AETH beats,
Aether Systems Announces First Quarter 2001 Results
First Quarter Highlighted by Record Revenue and Better than Expected Losses as Aether Moves to Introduce Aether Fusion Bulk of One-Time Charges, Including Goodwill From Acquisitions & Investments in 2000, Now Behind the Company
OWINGS MILLS, Md., May 8, 2001 (BUSINESS WIRE) -- Aether Systems, Inc. (Nasdaq: AETH chart, msgs), a leading provider of wireless data products and services, today reported financial results for the first quarter ended March 31, 2001.
Aether recorded a six-fold increase in first-quarter revenue to $30.7 million, compared with $5.4 million in the same period in 2000. The results included recurring services revenue of $10.4 million, engineering services revenue of $2.4 million, software product revenue of $11.8 million, and device sales of $6.1 million.
In the same period last year, recurring services revenue accounted for $2.8 million, engineering services revenue was $1.4 million, software product revenue was $1.1 million and device sales were $0.1 million. This is the first quarter that Aether has broken out device sales revenue to more effectively report this component of our business.
Aether's quarterly sequential revenue grew 19 percent from $25.8 million in the fourth quarter of 2000, as the company's products and services continued to gain traction. Aether also forged strategic alliances with leading enterprise technology companies including Computer Associates International, Inc. and Symbol Technologies, Inc.
Also during the first quarter, Aether invested in the build-out of its Aether Fusion(TM) technology foundation (announced April 18, 2001), which unifies a broad array of Aether and industry standard technology components. As Aether focuses on its path to profitability, Aether Fusion will help the company derive a greater percentage of its revenues from the higher margin software licensing business.
"With revenues at an all-time high and more and more companies in diverse industries turning to Aether for wireless solutions, we remain extremely upbeat about our position in the marketplace," said Aether Chairman and CEO Dave Oros. "During a very challenging time, Aether once again enjoyed strong revenue growth."
Aether reported a first quarter operating loss, excluding certain non-cash charges and one-time adjustments of ($1.16) per share or a total of ($46.8 million) compared with ($0.29) per share or ($8.6 million) operating loss in the same period last year.
Non-cash charges include the amortization and impairment of goodwill relating to acquisitions, the impairment of the company's investments, the company's share of losses in joint ventures under equity method accounting, a charge for excess and obsolete inventory and non-cash expenses relating to options and warrants.
Aether continually evaluates the carrying value of its intangible assets. If it is determined that the carrying value may require adjustment and the estimated fair value of the asset is less than its recorded amount, an impairment charge is recorded.
In fiscal 2000, Aether completed several acquisitions that were financed principally with shares of Aether stock. Based on the price of Aether stock at the time, these acquisitions and other investments were valued at approximately $1.8 billion.
Valuations of companies operating in the high tech sector have declined significantly in the past few quarters. Accordingly, Aether determined that the carrying values of some of its intangible assets required adjustment. The company used an independent third party to assist in this process.
In the first quarter, non-cash impairment charges to write down goodwill associated with fiscal 2000 acquisitions were $959.4 million. Additionally, Aether recorded non-cash charges to write down other company investments by $88.8 million. The company also recorded a provision for excess and obsolete inventory, which had a negative impact on gross margins.
Aether anticipates that this temporary margin impact will begin to diminish over the next several months.
"We continue to focus on integration, controlled spending and efficient operations in order to reach EBITDA positive by the third quarter of next year," Oros added. "A great deal of our engineering resources were dedicated in the first quarter - and will be on an ongoing basis - to the creation and rollout of Aether Fusion, our new modular, scalable foundation for end-to-end mobile and wireless solutions. Our goal with Aether Fusion is to derive a larger percentage of our revenues from higher margin software licensing fees and help us reach profitability more quickly."
Oros continued, "By absorbing a series of significant one-time charges related to acquisitions and investments made in 2000, we are able to move forward with a clean slate. We do so as the recognized industry leader with significant cash reserves. As we evolve to a software licensing model and the market for mobile and wireless solutions continues to grow, Aether is extremely well positioned for long-term success."
Aether will host a conference call on Wednesday, May 9, 2001 at 8:30 a.m. EDT. 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 9 a.m. EDT on Monday, May 14, 2001, by calling 1-800-839-0860, access code 1232.
About Aether Systems, Inc.
Aether Systems helps enterprise customers improve efficiency and profitability by providing the services, software and support necessary to extend existing and future business applications from the desktop to any wireless device.
