EX-99.1 2 c96808exv99w1.htm EXHIBIT 99.1 Exhibit 99.1
Exhibit 99.1
(AIRVANA MOBILE BROADBAND EVERYWHERE)
Airvana Reports Fourth Quarter and Full Year 2009 Financial Results
CHELMSFORD, Mass., February 25, 2010 — Airvana, Inc. (NASDAQ: AIRV), a leading provider of mobile broadband network infrastructure products, today reported financial results for the fourth quarter and the full year ended January 3, 2010. Airvana presents both GAAP and non-GAAP financial metrics below because management believes that the combination provides a more complete understanding of the company’s operating performance.
GAAP Financial Highlights
•   Revenue: Total revenue for the fourth quarter of 2009 was $47.7 million, compared with $63.3 million for the fourth quarter of 2008. For the full year 2009, total revenue was $64.6 million, compared with $138.2 million for the full year 2008.
 
•   Net Income/Loss: Net income for the fourth quarter of 2009 was $13.1 million, compared with net income of $24.8 million for the fourth quarter of 2008. For the full year 2009, net loss was $25.0 million, compared with net income of $21.3 million for the full year 2008.
In November 2009, the CDMA business of Nortel Networks Inc. (“Nortel”) was acquired by Telefon AB L.M. Ericsson (“Ericsson”). As part of this acquisition, Airvana’s contract with Nortel was assigned to Ericsson and Airvana received $39.6 million in cash from Ericsson, which represented payment for outstanding invoices of $36.4 million for sales of Airvana products and services to Nortel made prior to Nortel’s Chapter 11 bankruptcy filing in January 2009 plus interest of $3.2 million. As of January 3, 2010 Airvana’s cash, cash equivalents and investments increased to $263.2 million, from $228.4 million on December 28, 2008.
Non-GAAP Financial Highlights
•   Pro Forma Product and Service Billings (“Billings”): Airvana’s pro forma Billings for the fourth quarter of 2009 were $49.0 million, compared with $39.8 million for the fourth quarter of 2008. For the full year 2009, Airvana’s pro forma Billings were $152.3 million, compared with $146.9 million for the full year 2008.
 
•   Pro Forma Operating Profit on Billings: Pro forma operating profit on Billings for the fourth quarter of 2009 was $15.3 million, compared with $10.8 million for the fourth quarter of 2008. For the full year 2009, Airvana’s pro forma operating profit on Billings was $30.3 million, compared with $34.5 million for the full year 2008.

 

 

 

A description of Airvana’s revenue recognition policy is contained in its quarterly report on Form 10-Q and annual report on Form 10-K, each filed with the Securities and Exchange Commission. A description and a reconciliation of the company’s non-GAAP financial measures are included in this press release.
Proposed Acquisition of Airvana for Approximately $530 Million in Cash
On December 18, 2009, Airvana announced that it had entered into a definitive merger agreement with 72 Mobile Holdings, LLC, a newly formed entity owned by affiliates of S.A.C. Private Capital Group, LLC, GSO Capital Partners LP, Sankaty Advisors LLC and ZelnickMedia. As part of the transaction, Randall Battat, president and chief executive officer of Airvana, and Vedat Eyuboglu and Sanjeev Verma, vice presidents and co-founders of the company, together with certain of their affiliates, will exchange a portion of their shares of Airvana common stock for an equity interest in 72 Mobile Holdings, LLC. The transaction is valued at approximately $530 million. Under the terms of the merger agreement, at the closing of the merger, each share of Airvana common stock will be exchanged for $7.65 in cash.
Completion of the transaction is subject to the approval of Airvana’s shareholders and other closing conditions, and is expected to occur in the first half of 2010. In light of this proposed transaction, Airvana will not host a conference call in conjunction with today’s release of its fourth quarter and full year 2009 financial results. In addition, Airvana will not be providing financial guidance for the first quarter or full year 2010 or for any future periods.
Non-GAAP Financial Measures
To supplement Airvana’s condensed consolidated financial statements presented on a GAAP basis, Airvana uses non-GAAP Billings measures of operating results, gross profit on Billings and operating profit on Billings, which include changes in deferred revenue and deferred costs in a period. These non-GAAP financial measures are presented with the intent of providing both management and investors with a more complete understanding of Airvana’s underlying operating performance and trends. Airvana believes that these non-GAAP financial measures enhance the overall understanding of its past financial performance and also its prospects for the future. These non-GAAP measures provide an indication of Airvana’s financial results based upon sales activity in the period and are considered by management for the purpose of making operational decisions. In addition, these non-GAAP measures are the primary indicators that management uses as a basis for Airvana’s planning and forecasting of future periods.
Management uses the following non-GAAP measures (detailed in Exhibits 1, 2 and 3) as a supplement to GAAP revenue and cash flow from operations in evaluating Airvana’s performance:
•   Product and Service Billings (“Billings”) reflects the amount invoiced for products and services in a period and equals GAAP revenue plus the change in deferred revenue in the period. On January 14, 2009, Nortel filed for bankruptcy protection. At the time of the filing, Airvana had total pre-

 

 

 

    bankruptcy filing outstanding invoices to Nortel of $21.8 million for the quarter ended December 28, 2008 and $14.6 million for the quarter ended March 29, 2009. The collection of the total amount of $36.4 million was subject to Nortel’s bankruptcy process. As a result, Airvana excluded these amounts from Billings as of December 28, 2008 and March 29, 2009. This $36.4 million was accounted for on a cash basis when collected and included in Billings for the three months ended January 3, 2010. Pro forma Billings amounts reflect the pre-bankruptcy invoices in the periods originally invoiced.
•   Costs Related to Billings reflects the cost directly attributable to Billings in a period and equals GAAP cost of revenue plus the change in deferred cost in the period.
 
