Aether Systems Announces Second Quarter 2003 Results; More Progress Towards Profitability.Business Editors/High-Tech Writers OWINGS MILLS, Md.--(BUSINESS WIRE)--Aug. 12, 2003 Aether aether: see ether, in physics and astronomy. Aether god of whole atmosphere. [Gk. Myth.: Jobes, 42] See : Air Systems, Inc. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :AETH), a leading provider of wireless and mobile data solutions, today reported financial results for the second quarter ended June June: see month. 30, 2003. Revenues for the second quarter were $27.8 million. The results include subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. revenue of $17.8 million, engineering services revenue of $172,000, software product revenue of $5.6 million, and device sales of $4.2 million. In the same period last year, revenues were $31.6 million, including subscriber revenue of $19.9 million, engineering services revenue of $712,000, software product revenue of $5.6 million, and device sales of $5.4 million. In Q1 2003, revenues were $29.2 million. Based on Generally Accepted Accounting Principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), net loss was ($0.35) per share or ($14.7 million) in Q2 2003. In the same period last year, net loss was ($0.46) per share or ($19.5 million). Aether reported a Q2 2003 net operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. , excluding certain non-cash and other charges, of ($0.17) per share or a total of ($7.3 million). In the same period last year, Aether reported a net operating loss, excluding certain non-cash and other charges, of ($0.61) per share or a total of ($25.7 million). Additionally, Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become , which the Company believes is a meaningful supplemental measurement of its operating performance, was approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. ($3.9 million) for the second quarter 2003, as compared to an Adjusted EBITDA of ($18.1 million) for the second quarter 2002. Net operating loss, excluding certain non-cash and other charges, and Adjusted EBITDA are non-GAAP financial measures. Non-cash and other charges include restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , the amortization of intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. and other non-cash items primarily relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc acquisitions, the Company's share of losses in joint ventures under equity method accounting, and non-cash expenses Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) relating to options and warrants and certain other items, all of which are set forth on a reconciliation attached to this press release. "This quarter marked our eighth consecutive quarter of improvements with regard to net operating loss, excluding certain non-cash and other charges, as we aim for profitability," said Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Dave Oros. "Reflecting our continuing efforts to most efficiently manage our resources, we experienced another reduction in adjusted operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. (consisting of research and development, general and administrative, and selling and marketing costs) to $18.5 million." Oros continued, "We have been encouraged by the deployments from contracts won over recent quarters, such as those with global office supplies Office supplies is the generic term that refers to all supplies regularly used in offices by businesses and other organizations, from private citizens to governments, who works with the collection, refinement, and output of information (colloquially referred to as "paper work"). leader Corporate Express, public safety agencies in Hamilton County, Ohio Hamilton County is a county located in the southwest corner of the state of Ohio, United States. The county seat is Cincinnati, and as of 2000, the population was 845,303. This made it the third most populous county in Ohio (and Ohio's second most densely populated county). , and trucking leader U.S. Xpress See QuarkXPress. . The process that began in earnest ear·nest 1 adj. 1. Marked by or showing deep sincerity or seriousness: an earnest gesture of goodwill. 2. Of an important or weighty nature; grave. See Synonyms at serious. last year to optimize optimize - optimisation our cost structure and become more focused on specific business units is nearing completion. We can now focus more of our efforts on growing areas of the business that have demonstrated the most resiliency The ability to recover from a failure. The term may be applied to hardware, software or data. . The aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. deployments, the additional customers we win on a regular basis, and the overall improved financial trends are encouraging developments." Based on Generally Accepted Accounting Principles (GAAP), operating expenses were $28.7 million in Q2 2003. By comparison, operating expenses were $25.4 million in Q1 2003 and $47.2 million in Q2 2002. Adjusted operating expenses (which excludes depreciation and amortization, option and warrant expense, impairments of intangibles and other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. , and restructuring charges) continued to decrease for the tenth Tenth can mean: In mathematics:
n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be that is most closely associated with and supportive supportive adjective Pertaining to a Pt management philosophy in which only the Sx of a particular condition are treated; supportive measures are often taken when no specific and/or effective therapy is available or accessible–eg, viral meningitis, or of day-to-day day-to-day adj. 1. Occurring on a routine or daily basis: the day-to-day movements of the stock market. 2. operations. Revenue for this quarter decreased for specific reasons. As Aether has previously discussed, aggressive efforts in reducing expenses have had some impact on revenue, due in part to said efforts that sought to eliminate lower margin revenue. Aether noted, however, that while it has reduced adjusted operating expenses by over 40 percent from Q2 2002 to Q2 2003, revenue decreased by 12 percent during that same time period. While the Company will always look to improve efficiencies in managing the business, Aether has completed a significant portion of its expense reduction plan. Also, the ongoing process in Aether's Transportation division of seeking to convert Highway Master 5000 (HM5000) customers to Aether's MobileMax product is having a temporary impact, as MobileMax carries a lower, but more consistent, monthly fee than HM5000. The Company expects a majority of this conversion process to be completed by the end of this year and that a significant portion of HM5000 customers will continue to use Aether service. The results of this process include longer, multi-year contracts for MobileMax with a lower but more consistent monthly fee, as opposed op·pose v. op·posed, op·pos·ing, op·pos·es v.tr. 1. To be in contention or conflict with: oppose the enemy force. 2. to the more variable model of HM5000, which results in more volatile With regard to computer memory, it means "temporary" and not "highly changeable," which is the usual meaning of the word. See volatile memory. 1. (programming) volatile - volatile variable. 2. (storage) volatile - See non-volatile storage. and less predictable revenue. As the year progresses, the Company expects increases in MobileMax revenues to exceed declines in HM5000 revenues. Management Guidance For the balance of 2003, Aether expects a return to modest revenue growth, with more momentum likely to be seen in the last fiscal quarter, due principally to the deployments now being implemented across the business - particularly from our Transportation division. The Company also expects operating loss, excluding certain non-cash and other charges, to continue to improve through the balance of the year. Use of Non-GAAP Financial Measures This press release includes three non-GAAP financial measures, as defined by the SEC's Regulation G. These non-GAAP financial measures are (1) net operating loss, excluding non-cash and other charges, (2) adjusted operating expenses, and (3) Adjusted EBITDA. Net loss is the most directly comparable GAAP financial measure to both net operating loss, excluding non-cash and other charges, and Adjusted EBITDA; operating expenses is most directly comparable to adjusted operating expenses. As required by Regulation G, a reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure is attached to this press release. We provide these three non-GAAP financial measures because we believe that when considered with the comparable GAAP measures, they enhance an investor's ability to compare the Company's performance from one period to the next, as they exclude the impact of non-recurring or irregular HEIR, IRREGULAR. In Louisiana, irregular heirs are those who are neither testamentary nor legal, and who have been established by law to take the succession. See Civ. Code of Lo. art. 874. items. Aether management considers these non-GAAP financial measures in evaluating the Company's operations. We also believe they aid in management's and investors' assessment of the use of cash by the Company's core operations, as they exclude cash items (such as restructuring charges) that in management's judgment do not reflect the ongoing cash expenses of the Company's continuing business, as well as non-cash gains and charges. In addition, net operating loss, excluding certain non-cash and other charges, is a metric used by analysts and others in the investment community to evaluate the Company's performance and to express performance estimates for the Company. These non-GAAP financial measures require management to make judgments about the exclusion exclusion /ex·clu·sion/ (eks-kloo´zhun) 1. a shutting out or elimination. 