Airvana Reports Fourth Quarter and Full Year 2009 Financial Results

CHELMSFORD, Mass.--(BUSINESS WIRE)--

Airvana, Inc. AIRV, a leading provider of mobile broadband network infrastructure products, today reported financial results for the fourth quarter and the full year ended January 3, 2010. Airvana presents both GAAP and non-GAAP financial metrics below because management believes that the combination provides a more complete understanding of the company’s operating performance.

GAAP Financial Highlights

• Revenue: Total revenue for the fourth quarter of 2009 was $47.7 million, compared with $63.3 million for the fourth quarter of 2008. For the full year 2009, total revenue was $64.6 million, compared with $138.2 million for the full year 2008.
• Net Income/Loss: Net income for the fourth quarter of 2009 was $13.1 million, compared with net income of $24.8 million for the fourth quarter of 2008. For the full year 2009, net loss was $25.0 million, compared with net income of $21.3 million for the full year 2008.

In November 2009, the CDMA business of Nortel Networks Inc. (“Nortel”) was acquired by Telefon AB L.M. Ericsson (“Ericsson”). As part of this acquisition, Airvana’s contract with Nortel was assigned to Ericsson and Airvana received $39.6 million in cash from Ericsson, which represented payment for outstanding invoices of $36.4 million for sales of Airvana products and services to Nortel made prior to Nortel’s Chapter 11 bankruptcy filing in January 2009 plus interest of $3.2 million. As of January 3, 2010 Airvana’s cash, cash equivalents and investments increased to $263.2 million, from $228.4 million on December 28, 2008.

Non-GAAP Financial Highlights

• Pro Forma Product and Service Billings (“Billings”): Airvana’s pro forma Billings for the fourth quarter of 2009 were $49.0 million, compared with $39.8 million for the fourth quarter of 2008. For the full year 2009, Airvana’s pro forma Billings were $152.3 million, compared with $146.9 million for the full year 2008.
• Pro Forma Operating Profit on Billings: Pro forma operating profit on Billings for the fourth quarter of 2009 was $15.3 million, compared with $10.8 million for the fourth quarter of 2008. For the full year 2009, Airvana’s pro forma operating profit on Billings was $30.3 million, compared with $34.5 million for the full year 2008.

A description of Airvana’s revenue recognition policy is contained in its quarterly report on Form 10-Q and annual report on Form 10-K, each filed with the Securities and Exchange Commission. A description and a reconciliation of the company’s non-GAAP financial measures are included in this press release.

Proposed Acquisition of Airvana for Approximately $530 Million in Cash

On December 18, 2009, Airvana announced that it had entered into a definitive merger agreement with 72 Mobile Holdings, LLC, a newly formed entity owned by affiliates of S.A.C. Private Capital Group, LLC, GSO Capital Partners LP, Sankaty Advisors LLC and ZelnickMedia. As part of the transaction, Randall Battat, president and chief executive officer of Airvana, and Vedat Eyuboglu and Sanjeev Verma, vice presidents and co-founders of the company, together with certain of their affiliates, will exchange a portion of their shares of Airvana common stock for an equity interest in 72 Mobile Holdings, LLC. The transaction is valued at approximately $530 million. Under the terms of the merger agreement, at the closing of the merger, each share of Airvana common stock will be exchanged for $7.65 in cash.

Completion of the transaction is subject to the approval of Airvana’s shareholders and other closing conditions, and is expected to occur in the first half of 2010. In light of this proposed transaction, Airvana will not host a conference call in conjunction with today’s release of its fourth quarter and full year 2009 financial results. In addition, Airvana will not be providing financial guidance for the first quarter or full year 2010 or for any future periods.

Non-GAAP Financial Measures

To supplement Airvana’s condensed consolidated financial statements presented on a GAAP basis, Airvana uses non-GAAP Billings measures of operating results, gross profit on Billings and operating profit on Billings, which include changes in deferred revenue and deferred costs in a period. These non-GAAP financial measures are presented with the intent of providing both management and investors with a more complete understanding of Airvana’s underlying operating performance and trends. Airvana believes that these non-GAAP financial measures enhance the overall understanding of its past financial performance and also its prospects for the future. These non-GAAP measures provide an indication of Airvana’s financial results based upon sales activity in the period and are considered by management for the purpose of making operational decisions. In addition, these non-GAAP measures are the primary indicators that management uses as a basis for Airvana’s planning and forecasting of future periods.