•   Gross Profit on Billings reflects Billings less costs related to Billings in the period.
 
•   Operating Profit on Billings reflects Gross Profit on Billings less GAAP operating expenses in the period. On January 14, 2009, Nortel filed for bankruptcy protection. At the time of the filing, Airvana had total pre-bankruptcy filing outstanding invoices to Nortel of $21.8 million for the quarter ended December 28, 2008 and $14.6 million for the quarter ended March 29, 2009. The collection of the total amount of $36.4 million was subject to Nortel’s bankruptcy process. As a result, Airvana excluded these amounts from Billings as of December 28, 2008 and March 29, 2009. This $36.4 million was accounted for on a cash basis when collected and included in Billings for the three months ended January 3, 2010. Pro forma operating profit on Billings amounts reflect the pre-bankruptcy invoices in the periods originally invoiced.
Management believes investors may find these measures useful for understanding Airvana’s operations, but cautions that they should not be considered a substitute for disclosure in accordance with GAAP. Exhibits 1, 2 and 3 reconcile all non-GAAP metrics to the corresponding financial statement items as determined in accordance with GAAP for all periods presented.
About Airvana, Inc.
Airvana helps operators transform the mobile experience for users worldwide. The company’s high-performance technology and products, from comprehensive femtocell solutions to core mobile network infrastructure, enable operators to deliver compelling and consistent broadband services to mobile subscribers, wherever they are. Airvana’s products are deployed in 70 commercial networks on six continents. The company is headquartered in Chelmsford, Mass., USA, with offices worldwide. For more information, please visit www.airvana.com.
Safe Harbor Statement
Any statements in this press release that are not historical facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements typically contain words such as “believes,” “anticipates,” “plans,” “expects,” “will,” “continue,” “outlook” and similar terms, and include, without limitation, statements regarding the expected timing of the merger of Airvana, statements regarding the ability to complete the merger and statements underlying any of the foregoing. Actual results may differ materially from those indicated by such forward-looking statements

 

 

 

as a result of various important factors, including without limitation uncertainties as to the timing of the merger of Airvana, Airvana’s ability to maintain its relationship with Ericsson, the timing and rate of femtocell market acceptance and growth, operator femtocell deployment plans, the highly competitive and rapidly evolving market in which Airvana competes, Airvana’s limited operating history, the fluctuation of its past operating results and its reliance on sales through Ericsson for a significant portion of its revenues and product and service Billings and other factors discussed in Airvana’s filings with the Securities and Exchange Commission. In addition, the forward-looking statements included in this press release represent Airvana’s views as of the date of this press release. Airvana anticipates that subsequent events and developments may cause its views to change. While Airvana may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Airvana’s views as of any date subsequent to the date of this press release.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
This news release is for informational purposes only. It is not a solicitation of a proxy. Airvana, Inc. has filed with the SEC a preliminary proxy statement and plans to file with the SEC and mail to its stockholders a definitive proxy statement in connection with the transaction. The proxy statement will contain important information about Airvana, Inc., 72 Mobile Holdings, LLC, the proposed merger and related matters. Investors and security holders are urged to read the proxy statement carefully when it is available.
Investors and security holders will be able to obtain free copies of the proxy statement and other documents filed with the SEC by 72 Mobile Holdings, LLC and Airvana, Inc. through the web site maintained by the SEC at www.sec.gov. In addition, investors and security holders will be able to obtain free copies of the proxy statement from Airvana, Inc. by contacting Investor Relations at (978) 250-3000.
Airvana, Inc., its directors and executive officers may be deemed to be participants in the solicitation of proxies from Airvana, Inc.’s stockholders with respect to the transactions contemplated by the merger agreement. Information regarding Airvana, Inc.’s directors and executive officers is contained in Airvana, Inc.’s Annual Report on Form 10-K for the year ended December 28, 2008, its proxy statement dated April 21, 2009 and preliminary proxy statement dated January 14, 2010, which are filed with the SEC.
Investor contact:
David Reichman
Sharon Merrill Associates
617-542-5300
AIRV@InvestorRelations.com

 

 

 

Airvana, Inc.
GAAP Consolidated Statements of Operations
Comparative Financial Results
(Amounts in thousands except per share data)
(Unaudited)
                                 
    Three Months Ended     Year Ended  
    December 28,     January 3,     December 28,     January 3,  
    2008     2010     2008     2010  
Revenue:
                                
Product
   $ 57,616     $ 36,603     $ 123,295     $ 45,121  
Service
     5,653       11,122       14,878       19,473  
 
                        
Total revenue
     63,269       47,725       138,173       64,594  
 
                                
Cost of revenue:
                                
