Airvana Reports Third Quarter 2009 Financial Results.

Demand for Mobile Broadband Services Drives Outlook for Growth in Fourth Quarter

CHELMSFORD, Mass. -- Airvana, Inc. (NASDAQ: AIRV), a leading provider of mobile broadband network infrastructure products, today reported financial results for the quarter ended September 27, 2009. 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 third quarter of 2009 was $2.7 million, compared with $8.2 million for the third quarter of 2008. For the first nine months of 2009, total revenue was $16.9 million, compared with $74.9 million for the first nine months of 2008.

* Net Loss/Income: Net loss for the third quarter of 2009 was $16.9 million, compared with a net loss of $12.4 million for the third quarter of 2008. For the first nine months of 2009, net loss was $38.1 million, compared with a net loss of $3.6 million for the first nine months of 2008.

Non-GAAP Financial Highlights

* Product and Service Billings ("Billings"): Billings for the third quarter of 2009 were $31.2 million, compared with $43.0 million for the third quarter of 2008. For the first nine months of 2009, Billings were $103.3 million, including $14.6 million of pre-bankruptcy filing outstanding invoices to Nortel Networks Inc. ("Nortel") for sales to Nortel prior to Nortel's Chapter 11 bankruptcy protection filing on January 14, 2009, compared with $107.1 million for the comparable period of 2008.

Airvana has excluded from deferred revenue and Billings a total of $36.4 million of outstanding invoices related to royalties earned prior to Nortel's bankruptcy filing. Airvana's collection of these invoices is subject to the consummation of Telefon AB L.M. Ericsson's acquisition of Nortel's CDMA business and the assignment of the Airvana contract to Ericsson. Airvana expects the transaction to close in the fourth quarter of 2009. Airvana will continue to account for Nortel receivables as of the date of Nortel's bankruptcy filing on a cash basis, if and when collected.

* Operating Profit on Billings: Operating profit on Billings for the third quarter of 2009 was $0.8 million, compared with $14.3 million for the third quarter of 2008. For the first nine months of 2009, Airvana's operating profit on Billings was $15.0 million, including the $14.6 million of pre-bankruptcy filing invoices to Nortel, compared with $23.7 million for the first nine months of 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.

Comments on EV-DO Products

"Airvana's underlying business remained strong in the third quarter as mobile broadband traffic in operator networks continued its trajectory of strong growth," said Randy Battat, Airvana's president and chief executive officer. "As we had expected, some EV-DO upgrade Billings moved out of the third quarter due to Ericsson's pending acquisition of Nortel's CDMA business."

"Looking ahead, we expect continued growth in data traffic, which is increasingly fueled by the growth of smartphones, to drive healthy demand for our EV-DO products in the fourth quarter of 2009," Battat said. "We expect to start shipping upgrades of our version 8.0 software in conjunction with the closing of the Ericsson/Nortel transaction, which we now expect to occur in November. As a result, we expect fourth quarter 2009 EV-DO Billings to be higher than the fourth quarter of 2008, and second half EV-DO shipments to be higher than the first half of this year."

Comments on Femtocell Products

"The femtocell's time has come," Battat said. "We have been awarded several commercial deployments around the world with contracts in place and purchase commitments for significant volumes in 2010 and beyond. Both our CDMA and UMTS femtocell products are in the final stages of software development and testing, with commercial production starting late this quarter and ramping in the first quarter of 2010. We expect operator launches with Airvana products, especially in North America and Asia, starting in the first half of 2010."

Business and Financial Outlook

"We expect fourth-quarter 2009 Billings to be in the range of $44 million to $46 million, compared with $39.8 million in the fourth quarter of 2008. We expect full-year shipments to be in the range of $147 million to $149 million, compared with $146.8 million in 2008," Battat said. "This outlook is based on our current expectation that the Nortel/Ericsson transaction closes in November and is exclusive of collection of pre-bankruptcy filing outstanding invoices to Nortel. We expect GAAP revenue in the range of $38 million to $40 million, compared with revenue of $63.3 million in the fourth quarter of the prior year. For full-year 2009, we expect revenue in the range of $55 million to $57 million, compared with revenue of $138.2 million in 2008.

"We have a lot of software in the development pipeline for our EV-DO customers," Battat said. "We expect to deliver three major releases in 2010."

"We expect to ship limited quantities of femtocell pre-production units in the fourth quarter of 2009, and we expect femtocell products to represent less than 10% of Billings for the fourth quarter of 2009 and the full year," Battat said. "We expect to start volume production of femtocell products in the fourth quarter of 2009 with shipments ramping significantly in 2010."

Conference Call Details

Airvana will host a conference call today at 8:30 a.m. (ET) to discuss its financial results, highlights of the quarter, business strategy and financial outlook. The conference call and accompanying slide presentation will be webcast live on the Internet and can be accessed on the Investor Relations section of Airvana's website (www.airvana.com). The conference call can also be accessed by dialing [phone] or [phone]. A replay of the webcast will be archived on Airvana's website.

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, 3 and 4) 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.

* 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.

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, 3 and 4 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 about future expectations, plans and prospects for Airvana, including without limitation, expectations related to its development of femtocell alliances, its shipments during future periods, its invoiced amounts, Billings and revenue for future periods, its relationship with Nortel and Telefon AB L.M. Ericsson, as successor owner of Nortel's CDMA business, and the closing of Ericsson's purchase of Nortel's CDMA business, 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. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including without limitation Airvana's ability to secure court approval for payment of its outstanding invoices to Nortel, Airvana's ability to maintain its relationship with the successor owner of Nortel's CDMA business, 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 Nortel 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.

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Note (1): 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 $110 from accumulated deficit, $36,332 from deferred revenue, and $36,442 from accounts receivable as of September 27, 2009. These amounts will be accounted for on a cash basis if and when collected.

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