Wave Systems Corp. (fka WAVXQ)

[Fullmoon]

Wave Q2 Revenues Rose 34%, to $6.4 Million Driven by Continued Progress in Software License Activity

Market Wire
4:02 PM Eastern Daylight Time Aug 09, 2010
Wave Systems Corp.

LEE, MA, Aug 09 (Marketwire) --
Announces Recent Customer and OEM Progress

Wave Systems Corp. (NASDAQ: WAVX) (www.wave.com) today reported
operating results for the second quarter (Q2) and six months ended June
30, 2010. The company also reported on recent customer wins and OEM and
partner progress.

Benefiting from growth in royalties from enterprise software license sales
(previously referred to as "upgrade sales"), as well as increased
shipments of Wave's software bundled with enterprise PCs that include a
Trusted Platform Module (TPM) and/or a self-encrypting drive (SED),
Wave's Q2 '10 net revenues from software licensing rose 40% to $6.2
million from $4.4 million in Q2 '09. Including a modest decrease in net
services revenues related to government service contracts, Wave's Q2 '10
net revenues rose 34% to $6.4 million versus $4.8 million in Q2 '09 and
rose 10% over Q1 '10 net revenues of $5.9 million. Total billings
increased 38% to $6.3 million in Q2 '10, compared to total billings of
$4.6 million in Q2 '09, and rose 12% versus Q1 '10 total billings of $5.6
million. Net revenue is reconciled to billings below.

Reflecting increased investments in SG&A and R&D to support Wave's OEM
relationships, its expanding base of customers and an array of product
enhancements, Wave's Q2 '10 net loss increased to $1.0 million, or $0.01
per basic and diluted share, compared to a Q2 '09 net loss of $0.3
million, or $0.01 per basic and diluted share, and Wave's Q1 '10 net loss
of $0.7 million, or $0.01 per basic and diluted share. Per-share figures
are based on a weighted average number of basic shares outstanding in the
second quarters of 2010 and 2009 of 80.3 million and 66.4 million,
respectively, and on a weighted average of 77.2 million basic shares
outstanding at March 31, 2010.

Wave reported negative EBITDAS of $53,000 for Q2 '10 compared to positive
EBITDAS of $144,000 in Q2 '09 and negative EBITDAS of $118,000 in Q1 '10.
EBITDAS is a non-GAAP measure defined as earnings before interest income
(expense), income taxes, depreciation and amortization and stock-based
compensation expense. Net income is reconciled to EBITDAS below.

Giving effect to Wave's second quarter purchase of two U.S. patents on
core technology underlying SEDs for $1.1 million in cash, as of June 30,
2010, Wave's cash and cash equivalents declined to $4.5 million compared
to $5.1 million on March 31, 2010. As of June 30, 2010, Wave's total
current assets declined to $8.5 million as compared to $9.1 million at
March 31, 2010 and its total current liabilities declined to $7.1
million, including $3.1 million of deferred revenue, from $7.5 million at
March 31, 2010.

Steven Sprague, President and CEO of Wave Systems, commented, "Wave's
improved second quarter revenues reflected sequential and year-over-year
increases in both enterprise software sales activity, as well as a higher
volume of OEM software bundling with PCs incorporating TPMs. The increase
in bundling activity reflected a rebound in PC shipments by our OEM
partners.

"To support growing interest we are seeing in trusted computing solutions,
we have increased investments in sales and marketing and in R&D, generally
in line with our revenue performance. We believe these investments are
critical to the continued expansion of our business and to address OEM
partner and customer interest in our products. Significant developments
include Dell's plans to significantly enhance the user interface for
Wave's solutions in next year's commercial PCs and Acer's decision to
expand its relationship with Wave beyond enterprise desktops to include
business notebook systems.

"We are also seeing continued adoption of our enterprise solutions by
customers in new markets, including a national online brokerage services
firm and a large integrated healthcare delivery system. We review some new
customer developments below.

"We are also encouraged by our continued services work with the U.S.
government and are dedicating substantial resources to support this
project and are particularly encouraged by the visibility they will be
giving to trusted computing solutions at a conference in September."