Product
     1,407       1,968       3,267       3,195  
Service
     2,163       2,752       8,195       10,374  
 
                        
Total cost of revenue
     3,570       4,720       11,462       13,569  
 
                                
Gross profit
     59,699       43,005       126,711       51,025  
Gross margin
     94 %     90 %     92 %     79 %
 
                                
Operating expenses:
                                
Research and development
     18,617       19,474       74,826       73,676  
Selling and marketing
     3,721       3,962       14,933       16,307  
General and administrative
     2,301       4,461       8,976       12,772  
 
                        
Total operating expenses
     24,639       27,897       98,735       102,755  
 
                                
Operating income (loss)
     35,060       15,108       27,976       (51,730 )
Interest income, net
     1,358       3,601       7,240       6,693  
 
                                
Income (loss) before income tax expense
     36,418       18,709       35,216       (45,037 )
Income tax expense (benefit)
     11,569       5,610       13,923       (20,045 )
 
                        
 
                                
Net income (loss)
   $ 24,849     $ 13,099     $ 21,293     $ (24,992 )
 
                        
 
                                
Net income (loss) per common share:
                                
Basic
   $ 0.39     $ 0.21     $ 0.33     $ (0.40 )
 
                        
Diluted
   $ 0.36     $ 0.19     $ 0.30     $ (0.40 )
 
                        
 
                                
Weighted average common shares outstanding:
                                
Basic
     63,655       62,730       64,278       62,499  
 
                        
Diluted
     68,744       67,701       70,091       62,499  
 
                        

 

 

 

Exhibit 1
Airvana, Inc.
GAAP to Non-GAAP Product and Service Billings Reconciliation
(Amounts in thousands)
(Unaudited)
                                                                                 
    Three Months Ended December 28, 2008     Three Months Ended January 3, 2010  
                    Adjusted     Pro Forma                             Adjusted     Pro Forma        
            Deferral     GAAP     Nortel     Pro Forma             Deferral     GAAP     Nortel     Pro Forma  
    GAAP     Adjustments     Results     Adjustments (1)     Results (1)     GAAP     Adjustments     Results     Adjustments (2)     Results (2)  
 
                                                                                
Revenue
   $ 63,269     $ (45,274 )   $ 17,995     $ 21,818     $ 39,813     $ 47,725     $ 37,726     $ 85,451     $ (36,442 )   $ 49,009  
Cost of revenue
     3,570       816       4,386       —       4,386       4,720       1,062       5,782       —       5,782  
 
                                                            
Gross profit (loss)
     59,699       (46,090 )     13,609       21,818       35,427       43,005       36,664       79,669       (36,442 )     43,227  
Gross margin
     94 %             76 %             89 %     90 %             93 %             88 %
Operating expenses
     24,639       —       24,639       —       24,639       27,897       —       27,897       —       27,897  
 
                                                            
Operating income (loss) from operations
     35,060       (46,090 )     (11,030 )     21,818       10,788       15,108       36,664       51,772       (36,442 )     15,330  
Operating margin
     55 %             -61 %             27 %     32 %             61 %             31 %
Stock-based compensation
     1,302       —       1,302       —       1,302       1,817       —       1,817       —       1,817  
 
                                                            
Operating income (loss) excluding stock compensation
   $ 36,362     $ (46,090 )   $ (9,728 )   $ 21,818     $ 12,090     $ 16,925     $ 36,664     $ 53,589     $ (36,442 )   $ 17,147  
Operating margin excluding stock compensation
     57 %             -54 %             30 %     35 %             63 %             35 %
                                                                                 
    Year Ended December 28, 2008     Year Ended January 3, 2010  
                    Adjusted     Pro Forma                             Adjusted     Pro Forma        
            Deferral     GAAP     Nortel     Pro Forma             Deferral     GAAP     Nortel     Pro Forma  
    GAAP     Adjustments     Results     Adjustments (1)     Results (1)     GAAP     Adjustments     Results     Adjustments (1)     Results (1)  
 
                                                                                
Revenue
   $ 138,173     $ (13,118 )   $ 125,055     $ 21,818     $ 146,873     $ 64,594     $ 109,573     $ 174,167     $ (21,818 )   $ 152,349  
Cost of revenue
     11,462       2,163       13,625       —       13,625       13,569       5,731       19,300       —       19,300  
 
                                                            
Gross profit
     126,711       (15,281 )     111,430       21,818       133,248       51,025       103,842       154,867       (21,818 )     133,049  
Gross margin
     92 %             89 %             91 %     79 %             89 %             87 %
Operating expenses
     98,735       —       98,735       —       98,735       102,755       —       102,755       —       102,755  
 
                                                            
Operating income (loss) from operations
     27,976       (15,281 )     12,695       21,818       34,513       (51,730 )     103,842       52,112       (21,818 )     30,294  
Operating margin
     20 %             10 %             23 %     -80 %             30 %             20 %
Stock-based compensation
     4,844       —       4,844       —       4,844       6,317       —       6,317       —       6,317  
 
                                                            
Operating income (loss) excluding stock compensation
   $ 32,820     $ (15,281 )   $ 17,539     $ 21,818     $ 39,357     $ (45,413 )   $ 103,842     $ 58,429     $ (21,818 )   $ 36,611  
Operating margin excluding stock compensation
     24 %             14 %             27 %     -70 %             34 %             24 %
     
Note (1):    On January 14, 2009, Nortel filed for bankruptcy protection. For the three months and year ended December 28, 2008, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $21,818, the collection of which was subject to Nortel’s bankruptcy process. As a result, Airvana excluded this amount from Billings and from accounts receivable as of December 28, 2008. This amount was accounted for on a cash basis when collected and included in Billings for the three months ended January 3, 2010.
 