Through Aether Fusion(TM), Aether's wireless enabling technology foundation, Aether develops, deploys and manages wireless solutions built on industry standard technology and backed by Aether's expertise in wireless hosting, software and services. Aether provides the business world with a single source for reliable, scalable and cost effective wireless solutions.
For more information, please visit www.aethersystems.com.
Safe Harbor Statement
This press release includes forward-looking statements based on the current expectations of Aether about future events. These forward-looking statements are subject to a number of risks, uncertainties and assumptions about Aether that could cause actual results to differ materially from those in such forward-looking statements. Potential risks and uncertainties include, but are not limited to, market acceptance of the products developed or to be developed by Aether, the ability of Aether to develop new technologies and projects, future decisions regarding investments and acquisitions and future market values of similar businesses, the success of Aether's efforts to reduce marginal costs while increasing sales, and the success of joint efforts with partner companies. These risks and other risk factors are described under the caption, "Risk Factors" in Aether's filings with the Securities and Exchange Commission. Aether undertakes no obligation to update the forward-looking statements contained in this press release.
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (Unaudited)
Three months ended
March 31,
-----------------------------
2001 2000
---- ----
in thousands except per share data
Subscriber revenue $ 10,400 $ 2,794
Engineering services revenue 2,363 1,403
Software and related services 11,797 1,069
Device sales 6,099 135
---------- ----------
Total revenue 30,659 5,401
Cost of subscriber revenue 6,234 1,059
Cost of engineering services revenue 1,300 614
Cost of software and related services 4,082 678
Cost of device sales 8,217 673
---------- ----------
Total cost of revenue 19,833 3,024
---------- ----------
Gross profit 10,826 2,377
Operating expenses:
Research and development 17,171 2,031
General and administrative 25,804 4,931
Selling and marketing 20,216 5,812
In process research and development
related to acquisitions - 2,100
Depreciation and amortization 91,795 17,410
Option and warrant expense 4,580 2,445
Impairment of goodwill associated
with acquisitions 959,369 -
---------- ----------
1,118,935 34,729
---------- ----------
Operating loss (1,108,109) (32,352)
Other income (expense):
Interest income (expense), net 6,406 2,189
Equity in losses of investment (14,516) (3,107)
Investment loss, including
impairments (94,744) -
Cumulative effect of change in
accounting principle relating
to adoption of SFAS 133,
Accounting for Derivatives 6,564 -
Income taxes 435 -
Minority Interest 3,664 -
---------- ----------
Net loss (1,200,300) (33,270)
---------- ----------
Net loss per share - basic and
diluted ($29.67) ($1.13)
========== ==========
Weighted average shares
outstanding - basic
and diluted 40,452 29,451
========== ==========
Reconciliation to net
operating loss:
Net loss (1,200,300) (33,270)
Add back non-cash and
one-time charges:
One-time adjustments (impairment
of goodwill, write-down of
investments, inventory
obsolescence) 1,050,032 -
Amortization of
intangibles relating
to acquisitions 87,890 16,984
In process research and
development acquired - 2,100
Proportionate share of
losses in investee 14,516 3,107
Option and warrant expense 4,580 2,445
Charges from adoption of
SFAS 133 (599) -
Deferred tax benefit (435) -
Minority Interest -
amortization (2,520) -
---------- ----------
Net operating loss (46,836) (8,634)
========== ==========
Net operating loss per
share -
basic and diluted ($1.16) ($0.29)
========== ==========
AETHER SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, Dec. 31,
2001 2000
----------- ----------
in thousands (unaudited)
Current assets:
Cash and cash equivalents $729,410 $872,747
Short-term investments 2,618 2,648
Trade accounts receivable 32,087 30,263
Inventory 32,331 19,130
Prepaid expenses and other
current assets 20,588 17,081
----------- ----------
Total current assets 817,034 941,869
Furniture, computers, and
equipment, net 64,546 53,223
Intangibles and other assets 534,705 1,682,283
----------- ----------
$1,416,285 $2,677,375
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $13,921 $9,747
Accrued expenses 35,078 66,949
Accrued employee compensation
and benefits 16,702 12,566
Deferred revenue 16,631 14,170
Notes payable 112 18,813
----------- ----------
Total current liabilities 82,444 122,245
Long-term liabilities:
Convertible subordinated
notes payable and other
notes payable 320,690 321,201
Deferred tax liability 10,259 10,694
Minority interest in net
assets of subsidiary 51,873 55,537
Stockholders' equity 951,019 2,167,698
Commitments and contingencies
$1,416,285 $2,677,375
=========== ==========
Contact:
Gregg Lampf, 410/654-6400 x5165
glampf@aethersystems.com |
