent corporate progress and developments.
Principally reflecting higher bundled software royalties, services revenue
and increased software upgrade sales, Wave's Q3 2009 net revenues rose 164%
to $4.8 million, compared with Q3 2008 net revenues of $1.8 million. Q3
'09 net revenues rose 1% over Q2 '09 due to a 7% increase in licensing
revenue that more than offset a decline in services revenue related to the
completion of a government contract in Q3 '09. Total billings for Q3 2009
grew 13% to $5.2 million compared to Q2 '09 and grew 126% as compared to Q3
'08. A reconciliation of total billings to total net revenues is provided
below.
Reflecting ongoing cost reduction efforts aimed at improving Wave's cash
flow from operations, Q3 '09 SG&A expense declined by 27% to $2.9 million
from $4.0 million in Q3 '08, while research and development expenses were
reduced by 35% to $2.1 million from $3.2 million in Q3 '08. On a
sequential basis, Q3 '09 SG&A was in line with Q2 '09 SG&A while research
and development expense increased 15% from $1.8 million in Q2 '09 as a
result of required investments in product development.
Wave's Q3 '09 net loss was $479,000, or $0.01 per basic and diluted share,
compared with a Q3 '08 net loss of $5.6 million, or $0.10 per basic and
diluted share, and Wave's Q2 2009 net loss of $344,000, or $0.01 per basic
and diluted share. Per-share figures are based on a weighted average
number of basic shares outstanding in the third quarters of 2009 and 2008
of 71.8 million and 57.9 million, respectively, and 66.4 million in the
second quarter of 2009.
To highlight its operational performance on a cash-flow basis, Wave reports
EBITDAS, a non-GAAP measure defined as earnings before interest income
(expense), income taxes, depreciation and amortization and stock-based
compensation expense. For Q3 '09 Wave reported its second consecutive
quarter of positive EBITDAS. Q3 '09 EBITDAS was $60,000, compared to
negative EBITDAS of $5.0 million in Q3 '08. A reconciliation of net income
to EBITDAS is provided below.
As of September 30, 2009, Wave had total current assets of $5.2 million as
compared to $2.4 million at June 30, 2009 and compared with $2.9 million at
December 31, 2008. Wave's deferred revenue rose to $1.6 million at
September 30 as compared with $1.2 million at the end of Q2 '09.
Steven Sprague, President and CEO of Wave Systems, commented, "Having
achieved year-over-year and quarterly growth in our software licensing
sales, despite ongoing challenges in tech sector spending, Wave was able to
report total net revenue of $4.8 million in Q3 '09, as well as record total
billings of $5.2 million. Of equal importance, Wave achieved positive
EBITDAS for the second straight quarter."
"We continue to see encouraging interest in our EMBASSY security solutions
for managing self-encrypting hard drives," Sprague added. "Shipments of our
EMBASSY Trusted Drive Manager with self-encrypting drives sold by our OEM
customers increased 42 percent in Q3 '09 versus Q2 '09. While the shipment
volumes remain relatively modest, we are pleased with our continued
progress on this front.
"In Q3 '09, our billings attributable to upgrades to our EMBASSY Remote
Administration Server (ERAS) grew 98 percent over Q2 '09. We completed
ERAS upgrade sales across market segments in the U.S. and Europe, including
advertising, aerospace, construction, finance, government, healthcare, IT,
legal, non-profit, utilities and telecommunications. In addition, we
completed an installation of EMBASSY software for the management of Trusted
Platform Modules (TPMs) to strengthen the security of user certificates for
one of the world's largest professional services firms.
"Finally, we recently reported a $1.6 million professional services
contract from a U.S. government agency which followed an earlier $786,000
services contract completed in Q3 '09. We continue to actively support
their review and analysis of trusted computing solutions," Sprague
concluded.
Summary of Recent Progress/Developments:
-- In September Wave announced its participation in the first open pilot
program to enable the public to register and participate in government
websites without creating new user names and passwords. Wave joined
Yahoo!, PayPal, Google, Equifax, AOL, Citi and others in offering solutions
based on OpenID and Information Card technologies. Wave developed a
service that combined the hardware security of the TPM with open identities
for secure, single sign-on access to Web services, utilizing OpenID and
Security Assertion Markup Language (SAML).
-- At Digital ID World in September Wave released and demonstrated a beta
version of id.wave.com, its new identity service for strong authentication
and single-sign on to Web services and applications in the Cloud.
id.wave.com takes advantage of the TPM security chip to secure users'
authentication identities with keys held in the TPM.