Summary of Recent Progress/Developments:

OEM/Partner News:

-- Dell and Wave Are Developing the Next Generation Platform Security
Solution for Dell's 2011 Latitude(TM), Precision(TM) and Optiplex(TM)
Models. These platforms are to include an enhanced user interface designed
to make it easier for users to activate client-side security capabilities.
Wave will continue to supply Dell with authentication solutions (TPM,
biometrics and smart cards) and SED management. Dell PCs powered by Wave
security are currently in use in financial services, healthcare,
manufacturing, utilities, law firms, and government customer verticals.

-- Acer to Include Wave Security Solutions on Desktop and Notebook Systems
for Release in Q4 2010. On select platforms, Acer now plans to provide an
enhanced user interface that includes Wave's TPM authentication management
and optional SED management. The platforms will be targeted to the SMB
market, with the intention of building channel awareness of Acer platforms
with security installed at the factory. Acer also continues to be licensed
to resell Wave's EMBASSY(R) Remote Administration Server (ERAS) to end
users through its broad channel partner network.

-- Wave and Hitachi GST Announce Comprehensive Data Protection Solution.
Wave's EMBASSY security software is compatible with Hitachi Global Storage
Technologies' (Hitachi GST) Travelstar(TM) SEDs available through
Hitachi's worldwide distribution channels. The drives are among the first
commercially available based on the Trusted Computing Group's Opal
storage specification that defines a set of drive security features.
Wave's EMBASSY management software (available separately from Wave's
channel partners, resellers and direct from Wave) provides IT managers
with powerful capabilities for deploying, administering and managing
Hitachi SEDs.

Customer News:

-- A Big Four Accounting Firm Selected Wave to Roll out Strong
Authentication Using Trusted Platform Modules (TPMs) Throughout the
Enterprise. As previously reported by Wave in May, this accounting firm
selected Wave software for use in activating tens of thousands of TPMs for
VPN, network access and other security issues.

-- BNY Mellon Corporate Launched Innovative eVault Service. Wave's
eSignSystems division was integral in the launch, providing lifecycle
management tools for eMortgage processing that support the ongoing eVault
Service.

Other News:

-- Gartner Predicts All Hard Drives will be Shipped Pre-Loaded with
Industry Standard FDE within Five Years; Key Management Cited as Critical.
Citing the role of the Trusted Computing Group in defining and promoting
open standards for hardware-enabled trusted computing technologies,
Gartner "believes that, within five years, all HDDs will be shipped
preloaded with some kind of industry-standard FDE technology, just as all
mobile, desktop and enterprise HDDs shipped today are preloaded with some
kind of diagnostic software." The report also notes that key management
"is a crucial issue, and encryption is useless if there is weak key
management." A primary benefit of self-encrypting drives, according to
Gartner, was that the encryption key never leaves the drive and that key
management is generally handled by an independent software vendor with
some centralized management for password recovery and authentication. The
report, entitled "Gartner Hype Cycle for Storage Technologies, 2010" is
available for download here.

About Wave Systems Corp.

Wave provides software to help solve critical enterprise PC security
challenges such as data protection, strong authentication, network access
control and the management of these enterprise functions. Wave is a
pioneer in hardware-based PC security and a founding member of the Trusted
Computing Group (TCG), a consortium of over 100 companies that forged open
standards for hardware security. Wave's EMBASSY(R) line of client- and
server-side software leverages and manages the security functions of the
TCG's industry standard hardware security chip, the Trusted Platform
Module (TPM) and supports the self-encrypting drive standard, Opal. TPMs
are included on an estimated 300 million PCs and are standard equipment
on many enterprise-class PCs shipping today. Using TPMs and Wave software,
enterprises can substantially and cost-effectively strengthen their
current security solutions. Self-encrypting drives are a growing segment
of the data protection market, offering increased security and better
performance than existing software-based encryption solutions. For more
information about Wave and its solutions, visit http://www.wave.com.