Wave Q2 Net Revenues Rise to $910,000, Primarily Due to Initiation of Bundled Software Shipments by OEM Customers and Increased Services Activity; Net Revenues were $258,000 in Q2 2005 and $493,000 in Q1 2006.LEE, Ma. -- Wave Systems Corp. (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 : WAVX; www.wave.com) today reported results for the second quarter (Q2) and six months ended June 30, 2006 and reviewed recent corporate progress and other developments. Wave's Q2 2006 net revenues rose over 250% to $910,000, compared to Q2 2005 net revenues of $258,000 and an increase of 85% versus Q1 2006 net revenues of $493,000. The improvement in Q2 2006 net revenues reflected increases in both license and services revenues as compared to Q2 2005 and Q1 2006. The increase in license revenues was principally due to higher royalties earned from increased shipments of Wave software. Services revenue increased versus the year ago and Q1 2006 quarters primarily due to the substantial completion of a service contract for the U.S. government. Gross profit rose to $554,000, or 61% of net revenues, in Q2 2006, versus gross profit of $81,000, or 31% of net revenues, in Q2 2005, and gross profit of $278,000, or 56% of net revenues, in Q1 2006. For Q2 2006 Wave reported a net loss of $4.5 million, or $0.13 per basic share, including non-cash, share-based compensation expense of $408,000, or $0.01 per basic share, which was recorded in accordance with the implementation of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123(R) for "Share-based Payment," effective January 1, 2006. Wave's Q2 2005 net loss of $4.2 million, or $0.15 per basic share, did not include any share-based compensation expense. Wave's loss per share figures have been retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin adjusted to reflect the Company's 1-for-3 reverse stock split that went into effect on July 26, 2006. The weighted average number of basic shares outstanding in the second quarters of 2006 and 2005 were 35,416,000 and 27,042,000, respectively, also adjusted for the impact of the reverse split. For the first six months of 2006, Wave's net revenues rose to $1.4 million, compared to net revenues of $335,000 in the year-ago six month period. For the first six months of 2006 Wave reported a net loss of $9.5 million, or $0.28 per basic share, including non-cash, share-based compensation expense of $761,000, or $0.02 per basic share. Wave's net loss of $8.7 million, or $0.33 per basic share, in the first six months of 2005 did not include any share based compensation expense. The weighted average number of basic shares outstanding in the first six months of 2006 and 2005 were 33,998,000 and 26,393,000, respectively. Both the basic loss per share and weighted average number of basic shares outstanding in the 2006 and 2005 six-month periods have been retroactively adjusted to reflect the impact of the 1-for-3 reverse split. As of June 30, 2006 Wave had total current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. of $3.0 million and no long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. . Deferred revenue increased to $564,000 at June 30, 2006 compared to $440,000 at March 31, 2006 and $504,000 at year-end 2005. Steven Sprague, Wave's president 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. , commented, "We are very pleased that our OEMs' shipments have increased this quarter. We believe our strategy to partner with major manufacturers and OEMs is beginning to yield positive results, and we continue to make significant investments in our software and in the marketing of trusted computing Trusted Computing (also abbreviated TC) is a technology developed and promoted by the Trusted Computing Group. The term is taken from the field of trusted systems and has a specialized meaning. solutions to support those relationships. It is our view that the integration of hardware security into the PC provides an excellent platform to address many of the security issues that have plagued PC users. As the industry discovers this new capability, we believe Wave should be well positioned to participate in resulting growth opportunities. As with many previous PC industry standards, we believe that there will be broad based adoption of Trusted Computing in the PC industry, and we look forward to helping the industry realize the full security benefit of this technology. "Of course, there is significant work still to be done. Wave will continue to invest in our software solutions to support three core markets for trusted computing: Strong Authentication (1) Verifying the integrity of a transmitted message. See message integrity, e-mail authentication and MAC. (2) Verifying the identity of a user logging into a network. , Data Protection including Full disk encryption Full disk encryption (or whole disk encryption) is a kind of disk encryption software or hardware which encrypts every bit of data that goes on a disk. The term "full disk encryption" is often used to signify that everything on a disk including the operating system is , and Network Access control. We believe that ongoing investments will continue to support our market share, our revenue and our intellectual property portfolio. Though it has been and continues to be a challenging road, this is an exciting time for Wave and its employees and shareholders." These forward looking statements are predicated on a variety of factors outside of Wave's control, including the accuracy of preliminary forecasts by OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and partners, timing of OEM shipments, enterprise demand for trusted computing solutions, the success of OEM marketing efforts, engineering or support requirements of OEM partners, and other related factors. Summary of recent progress/developments: (for more details, please visit www.wave.com): --Intel(R) Software License and Distribution Agreement: In late July, Wave amended an existing Software License and Distribution Agreement with Intel. The amendment permits Intel to ship the next version of