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iPass Reports Third Quarter 2009 Results

11/5/09 - iPass Inc. (NASDAQ: IPAS)reported financial results for its third quarter ended September 30, 2009. On a GAAP basis, iPass reported revenues of $42.6 million for the third quarter of 2009 and a $6.1 million net loss or ($0.10) per share, of which $4.8 million or ($0.08) per share resulted from a charge for state sales taxes and related penalties and interest. This compared to revenues of $48.4 million and a $2.1 million net loss or ($0.03) per share in the third quarter of 2008, and compared to revenues of $43.7 million and $1.0 million in net income or $0.02 per diluted share in the prior quarter.

On a non-GAAP basis (which excludes stock compensation expenses, amortization of intangible assets, restructuring charges, and charges, penalties and interest associated with sales taxes), non-GAAP net income for the third quarter was $0.9 million or $0.01 per diluted share. This compared to non-GAAP net income of $0.5 million or $0.01 per diluted share for the third quarter of 2008, and compared to non-GAAP net income of $1.8 million or $0.03 per diluted share in the prior quarter.

"I'm pleased with the work of the new management team, particularly in light of a challenging business environment. The evolution of the business continues to push forward and the technology-led turnaround here at iPass is on track," said Evan Kaplan, President and Chief Executive Officer of iPass. "Our new mobility platform is scheduled for delivery at year-end, and we've received very positive feedback from customers and carrier partners."

"Importantly, I am pleased that despite the lack of any recovery in business travel, we delivered non-GAAP profitability and nearly $2 million of Adjusted EBITDA in the quarter," said Steven Gatoff, Senior Vice President and Chief Financial Officer. "While I'm disappointed by the sales tax charges, having the team apply rigor and a fresh look will ensure we get this work behind us and provide a solid foundation for driving value going forward."

The company achieved several significant milestones in the third quarter, including:

  • Launch of its Blackberry Smartphone solution, extending leadership in breadth of mobile device support;
  • Commencement of global customer testing of its new enterprise mobility services platform; and
  • Completion of its leadership transformation with the addition of Nick Hulse as senior vice president of worldwide sales.

Also during the quarter, the company closed $380,000 of Monthly Order Value contracts representing newly committed monthly revenues and reported another quarter of increase in its iPassConnect client fees. iPass continues to make progress on several fronts, including the development of the company's new cloud-based platform that will allow iPass to more effectively monetize and extend its leadership position in enterprise mobility services.

Also in Q3, the company determined that additional sales taxes were probable of being assessed for multiple states as a result of addressing a sales and use tax audit which was initiated this fiscal year. The company has worked to quantify the cumulative amount of these additional sales taxes, which have not been billed to customers, as of September 30, 2009. As a result, the company recorded an estimated sales tax liability, including interest and penalties, of approximately $4.8 million or $0.08 per share during the quarter. Importantly, the company has also begun the process of implementing the systems to address these sales taxes and anticipates billing for these taxes will begin in 2010.

In the third quarter, iPass began delivering on its commitment to return up to $40 million to stockholders, paying a special cash dividend of $20 million or $0.32 per share in September 2009. iPass also announced today that the company intends to distribute an additional $10 million of capital to stockholders as a special cash dividend of $0.16 per share in December 2009. The company concurrently announced that it is launching a $10 million stock buyback program and that it will dividend-out to stockholders any remaining portion of the $10 million that has not been used to repurchase iPass shares by March 31, 2011.

By Robert Hoskins

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