Airvana Reports Third-Quarter Financial Results.

Third-quarter 2008 Billings increase 39% over third-quarter 2007 Billings to $43.0 million

CHELMSFORD, Mass. -- Airvana, Inc. (NASDAQ: AIRV), a leading provider of mobile broadband network infrastructure products, today reported financial results for the third quarter ended September 28, 2008. Airvana presents both GAAP and non-GAAP financial metrics below because management believes the combination provides a more complete understanding of Airvana's operating performance.

GAAP Financial Highlights

* Revenue: Total revenue for the third quarter of 2008 was $8.2 million, compared with $3.6 million in the third quarter of 2007. For the first nine months of 2008, total revenue was $74.9 million, compared with $160.2 million for the first nine months of 2007.

* Net Income/Loss: Net loss for the third quarter of 2008 was $12.4 million, compared with net loss of $18.2 million for the third quarter of 2007. For the first nine months of 2008, net loss was $3.6 million, compared with net income of $49.1 million for the first nine months of 2007.

Non-GAAP Financial Highlights

* Product and Service Billings ("Billings"): On a non-GAAP basis, Billings for the third quarter of 2008 increased 39% to $43.0 million from $30.8 million for the third quarter of 2007. This growth reflects increased EV-DO Billings, driven by an increased number of shipments of Radio Network Controllers (RNCs) and operator deployments of Airvana's June 2008 software release 6.0. For the first nine months of 2008, Billings were $107.1 million as compared to $108.8 million for the first nine months of 2007.

* Gross Profit on Billings: On a non-GAAP basis, Airvana's gross profit on Billings for the third quarter of 2008 increased 38% to $39.3 million from $28.5 million for the third quarter of 2007. This growth was primarily driven by increased EV-DO Billings in the third quarter of 2008. For the first nine months of 2008, gross profit on Billings was $97.8 million, compared with $102.6 million for the first nine months of 2007.

* Operating Profit on Billings: On a non-GAAP basis, Airvana's operating profit on Billings for the third quarter of 2008 increased to $14.3 million from $3.3 million for the third quarter of 2007. For the first nine months of 2008, Airvana incurred operating profit on Billings of $23.7 million, compared with $31.5 million for the first nine months of 2007.

A description of Airvana's revenue-recognition policy, which results in significant variability in reported revenue from quarter to quarter, and its non-GAAP financial measures is included in this press release.

Comments on the Third Quarter

"As we expected, Airvana returned to billings growth in the third quarter, both sequentially and compared to the prior year period," said President and Chief Executive Officer Randy Battat. "Our EV-DO Billings continue to be driven by increased broadband data traffic on operator networks, which has been fueled by greater use of e-mail, web browsing and 3G multimedia applications used on handsets and laptops. Despite the weakness of the overall global economy, operators are continuing to invest in network coverage and capacity expansion to accommodate the increased traffic, driving further demand for Airvana's EV-DO RNCs and software upgrades."

"This also was a quarter of measurable progress in our fixed-mobile convergence business," Battat said. "Following a joint development agreement with Hitachi for our CDMA femtocell products in July, in October we announced a supply agreement with Hitachi that opens the door to commercial femtocell deployments on wireless networks that serve more than 30 million subscribers in Japan. In addition to Hitachi, Airvana has previously announced collaborations with Nokia Siemens Networks, Thomson, Motorola and Alcatel-Lucent aimed at developing a broad range of UMTS and CDMA femtocell products and solutions."

Business and Financial Outlook

"We expect to conclude 2008 with continued progress in the fourth quarter," said Battat. "Our forecast for the quarter reflects expected purchases of RNCs and software upgrades by operators, as well as the CDMA and UMTS femtocell products we have developed with our fixed-mobile convergence partners."

For the fourth quarter of 2008, Airvana expects Billings (non-GAAP) in the range of $36 million to $38 million and $143 million to $145 million for the year. Airvana also expects revenue (GAAP) for the fourth quarter of 2008 in the range of $58 million to $60 million.

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 the website.

Revenue Recognition Policy

Airvana recognizes revenue in accordance with the American Institute of Certified Public Accountants' Statement of Position (SOP) No. 97-2, Software Revenue Recognition. Airvana collaborates with its OEM customers to develop specific features for products that they sell to their wireless operator customers. Airvana and its OEM customers typically agree on software specifications and plans for specified upgrades several years in advance of delivery, and these upgrades are unique to each OEM customer.

Airvana's typical sales arrangements involve multiple elements, including: perpetual licenses for software products and specified software upgrades; the sale of hardware, maintenance and support services; and the sale of professional services, including training. In order to recognize revenue from current product shipments, Airvana must establish vendor specific objective evidence, or VSOE, of fair value for all undelivered elements, including specified upgrades and maintenance and support services. The best objective evidence of fair value of specified upgrades would be to sell these specified software upgrades separately to multiple customers at the same price. However, the specific features and functionality delivered in Airvana's software upgrades are uniquely designed for each OEM, and therefore Airvana is unable to establish VSOE of fair value for such upgrades. Additionally, Airvana currently only sells maintenance and support services together with its products, and therefore is unable to establish VSOE of fair value for those services.

Therefore, Airvana recognizes revenue from the sale of products and services under these OEM arrangements only after it delivers the upgrades that were committed at the time of sale. At the time of the delivery of all such upgrades, Airvana recognizes a proportionate amount of the product and service revenue previously deferred based on the duration of the applicable warranty period that has elapsed at the time of such delivery, and the unearned revenue is recognized ratably over the remainder of the applicable warranty period. As a result, Airvana believes that its revenue, taken in isolation, provides limited insight into the performance of its business. Therefore, Airvana also presents certain non-GAAP financial measures including: product and service billings, which reflects sales activity in a period; and costs related to product and service billings, which reflects the cost associated with product and service billings.

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 income 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 and 2) 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 product 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 and 2 reconcile all non-GAAP metrics to the corresponding income statement items as determined in accordance with GAAP for all periods presented and for the seven quarters ending with the third quarter of 2008.

About Airvana, Inc.

Airvana specializes in helping wireless operators transform the mobile experience for users worldwide. Airvana's high-performance technology and products, from comprehensive femtocell solutions to core mobile network infrastructure, enable operators to deliver broadband services to mobile devices, independent of physical location. Airvana is headquartered in Chelmsford, Massachusetts, with additional offices in Dallas, Texas, the United Kingdom, Spain, Germany, China, India, Japan, Singapore and Korea. For more information, please visit Airvana's website at www.airvana.com.

Safe Harbor Statement

Any statements in this press release about future expectations, plans and prospects for Airvana, including without limitation statements about expectations related to its future performance, such as total revenue and Billings, and the timing for product releases, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements typically contain the words "believes," "anticipates," "plans," "expects," "will" and similar expressions. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including without limitation the highly competitive and rapidly evolving market in which Airvana competes, Airvana's limited operating history, the timing and rate of femtocell market acceptance and growth, operator femtocell deployment plans, the fluctuation of its past operating results and its reliance on sales through Nortel Networks for a significant portion of its revenues and product and service billings, as well as 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 will cause its views to change. However, 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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