Management uses the following non-GAAP measures (detailed in Exhibits 1, 2 and 3) as a supplement to GAAP revenue and cash flow from operations in evaluating Airvana’s performance:

• Product and Service Billings (“Billings”) reflects the amount invoiced for products and services in a period and equals GAAP revenue plus the change in deferred revenue in the period. On January 14, 2009, Nortel filed for bankruptcy protection. At the time of the filing, Airvana had total pre-bankruptcy filing outstanding invoices to Nortel of $21.8 million for the quarter ended December 28, 2008 and $14.6 million for the quarter ended March 29, 2009. The collection of the total amount of $36.4 million was subject to Nortel's bankruptcy process. As a result, Airvana excluded these amounts from Billings as of December 28, 2008 and March 29, 2009. This $36.4 million was accounted for on a cash basis when collected and included in Billings for the three months ended January 3, 2010. Pro forma Billings amounts reflect the pre-bankruptcy invoices in the periods originally invoiced.
• Costs Related to Billings reflects the cost directly attributable to Billings in a period and equals GAAP cost of revenue plus the change in deferred cost in the period.
• Gross Profit on Billings reflects Billings less costs related to Billings in the period.
• Operating Profit on Billings reflects gross profit on Billings less GAAP operating expenses in the period. On January 14, 2009, Nortel filed for bankruptcy protection. At the time of the filing, Airvana had total pre-bankruptcy filing outstanding invoices to Nortel of $21.8 million for the quarter ended December 28, 2008 and $14.6 million for the quarter ended March 29, 2009. The collection of the total amount of $36.4 million was subject to Nortel's bankruptcy process. As a result, Airvana excluded these amounts from Billings as of December 28, 2008 and March 29, 2009. This $36.4 million was accounted for on a cash basis when collected and included in Billings for the three months ended January 3, 2010. Pro forma operating profit on Billings amounts reflect the pre-bankruptcy invoices in the periods originally invoiced.

Management believes investors may find these measures useful for understanding Airvana’s operations, but cautions that they should not be considered a substitute for disclosure in accordance with GAAP. Exhibits 1, 2 and 3 reconcile all non-GAAP metrics to the corresponding financial statement items as determined in accordance with GAAP for all periods presented.

About Airvana, Inc.

Airvana helps operators transform the mobile experience for users worldwide. The company's high-performance technology and products, from comprehensive femtocell solutions to core mobile network infrastructure, enable operators to deliver compelling and consistent broadband services to mobile subscribers, wherever they are. Airvana's products are deployed in 70 commercial networks on six continents. The company is headquartered in Chelmsford, Mass., USA, with offices worldwide. For more information, please visit www.airvana.com.

Safe Harbor Statement

Any statements in this press release that are not historical facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements typically contain words such as “believes,” “anticipates,” “plans,” “expects,” “will,” “continue,” “outlook” and similar terms, and include, without limitation, statements regarding the expected timing of the merger of Airvana, statements regarding the ability to complete the merger and statements underlying any of the foregoing. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including without limitation uncertainties as to the timing of the merger of Airvana, Airvana’s ability to maintain its relationship with Ericsson, the timing and rate of femtocell market acceptance and growth, operator femtocell deployment plans, the highly competitive and rapidly evolving market in which Airvana competes, Airvana’s limited operating history, the fluctuation of its past operating results and its reliance on sales through Ericsson for a significant portion of its revenues and product and service Billings and other factors discussed in Airvana’s filings with the Securities and Exchange Commission. In addition, the forward-looking statements included in this press release represent Airvana’s views as of the date of this press release. Airvana anticipates that subsequent events and developments may cause its views to change. While Airvana may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing Airvana’s views as of any date subsequent to the date of this press release.

IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC

This news release is for informational purposes only. It is not a solicitation of a proxy. Airvana, Inc. has filed with the SEC a preliminary proxy statement and plans to file with the SEC and mail to its stockholders a definitive proxy statement in connection with the transaction. The proxy statement will contain important information about Airvana, Inc., 72 Mobile Holdings, LLC, the proposed merger and related matters. Investors and security holders are urged to read the proxy statement carefully when it is available.

Investors and security holders will be able to obtain free copies of the proxy statement and other documents filed with the SEC by 72 Mobile Holdings, LLC and Airvana, Inc. through the web site maintained by the SEC at www.sec.gov. In addition, investors and security holders will be able to obtain free copies of the proxy statement from Airvana, Inc. by contacting Investor Relations at (978) 250-3000.

Airvana, Inc., its directors and executive officers may be deemed to be participants in the solicitation of proxies from Airvana, Inc.’s stockholders with respect to the transactions contemplated by the merger agreement. Information regarding Airvana, Inc.’s directors and executive officers is contained in Airvana, Inc.’s Annual Report on Form 10-K for the year ended December 28, 2008, its proxy statement dated April 21, 2009 and preliminary proxy statement dated January 14, 2010, which are filed with the SEC.