-- During the Intel Developers Forum in San Francisco, Wave demonstrated
remote, out-of-band management of self-encrypting drives using Intel®
vPro(TM) Technology with Wave's EMBASSY® client and server software. The
solution allows a secure network unlock of the drives automatically by an
administrator, regardless of whether the PC is powered on or not and
independent of the operating system.
-- Systems integrator NCI Information Systems (NCI) named Wave Systems as
one of its subcontractors for the U.S. General Services Administration
(GSA) Alliant prime contract.
-- Wave continued to ramp its global marketing efforts demonstrating at
GITEX Technology Week in Dubai at Dell's booth. The show, which attracted
more than 100,000 attendees, is one of the world's largest information
technology exhibitions. Wave showcased its advanced lifecycle management
tools for self-encrypting drives available directly from Dell.
-- Wave's eSignSystems division was named to Mortgage Technology
magazine's elite "Lasting Impact Award," recognizing eSign for its
contributions to the burgeoning electronic mortgage space.
About Wave Systems Corp.
Wave provides software to help solve critical enterprise PC security
challenges such as strong authentication, data protection, network access
control and the management of these enterprise functions. Wave is a
pioneer in hardware-based PC security and a founding member of the Trusted
Computing Group (TCG), a consortium of more than 100 companies that forged
open standards for hardware security. Wave's EMBASSY® line of client-
and server-side software leverages and manages the security functions of
the TCG's industry standard hardware security chip, the Trusted Platform
Module (TPM) and supports the TCG's "Opal" self-encrypting drive standard.
Self-encrypting drives are a growing segment of the data protection market,
offering increased security and better performance than many existing
software-based encryption solutions. TPMs are included on an estimated 300
million PCs and are standard equipment on many enterprise-class PCs
shipping today. Using TPMs and Wave software, enterprises can
substantially and cost-effectively strengthen their current security
solutions. For more information about Wave and its solutions, visit
http://www.wave.com.
Safe Harbor for Forward-Looking Statements
This press release may contain forward-looking information within the
meaning of the Private Securities Litigation Reform Act of 1995 and Section
21E of the Securities Exchange Act of 1934, as amended (the Exchange Act),
including all statements that are not statements of historical fact
regarding the intent, belief or current expectations of the company, its
directors or its officers with respect to, among other things: (i) the
company's financing plans; (ii) trends affecting the company's financial
condition or results of operations; (iii) the company's growth strategy and
operating strategy; and (iv) the declaration and payment of dividends. The
words "may," "would," "will," "expect," "estimate," "anticipate,"
"believe," "intend" and similar expressions and variations thereof are
intended to identify forward-looking statements. Investors are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, many of which are beyond
the company's ability to control, and that actual results may differ
materially from those projected in the forward-looking statements as a
result of various factors. Wave assumes no duty to and does not undertake
to update forward-looking statements.
All brands are the property of their respective owners.
WAVE SYSTEMS CORP. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three months ended Nine months ended
September September September September
30, 2009 30, 2008 30, 2009 30, 2008
---------- ----------- ----------- ------------
Net revenues:
Licensing $4,717,523 $ 1,821,225 $12,872,911 $ 5,442,830
Services 126,283 13,482 802,716 76,249
---------- ----------- ----------- ------------
Total net revenues 4,843,806 1,834,707 13,675,627 5,519,079
---------- ----------- ----------- ------------
Operating expenses:
Licensing 232,661 198,354 583,062 567,222
Services 71,041 8,614 455,870 56,797
Selling, general,
and administrative 2,942,158 4,048,641 9,268,818 12,589,387
Research and
development 2,071,652 3,177,408 5,697,738 9,576,213
---------- ----------- ----------- ------------
Total operating
expenses 5,317,512 7,433,017 16,005,488 22,789,619
---------- ----------- ----------- ------------
Operating loss (473,706) (5,598,310) (2,329,861) (17,270,540)
---------- ----------- ----------- ------------
Other income (expense):
Interest income 167 1,395 651 23,682
Interest expense (5,177) (7,817) (16,491) (7,817)
---------- ----------- ----------- ------------
Total other income
(expense) (5,010) (6,422) (15,840) 15,865
---------- ----------- ----------- ------------
Net loss $ (478,716) $(5,604,732) $(2,345,701) $(17,254,675)
========== =========== =========== ============
Loss per common share -
basic and diluted $ (0.01) $ (0.10) $ (0.04) $ (0.32)
Weighted average number
of common shares
outstanding during the
period 71,799,844 57,896,307 66,717,852 54,261,426
WAVE SYSTEMS CORP. AND SUBSIDIARIES
Consolidated Supplemental Schedules
(Unaudited)
Three months ended Nine months ended
September September September September
30, 2009 30, 2008 30, 2009 30, 2008
---------- ----------- ----------- ------------
Total net revenues $4,843,806 $ 1,834,707 $13,675,627 $ 5,519,079
Increase in deferred
revenue 350,156 461,921 115,655 761,535
---------- ----------- ----------- ------------
Total billings
(Non-GAAP) $5,193,962 $ 2,296,628 $13,791,282 $ 6,280,614
========== =========== =========== ============
Net loss as reported $ (478,716) $(5,604,732) $(2,345,701) $(17,254,675)
Interest (income)
expense 5,010 6,422 15,840 (15,865)
Income tax (benefit)
expense - - - -
Depreciation and
amortization 65,387 105,290 190,950 279,328
Stock-based
compensation expense 468,041 501,008 1,309,465 1,706,247
---------- ----------- ----------- ------------
EBITDAS (Non-GAAP) $ 59,722 $(4,992,012) $ (829,446) $(15,284,965)
========== =========== =========== ============
Non-GAAP Financial Measures:
As supplemental information, we provide the non-GAAP performance measures
that we refer to as total billings and EBITDAS. Total billings is provided
in addition to, but not as a substitute for, GAAP total net revenues.