Wave's EMBASSY(R) Trust Suite with Intel's new Broadwater 965 Express Chipset-based Intel Desktop Boards for trusted personal computers. The agreement does not provide for guaranteed minimum or maximum shipped quantities or royalties. --Trust Company of America: In early July, Wave was selected to provide a server-based e-signature and secure document vaulting vaulting Gymnastics exercise in which the athlete leaps over a form that was originally intended to mimic a horse. At one time, the pommel horse was used in the vaulting exercise, with the pommels (handles) removed. solution for Trust Company of America, a specialized provider of custody and back office services to the financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. industry. Wave's TCG (Trusted Computing Group, Beaverton, OR, www.trustedcomputinggroup.org) The successor to the Trusted Computer Platform Alliance (TCPA), announced in 2003 by founding members AMD, HP, IBM, Intel and Microsoft. compatible eSign Transaction Management Suite(TM) will be deployed with Efficient Forms' iForms Product Suite(TM), to enable Trust Company of America to automate its new account and account maintenance processes. --NTT Data: In early July, Wave executed a software reseller An organization that sells hardware and software to the general public. Resellers purchase products from software publishers and hardware manufacturers. agreement with NTT NTT Nippon Telegraph and Telephone Corporation NTT New Technology Telescope NTT National Technology Transfer, Inc NTT Name That Tune (TV game show) NTT National Tree Trust NTT Number Theoretic Transform DATA Corporation of Japan, a leading systems integrator. Pursuant to the agreement NTT DATA will be authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: to resell and provide support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services for Wave's EMBASSY Trust Suite technology and solutions for the trusted computing market in Japan, including financial services, government, healthcare and consumer market segments. The agreement does not provide for guaranteed minimum or maximum shipped quantities or royalties. --STMicro: In June, STMicroelectronics (STMicro) enhanced its existing license agreement with Wave with the addition of a license for a new suite of EMBASSY security software for bundling and distribution with STMicro's TCG 1.2 TPM (1) See TP monitor. (2) (Transactions Per Minute) The number of transactions processed within one minute. See TPS. (3) (Trusted Platform M Solution for personal computers. Under the agreement, Wave receives a per-unit royalty - similar to Wave's existing PC OEM agreements - based on STMicro's shipment volumes of products equipped with the new suite of Wave's EMBASSY security software technology. This royalty would be in addition to the per-unit royalty currently paid to Wave for distribution of the original EMBASSY security software licensed under the companies' existing Master Software License and Distribution Agreement. The agreement does not provide for guaranteed minimum shipped quantities or royalties. --Seagate Momentus 5400 FDE FDE Full Disk Encryption FDE FedEx FDE Fundação para o Desenvolvimento da Educação (Brazil) FDE Frequency Domain Equalization FDE Fault Detection and Exclusion FDE Full Duplex Ethernet FDE Flat Dark Earth : In early June, Wave announced the availability of the EMBASSY Trusted Drive Manager software supporting Seagate Momentus 5400 FDE (Full Disc Encryption The reversible transformation of data from the original (the plaintext) to a difficult-to-interpret format (the ciphertext) as a mechanism for protecting its confidentiality, integrity and sometimes its authenticity. Encryption uses an encryption algorithm and one or more encryption keys. ) hard drives. EMBASSY Trusted Drive Manager is the newest component of Wave's EMBASSY Trust Suite software products, which provide industry standard-based support for security hardware such as Trusted Platform Modules In computing, Trusted Platform Module (TPM) is both the name of a published specification detailing a microcontroller that can store secured information, as well as the general name of implementations of that specification, often called "TPM chip" or "TPM Security Device" (Dell). (TPM) and the Seagate Momentus 5400 FDE drives. --Wave's EMBASSY(R) Endpoint Enforcer: In early May, Wave introduced EMBASSY Endpoint Enforcer, a new network security product that is designed to support the hardware security features provided by TPM security chips and enable third party applications and services to make informed network access decisions by providing protected access to client security metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. . EMBASSY Endpoint Enforcer can be accessed with Trusted Network Connect Trusted Network Connect or TNC is an open architecture for Network Access Control, promulgated by the Trusted Network Connect Work Group (TNC-WG) of the Trusted Computing Group (TCG). (TNC (hardware) TNC - A threaded version of a BNC. ) API's and has successfully passed interoperability The capability of two or more hardware devices or two or more software routines to work harmoniously together. For example, in an Ethernet network, display adapters, hubs, switches and routers from different vendors must conform to the Ethernet standard and interoperate with each other. testing with the leading TNC solution providers. TNC, a security architecture developed by a TCG subgroup sub·group n. 1. A distinct group within a group; a subdivision of a group. 2. A subordinate group. 