Airvana, Inc.
GAAP Consolidated Statements of Operations
Comparative Financial Results
(Amounts in thousands except per share data)
(Unaudited)
				Three Months Ended									Year Ended
				December 28,				January 3,					December 28,				January 3,
				2008				2010					2008				2010
Revenue:
Product				$	57,616			$	36,603				$	123,295			$	45,121
Service					5,653				11,122					14,878				19,473
Total revenue					63,269				47,725					138,173				64,594
Cost of revenue:
Product					1,407				1,968					3,267				3,195
Service					2,163				2,752					8,195				10,374
Total cost of revenue					3,570				4,720					11,462				13,569
Gross profit					59,699				43,005					126,711				51,025
Gross margin					94%				90%					92%				79%
Operating expenses:
Research and development					18,617				19,474					74,826				73,676
Selling and marketing					3,721				3,962					14,933				16,307
General and administrative					2,301				4,461					8,976				12,772
Total operating expenses					24,639				27,897					98,735				102,755
Operating income (loss)					35,060				15,108					27,976				(51,730	)
Interest income, net					1,358				3,601					7,240				6,693
Income (loss) before income tax expense					36,418				18,709					35,216				(45,037	)
Income tax expense (benefit)					11,569				5,610					13,923				(20,045	)
Net income (loss)				$	24,849			$	13,099				$	21,293			$	(24,992	)
Net income (loss) per common share:
Basic				$	0.39			$	0.21				$	0.33			$	(0.40	)
Diluted				$	0.36			$	0.19				$	0.30			$	(0.40	)
Weighted average common shares outstanding:
Basic					63,655				62,730					64,278				62,499
Diluted					68,744				67,701					70,091				62,499

Exhibit 1
Airvana, Inc.
GAAP to Non-GAAP Product and Service Billings Reconciliation
(Amounts in thousands)
(Unaudited)
		Three Months Ended December 28, 2008																			Three Months Ended January 3, 2010
						Deferral				Adjusted GAAP				Pro Forma Nortel			Pro Forma								Deferral			Adjusted GAAP				Pro Forma Nortel				Pro Forma
		GAAP				Adjustments				Results				Adjustments (1)			Results (1)				GAAP				Adjustments			Results				Adjustments (2)				Results (2)
Revenue		$	63,269			$	(45,274	)		$	17,995			$	21,818		$	39,813			$	47,725			$	37,726		$	85,451			$	(36,442	)		$	49,009
Cost of revenue			3,570				816				4,386				-			4,386				4,720				1,062			5,782				-				5,782
Gross profit (loss)			59,699				(46,090	)			13,609				21,818			35,427				43,005				36,664			79,669				(36,442	)			43,227
Gross margin			94	%							76	%						89	%			90	%						93	%							88	%
Operating expenses			24,639				-				24,639				-			24,639				27,897				-			27,897				-				27,897
Operating income (loss) from operations			35,060				(46,090	)			(11,030	)			21,818			10,788				15,108				36,664			51,772				(36,442	)			15,330
Operating margin			55	%							-61	%						27	%			32	%						61	%							31	%
Stock-based compensation			1,302				-				1,302				-			1,302				1,817				-			1,817				-				1,817
Operating income (loss) excluding stock compensation		$	36,362			$	(46,090	)		$	(9,728	)		$	21,818		$	12,090			$	16,925			$	36,664		$	53,589			$	(36,442	)		$	17,147
Operating margin excluding stock compensation			57	%							-54	%						30	%			35	%						63	%							35	%
		Year Ended December 28, 2008																			Year Ended January 3, 2010
						Deferral				Adjusted GAAP				Pro Forma Nortel			Pro Forma								Deferral			Adjusted GAAP				Pro Forma Nortel				Pro Forma
		GAAP				Adjustments				Results				Adjustments (1)			Results (1)				GAAP				Adjustments			Results				Adjustments (1)				Results (1)
Revenue		$	138,173			$	(13,118	)		$	125,055			$	21,818		$	146,873			$	64,594			$	109,573		$	174,167			$	(21,818	)		$	152,349
Cost of revenue			11,462				2,163				13,625				-			13,625				13,569				5,731			19,300				-				19,300
Gross profit			126,711				(15,281	)			111,430				21,818			133,248				51,025				103,842			154,867				(21,818	)			133,049
Gross margin			92	%							89	%						91	%			79	%						89	%							87	%
Operating expenses			98,735				-				98,735				-			98,735				102,755				-			102,755				-				102,755
Operating income (loss) from operations			27,976				(15,281	)			12,695				21,818			34,513				(51,730	)			103,842			52,112				(21,818	)			30,294
Operating margin			20	%							10	%						23	%			-80	%						30	%							20	%
Stock-based compensation			4,844				-				4,844				-			4,844				6,317				-			6,317				-				6,317
Operating income (loss) excluding stock compensation		$	32,820			$	(15,281	)		$	17,539			$	21,818		$	39,357			$	(45,413	)		$	103,842		$	58,429			$	(21,818	)		$	36,611
Operating margin excluding stock compensation			24	%							14	%						27	%			-70	%						34	%							24	%
Note (1): On January 14, 2009, Nortel filed for bankruptcy protection. For the three months and year ended December 28, 2008, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $21,818, the collection of which was subject to Nortel's bankruptcy process. As a result, Airvana excluded this amount from Billings and from accounts receivable as of December 28, 2008. This amount was accounted for on a cash basis when collected and included in Billings for the three months ended January 3, 2010.
Note (2): On January 14, 2009, Nortel filed for bankruptcy protection. At the time of the filing, Airvana had total pre-bankruptcy filing outstanding invoices to Nortel of $36,442, the collection of which was subject to Nortel's bankruptcy process. As a result, Airvana excluded this amount from Billings and from accounts receivable as of December 28, 2008 and March 29, 2009. This amount was accounted for on a cash basis when collected and included in Billings for the three months ended January 3, 2010.

