SAN DIEGO--(BUSINESS WIRE)--NextWave Wireless Inc. (NASDAQ: WAVE), a global provider of wireless broadband and mobile multimedia products, filed its Quarterly Report on Form 10-Q for the second fiscal quarter which ended June 28, 2008. Financial schedules are included with this release.

NextWave reported revenues of $31.8 million for the second quarter of 2008, a $5.8 million or 22 percent increase over the first quarter of 2008. The significant increase in quarterly revenue was driven by increased sales of NextWave’s wireless broadband network equipment and subscriber devices and by the continued growth in mobile device software revenues generated by the Company’s PacketVideo subsidiary.

For the first six months of 2008, revenues were $57.8 million compared to $20.6 million for the first six months of 2007, an increase of $37.2 million or 181 percent. The increase in revenues year-over-year is primarily related to the acquisition of IPWireless, Inc. in May 2007 and continued sales growth and market penetration in mobile subscriber services by PacketVideo.

“The 22 percent revenue growth we achieved this quarter reflects the investments we have made in developing industry-leading mobile multimedia and wireless broadband technologies,” said Allen Salmasi, chairman and chief executive officer of NextWave Wireless Inc. “However, we are feeling the effects of a slowing global economy on our business. This has resulted in lower than anticipated sales of our 3GPP and Wi-Fi based network products and a delay in WiMAX network deployments that will continue to impact projected sales of our WiMAX semiconductor products.”

NextWave reported a loss from operations of $65.7 million for the second quarter of 2008, a decrease of $13.9 million or 17 percent over the first quarter of 2008. The second quarter 2008 loss from operations includes $14.3 million of non-cash expenses. These non-cash expenses include $8.4 million of wireless spectrum and intangible asset amortization expenses and $5.9 million of depreciation and other non-cash operating expenses. Excluding these non–cash operating expenses of $14.3 million, the cash-based loss from operations for the second quarter of 2008 was $51.4 million, compared to $58.3 million for the first quarter of 2008, a decrease of $6.9 million primarily due to an increase in revenues and a reduction in operating expenses.

Total reported net interest expense in the second quarter of 2008 was $18.4 million compared to $13.1 million in the first quarter of 2008, an increase of $5.3 million. This increase was primarily due to $7.0 million in financing consent fees related to the withdrawal of $50.0 million from the cash reserve account related to the Senior Notes compared to $3.5 million being paid in the first quarter.

Net loss available to common shares for the second quarter 2008 was $91.8 million, or $0.89 per share, compared to a net loss available to common shares of $102.2 million, or $1.09 per share for the first quarter of 2008. The decrease in net loss available to common shares is due to increased revenues and a reduction in operating expenses, offset by an increase in interest expense.

For the first six months of 2008, net loss available to common shares was $194.0 million, or $1.97 per share, compared to $121.7 million, or $1.41 per share for the first six months of 2007. The increase in net loss year over year is primarily related to acquisitions that were not present in the first half of 2007 as well as an increase in development spending.

Since the filing of the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 29, 2008, several factors have negatively impacted the Company’s current and future operations and potential sources of funding. These factors include adverse worldwide economic conditions, which the Company believes have adversely affected manufacturers of telecommunications equipment and technology and caused the NextWave Network Products group to experience lower than projected contract bookings and sales. The Company believes these conditions have also led to a delay in global WiMAX network deployments that will continue to impact the timing and volume of projected commercial sales of its WiMAX semiconductor products. In addition, the Company’s efforts to sell certain of its U.S. spectrum assets on favorable terms has been delayed by current market conditions, as well as regulatory and other market activities involving potential buyers.

NextWave’s cash, cash equivalents, marketable securities, and restricted cash totaled $71.1 million at the end of the second quarter of 2008, compared to $142.5 million at the end of the first quarter of 2008. The Company utilized $71.4 million of cash in the second quarter of 2008 of which $51.4 million was used in operations; $7.8 million was used for spectrum lease payments, spectrum purchases, and capital expenditures; $7.0 million was paid in financing consent fees; and $5.2 million was used in working capital and other activities.

