Wavecom announces first quarter 2002 results

Company reports record revenues of €108.6 million. Product gross margin increases to 26.7%; operating income increases 40.9% over prior quarter.
Issy-les-Moulineaux, France-April 23, 2002
Wavecom SA (Nasdaq: WVCM; Euronext Nouveau Marche: 7306), a leading developer of digital wireless standard modules (WISMO) today announced operating results for the first quarter. All results are unaudited and reported in accordance with U.S. generally accepted accounting principles (US GAAP).

For the first quarter of 2002, Wavecom reported that total revenues rose 101% to €108.6 million from €54.0 million for the first quarter of 2001, and increased 3.1% from the €105.3 million achieved in the fourth quarter of 2001. The rise in product revenues reflects continued strong sales into the Asian market and overall higher than expected demand for deliveries in March, despite the anticipated decrease in sales in February at the time of Chinese New Year. Sales of WISMO modules represented 89.7% of total revenues and modem sales accounted for 10.1%, with service revenues representing 0.2% of Q1 revenues.

Total product shipments reached a record 1.5 million units in the first quarter, up from 1.4 million in the previous quarter. Product backlog rose sharply to €175 million at March 31, 2002, which was 35.7% higher than backlog of €129 million at December 31, 2001. Due to the increase in demand, Wavecom has begun increasing its production capacity with its existing contract manufacturers in Europe. The Company’s objective is to have a production capacity of 4 million units per quarter in place with these contract manufacturers by the third quarter of 2002. Wavecom also expects to add a third contract manufacturer, most likely located in Asia, during the second half of 2002.

“Our first quarter performance was better than we originally expected,” said Michel Alard, Wavecom’s chairman. “We saw strong demand for our products in all target markets from existing customers such as TCL in China, which is experiencing sustained growth, and Sewon in South Korea as well as new customers such as Handspring in the U.S.”

Mr. Alard continued: “During the first quarter, we signed strategic contracts with several customers, including: GST, a subsidiary of the Sense Limited group (Hong Kong), to equip its new bilingual communicator; Cesscom (South Korea) for its new PDA communicator; Pretec (U.S.), for its new CompactGPRS card; iWOW (Singapore) for the launch of the first USB interface wireless modem; ASE Telecom (South Korea) for its new line of mobile phones; and Autoliv (Sweden) which recently has chosen the Wismo module as the technology solution to support the Volvo On Call telematic system. These design wins confirm that our new WISMO products (WISMO Quik and WISMO Pac) meet the changing needs of the wireless communications market and reflect our commitment to diversify and grow both our customer and geographic base.”

First quarter revenues by geographic region were Asia Pacific, 75.1%; Europe, Middle-East and Africa, 15.6%; and North and South America, 9.3%. The Americas represented only 0.9% of revenues in Q4 2001, with Asia-Pacific representing 86.1% and Europe, Middle-East and Africa 13.0%.

The quarterly product revenue breakdown by sector was: Personal Communication Devices (“PCD”, which includes mobile telephones and personal digital assistants), 82.5%; Machine to Machine (“M2M”, formerly known as telemetry), 4.6%; Automotive, 2.0%; Mobile Computing (which includes portable PCs), 0.6%; and Distributors, 10.3%.

Product gross margin for the first quarter of 2002 was 26.7%, compared with 22.7% for the previous quarter and 15.2% for the first quarter last year. This improved performance reflects ongoing efforts to lower component and labor costs and continued gains in production efficiency, combined with a reduction in the average selling price for modules of less than 3% compared with the fourth quarter of 2001.

Operating expenditures for the first quarter of 2002 were €21.7 million, versus €12.0 million for the previous year’s quarter and €18.1 million for the fourth quarter of 2001. The increases are principally due to higher headcount in all departments and in all regions in order to support and promote the Company’s growing volume of business. At March 31, 2002, total personnel numbered 640 compared with 580 at the end of 2001.

For the first quarter of 2002, Wavecom reported operating income of €6.3 million, compared with a €2.3 million loss during the same quarter a year ago, and representing an increase of 40.9% from operating income of €4.5 million in the fourth quarter of 2001.

The Company reported net income of €7.8 million for this year’s first quarter, or €0.53 per share (€0.51 on a fully diluted basis), compared with a loss of €1.5 million, or €0.11 per share, for the first quarter of 2001. First quarter net income increased 25.9% compared with the fourth quarter 2001 net income of €6.2 million, or €0.42 per share (€0.40 on a fully-diluted basis).

As of March 31, 2002, the Company had cash, cash equivalents and short-term investments of €102 million, compared with €132 million at December 31, 2001, mirroring the decrease in supplier accounts payable from €111.9 million at December 31, 2001 to €62.4 million at March 31, 2002.