Airvana, Inc.
Consolidated Balance Sheets
(Amounts in thousands)
(Unaudited)
				December 28,				January 3,
				2008				2010
ASSETS
Current assets
	Cash and cash equivalents			$	30,425			$	30,318
	Investments				197,941				232,849
	Accounts receivable				3,354				19,030
	Deferred product cost				1,913				3,379
	Prepaid taxes & deferred tax assets and charges, net				2,168				23,079
	Prepaid expenses and other current assets				2,758				4,372
		Total current assets			238,559				313,027
	Property and equipment, net				4,822				5,380
Deferred service cost, long-term					1,300				5,565
Deferred tax assets and charges, net					956				3,686
Goodwill and intangible assets, net					11,096				10,027
Other assets					603				1,032
		Total assets		$	257,336			$	338,717
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Accounts payable			$	4,455			$	3,430
	Accrued expenses and other current liabilities				14,365				11,974
	Accrued income taxes				1,897				72
	Deferred revenue				61,310				167,390
		Total current liabilities			82,027				182,866
Deferred revenue, long-term					5,550				9,043
Accrued income taxes					5,703				6,132
Other liabilities					1,174				653
		Total long-term liabilities			12,427				15,828
Stockholders' equity:
	Common stock				63				63
	Additional paid-in capital				186,824				188,777
	Accumulated other comprehensive income				-				180
	Accumulated deficit				(24,005	)			(48,997	)
		Total stockholders' equity			162,882				140,023
		Total liabilities and stockholders' equity		$	257,336			$	338,717

Airvana, Inc.
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
						Three Months Ended								Year Ended
						December 28,				January 3,				December 28,				January 3,
						2008				2010				2008				2010
Operating activities
	Net income (loss)					$	24,849			$	13,099			$	21,293			$	(24,992	)
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Depreciation					780				839				3,215				3,249
		Amortization of intangible assets					268				268				1,069				1,069
		Stock-based compensation					1,302				1,817				4,844				6,317
		Deferred tax (expense) benefit					(160	)			(356	)			(951	)			(14,827	)
		Excess tax benefit related to exercise of stock options					(288	)			(650	)			(2,266	)			(2,442	)
		Amortization of investments					(732	)			935				(4,113	)			940
		Unrealized gain on forward foreign currency exchange contracts					-				188				-				-
		Amortization of leasehold incentive					(131	)			(130	)			(522	)			(521	)
		Changes in operating assets and liabilities:
			Accounts receivable				4,739				(594	)			10,817				(15,676	)
			Deferred product and service cost				(816	)			(1,062	)			(2,163	)			(5,731	)
			Prepaid taxes and deferred tax charges				8,877				6,908				115				(6,372	)
			Prepaid expenses and other current assets				483				(469	)			306				(1,384	)
			Accounts payable				1,836				271				649				(1,025	)
			Accrued expenses and other current liabilities				734				(100	)			3,358				(2,386	)
			Accrued income taxes				2,792				(775	)			(9,964	)			(1,396	)
			Deferred revenue				(45,274	)			37,726				(13,118	)			109,573
				Net cash (used in) provided by operating activities			(741	)			57,915				12,569				44,396
Investing activities
	Purchases of property and equipment						(194	)			(456	)			(1,765	)			(3,827	)
	Purchase of investments						(92,995	)			(98,041	)			(341,622	)			(290,902	)
	Maturities of investments						78,280				56,944				309,579				255,234
	Investments sold						-				-				16,631				-
	Other assets						(47	)			38				4				(639	)
				Net cash used in investing activities			(14,956	)			(41,515	)			(17,173	)			(40,134	)
Financing activities
	Payments on long-term debt						(2	)			-				(121	)			-
	Payments of cash dividend						(21	)			-				(92	)			(5	)
	Purchase and retirement of treasury stock						(9,781	)			-				(13,328	)			(9,291	)
	Excess tax benefit related to exercise of stock options						288				650				2,266				2,442
	Proceeds from exercise of stock options						413				449				2,632				2,485
				Net cash (used in) provided by financing activities			(9,103	)			1,099				(8,643	)			(4,369	)
Effect of exchange rates on cash and cash equivalents							(95	)			-				125				-
Net (decrease) increase in cash and cash equivalents							(24,895	)			17,499				(13,122	)			(107	)
Cash and cash equivalents at beginning of period							55,320				12,819				43,547				30,425
Cash and cash equivalents at end of period						$	30,425			$	30,318			$	30,425			$	30,318