The Company currently believes its existing cash and cash equivalents, along with the $4.9 million received in July 2008 from the settlement of its escrow claim related to the acquisition of IPWireless, Inc., and the $21.5 million received in August 2008 from a collateralized borrowing against the Company’s auction rate securities will be sufficient to meet its estimated working capital requirements into September 2008. If the Company does not obtain further financing in September 2008, it would not be able to meet its financial obligations at the beginning of the fourth quarter of 2008, will not be able to continue its operations in the normal course of business and may be forced to restructure its obligations. If the Company successfully obtains financing, it will continue to seek buyers for its U.S. spectrum assets as previously disclosed, and will explore additional options for further cost reductions.

“In order to meet our estimated working capital requirements through June 2009, we are in the process of negotiating the terms for $100 to $200 million of additional financing,” added Salmasi. “We are working on a $100 million private placement of junior preferred stock to be completed in September 2008, subject to the execution of definitive agreements and board approvals. In addition, we are also exploring the possibility of obtaining up to $100 million in second lien debt financing.”

In July 2008, as part of a global cost reduction initiative, the Company announced plans to consolidate its network product engineering and development activities at its facility in the United Kingdom. This consolidation is expected to reduce the Company’s worldwide workforce by approximately 132 employees. The Company is reviewing other cost reduction measures, including additional operational consolidations, in response to current and anticipated marketplace conditions.

On July 23, 2008, the Company announced that it had signed agreements with four parties to sell a portion of its AWS license portfolio, representing 63% of its total AWS MHz-pops, for a total of $150.1 million. Pursuant to the terms of NextWave's Senior Notes, $75 million of the proceeds from the sale will be deposited into a restricted cash collateral account and $75 million will be used to redeem a portion of the Notes. NextWave's remaining U.S. spectrum assets include 2.8 billion MHz-pops of 2.3 GHz WCS spectrum, 972 million MHz-pops of 2.5 GHz BRS/EBS spectrum, and 348 million MHz pops of AWS spectrum. In addition, the Company has 5.9 billion MHz-pops of spectrum in Europe, Canada, and South America. In April 2008, NextWave announced that it had retained Deutsche Bank and UBS Investment Bank to explore the sale of its U.S. spectrum assets. The Company has also retained Canaccord Adams to explore the sale of its Canadian spectrum assets. The Company’s efforts towards monetization of its remaining domestic and international spectrum through the investment banks and direct discussions with interested parties will remain on-going.

NEXTWAVE WIRELESS INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except par value data)
		June 28, 2008			December 29, 2007
ASSETS		(unaudited)
Current assets:
Cash and cash equivalents		$	40,847		$	53,050
Marketable securities			25,857			113,684
Restricted cash			4,401			202
Accounts receivable, net of allowance for doubtful accounts of $1,000 and $1,419, at June 28, 2008 and December 29, 2007, respectively			13,113			14,788
Inventory			8,507			4,934
Deferred cost of revenues			25,695			27,840
Prepaid expenses and other current assets			22,040			9,242
Total current assets			140,460			223,740
Restricted cash			—			75,000
Wireless spectrum licenses, net			665,836			633,881
Goodwill			158,223			171,056
Other intangible assets, net			72,666			82,388
Property and equipment, net			37,379			44,382
Other noncurrent assets			7,078			28,291
Total assets		$	1,081,642		$	1,258,738
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	20,982		$	25,885
Accrued expenses			71,728			76,137
Current portion of long-term obligations			6,815			6,745
Deferred revenue			54,090			55,964
Other current liabilities			1,046			2,931
Total current liabilities			154,661			167,662
Deferred income tax liabilities			103,290			103,264
Long-term obligations, net of current portion			330,355			320,782
Accrued purchase consideration and stock bonuses payable			2,568			57,903
Other noncurrent liabilities			10,813			8,376
Total liabilities			601,687			657,987
Commitments and contingencies
Redeemable Series A Senior Convertible Preferred Stock, $0.001 par value; 355 shares authorized; 355 shares issued and outstanding, liquidation preference of $390,195 and $375,811 at June 28, 2008 and December 29, 2007, respectively			386,516			371,986
Stockholders’ equity:
Preferred stock, $0.001 par value; 25,000 shares authorized; 355 shares designated as Series A Senior Convertible Preferred Stock; no other shares issued or outstanding			—			—
Common stock, $0.001 par value; 400,000 shares authorized; 103,092 and 92,667 shares issued and outstanding at June 28, 2008 and December 29, 2007, respectively			103			93
Additional paid-in-capital			725,451			686,918
Accumulated other comprehensive income			18,445			12,836
Accumulated deficit			(650,560)			(471,082)
Total stockholders’ equity			93,439			228,765
Total liabilities and stockholders’ equity		$	1,081,642		$	1,258,738

