Good day and welcome to the Novatel Wireless second quarter 2013 financial results conference call. All participants will be in listen-only mode. (Operator Instructions). After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Matthew Hunt, Blueshirt Group for Investor Relations. Mr. Hunt, the floor is yours sir.

Good afternoon and thank you for joining us on our second quarter 2013 conference call. We will begin with the business overview and outlook from Chairman and CEO, Peter Leparulo, followed by a financial overview and guidance from Chief Financial Officer, Ken Leddon. We will then open the call for questions. As a reminder, this conference call is being broadcast on Wednesday, August 7, 2013, over the phone and internet to all interested parties. The information shared on this call is effective as of today’s date and will not be updated. During this call, non-GAAP financial measures will be discussed. A reconciliation to the most directly comparable GAAP financial measures is included in the earnings release which is available on the Investors section of our website. An audio replay of this call will also be archived there. Please also be advised that today’s discussion will contain forward-looking statements. These forward-looking statements are not historical facts, but rather are based on company’s current expectations and beliefs. For a discussion of factors that could cause actual results to differ materially from expectations, please refer to the Risk Factors described in our forms 10-K, 10-Q and other SEC filings which are available on our website. Now I would like to introduce Peter Leparulo, Chairman and Chief Executive Officer of Novatel Wireless.

Thanks, Matt. Good afternoon and thank you for joining our call today. During the second quarter we made solid progress across both of our business segments. We grew revenue by 6% sequentially and improved our bottom line, driven by strong demand during the quarter across most of our portfolio. In Mobile Computing, revenue from our MiFi product line grew 6% sequentially. This increase builds off the 35% sequential growth we saw on this product line in the first quarter. Before I discuss specific products in this business, as we indicated may have in last quarter, the increase in demand that we saw for the new MiFi products in the second quarter exceeded certain components supplies, primarily due to supply allocations. So even while growth in this business was moderately tempered by the component shortage, we are still able to grow sequentially. Now onto details from Mobile Computing business, at Verizon we experienced strong demand for our MiFi products in the second quarter. The second quarter was the first full quarter with our MiFi 5510L in the value position, and we are pleased with its performance. This product is now being offered with the option for a prepaid plan by Verizon as well. The second quarter results of the first full quarter in which we have both a value and premium product, our MiFi 4620LE with extended battery pack in the channel with Verizon. Looking forward we’ve been awarded a new design win with Verizon for a next generation MiFi for 2014 launch. During the second quarter shipments of MiFi 2 increased by almost 84% over the first quarter. At AT&T our focused in the second quarter was to increase distribution of the MiFi 2 international retailers where a good chunk of activations take place. We have now expanded to most…

Thank you, Peter. I will begin with a financial overview of the second quarter and then we’ll provide our outlook for the third quarter of 2013. Revenue for the second quarter was $91.1 million within the guidance range we provided last quarter and up 6% sequentially. To break that revenue performance down by business segment, our mobile computing revenues in the quarter was $80.8 million, up from $75.6 million in the mobile computing revenue in the prior quarter. This include $68.5 million of MiFi revenues, $8.1 million of USB modems, combination cards and related products, and $4.2 million from our PC OEM business. Our M2M products and solutions totaled $10.3 million, which is in line with the prior quarter, which had increased over 50% sequentially. From a geographic perspective, sales in North America accounted for approximately 96% of total revenue. Our net operating loss for the second quarter was $7.7 million and our net loss was $7.9 million or $0.23 loss per share, improved from a loss of $9.1 million or $0.27 loss per share last quarter From here on I will discuss our results on a non-GAAP basis. Please see our earnings release for a reconciliation of our GAAP to non-GAAP second quarter results. The non-GAAP adjustments for the quarter totaled $1.2 million and included adjustments for share-based compensation expense, amortization of acquired intangible assets and certain income tax asset and liability adjustments. Non-GAAP gross margin in the second quarter was 21.1%, up from 19.7% last quarter and within our guidance range. Our non-GAAP operating expenses totaled $25.8 million, up from $24.3 million in the prior quarter. The increase in the quarter was primarily due to higher legal expenses. Accordingly, looking at our operating expenses by category, R&D expenses were $12.7 million compared to prior quarter of $13.1 million.…

Thanks Ken. In summary, we are making good progress in both of our business segments. Our products are increasingly integrated, platform leveraging devices with wider extendibility, resulting in wider customer applications and compelling value prepositions. Even our product pipeline bookings and customer forecast were excited about the opportunities we are seeing. And with that, Ken I would be happy to answer your questions. Operator, please open the call for Q&A.