2. surgical isolation of a part, as of a segment of intestine, without removal from the body. of certain items, and if different judgments were made, the amounts reported would be different. Conference Call Aether will host a conference call on Wednesday Wednesday: see week. , August 13, 2003 at 8:30 a.m. Eastern Time. Interested parties may access the call at www.aethersystems.com or by telephone at 1-800-441-0022. Please ask for the Aether Systems call. Replay of this call will be available until Friday Friday: see Sabbath; week. Friday young Indian rescued by Crusoe and kept as servant and companion. [Br. Lit.: Robinson Crusoe] See : Servant , August 22, 2003, by calling 1-800-839-0860, access code 1057. Additionally, this press release is available on the Company's website. About Aether Systems, Inc. Aether Systems delivers wireless and mobile workforce automation solutions that make people more productive and their organizations more profitable. Aether's products and services are built on Aether Fusion, the company's standards-based platform that allows for secure, reliable extension of critical information to virtually any wireless or mobile environment. Return on investment in Aether solutions comes from a unique combination of strengths - quick access to multiple back-end (programming) back-end - Any software performing either the final stage in a process, or a task not apparent to the user. A common usage is in a compiler. A compiler's back-end generates machine language and performs optimisations specific to the machine's architecture. information sources, workflow The automatic routing of documents to the users responsible for working on them. Workflow is concerned with providing the information required to support each step of the business cycle. that is optimized for specific industries, and turnkey See turnkey system. deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. services and professional support. Backed by years of in-market expertise, Aether is making it possible for thousands of government agencies and businesses to unleash the power of the mobile workforce. For more information, please visit www.aethersystems.com. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used herein, the words anticipate, believe, estimate, intend, may, will, and expect and similar expressions as they relate to Aether Systems, Inc. (Aether or Company) or its management are intended to identify such forward-looking statements. Actual results could differ materially for a variety of reasons and circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . Risks and uncertainties that may affect the Company's operations, financial condition and financial results are discussed in detail in the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and include, but are not limited to: the lack of an established market for our products; uncertainty as to whether our acquisitions will produce anticipated benefits, whether we will be able to alter our services to meet changing market demands and technologies; whether we will be able to recruit RECRUIT. A newly made soldier. and retain qualified personnel; our dependence on wireless networks owned and controlled by third parties; potential negative effects on our operations from workforce reductions and other restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). activities; limitations on our ability to protect the Company's intellectual property; potential liabilities for transmitting transmitting, v to send and receive information, signals, and so on; allows a therapist to perceive a client's physical, emotional, and spiritual states. third party information, service disruptions and systems failures; the potential loss of significant customers; and the impact of changes in laws and rules that affect our domestic and foreign operations.Aether undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
in thousands except per
share data
Subscriber revenue $17,772 $19,881 $36,764 $32,190
Engineering services
revenue 172 712 251 2,335
Software and related
services 5,646 5,633 11,495 11,655
Device sales 4,165 5,392 8,482 9,110
---------- ---------- ---------- ----------
Total revenue 27,755 31,618 56,992 55,290
Cost of subscriber revenue 8,395 11,203 18,240 18,557
Cost of engineering
services revenue 37 318 58 1,121
Cost of software and
related services 1,148 2,264 2,421 4,440
Cost of device sales 3,488 4,519 8,203 7,950
---------- ---------- ---------- ----------
Total cost of
revenue 13,068 18,304 28,922 32,068
---------- ---------- ---------- ----------
Gross profit 14,687 13,314 28,070 23,222
Operating expenses:
Research and development 4,272 6,991 8,710 15,617
General and
administrative 10,870 15,561 22,580 32,936
Selling and marketing 3,400 8,885 6,785 19,039
Depreciation and
amortization 4,164 10,604 8,414 21,353
Option and warrant
expense 521 2,170 1,130 4,391
Impairment of intangibles
and fixed assets 2,202 - 2,644 2,377
Loss on disposal of
assets 838 - 838 -
Restructuring charge 2,378 3,025 2,904 15,581
---------- ---------- ---------- ----------
Total operating
expenses 28,645 47,236 54,005 111,294
---------- ---------- ---------- ----------
Operating loss (13,958) (33,922) (25,935) (88,072)
Other income (expense):
Interest income
(expense), net (768) (1,780) (1,006) (4,034)
Gain on extinguishment of
debt - 22,046 - 28,308
Equity in losses of
investment (33) (833) (92) (3,606)