3. Mathematics A group that is a subset of a group. tr.v. of over 60 companies, is designed to improve the security policy compliance of clients during the network connection process. Wave demonstrated EMBASSY Endpoint Enforcer working with products from Juniper Networks Juniper Networks, Inc. (NASDAQ: JNPR) is an information technology company based in Sunnyvale, California and founded in 1996. The company designs and sells Internet Protocol network products and services. , Meetinghouse meet·ing·house n. A building used for public meetings and especially for Protestant or Quaker religious services. Noun 1. meetinghouse - a building for religious assembly (especially Nonconformists, e.g. and Nortel at Interop in May. --EMBASSY Trust Suite version 5.1: In early May, Wave announced the availability of EMBASSY Trust Suite (ETS ETS Educational Testing Service (nonprofit private educational testing and measurement organization) ETS Emergency Telecommunications Service ETS Electronic Trading System ETS Engineering (&) Technical Services ) version 5.1. Improvements to Wave's EMBASSY Trust Suite version 5.1 include powerful new password management functions and a simplified set-up wizard to aid new users with initial security options and settings. Wave's newest server capabilities provide sophisticated policy management and key management features which are designed to allow enterprise IT managers to implement varying security group policies, while providing a flexible solution that enables simple changes relative to user or department. --Broadcom and Winbond: In April Wave signed OEM Software Distribution agreements with Broadcom Corporation and Winbond Electronic Corporation permitting the distribution of Wave's EMBASSY Security Center (ESC See escape character and escape key. See also ESC/P. ESC - escape ) and Cryptographic Service Provider In Microsoft Windows, a Cryptographic Service Provider (CSP) is a software library that implements the Cryptographic Application Programming Interface (CAPI). CSP's implement encoding and decoding functions, which computer's application programs may use for e.g. (CSP (1) (Certified Systems Professional) An earlier award for successful completion of an ICCP examination in systems development. See ICCP. (2) (Commerce Service P ) software technology with Broadcom and Winbond devices that include a Trusted Platform Module. With these agreements, Wave now has license agreements in place with four of the five leading TPM manufacturers. Wave will receive a per-unit royalty based on partner sales of products that are equipped with or include Wave's software technology. The agreements do not provide for guaranteed minimum or maximum shipped quantities or royalties. About Wave Systems Consumers and businesses are demanding a computing environment that is more trusted, private, safe and secure. Wave is a leader in delivering trusted computing applications and services with advanced products, infrastructure and solutions across multiple trusted platforms from a variety of vendors. Wave holds a portfolio of significant fundamental patents in security and e-commerce applications and employs some of the world's leading security systems architects and engineers. For more information about Wave, visit http://www.wave.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. for 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. Except for the statements of historical fact, the information presented herein constitutes forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include general economic and business conditions, the ability to fund operations, the ability to forge partnerships required for deployment, changes in consumer and corporate buying habits, chip development and production, the rapid pace of change in the technology industry and other factors over which Wave Systems Corp. has little or no control. Wave Systems assumes no obligation to publicly update or revise any forward-looking statements. All brands are the property of their respective owners.
Conference call: Today, Thursday, August 3, 2006 at 4:30 P.M. EDT
Webcast / Replay URL: http://www.wave.com
Dial-in numbers: 212-346-6548 or 414-904-7364
Wave Systems Corp. and Subsidiaries
Consolidated Balance Sheets
(in thousands)
(Unaudited)
June 30, December 31,
2006 2005
------------ ------------
Assets
Current Assets:
Cash and cash equivalents $1,891 $2,006
Accounts receivable 881 335
Prepaid expenses and other receivables 200 140
------------ ------------
Total current assets 2,972 2,481
Property & equipment, net 609 754
Other assets 134 195
------------ ------------
Total assets 3,715 3,430
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses 2,526 3,089
Deferred revenue 564 504
------------ ------------
Total current liabilities 3,091 3,593
Liability for warrants containing cash
settlement provisions -- 3
------------ ------------
Total liabilities 3,091 3,596
Total stockholders' equity (deficit) 625 (166)
------------ ------------
Total Liabilities and Stockholders' Equity $3,715 $3,430
Wave Systems Corp. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited)
Three Months Six Months
Ended Ended
June 30, June 30,
----------------- -----------------
2006 2005 2006 2005
------- ------- ------- -------
Revenues
Licensing 683 244 991 315
Services 228 14 413 20
------- ------- ------- -------
Total net revenues $ 910 $ 258 $ 1,404 $ 335
Cost of Sales
Licensing 87 7 99 12
Services 170 15 275 24
Amortization expense 99 155 196 311
------- ------- ------- -------
Total Cost of Sales 356 177 571 346
------- ------- ------- -------
Gross Profit 555 81 833 (10)
Operating Expenses:
Selling, general and
administrative 3,212 2,937 6,402 5,934
Research and development 1,912 1,670 4,013 3,264
------- ------- ------- -------
5,124 4,607 10,415 9,198
Net Interest income 30 19 48 40
Unrealized gain in value of
warrant liability -- 347 3 463
------- ------- ------- -------
30 366 51 503
------- ------- ------- -------
Net loss (4,539) (4,160) (9,531) (8,705)
Net loss per share - basic ($0.13) ($0.15) ($0.28) ($0.33)
======= ======= ======= =======
Adjusted weighted average shares
outstanding - basic** 35,416 27,042 33,998 26,393
** The net loss per basic share and basic weighted average shares
outstanding in the three-month and six-month periods in 2006 and
2005 have been retroactively adjusted to reflect the impact of the
Company's 3-for-1 reverse stock split of its common stock, which
was in effect with the commencement of trading on July 26, 2006.
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