Thank you, sir. We will now begin the question-and-answer session. (Operator Instructions) The first question we have comes from Mike Walkley of Canaccord Genuity. Please go ahead.

Yes. Thank you very much. This is Matt Ramsey on the call for Mike today, good afternoon guys. Just want to say to start off with a few questions on the mobile computing business, I guess first obviously congratulations on the launch of new products and diversification of the carrier relationships there and also I think you guys mentioned in the prepared remarks that next generation win for 2014 MiFi Verizon which is obviously encouraging. And maybe you can walk us through the incremental opportunities at carriers outside of Verizon and maybe a percentage of the MiFi revenue mix going forward relative to the size of the MiFi market going forward in total given that they are completing solutions from WiFi solutions from smartphones and Tablets and include this type of feature that has been kind of rest to the group for a while, thanks.

Excuse me, sure if I read correctly let me go through this Matt. At Verizon I believe that lead we have in certain Q2 a very strong talent position because the both the premium swap and the value swap at that operator that is only subject to change but and certainly right now we have a very strong talent position over there. I am just sticking with MiFi external devices, At AT&T there is certainly dual sourcing at the operators and we expect that to continue but what we basically have done is develop products so that going forward, we aim to get the value position and the more highly promoted channel position at those operators. So you may have noticed that at Sprint for example we have Sprint is putting a time promotion behind our product in its channel right now, but I do expect dual sourcing at those operators to go forward. One of the things that we have seen historically happen though as you migrate from 2G to 3G and 3G to 4G the market not only expands but it everybody in the channel. But nevertheless, we expect there to continue to be dual sourcing and our challenge is to make sure that we get the lion share as much as we can with each operator. In terms of competing devices for things like this, we have not seen the laptops and tablets going to be a threat to the MiFi product line and I think it's really for several reasons. Among the OEMs we have really not seen a motivation to migrate the market with a lot of force behind it if you will to 4G. So we still see fairly disrupt pricing between 3G and 4G, but we don't see a subsidy, strong subsidy model behind 4G outside of some branded products at the operators. And then there is also the greater functionality of a mobile hotspot in terms of being able to connect to mobile devices simultaneously. So that my change, but we have not seen tablets with cellular connectivity and laptops with cellular connectivity, let it be up begin to cannibalize the external devices. In terms of smartphones, we've talked about this before really smartphones really there are several reasons, the data plans in smartphones you feed into the smartphone data plan. So it really historically has not been robust enough even without some type of premium for additional data usage on it. The data plans really aren’t as robust as you would do with an external device. And then as we've talked about 4G, the user experience in terms of power management, in terms of usability and basically they have not been optimized for mobile broadband. So in terms of smartphones, we believe there will be some level of co-existing, some people might go for that, but we still think that there will be a strong segment that use MiFi products.

In addition, if I am doing the math right, it looks like your PC OEMs sales were up pretty dramatically on a sequential basis, I mean, still down year-over-year, but up sequentially when you guys have talked about relatively recently the plan to exit that business. Maybe you can talk about the dynamics of what throw that increase in the quarter given the change in strategy and what could happen to that business over the next couple of quarters?

The PC OEM as you say, we decided to exit the PC OEM in terms of future product development unless we saw a different business model emerge from that and it really was because that business, because of them with dispersion was very extensive structurally to develop for and we simply didn’t see the take up in terms of forecast. There have been some catalysts in that business and what you are seeing right now is sort of the same business with the same products simply continue and some of the catalysts that have happened in that business are, number one, family plans have helped encode multiple devices within a family plan. Win 8 has in some sectors we see has been a catalysts and that’s really what we’re seeing now. Some of that is also still 3G and as we've talked about, we've not been a big motivation to migrate to 4G by using that, the pricing differential between 3G and 4G. So that’s ebbing and flowing but it still is, we are pleased to see it, I would expect that to start to take up going but to be replaced by some of the newer markets that we believe have better opportunities for us in the future.