Note (2):    On January 14, 2009, Nortel filed for bankruptcy protection. At the time of the filing, Airvana had total pre-bankruptcy filing outstanding invoices to Nortel of $36,442, the collection of which was subject to Nortel’s bankruptcy process. As a result, Airvana excluded this amount from Billings and from accounts receivable as of December 28, 2008 and March 29, 2009. This amount was accounted for on a cash basis when collected and included in Billings for the three months ended January 3, 2010.

 

 

 

Airvana, Inc.
Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
                 
    December 28,     January 3,  
    2008     2010  
ASSETS
                
 
                
Current assets
                
Cash and cash equivalents
   $ 30,425     $ 30,318  
Investments
     197,941       232,849  
Accounts receivable
     3,354       19,030  
Deferred product cost
     1,913       3,379  
Prepaid taxes and deferred tax assets and charges, current, net
     2,168       23,079  
Prepaid expenses and other current assets
     2,758       4,372  
 
            
Total current assets
     238,559       313,027  
 
                
 
  
Property and equipment, net
     4,822       5,380  
 
                
Deferred service cost, long-term
     1,300       5,565  
Deferred tax assets and charges, long-term, net
     956       3,686  
Goodwill and intangible assets, net
     11,096       10,027  
Other assets
     603       1,032  
 
            
Total assets
   $ 257,336     $ 338,717  
 
            
 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
 
                
Current liabilities
                
Accounts payable
   $ 4,455     $ 3,430  
Accrued expenses and other current liabilities
     14,365       11,974  
Accrued income taxes
     1,897       72  
Deferred revenue
     61,310       167,390  
 
            
Total current liabilities
     82,027       182,866  
 
                
Deferred revenue, long-term
     5,550       9,043  
Accrued income taxes
     5,703       6,132  
Other liabilities
     1,174       653  
 
            
Total long-term liabilities
     12,427       15,828  
 
                
Stockholders’ equity:
                
Common stock
     63       63  
Additional paid-in capital
     186,824       188,777  
Accumulated other comprehensive income
     —       180  
Accumulated deficit
     (24,005 )     (48,997 )
 
            
Total stockholders’ equity
     162,882       140,023  
 
            
Total liabilities and stockholders’ equity
   $ 257,336     $ 338,717  
 
            

 

 

 

Airvana, Inc.
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
                                 
    Three Months Ended     Year Ended  
    December 28,     January 3,     December 28,     January 3,  
    2008     2010     2008     2010  
Operating activities
                                
Net income (loss)
   $ 24,849     $ 13,099     $ 21,293     $ (24,992 )
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
                                
Depreciation
     780       839       3,215       3,249  
Amortization of intangible assets
     268       268       1,069       1,069  
Stock-based compensation
     1,302       1,817       4,844       6,317  
Deferred tax (expense) benefit
     (160 )     (356 )     (951 )     (14,827 )
Excess tax benefit related to exercise of stock options
     (288 )     (650 )     (2,266 )     (2,442 )
Amortization of investments
     (732 )     935       (4,113 )     940  
Unrealized gain on forward foreign currency exchange contracts
     —       188       —       —  
Amortization of leasehold incentive
     (131 )     (130 )     (522 )     (521 )
Changes in operating assets and liabilities:
                                
Accounts receivable
     4,739       (594 )     10,817       (15,676 )
Deferred product and service cost
     (816 )     (1,062 )     (2,163 )     (5,731 )
Prepaid taxes and deferred tax charges
     8,877       6,908       115       (6,372 )
Prepaid expenses and other current assets
     483       (469 )     306       (1,384 )
Accounts payable
     1,836       271       649       (1,025 )
Accrued expenses and other current liabilities
     734       (100 )     3,358       (2,386 )
Accrued income taxes
     2,792       (775 )     (9,964 )     (1,396 )
Deferred revenue
     (45,274 )     37,726       (13,118 )     109,573  
 
                        
Net cash (used in) provided by operating activities
     (741 )     57,915       12,569       44,396  
 
                                
Investing activities
                                
Purchases of property and equipment
     (194 )     (456 )     (1,765 )     (3,827 )
Purchase of investments
     (92,995 )     (98,041 )     (341,622 )     (290,902 )
Maturities of investments
     78,280       56,944       309,579       255,234  
Investments sold
     —       —       16,631       —  
Other assets
     (47 )     38       4       (639 )
 
                        
Net cash used in investing activities
     (14,956 )     (41,515 )     (17,173 )     (40,134 )
 
                                
Financing activities
                                
Payments on long-term debt
     (2 )     —       (121 )     —  
Payments of cash dividend
     (21 )     —       (92 )     (5 )
Purchase and retirement of treasury stock
     (9,781 )     —       (13,328 )     (9,291 )
Excess tax benefit related to exercise of stock options
     288       650       2,266       2,442  
Proceeds from exercise of stock options
     413       449       2,632       2,485  
 