Investment gain (loss),
including impairments,
net 42 (5,877) (124) (10,112)
Minority interest - (1,408) - 108
Other income - 2,319 - 2,319
Cumulative effect of
change in accounting
principle, Relating to
adoption of SFAS 142 - - - (129,306)
---------- ---------- ---------- ----------
Net Loss $(14,717) $(19,455) $(27,157) $(204,395)
========== ========== ========== ==========
Net loss per share - basic
and diluted ($0.35) ($0.46) ($0.64) ($4.86)
Weighted average shares
outstanding - basic and
diluted 42,538 42,156 42,406 42,074
========== ========== ========== ==========
Reconciliation to net
operating loss excluding
non-cash and other
charges:(1)
Net loss per GAAP $(14,717) $(19,455) $(27,157) $(204,395)
Add back non-cash and
other charges:
Other adjustments
(impairment of
goodwill, write-down
of investments,
inventory
obsolescence) 2,160 5,877 2,768 12,489
Amortization of
intangibles 1,499 4,869 2,873 9,818
Proportionate share of
losses in investee 33 833 92 3,606
Other income - (2,319) - (2,319)
Option and warrant
expense 521 2,170 1,130 4,391
Restructuring charge
(includes cash and non
cash charges) 2,378 3,025 2,904 15,581
Loss on disposal of
assets 838 - 838 -
Gain on extinguishment
of debt - (22,046) - (28,308)
Minority interest -
amortization - 1,351 - (94)
Cumulative effect of
change in accounting
principle - - - 129,306
---------- ---------- ---------- ----------
Net operating loss
excluding non-cash
and other charges (7,288) (25,695) (16,552) (59,925)
========== ========== ========== ==========
Net operating loss
excluding non-cash
and other charges per
share - basic and
diluted ($0.17) ($0.61) ($0.39) ($1.42)
========== ========== ========== ==========
Reconciliation to adjusted
operating expenses:(1)
Operating expenses per
GAAP 28,645 47,236 54,005 111,294
Subtract non cash and
other charges:
Depreciation and
amortization (4,164) (10,604) (8,414) (21,353)
Option and warrant
expense (521) (2,170) (1,130) (4,391)
Impairment of
intangibles and fixed
assets (2,202) - (2,644) (2,377)
Loss on disposal of
assets (838) - (838) -
Restructuring charge
(includes cash and non
cash charges) (2,378) (3,025) (2,904) (15,581)
---------- ---------- ---------- ----------
Adjusted operating
expenses 18,542 31,437 38,075 67,592
========== ========== ========== ==========
Reconciliation to Adjusted EBITDA: (2)
Net loss per GAAP $(14,717) $(19,455) $(27,157) $(204,395)
Depreciation and
amortization 4,164 10,604 8,414 21,353
Option and warrant
expense 521 2,170 1,130 4,391
Impairment of
intangibles and fixed
assets 2,202 - 2,644 2,377
Loss on disposal of
assets 838 - 838 -
Restructuring charge 2,378 3,025 2,904 15,581
Interest income
(expense), net 768 1,780 1,006 4,034
Gain on extinguishment
of debt - (22,046) - (28,308)
Equity in losses of
investment 33 833 92 3,606
Investment gain (loss),
including impairments,
net (42) 5,877 124 10,112
Minority interest - 1,408 - (108)
Other income - (2,319) - (2,319)
Cumulative effect of
change in accounting
principle - - - 129,306
---------- ---------- ---------- ----------
Adjusted EBITDA (3,855) (18,123) (10,005) (44,370)
========== ========== ========== ==========
(1) Our Adjusted operating expenses and Net operating loss excluding
non-cash and other charges are non-GAAP measures and are
indicators of performance used by management and industry analysts
to evaluate the operational performance of the company.
(2) The Company calculates Adjusted EBITDA, which is a non-GAAP
measure, by adding back to its operating loss (as reported under
GAAP) the following non-cash and other items:
Depreciation and amortization, option and warrant expense,
impairment of intangibles and fixed assets, loss of disposal
of assets and restructuring charges.
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
2003 2002
------------ ------------
in thousands
Current assets:
Cash and cash equivalents $111,349 $68,593
Short-term investments 190,032 255,825
Trade accounts receivable 26,207 22,788
Inventory 8,180 19,664
Assets held for sale - 5,250
Leased equipment receivable 2,021 1,656
Prepaid expenses and other current assets 14,317 16,002
------------ ------------
Total current assets 352,106 389,778
Restricted cash 2,000 -
Furniture, computers, and equipment, net 15,356 19,301
Leased equipment receivable 8,306 6,691
Intangibles and other assets 62,408 57,639
------------ ------------
$440,176 $473,409
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $16 $4
Accounts payable 2,342 1,902
Accrued expenses 14,543 19,963
Restructuring reserve 7,526 8,651
Accrued employee compensation and benefits 5,052 7,336
Accrued interest payable 2,529 2,529
Deferred revenue 17,062 14,234
------------ ------------
Total current liabilities 49,070 54,619
Long-term liabilities:
Convertible subordinated notes payable and
other notes payable 154,933 154,942
Deferred revenue 15,497 11,789
Restructuring reserve 19,667 23,801
Deferred rent 782 858
Stockholders' equity 200,227 227,400
Commitments and contingencies
------------ ------------
$440,176 $473,409
============ ============
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