NEXTWAVE WIRELESS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
		Three Months Ended						Six Months Ended
		June 28, 2008			June 30, 2007			June 28, 2008			June 30, 2007
Revenues:
Technology licensing and service		$	17,703		$	7,802		$	33,268		$	15,506
Hardware			14,096			5,030			24,515			5,072
Total revenues			31,799			12,832			57,783			20,578
Operating expenses:
Cost of technology licensing and service revenues			7,593			3,901			14,393			7,498
Cost of hardware revenues			14,111			8,165			25,954			8,233
Engineering, research and development			40,327			34,850			85,745			58,196
Sales and marketing			10,076			5,612			23,661			9,285
General and administrative			23,151			19,778			51,057			37,046
Asset impairment charge			2,196			—			2,196			—
Purchased in-process research and development costs			—			—			—			860
Total operating expenses			97,454			72,306			203,006			121,118
Loss from operations			(65,655)			(59,474)			(145,223)			(100,540)
Other income (expense):
Interest income			366			5,444			2,544			7,517
Interest expense			(18,750)			(11,447)			(34,032)			(22,586)
Other income (expense), net			8			298			(2,107)			302
Total other income (expense), net			(18,376)			(5,705)			(33,595)			(14,767)
Loss before provision for income taxes and minority interest			(84,031)			(65,179)			(178,818)			(115,307)
Income tax provision			(425)			(224)			(656)			(401)
Minority interest			—			138			—			1,048
Net loss			(84,456)			(65,265)			(179,474)			(114,660)
Less: Preferred stock dividends			(7,260)			(6,730)			(14,385)			(6,952)
Accretion of issuance costs on preferred stock			(73)			(68)			(145)			(70)
Net loss applicable to common shares		$	(91,789)		$	(72,063)		$	(194,004)		$	(121,682)
Net loss per common share – basic and diluted		$	(0.89)		$	(0.81)		$	(1.97)		$	(1.41)
Weighted average shares used in per share calculation			102,765			88,774			98,231			86,385

