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Good afternoon. And thank you for joining our second quarter 2012 conference call. We will begin with a business overview and outlook from Chairman and CEO Peter Leparulo followed by a financial overview with third quarter guidance from Chief Financial Officer, Ken Leddon. We will then open the call for questions. As a reminder, this conference call is being broadcast on Tuesday, August 7, 2012 over the phone and the internet to all interested parties. Information shared in this call is effective as of today’s date, and will not be updated. During this call, non-GAAP financial measures will be discussed. Reconciliations to the most directly comparable GAAP financial measures are included in the earnings Release, which is available in the Investors section of our website. The audio replay of this call will also be archived there. Please also be advised that today’s discussion will contain forward-looking statements. These forward-looking statements are not historical facts, but rather are based on the company’s current expectations and beliefs. The company’s actual results may differ materially. Please refer to the risk factors described in our Forms 10-K, 10-Q and other SEC filings which are available on our website.
And now, I’d like to introduce Peter Leparulo, Chairman and Chief Executive Officer of Novatel Wireless.Peter Leparulo Good afternoon and thank you for joining our call today. Overall results for the second-quarter showed improvement on a sequential quarter basis in both business segments. We were near or above the top of our guidance range in all three key metrics, revenue, non-GAAP gross margin and EPS. We do expect a temporary decline in revenue in the third quarter due to the impact of a competing product at our largest customer as orders received outside of required (indiscernible). Clearly we are not satisfied with the third quarter forecast. However we expect a strong rebound in the fourth quarter as we stated in our press release. In the fourth quarter we also expect to demonstrate concrete progress in reducing both customer concentration and product concentration through key new customer relationships, significant product introductions in both mobile computing and M2M solutions and new sales channels. There are a number of catalysts that are expected to result in significant financial improvement in the fourth quarter. These include an exciting new MiFi launch with a major North American carrier that is not a current customer; revenue growth in embedded modules as our OEM customers launch new platforms that include our products and third, growth in sales of our M2M solutions. We are putting the pieces together that are building the foundation for growth and sustainable value creation over the longer term. There are a number of reasons for our optimistic long term outlook. Most important is the continued strength of MiFi brand, even in the face of competition. We believe that our MiFi sales will continue to advance position as the dominant global hotspot brand in North America. As I mentioned we are working with a major carrier on a significant launch later this year of a new MiFi product that will reflect our solutions based approach to the market. The launch of this next generation MiFi will culminate over 12 months of development and will significantly advance the product category. Among other things, our proprietary operating system will enable new usage patterns together with cloud based application support which can be hosted by us and enterprise or operators.
This will be the first in a number of additions to our MiFi portfolio that address a variety of use patterns. From those connected 27x7 with multiple interactive devices, to those for whom price and value are key factors in purchase decisions. We have anchored tier 1 carrier customers for each of these product development initiatives. With the steady rollout of new MiFi products that address new use cases rather than simply air interface cycles, we expect to gain a leading mobile hotspot position at all three major carriers in 2013.We are also optimistic about the future of our mobile computing embedded module product line. By way of background, we provide both 3G and 4G embedded modules to PC OEMs but our competitive focus has been on 4G. Unfortunately a majority of the PC OEM market is still based on 3G technology which has constrained our sales. However we see a number of catalysts that should cause this to change. These include lower-prices to end-users of 4G capable laptops and tablets, a reduction in the number of 3G platform offerings than 4G platforms, and the launch of Windows 8 OEM platforms for business content. As a result, we expect to see growth in our mobile computing embedded module sales by year end as existing 3G platforms begin to migrate to 4G. The third fundamental reason for our optimism is progress that we are making in launching our M2M products, both integrated platforms and embedded modules. We are working diligently to supplement our M2M products with CDMA and HSPA capabilities, not only for our integrated solutions product portfolio but also for our footprint compatible M2M embedded modules. Along with this expansion of our portfolio we are seeing new customer traction in every stage of the sale cycle. Overall more than 20 strategic customers worldwide are engaged in beta trials of our CDMA and HSPA based products that will be commercially launched over the next several quarters. Read the rest of this transcript for free on seekingalpha.com