Wave Systems Corp. (NASDAQ: WAVX -- www.wave.com) today reported results for the second quarter (Q2) ended June 30, 2009 and reviewed recent corporate progress and developments.
Principally reflecting higher bundled software royalties, services revenue related to a U.S. government contract that was largely completed during the period and increased software upgrade sales, Wave's Q2 2009 net revenues rose 142% to $4.8 million, compared with Q2 2008 net revenues of $2.0 million and Q1 2009 net revenues of $4.0 million. Total billings for Q2 2009 grew 107% to $4.6 million, compared to Q2 2008 total billings of $2.2 million (a reconciliation of total billings to total net revenues is included in the financial tables below).
As a result of ongoing overhead and cost management efforts, Q2 2009 selling, general and administrative expense declined 30.5% to $2.9 million as compared to $4.2 million in Q2 2008, and declined 12.7% versus the Q1 2009 level. Wave also reduced its research and development expenses by 42.7% to $1.8 million in Q2 2009 as compared to $3.1 million in Q2 2008 and in-line with the level in Q1 2009.
Wave's Q2 2009 net loss declined to $0.3 million, or $0.01 per basic and diluted share, compared with a Q2 2008 net loss of $5.6 million, or $0.10 per basic and diluted share, and Wave's Q1 2009 net loss of $1.5 million, or $0.02 per basic and diluted share. Per-share figures are based on a weighted average number of basic shares outstanding in the second quarters of 2009 and 2008 of 66.4 million and 53.9 million, respectively, and 61.9 million in the first quarter of 2009.
To highlight the company's operational performance on a cash flow basis, for Q2 2009 Wave is reporting EBITDAS, a non-GAAP measure defined as earnings before interest income (expense), income taxes, depreciation and amortization and stock-based compensation expense. For Q2 2009 Wave had positive EBITDAS of approximately $144,000 as compared to negative EBITDAS of approximately $5.0 million in Q2 2008. The Q2 2009 performance represents Wave's first-ever positive EBITDAS. A reconciliation of net income to EBITDAS is included in the financial tables below.
As of June 30, 2009, Wave had total current assets of $2.4 million which does not reflect the net proceeds of approximately $4.2 million from two equity financings completed in July 2009. Wave's deferred revenue was $1.2 million at June 30, as compared with $1.5 million at the end of Q1 ‘09.
Steven Sprague, president and CEO of Wave Systems, commented, "We are pleased to report top- and bottom-line progress for the second quarter which has yielded our first-ever quarter of positive EBITDAS. Our total net revenue through the first six months of 2009 has exceeded total net revenue for all of last year. We have also posted the third consecutive quarter of reduced overhead levels, highlighting our continuing focus on cost management. Notwithstanding these positive developments, Wave continued to feel the effects of the economic down-turn, as have many other technology companies. On the software upgrade sales front, though we made progress in the second quarter, enterprise upgrade sales in Q2 didn't grow as quickly as we would have liked.
"Nonetheless, we are encouraged by customer interest in enterprise upgrades, though many prospective customers have slashed their IT spending or put a temporary moratorium on new orders. Though still at modest volume levels, we continued to see growth in enterprise adoption of self-encrypting drives and EMBASSY® Remote Administration Server enterprise seats during the second quarter."
"There have been a number of positive developments on the partner and industry front," Sprague continued. "Last month, Dell began shipping the new self-encrypting, solid-state drives (SSD) from Samsung. A number of our customers have expressed interest in evaluating Samsung's SSDs, which we believe offer superior performance and security features. Our partners have also helped in promoting self-encrypting drives, biometrics, human interface devices (HID) and Trusted Platform Modules (TPM). We continue to focus our efforts on supporting our partners' platforms and working to offer world-class security at an attractive price. One particular benefit of our partner relationships is that our security solutions can be installed and configured at the factory, substantially simplifying their deployment for large or small enterprises.
"In another significant development, for the first time ever, the U.S. Army listed self-encrypting drives on its consolidated buy program for orders of desktop and notebook computers. Self-encrypting drives and TPMs are important tools that can enable the government to secure its vast network of computers and sensitive data. Accordingly, we view the DoD and the federal government as very important customers, and are continuing to pursue opportunities in this arena, as well as other vertical markets."
Summary of Recent Progress/Developments:
- In May, the U.S. Army's CHESS (Computer Hardware Enterprise Software and Solutions) organization listed self-encrypting hard drives (SED) from Seagate and Samsung, along with Wave management software, through the consolidated buy (9) period from June through September. This is the first time SEDs were included as an option in the Army's consolidated buy.
- Dell began shipping self-encrypting solid-state drives from Samsung bundled with Wave management software in July. Additionally, Dell and Samsung participated with Wave in a webinar for industry media and technology analysts which providing background on solid state SEDs.
- Wave's eSignSystems division was named to Mortgage Technology magazine's elite "Top 50 Service Providers" list, recognizing eSign for its contributions to the burgeoning electronic mortgage space.
- Admiral Bobby R. Inman, USN (Ret.) Appointed as Advisor to Wave's Board. In May, Admiral Inman assumed the title of Advisory Director and will advise the company on its strategy and business development efforts in the government, military, technology and energy markets.