UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-16073
OPENWAVE SYSTEMS INC.
(Exact name of registrant as specified in its charter)
| Delaware | 94-3219054 | |
| (State of incorporation or organization) | (I.R.S. Employer Identification No.) |
1400 Seaport Blvd.
Redwood City, California 94063
(Address of principal executive offices, including zip code)
(650) 480-8000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes x No ¨
As of April 30, 2004, there were 64,278,658 shares of the registrant’s Common Stock outstanding.
OPENWAVE SYSTEMS INC. AND SUBSIDIARIES
| PART I. FINANCIAL INFORMATION |
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| Item 1. |
Condensed Consolidated Balance Sheets as of March 31, 2004 and June 30, 2003 (unaudited) |
3 | ||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
19 | ||
| Item 3. |
43 | |||
| Item 4. |
44 | |||
| PART II. OTHER INFORMATION |
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| Item 1. |
45 | |||
| Item 2. |
45 | |||
| Item 3. |
45 | |||
| Item 4. |
45 | |||
| Item 5. |
45 | |||
| Item 6. |
46 | |||
| SIGNATURES |
46 | |||
2
OPENWAVE SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands)
| March 31, 2004 |
June 30, 2003 |
|||||||
| Assets |
||||||||
| Current Assets: |
||||||||
| Cash and cash equivalents |
$ | 228,471 | $ | 139,339 | ||||
| Short-term investments |
20,202 | 33,345 | ||||||
| Accounts receivable, net |
77,315 | 62,907 | ||||||
| Prepaid and other current assets |
13,015 | 13,218 | ||||||
| Total current assets |
339,003 | 248,809 | ||||||
| Property and equipment, net |
29,932 | 44,582 | ||||||
| Long-term investments, and restricted cash and investments |
97,197 | 61,466 | ||||||
| Deposits and other assets |
15,812 | 6,311 | ||||||
| Goodwill and intangibles, net |
3,637 | 6,283 | ||||||
| $ | 485,581 | $ | 367,451 | |||||
| Liabilities and Stockholders’ Equity |
||||||||
| Current Liabilities: |
||||||||
| Accounts payable |
$ | 2,521 | $ | 3,844 | ||||
| Accrued liabilities |
36,924 | 37,159 | ||||||
| Accrued restructuring costs |
11,801 | 18,358 | ||||||
| Deferred revenue |
57,733 | 62,786 | ||||||
| Total current liabilities |
108,979 | 122,147 | ||||||
| Accrued restructuring costs, less current portion |
40,650 | 48,152 | ||||||
| Deferred revenue, less current portion |
13,075 | 11,004 | ||||||
| Deferred rent obligations |
4,566 | 3,870 | ||||||
| Convertible subordinated notes, net |
146,336 | — | ||||||
| Total liabilities |
313,606 | 185,173 | ||||||
| Commitments and contingencies |
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| Stockholders’ equity: |
||||||||
| Common stock |
64 | 60 | ||||||
| Additional paid-in capital |
2,740,284 | 2,720,994 | ||||||
| Deferred stock-based compensation |
(2,716 | ) | (2,185 | ) | ||||
| Accumulated other comprehensive income |
48 | 52 | ||||||
| Notes receivable from stockholders |
(202 | ) | (254 | ) | ||||
| Accumulated deficit |
(2,565,503 | ) | (2,536,389 | ) | ||||
| Total stockholders’ equity |
171,975 | 182,278 | ||||||
| $ | 485,581 | $ | 367,451 | |||||
See accompanying notes to condensed consolidated financial statements
3
OPENWAVE SYSTEMS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
| Three Months Ended March 31, |
Nine Months Ended March 31, |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