Great, that makes complete sense. On the M2M business sales were flat sequentially, but obviously a pretty heavy investment going on in that business given in your release the operating loss in that segment and then it sounds like some pretty exciting opportunities potentially ramping in the back half for the year and into next year. I mean Peter is that, what you guys think is a realistic breakeven level for that business on the revenue line given the margin profile on the gross margin side of that business and when could we think about it’s not breakeven point?

This is Ken speaking. Argue the business and looking at the pipeline in that and looking into the future indicates that that business as a separate segment will evolve into a higher margins and currently – we're currently experiencing what legacy product is until recently primarily GPRS product and heavily laden with GPRS modules. As we’ve gone into CDMA and 3G and then in the future of on the LTE possibly we see the margins going up and the cost structure that business continues to come down as we continue to integrate it with the mobile computing business. So we think that somewhere in the range of $14 million to $15 million in the two or three -- in a couple of quarters or so. I mean I don’t give any guidance, but it looks to be taken that gross margin profile up we believe it’s probably be around $14 million, $15 million in time. So I think we will be approaching that as the pipeline continues to materialize and convert concepts in the revenue.

Great, and the last question from me and then I will pass it on, Peter you made the interesting comments in your prepared remarks about so the fleet vertical which is obviously a very strong vertical in the machine to machine market but different segment of the vertical and over the rope (inaudible) tucking and assets tracking but it sounds like for me your products are here more just from the features that you laid out towards the insurance usage based insurance market and maybe you could talk a bit about the opportunity there is been a high topic and some consequences of point that we just been recent?

Sure, I will separate both of those I don’t want to minimize the historical fleet and we see the free market and let me just speak to that first. We see that the core fleet market that is been running for while growing across in terms of long haul fleet as well as smaller fleets of less than a 100 vehicles, and the reason really is that is very its lucky that now will show an ROI to fleet management companies that offer either applications or the services in fleet. And then in turn for that ROI is seen by the actual the fleet itself and the reason really just because there’s some put to you with ease of use with [OVD] it’s much easier to installed and letting to outside professional to do it. So the ROI is much crisper and readily apparent to them and that is certainly one more thing that we are addressing and what you are seeing with our MT3060 is what we bring to market is a full OVD portfolio is that they will address geographic market as well as attach different operator networks. That said as and that's where we, that's one of the places that we believe, we're growing. The second place really as you suggest is in what I would call the overall aftermarket commercial and consumer telematics and that includes usage based insurance and driver behavior as well. And then some of the applications are mentioned in that space, for driver behavior monitoring, remote diagnostics, road side assist. Those are the ones that we're addressing as well. I have talked on a couple of earnings calls, that the sales cycles on these is long, because these programs in and of themselves either systems integrators or the actual insurance companies or the insurance ecosystem has a long sales cycle. And then that in turn at somewhat of a downstream sale cycle to the existing customer base. That said, we've been doing this for quite a while and what I hope to suggest in my prepared statement was we're closing in on these and we expect to complete the trials that we are on right now, complete the pilot programs in fairly short order and start to table to talk about these in a much more specific way as we complete the sales cycle towards the our own launches and then with the insurance companies and systems integrators that we've been working with have then start their downstream programs. So hopefully a telegraph that this is a stage that we're pretty enthusiastic about right now when and we're in large opportunities, we believe we are at the center of the growth in it and I really hope very much to be able to talk about with much (Inaudible) as we announced in tandem with our customers partners on it.

Okay, great. Thank you very much for taking our questions look forward to seeing you at our conference next week

(Operator Instructions) Next we have the location of Cobb Sadler with Catamount Advisors. Please go ahead.

Just had a question on, I may have missed this. How much of revenue was component constrained? Can you quantify that?

Yes, debenture (inaudible) there is some uncertainty as you shift your components to try to make up for but I would say we are probably have been at the high end of our guidance except for the component constraints.

So it's significant then?

It was fairly significant.