                        
Net cash (used in) provided by financing activities
     (9,103 )     1,099       (8,643 )     (4,369 )
 
                                
Effect of exchange rates on cash and cash equivalents
     (95 )     —       125       —  
 
                        
 
                                
Net (decrease) increase in cash and cash equivalents
     (24,895 )     17,499       (13,122 )     (107 )
Cash and cash equivalents at beginning of period
     55,320       12,819       43,547       30,425  
 
                        
Cash and cash equivalents at end of period
   $ 30,425     $ 30,318     $ 30,425     $ 30,318  
 
                        

 

 

 

Exhibit 2
Airvana, Inc.
Select Quarterly Financial Data — GAAP & non-GAAP Metrics
(Amounts in thousands)
(Unaudited)
                                                                                                                                                 
    Three Months Ended  
                                                                    Pro Forma             Pro Forma             Pro Forma             Pro Forma             Pro Forma        
                                                                    Nortel             Nortel             Nortel             Nortel             Nortel        
                                                                    Adjustments     Pro Forma     Adjustments     Pro Forma     Adjustments     Pro Forma     Adjustments     Pro Forma     Adjustments     Pro Forma  
    Mar 30,     Jun 29,     Sep 28,     Dec 28,     Mar 29,     Jun 28,     Sep 27,     Jan 3,     Dec 28,     Dec 28,     Mar 29,     Mar 29,     Jun 28,     Jun 28,     Sep 27,     Sep 27,     Jan 3,     Jan 3,  
    2008     2008     2008     2008     2009     2009     2009     2010     2008 (1)     2008 (1)     2009 (2)     2009 (2)     2009 (3)     2009 (3)     2009 (4)     2009 (4)     2010 (5)     2010 (5)  
GAAP Financial Metrics
                                                                                                                                                
Total revenue
   $ 7,638     $ 59,019     $ 8,247     $ 63,269     $ 9,263     $ 4,880     $ 2,726     $ 47,725     $ 55     $ 63,324     $ 55     $ 9,318     $ —     $ 4,880     $ —     $ 2,726     $ (110 )   $ 47,615  
Cost of revenue
     1,913       3,327       2,652       3,570       2,547       3,402       2,900       4,720               3,570               2,547               3,402               2,900               4,720  
 
                                                                                                            
Gross profit
     5,725       55,692       5,595       59,699       6,716       1,478       (174 )     43,005       55       59,754       55       6,771       —       1,478       —       (174 )     (110 )     42,895  
Operating expenses
     24,910       24,237       24,949       24,639       23,946       24,786       26,126       27,897               24,639               23,946               24,786               26,126               27,897  
 
                                                                                                            
Operating (loss) profit
   $ (19,185 )   $ 31,455     $ (19,354 )   $ 35,060     $ (17,230 )   $ (23,308 )   $ (26,300 )   $ 15,108     $ 55     $ 35,115     $ 55     $ (17,175 )   $ —     $ (23,308 )   $ —     $ (26,300 )   $ (110 )   $ 14,998  
 
                                                                                                            
 
                                                                                                                                                
Net cash (used in) provided by operating activities
     (2,446 )     3,685       12,071       (741 )     (24,335 )     16,167       (5,351 )     57,915       —       (741 )     —       (24,335 )     —       16,167       —       —       —       57,915  
Cash, cash equivalents and investments
     220,969       227,491       237,814       228,366       198,394       211,001       205,326       263,167       —       228,366       —       198,394       —       211,001       —       —       —       263,167  
Accounts receivable
     11,039       7,941       8,093       3,354       13,105       9,493       18,436       19,030       21,818       25,172       36,442       49,547       36,442       45,935       36,442       54,878       —       19,030  
Days sales outstanding (a)
     27       28       17       17       61       23       54       20       —       57       —       132       —       110       —       160       —       35  
Deferred revenue — end of period
     110,136       77,396       112,134       66,860       77,124       110,185       138,707       176,433       21,763       88,623       36,332       113,456       36,332       146,517       36,332       175,039       —       176,433  
Deferred product cost — end of period
     1,651       1,354       2,397       3,213       4,694       6,492       7,882       8,944       —       3,213       —       4,694       —       6,492       —       7,882       —       8,944  
 
                                                                                                                                                
Reconciliation of GAAP and non-GAAP Metrics
                                                                                                                                                
Revenue (GAAP)
   $ 7,638     $ 59,019     $ 8,247     $ 63,269     $ 9,263     $ 4,880     $ 2,726     $ 47,725     $ 55     $ 63,324     $ 55     $ 9,318     $ —     $ 4,880     $ —     $ 2,726     $ (110 )   $ 47,615  
Deferred revenue at end of period
     110,136       77,396       112,134       66,860       77,124       110,185       138,707       176,433       21,763       88,623       36,332       113,456       36,332       146,517       36,332       175,039       —       176,433  
Less: deferred revenue at beginning of period
     (79,978 )     (110,136 )     (77,396 )     (112,134 )     (66,860 )     (77,124 )     (110,185 )     (138,707 )     —       (112,134 )     (21,763 )     (88,623 )     (36,332 )     (113,456 )     (36,332 )     (146,517 )     (36,332 )     (175,039 )
 