Exhibit 2
Airvana, Inc.
Select Quarterly Financial Data - GAAP & non-GAAP Metrics
(Amounts in thousands)
(Unaudited)
			Three Months Ended
																																			Pro Forma Nortel			Pro Forma				Pro Forma Nortel				Pro Forma				Pro Forma Nortel				Pro Forma				Pro Forma Nortel				Pro Forma				Pro Forma Nortel				Pro Forma
			Mar 30,				Jun 29,				Sep 28,				Dec 28,				Mar 29,				Jun 28,				Sep 27,				Jan 3,				Adjustments			Dec 28,				Adjustments				Mar 29,				Adjustments				Jun 28,				Adjustments				Sep 27,				Adjustments				Jan 3,
			2008				2008				2008				2008				2009				2009				2009				2010				Dec 28, 2008 (1)			2008 (1)				Mar 29, 2009 (2)				2009 (2)				Jun 28, 2009 (3)				2009 (3)				Sep 27, 2009 (4)				2009 (4)				Jan 3, 2010 (5)				2010 (5)
GAAP Financial Metrics
Total revenue			$	7,638			$	59,019			$	8,247			$	63,269			$	9,263			$	4,880			$	2,726			$	47,725			$	55		$	63,324			$	55			$	9,318			$	-			$	4,880			$	-			$	2,726			$	(110	)		$	47,615
Cost of revenue				1,913				3,327				2,652				3,570				2,547				3,402				2,900				4,720							3,570								2,547								3,402								2,900								4,720
Gross profit				5,725				55,692				5,595				59,699				6,716				1,478				(174	)			43,005				55			59,754				55				6,771				-				1,478				-				(174	)			(110	)			42,895
Operating expenses				24,910				24,237				24,949				24,639				23,946				24,786				26,126				27,897							24,639								23,946								24,786								26,126								27,897
	Operating (loss) profit		$	(19,185	)		$	31,455			$	(19,354	)		$	35,060			$	(17,230	)		$	(23,308	)		$	(26,300	)		$	15,108			$	55		$	35,115			$	55			$	(17,175	)		$	-			$	(23,308	)		$	-			$	(26,300	)		$	(110	)		$	14,998
Net cash (used in) provided by operating activities				(2,446	)			3,685				12,071				(741	)			(24,335	)			16,167				(5,351	)			57,915				-			(741	)			-				(24,335	)			-				16,167				-				-				-				57,915
Cash, cash equivalents and investments				220,969				227,491				237,814				228,366				198,394				211,001				205,326				263,167				-			228,366				-				198,394				-				211,001				-				-				-				263,167
Accounts receivable				11,039				7,941				8,093				3,354				13,105				9,493				18,436				19,030				21,818			25,172				36,442				49,547				36,442				45,935				36,442				54,878				-				19,030
Days sales outstanding (a)				27				28				17				17				61				23				54				20				-			57				-				132				-				110				-				160				-				35
Deferred revenue - end of period				110,136				77,396				112,134				66,860				77,124				110,185				138,707				176,433				21,763			88,623				36,332				113,456				36,332				146,517				36,332				175,039				-				176,433
Deferred product cost - end of period				1,651				1,354				2,397				3,213				4,694				6,492				7,882				8,944				-			3,213				-				4,694				-				6,492				-				7,882				-				8,944
Reconciliation of GAAP and non-GAAP Metrics
Revenue (GAAP)			$	7,638			$	59,019			$	8,247			$	63,269			$	9,263			$	4,880			$	2,726			$	47,725			$	55		$	63,324			$	55			$	9,318			$	-			$	4,880			$	-			$	2,726			$	(110	)		$	47,615
Deferred revenue at end of period				110,136				77,396				112,134				66,860				77,124				110,185				138,707				176,433				21,763			88,623				36,332				113,456				36,332				146,517				36,332				175,039				-				176,433
Less: deferred revenue at beginning of period				(79,978	)			(110,136	)			(77,396	)			(112,134	)			(66,860	)			(77,124	)			(110,185	)			(138,707	)			-			(112,134	)			(21,763	)			(88,623	)			(36,332	)			(113,456	)			(36,332	)			(146,517	)			(36,332	)			(175,039	)
	Product and service billings, “Billings” (non-GAAP)			37,796				26,279				42,985				17,995				19,527				37,941				31,248				85,451				21,818			39,813				14,624				34,151				-				37,941				-				31,248				(36,442	)			49,009
Cost of revenue (GAAP)				1,913				3,327				2,652				3,570				2,547				3,402				2,900				4,720				-			3,570				-				2,547				-				3,402				-				2,900				-				4,720
Deferred product cost at end of period				1,651				1,354				2,397				3,213				4,694				6,492				7,882				8,944				-			3,213				-				4,694				-				6,492				-				7,882				-				8,944
Less: deferred product cost at beginning of period				(1,050	)			(1,651	)			(1,354	)			(2,397	)			(3,213	)			(4,694	)			(6,492	)			(7,882	)			-			(2,397	)			-				(3,213	)			-				(4,694	)			-				(6,492	)			-				(7,882	)
	Cost related to Billings (non-GAAP)			2,514				3,030				3,695				4,386				4,028				5,200				4,290				5,782				-			4,386				-				4,028				-				5,200				-				4,290				-				5,782
Gross profit on Billings (non-GAAP) (b)				35,282				23,249				39,290				13,609				15,499				32,741				26,958				79,669				21,818			35,427				14,624				30,123				-				32,741				-				26,958				(36,442	)			43,227