Got it and just moving on to new product with Verizon for 2014, will that be low end or high end because you got a relatively new product to low end. I am assuming it's the high end replacing the 4620 jet pack. Is that right? Any special features or functionality?

I am sorry, Cobb. You are talking about the design win in my part or are you talking about the products that we're seeking to as a new product introduction?

Actually, both of the question was on the MiFi.

Sure, the MiFi, I hesitate to describe the product and where we are positioning it this far ahead of time but we believe that it will be a product that will have a good channel position at Verizon and regardless whether it's of the high end or low end, we try to bring as much in to the user experience and functionality as we can.

Got it and just on the enhanced software, the increased battery life. Why is that doesn’t have a huge differentiator, I mean how your customers respond or competitor responding to that. Because it seems like you are really differentiates you in the space?

I think it is a differentiator and a couple of things that it does is, one of the, if you look at the market data for user experiences, really what business users want to do is to be able to go through at least one full business day without recharging the device and we with that brought two business days depending on the batteries capacity, that’s in it. We’ve also been able to reduce our product thoughts on that because with a lower battery capacity we can still get the usage time up higher. I would say customers, the reception has been very good to it, it is a differentiator, but I will say this is, caveat is that customers measure usage time in a variety of different ways and so you don’t necessarily get the apple-to-apples comparison amongst different operators in terms of how they do it and that in terms of reflects on how they are able market it. But overall, I think it even without within market is a differentiator when you look at the usage time on our products you will see like-for-like batteries and we’ll have a great usage on certainly to the end users it’s been experienced and feedback that we’ve seen on it there is very good.

Great and then on Verizon product, I believe you [scrub] is a home gateway type product, what, could you talk about what the application would be there, is it fixed line replacement and the margin on these new products I mean how do they look versus what we are seeing now corporate wide?

So I don’t believe, I’ll get an operator for it for the product. I did say that we would be launching a new mobile computing product. In terms of over the application is for what the product really does is as you have suggested leverages the fixed infrastructure together with solar infrastructure and the applications are really for the operator allows them to offer them services things like in connectivity as a base line, replacement as the base line and analog to digital voice. So all of these are home or fixed and then also will be a portable device that can be taken to different locations. The interesting demand is well for us as we believe that there is a Trojan horse element that we developed into this, making it extensible into different types of home automation and again all build around sort of core MiFi technology which is able to abstract the connectivity for different devices and different local environments to different areas and levels of local connectivity and control routing of that data and voice in one device. I described the product but I am not, your questions was about what is the sort of operationally good for the business, I guess several things, number one we believe that products along this line that we are developing really fit into what we are trying to do overall in the company which is get products which much longer lives into them products which put us in a more defensible position because of the complexity and yet solving issues at a systems level, and not really been so device centric but relying on bringing solutions to the complexity of interaction between fixed line and cellular. On these particular products, they also fit into our the business model that we're attempting to get to really in all of our segments with all of our product lines which is a greater gross profit contribution to the company. So the absolute gross profit dollars that the gross profit contribution on this is greater than some of our historical products at their corporate gross margins. As well it also brings the amount of things that we're trying to do into our business model which is to leverage R&D from a core engine, which is the MiFi technology platform out to some of these additional used cases. So this will make R&D much more efficient, because the use of the same in common core engine. So, it does several things operationally for our business model.

Got it. And as far as time to market, when were these products impact your revenue stream and I guess the usual suspects in North America all are (inaudible) could you give us an update on where you stand?

We are in certification, I think we said in our remarks that we've been developing the first one for a 12 months and that is generally what our product development life cycle will be for this. So we hope that you will see this in the near future. Certainly, the first of these you should see in the near future.

Well, that will conclude today's Q&A. To access a digital replay of this conference, you may dial 1877-344-7529 or area code, 412-317-0088 beginning an hour after today's conclusion today, August 7, 2013 until Thursday, August 15, 2013 at 9’O clock AM Eastern Time. You will be prompted to enter a conference number, which will be 100-31-415. You will be prompted to record your name and company when joining. The conference call is now concluded. We thank you all for attending today’s presentation. At this time, you may disconnect your lines. Thank you and have a great day.