                                                                                                            
Product and service billings, “Billings” (non-GAAP)
     37,796       26,279       42,985       17,995       19,527       37,941       31,248       85,451       21,818       39,813       14,624       34,151       —       37,941       —       31,248       (36,442 )     49,009  
 
                                                                                                                                                
Cost of revenue (GAAP)
     1,913       3,327       2,652       3,570       2,547       3,402       2,900       4,720       —       3,570       —       2,547       —       3,402       —       2,900       —       4,720  
Deferred product cost at end of period
     1,651       1,354       2,397       3,213       4,694       6,492       7,882       8,944       —       3,213       —       4,694       —       6,492       —       7,882       —       8,944  
Less: deferred product cost at beginning of period
     (1,050 )     (1,651 )     (1,354 )     (2,397 )     (3,213 )     (4,694 )     (6,492 )     (7,882 )     —       (2,397 )     —       (3,213 )     —       (4,694 )     —       (6,492 )     —       (7,882 )
 
                                                                                                            
Cost related to Billings (non-GAAP)
     2,514       3,030       3,695       4,386       4,028       5,200       4,290       5,782       —       4,386       —       4,028       —       5,200       —       4,290       —       5,782  
 
                                                                                                                                                
Gross profit on Billings (non-GAAP) (b)
     35,282       23,249       39,290       13,609       15,499       32,741       26,958       79,669       21,818       35,427       14,624       30,123       —       32,741       —       26,958       (36,442 )     43,227  
Gross margin on Billings (non-GAAP) (c)
     93 %     88 %     91 %     76 %     79 %     86 %     86 %     93 %             89 %             88 %             86 %             86 %             88 %
 
                                                                                                                                                
Total operating expenses (GAAP)
     24,910       24,237       24,949       24,639       23,946       24,786       26,126       27,897       —       24,639       —       23,946       —       24,786       —       26,126       —       27,897  
 
                                                                                                            
Operating profit (loss) on Billings (non-GAAP) (d)
   $ 10,372     $ (988 )   $ 14,341     $ (11,030 )   $ (8,447 )   $ 7,955     $ 832     $ 51,772     $ 21,818     $ 10,788     $ 14,624     $ 6,177     $ —     $ 7,955     $ —     $ 832     $ (36,442 )   $ 15,330  
% operating profit (loss) on Billings (non-GAAP)
     27 %     -4 %     33 %     -61 %     -43 %     21 %     3 %     61 %             27 %             18 %             21 %             3 %             31 %
Total interest & other income, net (GAAP)
     2,585       1,792       1,505       1,358       1,124       1,542       426       3,601               1,358               1,124               1,542               426               3,601  
 
                                                                                                            
Profit (loss) before tax on Billings (non-GAAP) (e)
   $ 12,957     $ 804     $ 15,846     $ (9,672 )   $ (7,323 )   $ 9,497     $ 1,258     $ 55,373     $ 21,818     $ 12,146     $ 14,624     $ 7,301     $ —     $ 9,497     $ —     $ 1,258     $ (36,442 )   $ 18,931  
% profit (loss) before tax on Billings (non-GAAP)
     34 %     3 %     37 %     -54 %     -38 %     25 %     4 %     65 %             31 %             21 %             25 %             4 %             39 %
 
                                                                                                                                                
Stock-based compensation included in operating expense
   $ 1,085     $ 1,179     $ 1,278     $ 1,302     $ 1,371     $ 1,442     $ 1,687     $ 1,817     $ —     $ 1,302     $ —     $ 1,371     $ —     $ 1,442     $ —     $ 1,687     $ —     $ 1,817  
Acquisition costs included in operating expense
     —       —       —       —       —       —       —       —       —       —       —       —       —       —       —       —       —       —  
 
                                                                                                                                                
Profit (loss) before tax on Billings excluding stock-based compensation (non-GAAP) (e)
   $ 14,042     $ 1,983     $ 17,124     $ (8,370 )   $ (5,952 )   $ 10,939     $ 2,945     $ 57,190     $ —     $ 13,448     $ 14,624     $ 8,672     $ —     $ 10,939     $ —     $ 2,945     $ (36,442 )   $ 20,748  
% profit (loss) before tax on Billings excluding stock-based compensation (non-GAAP) (e)
     37 %     8 %     40 %     -47 %     -30 %     29 %     9 %     67 %             34 %             25 %             29 %             9 %             42 %
     
Note (1):    On January 14, 2009, Nortel filed for bankruptcy protection. As of December 28, 2008, Airvana had outstanding invoices to Nortel of $21,818, the collection of which is subject to Nortel’s bankruptcy process. As a result, Airvana has excluded $55 from revenue, $21,763 from deferred revenue, and $21,818 from accounts receivable as of December 28, 2008. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.
 
Note (2):    On January 14, 2009, Nortel filed for bankruptcy protection. As of March 29, 2009, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $36,442, the collection of which is subject to Nortel’s bankruptcy process. As a result, Airvana has excluded $55 from revenue, $36,332 from deferred revenue, and $36,442 from accounts receivable as of March 29, 2009. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.
 