Gross margin on Billings (non-GAAP) (c)				93	%			88	%			91	%			76	%			79	%			86	%			86	%			93	%						89	%							88	%							86	%							86	%							88	%
Total operating expenses (GAAP)				24,910				24,237				24,949				24,639				23,946				24,786				26,126				27,897				-			24,639				-				23,946				-				24,786				-				26,126				-				27,897
	Operating profit (loss) on Billings (non-GAAP) (d)		$	10,372			$	(988	)		$	14,341			$	(11,030	)		$	(8,447	)		$	7,955			$	832			$	51,772			$	21,818		$	10,788			$	14,624			$	6,177			$	-			$	7,955			$	-			$	832			$	(36,442	)		$	15,330
	% operating profit (loss) on Billings (non-GAAP)			27	%			-4	%			33	%			-61	%			-43	%			21	%			3	%			61	%						27	%							18	%							21	%							3	%							31	%
Total interest & other income, net (GAAP)				2,585				1,792				1,505				1,358				1,124				1,542				426				3,601							1,358								1,124								1,542								426								3,601
	Profit (loss) before tax on Billings (non-GAAP) (e)		$	12,957			$	804			$	15,846			$	(9,672	)		$	(7,323	)		$	9,497			$	1,258			$	55,373			$	21,818		$	12,146			$	14,624			$	7,301			$	-			$	9,497			$	-			$	1,258			$	(36,442	)		$	18,931
	% profit (loss) before tax on Billings (non-GAAP)			34	%			3	%			37	%			-54	%			-38	%			25	%			4	%			65	%						31	%							21	%							25	%							4	%							39	%
Stock-based compensation included in operating expense			$	1,085			$	1,179			$	1,278			$	1,302			$	1,371			$	1,442			$	1,687			$	1,817			$	-		$	1,302			$	-			$	1,371			$	-			$	1,442			$	-			$	1,687			$	-			$	1,817
Acquisition costs included in operating expense				-				-				-				-				-				-				-				-				-			-				-				-				-				-				-				-				-				-
Profit (loss) before tax on Billings excluding stock-based compensation (non-GAAP) (e)			$	14,042			$	1,983			$	17,124			$	(8,370	)		$	(5,952	)		$	10,939			$	2,945			$	57,190			$	-		$	13,448			$	14,624			$	8,672			$	-			$	10,939			$	-			$	2,945			$	(36,442	)		$	20,748
% profit (loss) before tax on Billings excluding stock-based compensation (non-GAAP) (e)				37	%			8	%			40	%			-47	%			-30	%			29	%			9	%			67	%						34	%							25	%							29	%							9	%							42	%
Note (1): On January 14, 2009, Nortel filed for bankruptcy protection. As of December 28, 2008, Airvana had outstanding invoices to Nortel of $21,818, the collection of which is subject to Nortel's bankruptcy process. As a result, Airvana has excluded $55 from revenue, $21,763 from deferred revenue, and $21,818 from accounts receivable as of December 28, 2008. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.
Note (2): On January 14, 2009, Nortel filed for bankruptcy protection. As of March 29, 2009, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $36,442, the collection of which is subject to Nortel's bankruptcy process. As a result, Airvana has excluded $55 from revenue, $36,332 from deferred revenue, and $36,442 from accounts receivable as of March 29, 2009. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.
Note (3): On January 14, 2009, Nortel filed for bankruptcy protection. As of June 28, 2009, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $36,442, the collection of which is subject to Nortel's bankruptcy process. As a result, Airvana has excluded $36,332 from deferred revenue and $36,442 from accounts receivable as of June 28, 2009. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.
Note (4): On January 14, 2009, Nortel filed for bankruptcy protection. As of September 27, 2009, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $36,442, the collection of which is subject to Nortel's bankruptcy process. As a result, Airvana has excluded $36,332 from deferred revenue and $36,442 from accounts receivable as of September 27, 2009. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.
Note (5): On January 14, 2009, Nortel filed for bankruptcy protection. During the quarter ended January 3, 2010, Airvana collected pre-bankruptcy filing outstanding invoices to Nortel of $36,442 and recorded them on a cash basis.
(a) Days sales outstanding (DSO) equals the accounts receivable divided by Billings (non-GAAP) multiplied by days in the period (98 in Q4 2009 and 91 for all other periods presented).
(b) Gross profit on Billings equals the excess of Billings over cost related to Billings.
(c) Gross margin on Billings equals the excess of Billings over cost related to Billings divided by Billings.
(d) Operating profit on Billings equals Billings less cost related to Billings, less total operating expenses.
(e) Profit (loss) before tax on Billings equals Billings less cost related to Billings, less total operating expenses plus interest income, net, plus cumulative change in accounting principle.

