iPass Reports Third Quarter 2017 Financial Results

iPass Inc., a leading provider of global mobile connectivity, reported total revenue of $13.4 million, GAAP net loss of $6.7 million, and Adjusted EBITDA loss of $4.9 million for the quarter ended September 30, 2017.

“In the third quarter, we made progress resolving technology stability and pay-per-use related revenue which impacted our Q2’17 results,” said Gary Griffiths, president and CEO.  “The partnership announced with Tech Data on October 31st is representative of growing interest in iPass SmartConnect technology, while a significant Veri-Fi deal with a major Mobile Network Operator is illustrative of the value in the data that iPass SmartConnect collects. In addition, we’ve made progress in our important partnership with HP. In short, revenue this quarter was modest, we’re confident that our new core of software and technology powering intelligent connection management and data analytics is getting back on the track we envisioned coming into 2017.”

Quarterly Metrics

  • Unlimited and Strategic Partner revenue combined increased to $6.0 million for Q3’17, compared to $4.5 million for Q2’17 and $5.3 million for Q3’16.  For the nine months ended September 30, 2017, this revenue was $15.3 million for 2017 and $12.0 million for 2016.  Hours consumed by these customers increased 24% over Q2’17 as the historical trend of seasonally lower usage in pay-as-you-go users in the third quarter is not relevant in the Unlimited and Business-to-Business-to-Consumer user groups.
  • Backlog Conversion, which tracks the recognition of revenue from ACV closed in the prior year, was $1.2 million incremental in Q3’17 over the prior quarter, but is still behind target at 56% of the conversion expected through the third quarter of 2017 in the company’s financial plan.
  • Net Annual Contract Value (ACV), defined as the annualized sales value under committed contracts for newly acquired or significant upsell customers signed, totaled $0.9 million in Q3’17, compared to $(1.0) million for Q2’17 and $3.7 million for Q3’16.
  • 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, decreased to $1.1 million in Q3’17, compared to $2.1 million in Q2’17 and $1.3 million in Q3’16.  Year to date, churn is trending slightly better than the company’s financial plan.

Financial Outlook

“Our goal is to achieve positive cash flow in the first half of 2018 based on completed and planned actions to reduce our Network Access Costs (“NAC”), continued management of operating expenses, and revenue growth stemming from recent partnership activity and stability in the our base of current customers. While we fell short of our targets in our efforts to reduce NAC in the third quarter, several renegotiations have been finalized in the fourth quarter, and we expect to recognize more relief prior to the end of 2017. Without this relief, the Adjusted EBITDA target we set at the end of Q2’17 will not be achievable.  However, as we discussed last quarter, many of our NAC commitments expire in Q1’18, giving us clear visibility in total costs and operating expenses.  While there is currently less visibility for Q1’18 revenue, based on reduced NAC and operating expenses, our break-even point gets close to $15 million in quarterly revenue, which we believe is achievable, with sufficient cash buffer to get there,” concluded Griffiths.

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