Wave Systems: Fiscal 1Q09 Financial Results

Wave Systems Corp. reported results for the first quarter (Q1) ended March 31, 2009 and reviewed recent corporate progress and developments. Wave’s Q1 2009 net revenues rose 137% to $4.0 million, compared with Q1 2008 net revenues of $1.7 million and Q4 2008 net revenues of $3.3 million, principally reflecting increased bundled software royalties as well as higher services revenue related to a contract with the U.S. government.

Reflecting the Company’s ongoing efforts to reduce its overhead expenses and quarterly cash burn, Q1 2009 selling, general and administrative expense declined 21% to $3.4 million as compared to $4.3 million in Q1 2008, and declined 11% versus the Q4 2008 level. Wave was able to reduce its R&D expenses by 44% to $1.8 million in Q1 2009 as compared to $3.3 million in Q1 2008, also achieving a decrease of 14% versus Q4 2008. For Q1 2009, total billings grew 127% to $4.0 million, compared to Q1 2008 total billings of $1.8 million.

Reflecting the benefit of higher revenues and lower overhead expenses, Wave’s Q1 2009 net loss was reduced to $1.5 million, or $0.02 per basic and diluted share, compared with a Q1 2008 net loss of $6.0 million, or $0.12 per basic and diluted share. Wave’s Q4 2008 net loss attributable to common stockholders was $4.0 million, or $0.07 per basic and diluted share. Per-share figures are based on a weighted average number of basic shares outstanding in the first quarters of 2009 and 2008 of 61.9 million and 50.9 million, respectively, and on 58.7 million basic shares outstanding at December 31, 2008.

As of March 31, 2009, Wave had total current assets of $2 million, which did not reflect the proceeds of a $1 million equity financing completed in early April 2009. Wave’s deferred revenue was slightly lower at $1.5 million at March 31, 2009, as compared to year-end 2008.

Steven Sprague, president and CEO of Wave Systems commented: "In spite of economic challenges facing companies in the technology sector, our first quarter results reflect significant progress in our business and a continued reduction of our net loss and cash burn. We grew our base of bundled software shipments during Q1 2009 and, as of the end of April, surpassed a cumulative total of 50 million units shipped. Beyond these important milestones, there were significant developments in the market for self-encrypting drive technology that we believe have been beneficial to Wave.

"In January, the Trusted Computing Group announced its Opal storage specification, which provided hard drive vendors with a standard design ‘blueprint.’ Its passage helped demonstrate that hardware encryption is more than a niche offering and makes it easier for organizations to implement large-scale adoption of SED drives across all their platforms.

"Q1 also saw Wave continue to collaborate with the leading self-encrypting drive vendors – Fujitsu, Toshiba, Seagate and Samsung. Samsung recently made headlines with the first solid state self-encrypting drives that will soon ship through Dell. We believe that solid state drives, or SSDs, will be the next generation of hard drives, and Wave applauds Samsung’s decision to make encryption standard on all its SSDs.

"We were honored to have Samsung and all of our drive partners join us at our booth at this year’s RSA Conference in San Francisco, showcasing interoperability and how Wave’s software manages all the major self-encrypting drives on the market — or in development — today. RSA was also a key venue as we were able to highlight our other partnerships with Dell and HID, a developer of contactless smart cards, in interactive presentations before the show."

"Based on our Q1 progress and the growing market for hardware-based PC security, we are encouraged about our opportunities in the months ahead," Sprague said.

Summary of Recent Progress/Developments:

• Samsung Electronics Self-Encrypting Solid State Drives Feature Wave Management Software: In April, Wave and Samsung announced their collaboration in offering mobile professionals significant hard drive security and speed with Samsung’s self-encrypting 256-, 128- and 64- gigabyte solid state (SSD) drives bundled with Wave’s management software. SSDs offer advantages over traditional platter hard drives, boasting two-to five-times faster overall performance and longer battery life in notebook PCs. SSDs are also far less prone to reliability issues and excessive heat generation.
• Dell Introduced Broad Suite of Mobile Data Security Solutions for its Latitude Laptop Line: In April, Dell announced that it would be one of the first in the industry to offer encrypted solid state drives from Samsung. Dell also showcased its innovative approach to a solution-based security framework that includes: Dell ControlPoint Security Manager for simplifying access to mobile security features; DellControlVault, a security engine to protect end-users’ security credentials; and contactless smart card authentication with HID Global iCLASS technology.  Wave collaborated on the development of DellControlPoint Security Manager for the deployment, management and enablement of pre-boot security, ControlVault, biometrics, smart cards, Trusted Platform Modules and self-encrypting drives. Wave’s EMBASSY software provides customers with multi-factor authentication, single sign-on and password management.
• The Adoption of Electronic Mortgages is the Central Theme at the MBA National Technology in Mortgage Banking Conference and Expo: In March, representatives from Wave’s eSignSystems division demonstrated the advanced functionality of their eSign Transaction Management Suite, which enables lenders to securely deliver, track, sign, purchase, refinance and modify loan documents electronically.