Exhibit 3
Airvana, Inc.
Select Annual Financial Data - GAAP & non-GAAP Metrics
(Amounts in thousands)
(Unaudited)
			Fiscal Year Ended
																																		Pro Forma Nortel				Pro				Pro Forma Nortel				Pro
																																		Adjustments				Forma				Adjustments				Forma
			2002				2003				2004				2005				2006				2007				2008				2009			2008 (1)				2008 (1)				2009 (1)				2009 (1)
GAAP Financial Metrics
Total revenue			$	4,567			$	6,978			$	3,617			$	2,347			$	170,270			$	305,786			$	138,173			$	64,594		$	55			$	138,228			$	(55	)		$	64,539
Cost of revenue				2,764				5,537				4,453				6,533				45,295				41,904				11,462				13,569							11,462								13,569
Gross profit (loss)				1,803				1,441				(836	)			(4,186	)			124,975				263,882				126,711				51,025			55				126,766				(55	)			50,970
Operating expenses																																							-								-
	Research & development			17,408				10,089				22,040				42,922				55,073				76,638				74,826				73,676							74,826								73,676
	Sales & marketing			4,005				3,582				4,665				5,237				7,729				12,055				14,933				16,307							14,933								16,307
	General & administrative			1,484				1,201				2,068				3,253				5,068				7,453				8,976				12,772							8,976								12,772
	In-process R&D			-				-				-				-				-				2,340				-				-							-								-
Total operating expenses				22,897				14,872				28,773				51,412				67,870				98,486				98,735				102,755							98,735								102,755
	Operating (loss) profit		$	(21,094	)		$	(13,431	)		$	(29,609	)		$	(55,598	)		$	57,105			$	165,396			$	27,976			$	(51,730	)	$	55			$	28,031			$	(55	)		$	(51,785	)
Net cash (used in) provided by operating activities				(18,600	)			(1,687	)			43,028				67,390				25,138				91,771				12,569				44,396			-				12,569				-				44,396
Cash, cash equivalents and investments				27,000				33,745				72,321				135,470				160,123				221,963				228,366				263,167			-				228,366				-				263,167
Accounts receivable				2,836				1,175				9,244				7,590				46,072				14,171				3,354				19,030			21,818				25,172				-				19,030
Days sales outstanding (a)																17.6				119.3				36.3				9.8				20.3			-				10				-				40
Deferred revenue - end of period				5,837				15,519				118,051				273,124				243,418				79,978				66,860				176,433			21,763				88,623				55				176,488
Deferred product cost - end of period				2,183				3,949				28,196				66,966				34,214				1,050				3,213				8,944			-				3,213				-				8,944
Reconciliation of GAAP and non-GAAP Metrics
Revenue (GAAP)			$	4,567			$	6,978			$	3,617			$	2,347			$	170,270			$	305,786			$	138,173			$	64,594		$	55			$	138,228			$	(55	)		$	64,539
Less: deferred revenue from acquisition				-				-				-				-				-				(171	)			-				-			-				-				-				-
Deferred revenue at end of period				5,837				15,519				118,051				273,124				243,418				79,978				66,860				176,433			21,763				88,623				-				176,433
Less: deferred revenue at beginning of period				-				(5,837	)			(15,519	)			(118,051	)			(273,124	)			(243,418	)			(79,978	)			(66,860	)		-				(79,978	)			(21,763	)			(88,623	)
	Product and service billings, “Billings” (non-GAAP)			10,404				16,660				106,149				157,420				140,564				142,175				125,055				174,167			21,818				146,873				(21,818	)			152,349
Cost of revenue (GAAP)				2,764				5,537				4,453				6,533				45,295				41,904				11,462				13,569			-				11,462				-				13,569
Deferred product cost at end of period				2,183				3,949				28,196				66,966				34,214				1,050				3,213				8,944			-				3,213				-				8,944
Less: deferred product cost at beginning of period				-				(2,183	)			(3,949	)			(28,196	)			(66,966	)			(34,214	)			(1,050	)			(3,213	)		-				(1,050	)			-				(3,213	)
	Cost related to Billings (non-GAAP)			4,947				7,303				28,700				45,303				12,543				8,740				13,625				19,300			-				13,625				-				19,300