Total billings means the sum of total net revenues determined in accordance
with GAAP, plus the increase or minus the decrease in deferred revenue. We
consider total billings an important measure of our financial performance,
as we believe it best represents the continued increase in our software
license upgrades. Total billings is not a measure of financial performance
under GAAP and, as calculated by us, may not be consistent with
computations of total billings by other companies. EBITDAS is defined as
net income (loss) before interest income (expense), income taxes,
depreciation and amortization and stock-based compensation. EBITDAS should
not be construed as a substitute for net income (loss) or net cash provided
by (used in) operating activities (all as determined in accordance with
GAAP) for the purpose of analyzing our operating performance, financial
position and cash flows, as EBITDAS is not defined by GAAP. However, we
regard EBITDAS as a complement to net income (loss) and other GAAP
financial performance measures, including an indirect measure of operating
cash flow.
WAVE SYSTEMS CORP. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
2009 2008
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 3,137,299 $ 951,563
Accounts receivable, net of allowance for
doubtful accounts of $-0- at September 30,
2009 and $16,364 at December 31, 2008 1,678,750 1,701,829
Prepaid expenses 381,049 227,967
------------ ------------
Total current assets 5,197,098 2,881,359
Property and equipment, net 278,054 408,440
Other assets 132,161 139,975
------------ ------------
Total Assets 5,607,313 3,429,774
============ ============
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses 5,228,290 7,655,834
Current portion of capital lease payable 60,686 63,537
Deferred revenue 1,599,699 1,484,044
------------ ------------
Total current liabilities 6,888,675 9,203,415
Long-term portion of capital lease payable 199,415 245,362
------------ ------------
Total liabilities 7,088,090 9,448,777
------------ ------------
Stockholders' Equity (Deficit):
8% Series I Convertible Preferred stock, $.01
par value. 220 shares issued and outstanding
(liquidation preference of $968,000) in 2009
and 2008 2 2
Series J Convertible Preferred stock, $.01 par
value. -0- shares issued and outstanding
(liquidation preference of $-0-) in 2009 and
91 shares issued and outstanding (liquidation
preference of $364,000) in 2008 - 1
8% Series K Convertible Preferred stock, $.01
par value. -0- shares issued and outstanding
(liquidation preference of $-0-) in 2009 and
456 shares issued and outstanding (liquidation
preference of $1,276,800) in 2008 - 5
Common stock, $.01 par value. Authorized
150,000,000 shares as Class A; 72,742,818 shares
issued and outstanding in 2009 and
58,877,968 in 2008 727,428 588,780
Common stock, $.01 par value. Authorized
13,000,000 shares as Class B; 38,232 shares
issued and outstanding in 2009 and 2008 382 382
Capital in excess of par value 344,826,976 338,081,691
Accumulated deficit (347,035,565) (344,689,864)
------------ ------------
Total Stockholders' Equity (Deficit) (1,480,777) (6,019,003)
------------ ------------
Total Liabilities and Stockholders' Equity
(Deficit) $ 5,607,313 $ 3,429,774
============ ============
Conference call: Today, November 9, 2009 at 4:30 P.M. EST
Webcast / Replay URL: www.wave.com/news/webcasts
Dial-in numbers: 212-231-2904 or 415-226-5358
Contact:
Gerard T. Feeney
CFO
Wave Systems Corp.
413-243-1600
Email Contact