Note (3):    On January 14, 2009, Nortel filed for bankruptcy protection. As of June 28, 2009, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $36,442, the collection of which is subject to Nortel’s bankruptcy process. As a result, Airvana has excluded $36,332 from deferred revenue and $36,442 from accounts receivable as of June 28, 2009. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.
 
Note (4):    On January 14, 2009, Nortel filed for bankruptcy protection. As of September 27, 2009, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $36,442, the collection of which is subject to Nortel’s bankruptcy process. As a result, Airvana has excluded $36,332 from deferred revenue and $36,442 from accounts receivable as of September 27, 2009. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.
 
Note (5):    On January 14, 2009, Nortel filed for bankruptcy protection. During the quarter ended January 3, 2010, Airvana collected pre-bankruptcy filing outstanding invoices to Nortel of $36,442 and recorded them on a cash basis.
(a)   Days sales outstanding (DSO) equals the accounts receivable divided by Billings (non-GAAP) multiplied by days in the period (98 in Q4 2009 and 91 for all other periods presented).
 
(b)   Gross profit on Billings equals the excess of Billings over cost related to Billings.
 
(c)   Gross margin on Billings equals the excess of Billings over cost related to Billings divided by Billings.
 
(d)   Operating profit on Billings equals Billings less cost related to Billings, less total operating expenses.
 
(e)   Profit (loss) before tax on Billings equals Billings less cost related to Billings, less total operating expenses plus interest income, net, plus cumulative change in accounting principle.

 

 

 

Exhibit 3
Airvana, Inc.
Select Annual Financial Data — GAAP & non-GAAP Metrics
(Amounts in thousands)
(Unaudited)
                                                                                                 
    Fiscal Year Ended  
                                                                    Pro Forma             Pro Forma        
                                                                    Nortel     Pro     Nortel     Pro  
                                                                    Adjustments     Forma     Adjustments     Forma  
    2002     2003     2004     2005     2006     2007     2008     2009     2008 (1)     2008 (1)     2009 (1)     2009 (1)  
GAAP Financial Metrics
                                                                                                
Total revenue
   $ 4,567     $ 6,978     $ 3,617     $ 2,347     $ 170,270     $ 305,786     $ 138,173     $ 64,594     $ 55     $ 138,228     $ (55 )   $ 64,539  
Cost of revenue
     2,764       5,537       4,453       6,533       45,295       41,904       11,462       13,569               11,462               13,569  
 
                                                                        
Gross profit (loss)
     1,803       1,441       (836 )     (4,186 )     124,975       263,882       126,711       51,025       55       126,766       (55 )     50,970  
Operating expenses
                                                                             —               —  
Research & development
     17,408       10,089       22,040       42,922       55,073       76,638       74,826       73,676               74,826               73,676  
Sales & marketing
     4,005       3,582       4,665       5,237       7,729       12,055       14,933       16,307               14,933               16,307  
General & administrative
     1,484       1,201       2,068       3,253       5,068       7,453       8,976       12,772               8,976               12,772  
In-process R&D
     —       —       —       —       —       2,340       —       —               —               —  
 
                                                                        
Total operating expenses
     22,897       14,872       28,773       51,412       67,870       98,486       98,735       102,755               98,735               102,755  
 
                                                                        
Operating (loss) profit
   $ (21,094 )   $ (13,431 )   $ (29,609 )   $ (55,598 )   $ 57,105     $ 165,396     $ 27,976     $ (51,730 )   $ 55     $ 28,031     $ (55 )   $ (51,785 )
 
                                                                        
 
                                                                                                
Net cash (used in) provided by operating activities
     (18,600 )     (1,687 )     43,028       67,390       25,138       91,771       12,569       44,396       —       12,569       —       44,396  
Cash, cash equivalents and investments
     27,000       33,745       72,321       135,470       160,123       221,963       228,366       263,167       —       228,366       —       263,167  
Accounts receivable
     2,836       1,175       9,244       7,590       46,072       14,171       3,354       19,030       21,818       25,172       —       19,030  
Days sales outstanding (a)
                             17.6       119.3       36.3       9.8       20.3       —       10       —       40  
Deferred revenue — end of period
     5,837       15,519       118,051       273,124       243,418       79,978       66,860       176,433       21,763       88,623       55       176,488  
Deferred product cost — end of period
     2,183       3,949       28,196       66,966       34,214       1,050       3,213       8,944       —       3,213       —       8,944  
 
                                                                                                
Reconciliation of GAAP and non-GAAP Metrics
                                                                                                
Revenue (GAAP)
   $ 4,567     $ 6,978     $ 3,617     $ 2,347     $ 170,270     $ 305,786     $ 138,173     $ 64,594     $ 55     $ 138,228     $ (55 )   $ 64,539  
Less: deferred revenue from acquisition
     —       —       —       —       —       (171 )     —       —       —       —       —       —  
Deferred revenue at end of period
     5,837       15,519       118,051       273,124       243,418       79,978       66,860       176,433       21,763       88,623       —       176,433  
Less: deferred revenue at beginning of period
     —       (5,837 )     (15,519 )     (118,051 )     (273,124 )     (243,418 )     (79,978 )     (66,860 )     —       (79,978 )     (21,763 )     (88,623 )
 