Gross profit on Billings (non-GAAP) (b)				5,457				9,357				77,449				112,117				128,021				133,435				111,430				154,867			21,818				133,248				(21,818	)			133,049
Gross margin on Billings (non-GAAP) (c)				52	%			56	%			73	%			71	%			91	%			94	%			89	%			89	%						91	%							87	%
Operating expenses (GAAP):
	Research & development			17,408				10,089				22,040				42,922				55,073				76,638				74,826				73,676			-				74,826				-				73,676
	% research & development expense on Billings			167	%			61	%			21	%			27	%			39	%			54	%			60	%			42	%						51	%							48	%
	Sales & marketing			4,005				3,582				4,665				5,237				7,729				12,055				14,933				16,307			-				14,933				-				16,307
	% sales & marketing expense on Billings			38	%			22	%			4	%			3	%			5	%			8	%			12	%			9	%						10	%							11	%
	General & administrative			1,484				1,201				2,068				3,253				5,068				7,453				8,976				12,772			-				8,976				-				12,772
	% general & administrative expense on Billings			14	%			7	%			2	%			2	%			4	%			5	%			7	%			7	%						6	%							8	%
	In-process R&D			-				-				-				-				-				2,340				-				-			-				-				-				-
	% in-process R&D expense on Billings			0	%			0	%			0	%			0	%			0	%			2	%			0	%			0	%						0	%							0	%
Total operating expenses (GAAP)				22,897				14,872				28,773				51,412				67,870				98,486				98,735				102,755			-				98,735				-				102,755
% total operating expenses (GAAP)				220	%			89	%			27	%			33	%			48	%			69	%			79	%			59	%						67	%							67	%
	Operating profit (loss) on Billings (non-GAAP) (d)		$	(17,440	)		$	(5,515	)		$	48,676			$	60,705			$	60,151			$	34,949			$	12,695			$	52,112		$	21,818			$	34,513			$	(21,818	)		$	30,294
	% operating profit (loss) on Billings (non-GAAP)			-168	%			-33	%			46	%			39	%			43	%			25	%			10	%			30	%						23	%							20	%
Total interest & other income, net (GAAP)				101				(93	)			485				3,459				6,602				9,845				7,240				6,693			-				7,240				-				6,693
Cumulative effect of change in accounting principle (GAAP)				-				-				-				-				(330	)			-				-				-							-								-
	Profit (loss) before tax on Billings (non-GAAP) (e)		$	(17,339	)		$	(5,608	)		$	49,161			$	64,164			$	66,423			$	44,794			$	19,935			$	58,805		$	21,818			$	41,753			$	(21,818	)		$	36,987
	% profit (loss) before tax on Billings (non-GAAP)			-167	%			-34	%			46	%			41	%			47	%			32	%			16	%			34	%						28	%							24	%
Stock-based compensation included in operating expense			$	-			$	-			$	-			$	-			$	800			$	2,996			$	4,844			$	6,317		$	-			$	4,844			$	-			$	6,317
Acquisition costs included in operating expense			$	-			$	-			$	-			$	-			$	-			$	2,340			$	-			$	-		$	-			$	-			$	-			$	-
Note (1): On January 14, 2009, Nortel filed for bankruptcy protection. As of December 28, 2008, Airvana had pre-bankruptcy filing outstanding invoices to Nortel of $21,818, the collection of which is subject to Nortel's bankruptcy process. As a result, Airvana has excluded $55 from revenue, $21,763 from deferred revenue, and $21,818 from accounts receivable as of December 28, 2008. These amounts were accounted for on a cash basis when collected in the fourth quarter of 2009.
(a) Days sales outstanding (DSO) equals the accounts receivable divided by Billings (non-GAAP) multiplied by days in the period (371 in 2009 and 364 for all other periods presented).
(b) Gross profit on Billings equals the excess of Billings over cost related to Billings.
(c) Gross margin on Billings equals the excess of Billings over cost related to Billings divided by Billings.
(d) Operating profit (loss) on Billings equals Billings less cost related to Billings, less total operating expenses.
(e) Profit (loss) before tax on Billings equals Billings less cost related to Billings, less total operating expenses plus interest income, net, plus cumulative change in accounting principle.