Emerging Technology

iPass (NASDAQ:IPAS), a leading provider of mobile connectivity reported total revenue of US$10.5 million for the quarter ended June 30, 2018. The company had a GAAP net loss of US$4.5 million and adjusted EBITDA loss of US$3.7 million. iPass noted that customer churn largely impacted revenue. As quoted in the press release: Financial Outlook “The …

iPass (NASDAQ:IPAS), a leading provider of mobile connectivity reported total revenue of US$10.5 million for the quarter ended June 30, 2018.

The company had a GAAP net loss of US$4.5 million and adjusted EBITDA loss of US$3.7 million. iPass noted that customer churn largely impacted revenue.

As quoted in the press release:

Financial Outlook
“The second quarter serves as a clear example of the manifestation of iPass that we started three years ago,” said Gary Griffiths, iPass president and CEO. “We witnessed significant churn in our legacy, pay-per-use enterprise business, but this churn was offset by a $3M iPass SmartConnect™ technology license, which is the type of high margin, high value business we’ve been striving to complete. While the future of our business is certainly centered in expanding the penetration of SmartConnect and the related Veri-Fi™  data products in a wide range of devices and applications, this does not mean that the enterprise is no longer important. To the contrary, the same technology that attracts mobile operators and service providers is entirely applicable to the enterprise, who will use SmartConnect and Veri-Fi to gain the insight required to manage today’s global mobile workforces. So while enterprises who have traditionally used iPass only as a means of reducing international roaming costs continue to churn, we’re adding new businesses that understand the value, the productivity, security, and cost savings associated with secure, reliable, ubiquitous connectivity, coupled with the data to help the efficient deployment of enterprise mobility.”

Quarterly Metrics

  • Revenue of $10.5 million in Q2’18 declined from $11.4 million in Q1’18 largely driven by churn in the Other Pricing Plan Customers.  Deferred revenue increased a net $1.8 million over March 31, 2018, primarily attributable to the iPass SmartConnect software license signed with Pareteum Corporation during the second quarter.

  • Net Annual Contract Value (“ACV”), defined as the annualized sales value under committed contract for newly acquired or significant upsell customers signed, in Q2’18 totaled $3.5 million compared to $1.6 million in Q1’18 and $1.2 million in Q4’17.  85% of second quarter ACV related to the one software license agreement mentioned above.

  • Customer Churn, defined as the annualized impact on revenue, based on the prior quarter run-rate, of any customer that terminates or has write-down of committed contract value, was $6.8 million in Q2’18 compared to $1.5 million in Q1’18 and $1.0 million in Q4’17.  67% of the second quarter churn was driven by four customers; a write-down of a strategic partner account that moved from commitment to pure pay-as-you-go on a limited subset of the iPass network, termination of two EMEA enterprise customers on legacy Other Pricing Plans, and termination of one US enterprise customer on a legacy Other Pricing Plan.

  • Network Access Cost (“NAC”) was $6.3 million in Q2’18, down from $6.8 million in Q1’18 and $9.1 million in Q4’17, as Gross Margin declined slightly to 26.7% in Q2 compared to 28.0% in Q1 on lower revenue.

  • Financing for Q2’18 included $3.3 million from the sale of equity under the common stock purchase agreement signed in November 2017, plus $10.0 million in debt, less $1.6 million of cash issuance costs, from a credit agreement signed in June 2018.

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