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| Revenues: |
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| License |
$ | 38,437 | $ | 35,011 | $ | 108,820 | $ | 110,978 | ||||||||
| Maintenance and support services |
20,523 | 18,494 | 62,991 | 56,321 | ||||||||||||
| Professional services |
14,450 | 4,933 | 33,588 | 19,034 | ||||||||||||
| Project |
817 | 5,033 | 8,570 | 15,079 | ||||||||||||
| Total revenues |
74,227 | 63,471 | 213,969 | 201,412 | ||||||||||||
| Cost of revenues: |
||||||||||||||||
| License |
1,672 | 1,600 | 6,495 | 6,464 | ||||||||||||
| Maintenance and support services |
6,435 | 6,571 | 18,477 | 22,264 | ||||||||||||
| Professional services |
11,439 | 5,911 | 27,420 | 17,160 | ||||||||||||
| Project |
772 | 4,381 | 4,883 | 13,536 | ||||||||||||
| Total cost of revenues |
20,318 | 18,463 | 57,275 | 59,424 | ||||||||||||
| Gross profit |
53,909 | 45,008 | 156,694 | 141,988 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
23,625 | 27,256 | 72,976 | 88,323 | ||||||||||||
| Sales and marketing |
25,479 | 27,058 | 74,169 | 90,418 | ||||||||||||
| General and administrative |
7,621 | 9,343 | 26,071 | 38,328 | ||||||||||||
| Restructuring and other costs |
726 | — | 2,996 | 83,191 | ||||||||||||
| Stock-based compensation* |
938 | 686 | 2,427 | 2,780 | ||||||||||||
| Amortization and impairment of goodwill and intangible assets |
67 | 67 | 202 | 8,248 | ||||||||||||
| In-process research and development |
— | — | — | 400 | ||||||||||||
| Merger, acquisition and integration-related costs |
— | — | — | 386 | ||||||||||||
| Total operating expenses |
58,456 | 64,410 | 178,841 | 312,074 | ||||||||||||
| Operating loss |
(4,547 | ) | (19,402 | ) | (22,147 | ) | (170,086 | ) | ||||||||
| Interest and other income, net |
1,151 | 1,385 | 3,402 | 5,138 | ||||||||||||
| Interest expense |
(1,284 | ) | (13 | ) | (2,873 | ) | (27 | ) | ||||||||
| Write-down of nonmarketable equity securities |
— | (1,864 | ) | — | (3,864 | ) | ||||||||||
| Loss before provision for income taxes and cumulative effect of change in accounting principle |
(4,680 | ) | (19,894 | ) | (21,618 | ) | (168,839 | ) | ||||||||
| Income taxes |
1,058 | 3,320 | 7,496 | 7,869 | ||||||||||||
| Loss before cumulative effect of change in accounting principle |
(5,738 | ) | (23,214 | ) | (29,114 | ) | (176,708 | ) | ||||||||
| Cumulative effect of change in accounting principle |
— | — | — | (14,547 | ) | |||||||||||
| Net loss |
$ | (5,738 | ) | $ | (23,214 | ) | $ | (29,114 | ) | $ | (191,255 | ) | ||||
| Basic and diluted net loss per share: |
||||||||||||||||
| Before cumulative effect of change in accounting principle |
$ | (.09 | ) | $ | (0.39 | ) | $ | (.47 | ) | $ | (2.99 | ) | ||||
| Cumulative effect of change in accounting principle |
— | — | — | (0.24 | ) | |||||||||||
| Basic and diluted net loss per share |
$ | (.09 | ) | $ | (0.39 | ) | $ | (.47 | ) | $ | (3.23 | ) | ||||
| Shares used in computing basic and diluted net loss per share |
63,233 | 59,547 | 61,756 | 59,175 | ||||||||||||
| *Stock-based compensation by category: |
||||||||||||||||
| Research and development |
$ | 231 | $ | 28 | $ | 729 | $ | 872 | ||||||||
| Sales and marketing |
191 | 118 | 360 | 372 | ||||||||||||
| General and administrative |
516 | 540 | 1,338 | 1,536 | ||||||||||||
| $ | 938 | $ | 686 | $ | 2,427 | $ | 2,780 | |||||||||