                                                                        
Product and service billings, “Billings” (non-GAAP)
     10,404       16,660       106,149       157,420       140,564       142,175       125,055       174,167       21,818       146,873       (21,818 )     152,349  
 
                                                                                                
Cost of revenue (GAAP)
     2,764       5,537       4,453       6,533       45,295       41,904       11,462       13,569       —       11,462       —       13,569  
Deferred product cost at end of period
     2,183       3,949       28,196       66,966       34,214       1,050       3,213       8,944       —       3,213       —       8,944  
Less: deferred product cost at beginning of period
     —       (2,183 )     (3,949 )     (28,196 )     (66,966 )     (34,214 )     (1,050 )     (3,213 )     —       (1,050 )     —       (3,213 )
 
                                                                        
Cost related to Billings (non-GAAP)
     4,947       7,303       28,700       45,303       12,543       8,740       13,625       19,300       —       13,625       —       19,300  
 
                                                                                                
Gross profit on Billings (non-GAAP) (b)
     5,457       9,357       77,449       112,117       128,021       133,435       111,430       154,867       21,818       133,248       (21,818 )     133,049  
Gross margin on Billings (non-GAAP) (c)
     52 %     56 %     73 %     71 %     91 %     94 %     89 %     89 %             91 %             87 %
 
                                                                                                
Operating expenses (GAAP):
                                                                                                
Research & development
     17,408       10,089       22,040       42,922       55,073       76,638       74,826       73,676       —       74,826       —       73,676  
% research & development expense on Billings
     167 %     61 %     21 %     27 %     39 %     54 %     60 %     42 %             51 %             48 %
Sales & marketing
     4,005       3,582       4,665       5,237       7,729       12,055       14,933       16,307       —       14,933       —       16,307  
% sales & marketing expense on Billings
     38 %     22 %     4 %     3 %     5 %     8 %     12 %     9 %             10 %             11 %
General & administrative
     1,484       1,201       2,068       3,253       5,068       7,453       8,976       12,772       —       8,976       —       12,772  
% general & administrative expense on Billings
     14 %     7 %     2 %     2 %     4 %     5 %     7 %     7 %             6 %             8 %
In-process R&D
     —       —       —       —       —       2,340       —       —       —       —       —       —  
% in-process R&D expense on Billings
     0 %     0 %     0 %     0 %     0 %     2 %     0 %     0 %             0 %             0 %
 
                                                                        
Total operating expenses (GAAP)
     22,897       14,872       28,773       51,412       67,870       98,486       98,735       102,755       —       98,735       —       102,755  
 
                                                                        
% total operating expenses (GAAP)
     220 %     89 %     27 %     33 %     48 %     69 %     79 %     59 %             67 %             67 %
Operating profit (loss) on Billings (non-GAAP) (d)
   $ (17,440 )   $ (5,515 )   $ 48,676     $ 60,705     $ 60,151     $ 34,949     $ 12,695     $ 52,112     $ 21,818     $ 34,513     $ (21,818 )   $ 30,294  
% operating profit (loss) on Billings (non-GAAP)
     -168 %     -33 %     46 %     39 %     43 %     25 %     10 %     30 %             23 %             20 %
 
                                                                                                
Total interest & other income, net (GAAP)
     101       (93 )     485       3,459       6,602       9,845       7,240       6,693       —       7,240       —       6,693  
Cumulative effect of change in accounting principle (GAAP)
     —       —       —       —       (330 )     —       —       —               —               —  
 
                                                                        
Profit (loss) before tax on Billings (non-GAAP) (e)
   $ (17,339 )   $ (5,608 )   $ 49,161     $ 64,164     $ 66,423     $ 44,794     $ 19,935     $ 58,805     $ 21,818     $ 41,753     $ (21,818 )   $ 36,987  
% profit (loss) before tax on Billings (non-GAAP)
     -167 %     -34 %     46 %     41 %     47 %     32 %     16 %     34 %             28 %             24 %
 
                                                                                                
Stock-based compensation included in operating expense
   $ —     $ —     $ —     $ —     $ 800     $ 2,996     $ 4,844     $ 6,317     $ —     $ 4,844     $ —     $ 6,317  
Acquisition costs included in operating expense
   $ —     $ —     $ —     $ —     $ —     $ 2,340     $ —     $ —     $ —     $ —     $ —     $ —  
     
Note (1):    On January 14, 2009, Nortel filed for bankruptcy protection. As of December 28, 2008, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $21,818, the collection of which is subject to Nortel’s bankruptcy process. As a result, Airvana has excluded $55 from revenue, $21,763 from deferred revenue, and $21,818 from accounts receivable as of December 28, 2008. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.
     
 
(a)   Days sales outstanding (DSO) equals the accounts receivable divided by Billings (non-GAAP) multiplied by days in the period (371 in 2009 and 364 for all other periods presented).
 
(b)   Gross profit on Billings equals the excess of Billings over cost related to Billings.
 
(c)   Gross margin on Billings equals the excess of Billings over cost related to Billings divided by Billings.
 
(d)   Operating profit (loss) on Billings equals Billings less cost related to Billings, less total operating expenses.
 
(e)   Profit (loss) before tax on Billings equals Billings less cost related to Billings, less total operating expenses plus interest income, net, plus cumulative change in accounting principle.