NEXTWAVE WIRELESS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
		Six Months Ended
		June 28, 2008			June 30, 2007
OPERATING ACTIVITIES
Net loss		$	(179,474)		$	(114,660)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of intangible assets			17,240			6,825
Depreciation			7,755			4,443
Non-cash share-based compensation			5,046			5,906
Accretion of interest expense			11,071			10,181
Asset impairment losses			3,585			—
In-process research and development			—			860
Minority interest			—			(1,048)
Other non-cash adjustments			(38)			743
Changes in operating assets and liabilities:
Accounts receivable			2,189			(1,899)
Inventory			(3,520)			(2,422)
Deferred cost of revenues			3,439			(735)
Prepaid expenses and other current assets			171			(1,044)
Other assets			(74)			2,197
Accounts payable and accrued liabilities			(10,897)			1,863
Deferred revenue			(4,413)			6,103
Other liabilities and deferred credits			379			(33)
Net cash used in operating activities			(147,541)			(82,720)
INVESTING ACTIVITIES
Proceeds from maturities of marketable securities			106,385			5,127
Proceeds from sales of marketable securities			92,225			622,892
Purchases of marketable securities			(112,163)			(649,064)
Cash paid for business combinations, net of cash acquired			(5,129)			(59,398)
Cash paid for wireless spectrum licenses			(4,863)			(34,252)
Cash paid to acquire property and equipment			(10,169)			(14,245)
Cash advanced to our investee pursuant to convertible note agreement			(500)			—
Other, net			(747)			(1,441)
Net cash provided by (used in) investing activities			65,039			(130,381)
FINANCING ACTIVITIES
Cash released from restricted cash account securing long-term obligations			75,000			—
Proceeds from the sale of Series A Senior Convertible Preferred Stock, net of costs to issue			—			351,146
Payments on long-term obligations			(6,475)			(3,347)
Proceeds from the sale of common shares			1,737			1,550
Cash distribution paid to members			—			(2,034)
Net cash provided by financing activities			70,262			347,315
Effect of foreign currency exchange rate changes on cash			37			—
Net increase (decrease) in cash and cash equivalents			(12,203)			134,214
Cash and cash equivalents, beginning of period			53,050			32,980
Cash and cash equivalents, end of period		$	40,847		$	167,194
Noncash investing and financing activities:
Common stock issued for business acquisitions		$	36,572		$	74,522
Common stock issued under stock plans		$	7,051		$	2,317
Wireless spectrum licenses acquired with lease obligations		$	8,624		$	5,222

About NextWave Wireless

NextWave Wireless Inc. (Nasdaq: WAVE) is engineering the future of mobility by providing next-generation mobile multimedia and wireless broadband technologies to the world’s leading mobile handset manufacturers, consumer electronics manufacturers and wireless service providers. From mobile television and mobile broadband systems to semiconductors and device-embedded mobile multimedia software that can be found in more than 250 million handsets around the globe, NextWave is evolving the way consumers experience mobile multimedia content. For more information, visit NextWave at www.nextwave.com.

Non- GAAP Financial Measures

This press release refers to a non-GAAP financial measure of billed revenue. Management believes that this non-GAAP financial measure provides more meaningful supplemental information regarding our cash flow and performance that enhances management’s and investor’s ability to evaluate the company’s equipment shipments and related trends and prospects. A reconciliation of GAAP revenue to non-GAAP billed revenue is provided with this press release.

Note Regarding Forward-Looking Statements

This press release contains “forward-looking statements” for purposes of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. There can be no assurances that forward-looking statements will be achieved, and actual events or results could differ materially from the events or results predicted by such statements. Important factors that could cause actual events or results to differ materially are discussed in greater detail in the filings of NextWave with the Securities and Exchange Commission. Investors should refer to NextWave’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 29, 2008 and other filings with the Securities and Exchange Commission for a description of risks relating to NextWave’s business, including, but not limited to its need to obtain additional financing or it will be unable to meet its financial obligations at the beginning of the fourth quarter of 2008, will not be able to continue its operations in the normal course of business and may be forced to restructure its obligations; its limited relevant operating history; its need to secure significant additional capital in the future to implement its business plan and to continue to fund its research and development activities and its operating losses until it becomes cash flow positive and generate earnings; its ability to manage growth or integrate recent or future acquisitions; and the other risks describe under the heading “Risk Factors” in such filings. All such documents are available through the SEC’s website at www.sec.gov. NextWave makes no commitment to update any forward-looking statements in order to reflect subsequent changes in events or circumstances except as may be required pursuant to applicable law.

Ruder Finn
Kristie Heins Fox, 312-329-3985
heinsfoxk@ruderfinn.com
or
NextWave Wireless
Investor Relations
Roseann Rustici, 203-742-2571
Vice President, Investor Relations
rrustici@nextwave.com